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What CMS Missed by Eliminating Dementia from HCC Calculations

Hundreds of articles are published every year to report the multi-hundred billion dollar annual medical costs of Alzheimer’s Disease, a common type of dementia.

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Most of these articles leave the impression that dementia is an expensive condition but fail to explain why. However, if dementia is so expensive, why did CMS eliminate the HCC Risk Adjustment Score* for dementia in 2014? 


It turns out that dementia on its own is not expensive. Because there is no cure for dementia and also no way to slow its progression (e.g., drugs like Namenda and Aricept have limited benefits) a person who is generally healthy and living with dementia does not require more medical care—because none exists. In fact, CMS announced in 2014** that “many of the costs directly associated with dementia are not Medicare Part A and B costs.” Thus, while dementia clearly has a devastating impact on quality of life, caregiver burden and family dynamics, CMS is unprepared to support higher reimbursement for the medical expenses of patients living solely with dementia. 


But wait, does that mean that the numbers reported in all of those published articles are incorrect? Not exactly; but the reasons given for why dementia is expensive are often not fully explained. 


The medical cost of dementia are exceptionally high when a person living with dementia is also unable to self-manage their other chronic conditions, for example, CHF, diabetes or COPD. Persons living with dementia are often unable to accurately report their symptoms, follow their physicians’ instructions, and have stressed and inexperienced family members who provide support. These are the reasons why patients with dementia much more likely to go to the emergency room, be admitted to the hospital and utilize more post-acute care (e.g., skilled nursing or home health). Experts agree that many of the causes for higher and more expensive utilization of healthcare services of those with dementia are preventable in the home. 


The truth is that dementia is a significant “multiplier” on the costs of chronic conditions, similar to the known multiplier effect that depression has on costs. Managing any chronic condition is two to three times more expensive in the presence of dementia.  In a typical Medicare population, 10% of patients have dementia or are cognitively impaired and drive more than 25% of total annual healthcare expenditures – the vast majority of which are in Part A and B cost categories.  If health plans and providers understood this reality, they’d be lobbying CMS for a reinstatement of the HCC codes for dementia, as a multiplier.  They’d also be aggressively seeking ways to help multi-chronic patients with dementia manage their chronic conditions, for example, by empowering a family caregiver to provide better care (this is what we do at Ceresti, www.ceresti.com).  


Imagine if it were possible to reallocate the billions that can be saved by providing better care for those with dementia, to research aimed at finding a cure. Everybody would benefit.


* Risk Adjustment and Hierarchical Condition Category (HCC) coding is a payment model mandated by the Centers for Medicare and Medicaid Service (CMS) to adjust Medicare Advantage health plan payment at the patient level. HCC risk adjustment is largely based on the enrollee health status and their demographic characteristic.


** Announcement of Calendar Year (CY) 2014 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter (April 1, 2013)


Author: Dirk Soenksen