The changing national policy system: complexity, Medicare, and implications for aging groups

Changes in congressional processes, health agendas, and competitive positions of physician and hospital groups in the 1980s have produced important setbacks for such group interests within Medicare. Though united and successful in opposing Carter's 1977-79 hospital cost-containment proposals, these groups were subjected to severe new limits on hospital reimbursements under the 1982 budget reconciliation act. Thereafter, problems in protecting their interests continued or increased. Disagreements among hospital groups (e.g., the American Hospital Association and the former Federation of American Hospitals) surfaced over the Prospective Payment System introduced in 1983. In 1984, Congress instituted a freeze on physicians' Medicare fees despite AMA opposition. This projected narrow self-interest, thus decreasing the AMA's credibility. Further cost restrictions were imposed in 1985-86 budget acts. The problems of these organizations indicate that if aging groups are to protect their own stake in Medicare in the new political context, they must be particularly concerned with unity, credibility, and long-term perspectives.     

Medicare and Health Care Reform

Although Medicare constitutes one of the most popular programs of the federal government, even its most ardent supporters would likely agree that improvements could be made and likely should be part of any package of comprehensive health care reform. While some changes could be made as stand-alone reforms. it would be better to integrate changes for the under 65-population with those for the Medicare program. For example, cost-containment strategies would work best if they applied to the population as a whole rather than creating differences that lead to cost-shifting and possible discrimination across groups. The generosity of services covered also ought to be balanced between Medicare and whatever happens elsewhere. This would allow Medicare's cost-sharing structure to be less severe in terms of hospital and skilled nursing care, for example. Finally, while it is tempting to use reductions in spending on Medicare as a means for helping to finance other expansions, the impact of such changes needs to be carefully assessed before assuming that they would create no lasting problems. This essay examines some of the options and likely consequences for Medicare as part of comprehensive health reform.     

Medicare and health care reform

Although Medicare constitutes one of the most popular programs of the federal government, even its most ardent supporters would likely agree that improvements could be made and likely should be part of any package of comprehensive health care reform. While some changes could be made as stand-alone reforms, it would be better to integrate changes for the under 65-population with those for the Medicare program. For example, cost-containment strategies would work best if they applied to the population as a whole rather than creating differences that lead to cost-shifting and possible discrimination across groups. The generosity of services covered also ought to be balanced between Medicare and whatever happens elsewhere. This would allow Medicare's cost-sharing structure to be less severe in terms of hospital and skilled nursing care, for example. Finally, while it is tempting to use reductions in spending on Medicare as a means for helping to finance other expansions, the impact of such changes needs to be carefully assessed before assuming that they would create no lasting problems. This essay examines some of the options and likely consequences for Medicare as part of comprehensive health reform.     

Policy Changes in Medicare Home Health Care: Challenges to Providing Family-Centered,Community-Based Care for Older Adults

The Balanced Budget Act of 1997 (BBA) established new reimbursement systems in the Medicare home health fee-for-service benefit. Reimbursements were reduced to 1993 levels and per-beneficiary capitated limits were introduced for the first time. This article analyzes the impact of these changes on chronically ill older adults and their families. The study combined a secondary analysis of the Provider of Service file (1996, 1999, 2002, and the Medicare Current Beneficiary Survey (1996, 1998) with qualitative interviews of home health agency directors. The greatest decreases in staff and visits were for medical social work and home health aide services. Patients with caregivers saw greater decreases in visits and reimbursements for all visits, skilled nursing, medical social work, and home health aide visits. Agency directors reported that they increased caregiver education, training, and involvement in care in order to discharge patients sooner. Additional research is needed to understand the long-term, adverse impact of these policy changes on chronically ill patients and their families.     

Hospice Eligibility and Election: Does Policy Prepare Us to Meet the Need?

A 7-point policy model is used to examine policy on hospice eligibility and election in the United States. Despite the growth of hospice, many eligible patients continue to lack access due to difficulties experienced by providers in discerning 6-month prognoses among chronically ill patients, the inability of patients to elect hospice alongside curative care, and limited reimbursement for hospice providers. Though the landscape of dying has evolved, with more deaths occurring later in life from chronic illness, Medicare hospice eligibility requirements have historically remained the same. Utilization would increase if hospice agencies were able to provide fewer restrictions by including ongoing treatments such as transfusions, intravenous nutrition, or palliative radiation. Hospices would be more likely to enroll critically ill patients who require some ongoing curative measures if Medicare reimbursement rates were higher, and patients would be more likely to seek hospice earlier if Medicare election policies were altered to allow concurrent care. Participation would also be increased by extending hospice eligibility past the traditional prognosis of 6 months. Though expansion in public spending of hospice care has been met with some opposition, current research suggests that potential savings due to decreased costs in acute care is promising.     

EXIT FROM THE HOSPITAL INDUSTRY

We study the exit of hospitals from the market for inpatient services. More generous hospital reimbursement significantly reduces the probability of exit throughout the 1990s. Conditional on reimbursement levels, hospital efficiency was not a significant determinant in the early 1990s but in the mid‐ to late 1990s, less efficient hospitals were significantly more likely to exit. Throughout the period, high‐tech services increased the probability of survival, and for‐profit hospitals were more likely to exit. The role of Medicare as a determinant of exit became less important in the latter half of the 1990s. (JEL I11, L11)     

Medicaid nursing facility reimbursement in flux: effects of federal regulatory changes and prevailing fiscal conditions, 1978-1998

Basic concepts and trends are examined in Medicaid nursing facility reimbursements between 1978 and 1998, because Medicaid payment reform is a common budget reduction strategy pursued by state officials. Non-incremental changes in state rate-setting methods, as well as incremental changes in per diem rates and expenditures per recipient, are analyzed. In addition to substantial cross-state variation, results reveal clear trends in reimbursement policy characteristics over time. Not only do these track closely with changes in the federal regulatory environment, but they also track closely with prevailing fiscal and economic conditions. Given the serious ramifications reimbursement policy changes can have for nursing home residents and providers, it is imperative that the impact of federal disengagement from this policy area be understood.     

The Centers for Medicare and Medicaid Services' Nursing Home Case-Mix and Quality Demonstration: a descriptive overview

This paper presents the first comprehensive account of a major national demonstration designed to integrate skilled nursing facilities (SNF) prospective case-mix payment and quality of care. It describes the Centers for Medicare and Medicaid Services' Nursing Home Case-Mix and Quality (NHCMQ) Demonstration-the template for Medicare's SNF Prospective Payment System (PPS) implemented July 1998. The NHCMQ Demonstration provided the basis for one of the most significant changes in SNF reimbursement and quality monitoring policies to date. Prospective reimbursement policies created positive incentive for providers to admit Medicare residents under more equitable payment rates. However, controversy regarding unanticipated perverse provider incentives remains. The quality management system designed under the NHCMQDemonstration is currently used in over 17,000 nursing homes. Furthermore, under the NHCMQ Demonstration, one standardized assessment tool-the MDS-was used to assess a resident's clinical condition, to monitor quality, and to calculate provider reimbursement. Experiences from the NHCMQ Demonstration and continued evaluation of the current national PPS, along with state systems, provide a rich information source regarding prospective, case-mix reimbursement, and provider incentives.     

The Centers for Medicare and Medicaid Services' Nursing Home Case-Mix and Quality Demonstration

Abstract

This paper presents the first comprehensive account of a major national demonstration designed to integrate skilled nursing facilities (SNF) prospective case-mix payment and quality of care. It describes the Centers for Medicare and Medicaid Services' Nursing Home Case-Mix and Quality (NHCMQ) Demonstration—the template for Medicare's SNF Prospective Payment System (PPS) implemented July 1998. The NHCMQ Demonstration provided the basis for one of the most significant changes in SNF reimbursement and quality monitoring policies to date. Prospective reimbursement policies created positive incentive for providers to admit Medicare residents under more equitable payment rates. However, controversy regarding unanticipated perverse provider incentives remains. The quality management system designed under the NHCMQ Demonstration is currently used in over 17,000 nursing homes. Furthermore, under the NHCMQ Demonstration, one standardized assessment tool—the MDS—was used to assess a resident's clinical condition, to monitor quality, and to calculate provider reimbursement. Experiences from the NHCMQ Demonstration and continued evaluation of the current national PPS, along with state systems, provide a rich information source regarding prospective, case-mix reimbursement, and provider incentives.     

Risk level assessment and occupational health insurance expenditure: a gender imbalance

It is tested whether occupational risk explains differences in reimbursements from occupational-injury insurance schemes in relation to socioeconomic differences in all municipalities in Stockholm county, Sweden. An occupational risk level is formed, which considered the proportions of workers in various industrial sectors and the probability of a worker being injured in each. A regression analysis is performed, treating socioeconomic condition and risk level as predictors of reimbursement. After controlling for variation in socioeconomic factors, occupational-risk level explains the pattern of payments to men but not to women. From a gender perspective, it can be concluded that women, as a group, are not compensated for their occupational risks to the same extent as men.     

An empirical examination of cost-adjusting in outpatient clinics

This paper presents an empirical methodology for examining cost-adjusting in relation to multiple-output health care providers. The methodology is subsequently implemented using a sample of California outpatient clinics. The empirical evidence is that these clinics do cost-adjust; that is, the clinics respond to low Medicare reimbursement by using lower quality to control the marginal costs of those patient groups not insured under a government-sponsored plan. In addition, clinics do not cost-adjust with respect to Medi-Cal patients, implying that various government reimbursement systems have different effects on a provider’s cost-adjusting behavior.     

The Changing National Policy System

Changes in congressional processes, health agendas, and competitive positions of physician and hospital groups in the 1980s have produced important setbacks for such group interests within Medicare. Though united and successful in opposing Carter's 1977-79 hospital cost-containment proposals, these groups were subjected to severe new limits on hospital reimbursements under the 1982 budget reconciliation act. Thereafter, problems in protecting their interests continued or increased. Disagreements among hospital groups (e.g., the American Hospital Association and the former Federation of American Hospitals) surfaced over the Prospective Payment System introduced in 1983. In 1984, Congress instituted a freeze on physicians' Medicare fees despite AMA opposition. This projected narrow self-interest, thus decreasing the AMA's credibility. Further cost restrictions were imposed in 1985-86 budget acts. The problems of these organizations indicate that if aging groups are to protect their own stake in Medicare in the new political context, they must be particularly concerned with unity, credibility, and long-term perspectives.     

Can Bundled Payment Improve Quality and Efficiency of Care for Patients with Hip Fractures?

The current Medicare reimbursement for hip fractures lacks accountability and promotes cost cutting. A bundled payment system—analogous to the Medicare Acute Care Episodes Demonstration for Orthopedic and Cardiovascular Surgery—may help curtail costs, foster communication among health care providers, and improve their accountability for patient outcomes. In hip fracture care, bundled payment may spur development of multidisciplinary best practice guidelines, quality assessment, and reporting, and result in benchmarking and best practices sharing. However, its implementation may face challenges: the need for quality assessment criteria and risk adjustment methods and possible risks of pushing costs outside of Medicare boundaries.     

Undeclared Work in Non-Profit Sports Clubs: A Mixed Method Approach for Assessing the Size and Motives

Non-market economy including volunteer work is often ignored in estimations of the shadow economy because no money changes hands. Whilst volunteers stricto sensu are not paid for their activities, a tendency is noted that legal frameworks do allow for reimbursement for actual expenses incurred. However, if the latter receive reimbursements beyond the scope of regulations and labour law this can also be regarded as undeclared work. In this article, the size and motives of this type of undeclared work in non-profit sports clubs in Flanders (Belgium) are explored. As this kind of informal work, by its nature, is difficult to measure, a mixed method approach was used. The results show that at least 10% of volunteers can be considered as undeclared workers. The tax and social security contribution burdens are considered as the main causes for this undeclared work. It is argued that a new employment status for paid volunteers in sports is necessary to guarantee the provision of qualitative sports services.     

Resource effects on access to long-term care for frail older people

Access to long-term care depends primarily on personal resources, including family members and income, and on external resources, including Medicaid and Medicare. This study investigates how resources affect frail older individuals' access to long-term care, with a focus on Black and White widows. Data from the 1989 National Long-Term Care Survey is used, in conjunction with state-level Medicaid and Medicare reimbursement rates for nursing home and home health care, to estimate the likelihood of five types of care arrangements. Results show that children are a primary resource for unmarried individuals in maintaining access to informal care. Income effects are nonlinear in relation to nursing home care: increasing incomes below the mean income are associated with decreasing probabilities of nursing home care, while increasing incomes above the mean are associated with increasing probabilities of nursing home care. Income and Medicaid effects are interrelated, with nonlinearities associated with income having the potential to adversely affect some older persons' ability to access nursing home care.     

Medicare on life support: will it survive?

This Issue Brief discusses Medicare reform. The Balanced Budget Act of 1997 reduces spending in the Medicare program by $115 billion between 1998 and 2002. Most of the reduction in spending comes from reducing payments to providers, and most of the savings (36 percent) occur in 2002. By 2007, the Part A trust fund is expected to be insolvent, four years before the baby-boom generation reaches the current Medicare eligibility age of 65. Congress is likely to revisit Medicare reform in the near future. A number of reforms received a significant amount of attention during the Medicare reform debate, but were not included in the final legislation. The Senate-passed legislation would have increased the Medicare eligibility age from 65 to 67, imposed means testing on Medicare Part B, and imposed a Part B home health copayment of $5. While these provisions were not included in the Balanced Budget Act of 1997, they may be the focal point of future Medicare reform. Many changes to the Medicare program are likely to significantly affect employment-based health plans for both active and retired workers. Raising the Medicare eligibility age would undoubtedly affect both workers and retirees. Unless workers are willing to work until age 67, their likelihood of becoming uninsured would increase. In 1995, 15.8 percent of retirees ages 55-64 were uninsured, compared with 11.5 percent of workers in the same age group. Early retirees might also find themselves unable to afford health insurance in the private market. An Employee Benefit Research Institute/Gallup poll indicates a direct link between the availability of retiree health benefits and a worker's decision to retire early. In 1993, 61 percent of workers reported that they would not retire before becoming eligible for Medicare if their employer did not provide retiree health benefits. If workers responded to an increase in the retirement age by working longer, employment-based health plans would probably experience an increase in costs, because older workers are the most costly to cover. Some employers might respond to an increase in the Medicare eligibility age by dropping coverage altogether. The message for future beneficiaries is becoming very clear: expect less from Medicare at later ages and higher premiums. As was true prior to the enactment of Medicare in 1965, workers will increasingly need to include retiree health insurance as an expected expense as they plan and save for retirement.     

Resource Effects on Access to Long-Term Care for Frail Older People

Abstract

Access to long-term care depends primarily on personal resources, including family members and income, and on external resources, including Medicaid and Medicare. This study investigates how resources affect frail older individuals' access to long-term care, with a focus on Black and White widows. Data from the 1989 National Long-Term Care Survey is used, in conjunction with state-level Medicaid and Medicare reimbursement rates for nursing home and home health care, to estimate the likelihood of five types of care arrangements. Results show that children are a primary resource for unmarried individuals in maintaining access to informal care. Income effects are nonlinear in relation to nursing home care: increasing incomes below the mean income are associated with decreasing probabilities of nursing home care, while increasing incomes above the mean are associated with increasing probabilities of nursing home care. Income and Medicaid effects are interrelated, with nonlinearities associated with income having the potential to adversely affect some older persons' ability to access nursing home care.     

The earned income tax credit and union formation: The impact of expected spouse earnings

Using the Survey of Income and Program Participation from 2001, 2004, and 2008 and federal and state variation in earned income tax credit generosity over time, I investigate how changes in expected household earned income tax credit benefits associated with marriage affect cohabitation and marriage behavior among low-income single mothers. I simulate a marriage market to predict potential spouse earnings for a sample of single mothers in order to estimate the potential losses or gains in earned income tax credit benefits upon marriage. Using multinomial logistic regressions, I then analyze how the anticipated loss in earned income tax credit benefits upon marriage affects the likelihood of marrying or cohabiting. Results suggest that the average earned income tax credit-eligible woman can expect to lose approximately US$1,300 in earned income tax credit benefits in the year following marriage, or about half of pre-marriage benefits. Single mothers who expect to lose earned income tax credit benefits upon marriage are 2.5 percentage points less likely to marry their partners and 2.5 percentage points more likely to cohabit compared to single mothers who expect no change or to gain earned income tax credit benefits upon marriage. Despite recent policy efforts to reduce the size of the marriage penalty embedded in the earned income tax credit structure, these results suggest that the earned income tax credit still creates distortions in marriage and cohabitation decisions among low-income single mothers.