The Independence at Home (IAP) demonstration program is an under-noticed section of PPACA targeted at high cost chronically-ill Medicare patients.

As outlined in Dr. Gawande’s New Yorker article (“The Hot Spotters: Can Lower Costs By Giving The Neediest Patients Better Care”; 1/24/11), Medicare spends almost 50% of its funds on the top 5% of patients.

IAP is to be a three year demonstration program covering not more than 10,000 Medicare beneficiaries.  A model program run for 30 years now by the Veteran’s Administration has reduced hospital days by 62% and overall costs by 24%.

The concept is to provide primary and related care to these chronic patients at home to reduce hospitalizations, drug interactions, and improve overall health, such that costs to Medicare for these outliers decreases.

Eligibility for IAP is limited to patients who meet each of the following objective criteria:

• Two or more chronic diseases (congestive heart failure, diabetes, chronic obstructive pulmonary disease, ischemic heart disease, stroke, Alzheimer’s Disease, neurodegenerative diseases; and 
   
• Two or more functional dependencies (bathing, dressing, toileting, walking, or feeding); and 
   
• At least one non-elective hospitalization in the prior 12 months.

Providers will be reimbursed according to normal Medicare rates for what are already defined as reasonable and necessary services, except that, to the extent providers succeed in reducing expenditures on their patients by more than 5% they will be paid 80% of any further savings.  Providers thus have a clear incentive to identify and enroll the most costly patients and to work hard to reduce their expenses.  At the same time, the patients give up no rights and can leave the IAP program at any time.

Many states are considering adopting parallel programs, as they do not result in any additional out of pocket costs to the Medicare or any Medicaid system.