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On January 1, 2017, the KHI News Service became part of KCUR public radio’s new initiative, the Kansas News Service. The Kansas News Service will continue to cover health policy news and broaden its scope to include education and politics. All stories produced by the former KHI News Service are archived here. Stories and photos may be republished at no cost with proper attribution and a link back to KHI.org.

Efficiency report’s projected savings on early Medicaid births look unlikely

By Meg Wingerter | March 07, 2016

Efficiency report’s projected savings on early Medicaid births look unlikely
Photo by Pixabay--Creative Commons A statewide efficiency report estimates Kansas could save nearly $20 million over five years by reducing early elective Medicaid births — a number that might require the state to prevent 800 more of those births than actually happened in the most recent year.

Editor’s note: This is the second of two stories examining the costs of early scheduled births in Kansas and efforts to reduce them. The first story focused on a Kansas hospitals initiative

A statewide efficiency report estimates Kansas could save nearly $20 million over five years by reducing early elective Medicaid births — a number that might require the state to prevent 800 more of those births than actually happened in the most recent year.

Alvarez and Marsal, a New York-based consulting firm, scoured Kansas government practices and outlined up to $2 billion in potential savings over five years in its recent report to legislators. Nearly 1 percent of those savings were projected to come from reducing early births and their associated medical costs among Kansans covered by Medicaid.

The report found Kansas could save $1.8 million by reducing the number of early births Medicaid would pay for in fiscal year 2017. The consultants projected those savings would rise each of the next four fiscal years — to $3.0 million in 2018, $4.2 million in 2019, $5.3 million in 2020 and $5.5 million in 2021 — for a total of $19.8 million.

In a section starting on page 192 of the report, the consultants suggested focusing on early elective births, which typically happen in the 37th or 38th week of pregnancy. A full-term pregnancy is defined as at least 39 weeks, though some doctors still perform cesarean sections or induce labor a week or two earlier. 

Reducing early elective births

Nancy Zielke, senior director at Alvarez and Marsal, said about $1.5 million in savings for 2017, the first fiscal year, would come from reduced Medicaid payments for early elective births. The remaining $265,000 in savings that year would come from reduced neonatal intensive care unit payments, she said.

The estimates are based on Kansas Department of Health and Environment data for 2014 showing that 28 percent of Kansas early births — about 3,310 — were elective cesarean sections, Zielke said.

KDHE defines an elective birth as one where labor is induced or the mother has a cesarean section, however — not necessarily one that was a matter of convenience. Doctors order some early births by cesarean sections if the mother or baby has a medical problem.

The number of early elective births based on convenience or other non-medical factors appears to be much lower than 3,310. In fact, it’s closer to half that number.

According to a survey of hospitals from the Kansas Healthcare Collaborative, 4.4 percent of births in 2014 were scheduled early without a medical reason — the type the report highlights for savings. That represents about 1,700 of the 39,000 births in Kansas, though it doesn’t include home births or those at facilities not included in the survey.

The efficiency report recommended Kansas adopt a program similar to one that South Carolina used to reduce the number of early elective births without a medical reason and to screen women for risk factors linked to premature birth.

The number of early elective births did fall in South Carolina under that program, from about 6,000 in 2011 to about 3,000 in 2013. About half of births in South Carolina have been covered by Medicaid in recent years, according to the Kaiser Family Foundation, indicating the state avoided paying for about 1,500 early elective births during that period. South Carolina reported about $6 million in total savings, or an average of $4,000 in savings per birth.

In Kansas, Medicaid would need to cover about 450 fewer early elective births in 2017 and gradually increase that number each year to 1,375 fewer early elective births in 2021 to create the savings in the efficiency report.

Medicaid covers about a third of Kansas births, so the state only has about 570 early elective births that it could see direct savings from.

That means by 2021 the state would need to prevent more than twice that number of births (570) to reduce early elective births by 1,375 and generate the savings in the report.

Such results are particularly unlikely given that efforts to lower the number of early elective births are in progress.

High health costs for premature babies

The state would have better odds of meeting the Medicaid savings goals if it worked to reduce the number of births before the 37th week of pregnancy, when babies are more likely to be born seriously ill.

The March of Dimes estimated in 2014 that the average medical cost in the first year of life for a healthy, full-term baby was $5,085, compared to an average cost of $55,393 for a baby born earlier than the 37th week of pregnancy.

About 3,400 Kansas babies, or 8.7 percent, were born prematurely in 2014, according to the March of Dimes.

To achieve $1.8 million in savings, only 36 babies covered by Medicaid who would have been born prematurely would need to be born at full-term in fiscal year 2017, assuming average costs. That number would need to rise to 110 babies to achieve the projected savings in fiscal year 2021, assuming the cost difference doesn’t change dramatically in the next four years.

Those numbers appear to be possible if Kansas reaches a goal set by March of Dimes for reducing preterm births to 8.1 percent of all births by 2020, which would mean 225 fewer early births if the same number of babies were born as in 2014.

Shalae Harris, maternal child health program director for March of Dimes Kansas, declined to comment on the efficiency report’s numbers. But she said the group supports a multi-pronged approach to lower the preterm birth rate, with an eventual goal of 5.5 percent of births by 2030.

“This number is within reach. However, there is no magic bullet to prevent preterm births,” she said. “There are multiple causes, and some are still unknown.”

Factors that contribute to a premature birth include:

  • Smoking or using other drugs.
  • Being overweight or underweight during pregnancy.
  • Having high blood pressure, diabetes or an infection.
  • Experiencing a serious physical injury or stressful life event.

Genetics may be a factor in other cases, according to the March of Dimes.

The March of Dimes recommends states adopt some of South Carolina’s practices, including stopping early scheduled births and giving women at high risk of early birth access to progesterone.