Zero in on cost containment for kids with chronic conditions

Just 10% of enrollees, two-thirds of whom have a chronic condition, account for 72% of spending on children in Medicaid and the Children's Health Insurance Program(CHIP), according to a study published by Genevieve M. Kenney, PhD, Thomas Selden, and Joel Ruhter in Health Affairs, "Containing Costs And Improving Care For Children In Medicaid And CHIP."

These data highlight the importance of cost-containment strategies to reduce avoidable hospitalizations and emergency department (ED) use among childrenwith chronic problems, and policies that increase preventivecare, particularly among African-American children.

"We were only able to look at this at a national level, but it made me think about how critical it is to understand the state variation in this. We just don't have our arms wrapped around that right now," says Kenney, the study's lead author and a senior fellow and health economist at The Urban Institute in Washington, DC.

However, since state claims data also reflect high levels of concentration in spending for children, "that suggests that this is probably the norm," says Dr. Kenney.

The researchers expected to find higher spending levels for disabled children who qualify for Supplemental Security Income (SSI), which are high-need populations. That pattern was borne out in the data. Surprisingly, though, the spending distribution was heavily concentrated among Medicaid and CHIP-enrolled kids who were not enrolled in SSI as well.

High spenders were more likely to have ED visits and hospital stays. This might be due to higher need for this type of care, but it also might reflect some inefficiencies in the delivery of care. If that is the case, then cost savings could be seen if outpatient care is managed more effectively.

"What feels highly actionable to me, from a policy standpoint, are the findings that indicate that such a high share of the kids in the upper part of the spending distribution have chronic health problems, and that high levels of spending frequently persist over time," says Dr. Kenney. "What that suggests is that states could achieve higher-quality, lower-cost care by testing and evaluating care coordination and disease management programs and other service delivery strategies targeted to children with chronic health problems. It could [prove] fruitful for Medicaid programs to zero in on this population, particularly the children who qualify for SSI."

Some getting no care

On the other end of the spectrum, 30% of the enrolled children received little or no care at all. "We were struck by the low spending side as another area that would require a different set of responses," says Kenney. "States should look closely at the children who are enrolled for a whole year who aren't showing up as getting any services. This could indicate problems with accessing care. Not seeing providers could also mean that children's health problems aren't being diagnosed."

In addition, for children who are receiving health care, it's not clear that they are getting the recommended levels of care, or that the care they are getting is appropriate.

"We know that health-seeking behavior and patterns of care are influenced both by provider availability and the individual's perception of their care needs," says Dr. Kenney. "Even for kids with private coverage, there can be low spenders. This type of issue isn't unique to public programs. But given that Medicaid and CHIP disproportionately serve children with more health problems and minority backgrounds, there is additional reason to worry about it."

Potential for savings

Cost-containment programs in Medicaid are largely focused on adults, partly because spending levels are higher than for children on average. "The concentration of high spenders in adults has been documented and explored, and now the same pattern is playing out with kids," says Dr. Kenney.

Dr. Kenney says it's "probably a safe bet that a big chunk of spending on children in any state's Medicaid program" is concentrated among the kids either enrolled in SSI or who have chronic health care problems.

For this reason, she says states would do well to develop strategies to identify children with chronic health care problems who are not enrolled in SSI. "When a child enrolls in Medicaid or CHIP, it's rare for them to fill out a health survey that indicates any conditions they might have," says Dr. Kenney. "States would also want to look at service patterns to see if there are certain models that are both lower cost and achieve better outcomes." For example, some care delivery models may have lower rates of ED use for kids or fewer hospitalizations for avoidable conditions.

"There will always be kids with large spending levels due to unexpected illnesses or accidents, but the persistence of high spending among children with chronic health care problems suggests that targeting them could pay off," says Dr. Kenney.

The tendency for children to "churn" in and out of Medicaid and CHIP is one complicating factor. If a child's asthma is managed more effectively, and this prevents an ED visit or hospitalization in the short term, the Medicaid program will see the savings. However, this is not the case if the ED visit is avoided after the child switches to private coverage. "We have to think about this from a more global perspective," says Dr. Kenney.

Since kids in SSI-eligible categories have high spending levels and because they are likely to have more continuous enrollment relative to other groups of children, this may be a good population to start with. "We are seeing that the burden of chronic illness is increasing with children. Moving forward, this will become an even more important issue facing state Medicaid and CHIP programs," says Dr. Kenney.

Contact Dr. Kenney at (202) 261-5568 or