However miraculous an outcome any surgical or other heroic intervention may achieve, doctor and patient alike would surely agree that the better alternative is always prevention. So would insurers: they know that effective disease management—efforts to help chronically ill patients follow a treatment plan and to spot problems early—could save them enormous amounts of money every year. Specialists estimate, for example, that more than half of all hospital admissions and sick days linked to asthma and about half of the major complications linked to diabetes (such as amputations, blindness, and stroke) could be avoided with better monitoring and care. One German study showed that medical costs for a diabetic who didn’t suffer complications came to around €2,000 ($1,760) a year, while annual medical costs when complications developed exceeded €5,000.

Disease-management plans are nothing new, though to date most have failed because they were too costly. But emerging technologies that support the patient-management process could change all that. A full program can help coordinate care, encourage patients to follow their treatment plans, and provide warning as soon as problems develop. Germany is likely to be a test bed, since its government plans to compensate insurers for more of the cost of running such programs. Its experience will be keenly watched (see sidebar "Testing models in Germany").

How it works

Many groups could benefit from effective disease-management programs. Patients would have a better chance of avoiding complications arising from their conditions and of leading healthier lives. Doctors and other health care practitioners would be able to supplement the personalized care they give with a program that offered their patients education, more frequent contact, and general encouragement. Pension and retirement plans could see fewer of their participants choosing early retirement.

Disease-management programs could well help insurers reap net savings of 10 to 30 percent for specific groups of patients

Still greater savings would accrue to insurers and, in some cases, to national health plans. Case studies and models show that disease-management programs combining a smart mix of technology and operational excellence would let insurers reap net savings of 10 to 30 percent for specific patient groups (Exhibit 1). This estimate means that in Germany, for example, where annual claims linked to diabetes come to about €13 billion, the participation of only 10 percent of the country’s diabetics in disease-management programs could cut these claims by more than €100 million a year in the medium term. McKinsey analysis suggests that the value of the overall reductions in German medical claims could be as high as €350 million.

It is for this reason that insurers will probably be willing to bear a substantial part of the cost of setting up disease-management programs. These insurers could do so by offering such programs themselves, by contracting with third-party providers, or perhaps even by reimbursing policyholders who join programs with which they have no connection. Large insurers in particular might well consider launching their own disease-management efforts in order to accumulate expertise in the field and to retain for themselves all of the eventual savings. However, such companies must surely recognize that establishing successful programs will take time as well as a significant investment in know-how and infrastructure. The wisest strategy for insurers is therefore probably to select the best candidates for such programs but to outsource their implementation to other companies.

Disease-management programs aren’t meant to replace a personal physician’s care; rather, they supplement it by acting as an intermediary among patients, physicians, hospitals, and other health care providers. With some conditions, the keys to success are the close, day-to-day monitoring and the rapid reaction to troubling signs that the programs make possible. Once deterioration in a relevant indicator has been spotted—perhaps by the patients themselves—it is often a straightforward matter to arrange effective medical or dietary interventions. The more episodic nature of the traditional physician-patient relationship and shortcomings in the care administered under its auspices often allow conditions to deteriorate before they are noticed, so that they require more drastic and costly responses.

Congestive heart failure offers a good example of how a program might work. Edema, or fluid in the lungs—a life-threatening condition if not treated promptly—sends the average patient with severe heart disease to the hospital three times a year. In a disease-management program, an expert would teach the patient about the disease, emphasizing the importance of taking medication, adhering to a specific diet, and monitoring weight daily. Program workers would check on the patient regularly and encourage adherence to the regimen. The patient’s weight and other health indicators would be monitored remotely, and program workers would alert the patient or the patient’s physician at the first sign of trouble. Compliance would tend to reduce the number and severity of relapses, thereby cutting medical expenses substantially (Exhibit 2).

Why earlier efforts failed

Compliance, however, was a significant problem in early disease-management programs. Adult patients are often entrenched in their habits, especially if their conditions don’t pose an immediate threat. Surveys by pharmaceuticals companies suggest that only 45 to 75 percent of diabetics take their medications regularly. To bring about changes in the behavior of patients, the evaluation of their health data must be followed by some degree of contact with them—on the part of either their own physicians or the staff of the disease-management program.

The first such programs mostly originated in the United States, where health maintenance organizations were keen to reduce costs and improve care, and pharmaceuticals companies saw a marketing opportunity in linking their brands to preventive medicine. By and large, these programs failed to satisfy expectations, and many were discontinued.

Some of the problems were specific to the United States. Because its people generally switch their health insurance company when they change jobs, for example, an individual insurer that invests in a disease-management program stands a good chance of losing the policyholder before gaining the program’s benefits—at least until all insurance companies offer effective programs, so the losses and gains of each company tend to cancel each other out. In other countries, including Germany, the turnover rate is much lower.

There were more general problems, too. Many program organizers underestimated the amount of intensive (and expensive) contact with patients needed to influence their behavior. Economies of scale were hard to achieve, in part because of the heavy turnover resulting from the frequency with which people switch insurers or drop out of programs. In addition, collecting the necessary data from patients, doctors, and hospitals was more difficult and time-consuming than expected.

Early programs failed mainly because they didn’t target the right conditions and couldn’t persuade patients to follow their treatments

However, the prime reasons for the programs’ failure to reduce the number of medical claims significantly were, first, the failure to target the right conditions and patient groups and, second, a lack of success in getting more people to follow their treatment regimes more faithfully.