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Response to criticisms of actuarial studies

September 12, 2012

In the past five years, several leading actuarial firms have released studies showing that CCNC generates substantial savings for the North Carolina Medicaid program. The legitimacy of these studies has been subject of relentless, strident attacks by Al Lewis, the head the Disease Management Purchasing Consortium of Waltham, MA. His organization represents companies that sell disease management services to health insurers, employers and managed care organizations. In addition to this obvious conflict of interest, Mr. Lewis appears to lack the credentials in healthcare analytics or health services research necessary to critique the work of top actuarial firms. We are not aware of any academic affiliation, or association with a reputable company or organization in the field of health services or healthcare financing and administration. Mr. Lewis recently published a book which claims to debunk actuarial methods commonly used in the industry for calculating “return on investment” and estimating savings. A chapter of that book is devoted to criticizing evaluations of the CCNC program conducted by several external consulting firms in recent years. Lewis has repeated these claims in an article published in the online versions of the American Journal of Managed Care and the Carolina Journal, and on The Health Care Blog.

Relying solely on a “back of the envelope” approach devoid of any empirical work with actual Medicaid data, Mr. Lewis boldly – and very implausibly – claims to “prove” that all reports showing substantial savings from CCNC are wrong. He references figures available to the lay public through online queries of AHRQ’s Healthcare Cost and Utilization Project (HCUP), an extensive collection of longitudinal hospital care data. This database does not provide actual Medicaid cost data, and does not distinguish between hospital utilization by Medicaid recipients who are CCNC-enrolled versus those who are not. Lewis’ HCUP queries in some cases vastly understate actual NC Medicaid costs, producing a series of irrelevant figures by which is it impossible to reach any definitive conclusion about CCNC’s performance.

Pinpointing the savings attributable to CCNC is indeed a challenging endeavor. We are a statewide program with a multilayered constellation of intervention efforts across a great diversity of local environments and health systems. The complexities of eligibility rules, benefit design, and payment policies including capitation carve-out differences across state Medicaid programs, as well as the lack of availability of recent and complete out-of-state Medicaid data, present challenges for any rigorous evaluator. That’s why the state Medicaid agency, at the direction of the NC General Assembly, engaged two highly prominent and reputable consulting firms (Mercer and Milliman) to provide independent evaluation of cost savings, and CCNC has independently engaged Treo Solutions to do the same. Using a variety of state-of-the-art approaches to budget analysis in the healthcare industry that are no different than the approaches used to set rates and evaluate performance in the managed care market, each has determined substantial savings attributable to the CCNC program, on the order of hundreds of millions of dollars a year.

At CCNC, we take evaluation of our programs very seriously, for two important reasons: 1) it is crucial for program development and decision making about program investments and improvements, and 2) it is essential to maintain and advance a healthy and trusting relationship with our stakeholders. We are quite transparent about what we know and don't know, and continue to seek opportunities to enhance the rigor and validity of our evaluation efforts within the live, real-world, statewide context of the work we are commissioned to do. Our continuing aim is better health for the population, a better healthcare experience for patients, and lower costs through payer-provider collaboration and comprehensive, innovative population health management solutions. We have nothing to hide. The available evidence is strongly conclusive that CCNC, in addition to improving access and quality of care for Medicaid recipients, and maintaining provider reimbursement at a stronger level than most states, provides a remarkable and sustained return on investment.