How US Healthcare Works, Part 11: Care Management

Parts 9 and 10 were about a payer saying no, or not yet. Care management is the other side: the payer reaching out to members to help them get the right care, follow treatment and stay out of hospital. It starts from one fact about health spending, which shapes almost every program in this part.

1. A few people account for most of the cost

In 2019, the top 5% of people ranked by spending accounted for 48.8% of all US health spending, averaging $61,007 each. The top 1% accounted for 20.7%. The bottom half of the population accounted for about 3%.

So a plan that wants to improve health and control costs gets the most from finding the few members who are, or soon will be, very sick, and working with them closely. That's the core idea of care management.

2. Finding the right members: risk stratification

Payers sort members by risk using the data they already have:

Source	What it shows
Medical claims	Diagnoses, hospital stays, emergency visits, procedures
Pharmacy claims	Medications, and whether refills are on time
Lab results	Values such as HbA1c for diabetes, where the payer receives them
Health risk assessments	Members' own answers about their health, habits and needs
Admission notifications	Real-time alerts when a member is admitted to, or discharged from, a hospital

Since 2021, hospitals that take Medicare have had to send these admission, discharge and transfer (ADT) notifications electronically to a patient's primary care doctor and other members of their care team. Many plans receive the same alerts through regional health information exchanges, which lets plans and care teams react within a day instead of waiting weeks for a claim.

The output is a risk score and a list of reasons, such as "two admissions for heart failure this year, missed diuretic refills". Models range from rules to machine learning. A common trap is that models trained on past spending find people who spent a lot, which isn't the same as people who would benefit from help: someone who couldn't get care spent little and looks low-risk.

3. The programs

Program	Who it's for	What happens
Complex case management	The highest-risk members, often with several conditions	A nurse or social worker builds a care plan with the member and coordinates doctors, medications, equipment and services
Disease management	Members with one chronic condition: diabetes, heart failure, COPD, asthma	Education, monitoring, reminders, sometimes devices such as blood pressure cuffs
Transitional care	Members just discharged from hospital	A call or visit within days, medication review, a follow-up appointment booked
Behavioral health	Members with depression, substance use or serious mental illness	Coordination with therapists and psychiatrists, often combined with medical care
Maternity	Pregnant members	Prenatal care reminders, high-risk pregnancy support, postpartum follow-up
Social needs	Members with food, housing or transport problems	Referrals to community services; some Medicare Advantage plans cover meals or rides as extra benefits

When Maria's husband went home after his appendectomy in part 3, a transitional care nurse from the plan called two days later to check his wound, confirm he understood his antibiotics and make sure his follow-up visit was booked. That call is cheap. A readmission for an infection is not, and Medicare also reduces payments to hospitals with too many readmissions under its Hospital Readmissions Reduction Program, so hospitals run similar programs from their side.

4. Quality measurement: HEDIS

Plans report how well their members are cared for using HEDIS, a set of measures maintained by NCQA: more than 90 measures across six domains. Most are calculated from claims, with some from medical records or surveys. Examples:

Measure	What it checks
Breast cancer screening	Women of screening age had a mammogram in the measurement period
Glycemic status assessment	Members with diabetes whose blood sugar is under control
Controlling high blood pressure	Members with hypertension whose last reading was under 140/90
Follow-up after hospitalization for mental illness	A follow-up visit within 7 and 30 days of discharge

A member who should have had a service but didn't has a care gap. Much of care management in practice is closing care gaps: reminding members, telling their doctors, arranging transport, booking appointments.

5. Star Ratings: where quality becomes money

For Medicare Advantage, quality measures feed CMS's Star Ratings, a score from 1 to 5 stars for each plan contract, built from HEDIS measures, member surveys, complaint and appeal data, and drug plan measures.

The stars are worth a great deal. Plans rated 4 stars or more get a quality bonus: their benchmark, the amount used to set what CMS pays them, rises by 5 percentage points, or 10 in some counties. KFF estimates the bonus program will cost Medicare at least $13.4 billion in 2026. 68% of Medicare Advantage enrollees are in plans that qualify, down from 75% in 2025, as fewer contracts reached 4 stars: 209 in 2026, against 261 the year before.

A difference of half a star can be worth hundreds of millions of dollars to a large plan. That's why Medicare Advantage care management teams are organized around Star measures, and why changes to how CMS calculates them are fought over closely.

6. Risk adjustment, briefly

There's a second reason Medicare Advantage plans care about members' diagnoses. CMS pays each plan more for members with more documented chronic conditions, using a risk adjustment model based on diagnosis categories. That's meant to stop plans profiting by enrolling only healthy people. But it also means a diagnosis that gets documented raises payment, which gives plans a reason to run home visits and record reviews that find more diagnoses. Part 16 covers how this payment works, and part 15 covers the audits that check it.

7. Does it work?

The evidence is mixed, and worth knowing before trusting any program's claimed savings.

The Congressional Budget Office reviewed six Medicare demonstrations in which Medicare paid 34 programs to provide disease management or care coordination. Programs with substantial in-person contact were more likely to reduce hospital admissions, mostly among high-risk patients. But once Medicare's fees to the programs were counted, spending was unchanged or higher in nearly all of them.

Two problems make evaluation hard:

Regression to the mean. Members picked because they had a bad year often have a better next year anyway. A program that compares members before and after will look effective even if it did nothing. Good evaluations compare against a similar group that didn't get the program.
Who answers the phone. Members who engage with a program are often the ones who would have done better anyway.

What tends to work, in the studies that hold up, is targeted, in-person, sustained support for high-risk members, connected to their own doctors, rather than broad phone-based programs for everyone with a condition.

8. Limits

Payers are one step removed. The plan doesn't treat the member, so it depends on persuading members and doctors.
Members change plans. A program that pays off over five years may not pay off for a plan that keeps the member for two.
Measures shape behaviour. What's measured gets attention, and what isn't measured, such as how a member feels day to day, gets less.

Remember

Term	Meaning
Risk stratification	Ranking members by risk to decide who gets which program
Case management	A nurse or social worker coordinating care for a high-risk member
Disease management	Support for members with one chronic condition
Transitional care	Follow-up in the days after hospital discharge
ADT notification	A real-time alert of a hospital admission, discharge or transfer
HEDIS	NCQA's set of 90+ health plan quality measures
Care gap	A recommended service a member hasn't had
Star Ratings	CMS's 1-to-5-star quality score for Medicare plans
Quality bonus	Higher payments to Medicare Advantage plans with 4 or more stars

Next, in part 12: from visit to claim, how a provider turns care into a bill and sends it to the payer.

Sources

AHRQ, Concentration of Healthcare Expenditures, 2019 (MEPS Statistical Brief #540)
NCQA, HEDIS
KFF, Medicare will spend more than $13 billion on the Medicare Advantage quality bonus program in 2026
Congressional Budget Office, Lessons from Medicare's Demonstration Projects on Disease Management, Care Coordination, and Value-Based Payment, January 2012
CMS, Hospital Readmissions Reduction Program