A Cost Analysis of the Iowa Medicaid Primary Care Case Management Program

OBJECTIVE: To determine the cost savings attributable to the implementation and expansion of a primary care case management (PCCM) program on Medicaid costs per member in Iowa from 1989 to 1997.

DATA SOURCES: Medicaid administrative data from Iowa aggregated at the county level.

STUDY DESIGN: Longitudinal analysis of costs per member per month, analyzed by category of medical expense using weighted least squares. We compared the actual costs with the expected costs (in the absence of the PCCM program) to estimate cost savings attributable to the PCCM program.

PRINCIPAL FINDINGS: We estimated that the PCCM program was associated with a savings of US dollars 66 million to the state of Iowa over the study period. Medicaid expenses were 3.8 percent less than what they would have been in the absence of the PCCM program. Effects of the PCCM program appeared to grow stronger over time. Use of the PCCM program was associated with increases in outpatient care and pharmaceutical expenses, but a decrease in hospital and physician expenses.

CONCLUSIONS: Use of a Medicaid PCCM program was associated with substantial aggregate cost savings over an eight-year period, and this effect became stronger over time. Cost reductions appear to have been mediated by substituting outpatient care for inpatient care.