Medicare revenue in large medical groups

The aged are the heaviest users of physician services. A ageing population and escalation in medical costs have pressured Medicare budgets, which have increased fastest in Part B physician reimbursement. Policy responses include adoption of the Resource Based Relative Value Scale (RBRVS) for physician payment. This paper considers receipt of Medicare revenues by large medical groups and expectations of how groups will fare under RBRVS. In a 73-percent sample of U.S. large group practices, Medicare coverage accounted for one-fourth of clients, Medicare-related revenues for slightly more than one-fourth of revenues, suggesting a slightly higher revenue intensity for Medicare clients, but showing no evidence of truly disproportionate revenues from Medicare users. Medicare shares of revenues are explained by factors related to Medicare clientele and geriatric service provision. Overly-strict Medicare assignment policy may control costs by limiting access to needed care, rather than by limiting overpayments to physicians. Expectations as to how groups will fare under RBRVS are not found to be related to reliance on Medicare, rather to group auspices and ability to contain costs under Medicare payment. The findings are important not only to physician payment under RBRVS but also under health care reform.     

Persistence in Medicare reimbursements and personal medical accounts

This study uses the Continuous Medicare History Sample (CMHS), a longitudinal sample of Medicare beneficiaries from 1974 to 1997, to identify persistence in Medicare reimbursements. Consistent estimates of Medicare reimbursement persistence are obtained using a dynamic panel Tobit model. Lagged reimbursements are statistically significant in explaining a beneficiary's current year reimbursements, yet their effect is moderate in magnitude. An additional dollar of Medicare spending in the previous year gives rise to 0.19 US dollars in spending in the current year for those who have positive expenditures, and the effect ranges between 0.16 US dollars and 0.25 US dollars. Past spending patterns for up to 5 years are also used to evaluate the out-of-sample prediction capabilities of a multi-equation cross-sectional model. Simulated spending patterns for several cohorts are derived and compared to actual spending. The simulated spending distributions are used to study the feasibility of establishing retirement health accounts for Medicare patients.     

Savings estimate for a Medicare insured group

Estimates of the savings potential of a managed-care program for a Medicare retiree population in Michigan under a hypothetical Medicare insured group (MIG) are presented in this article. In return for receiving an experience-rated capitation payment, a MIG would administer all Medicare and employer complementary benefits for its enrollees. A study of the financial and operational feasibility of implementing a MIG for retirees of a national corporation involving an analysis of 1986 claims data finds that selected managed-care initiatives implemented by a MIG would generate an annual savings of 3.8 percent of total (Medicare plus complementary) expenditures. Although savings are less than the 5 percent to be retained by Medicare, this finding illustrates the potential for savings from managed-care initiatives to Medicare generally and to MIGs elsewhere, where savings may be greater if constraints are less restrictive.     

Medicare assignment rates of physicians: their responses to changes in reimbursement policy.

A physician's Medicare assignment rate is one measure of his or her willingness to participate in the Medicare program. The assignment rate reflects the proportion of services provided to Medicare beneficiaries for which the physician accepts the Medicare reasonable fee as payment in full. Generally, Medicare reasonable fees are lower than the payment which a physician receives from providing the same service to a private patient or to a Medicare patient who is not treated on assignment. Because Medicare eligibles not treated on an assigned basis are financially liable for the difference between the physician's charge and the Medicare reasonable fee, the assignment rate is an indication of the out-of-pocket costs borne by Medicare eligibles. One factor which may affect the willingness of physicians to accept patients on assignment is the difference between the reimbursement which he or she may receive in the private market and the fee received from treating Medicare eligibles on assignment; Throughout this paper we assume that the physician's private price or billed charge is equivalent to the level of reimbursement received from treating privately insured patients and Medicare non-assigned patients. Since the level of reimbursement is generally no greater than the billed charge and may be less, this assumption may overstate the actual reimbursement received by the physician. In all instances, reimbursement refers to the aggregate amount received by the physician from all sources for a given service. The lower a physician's Medicare reasonable fee relative to the private market fee the less willing he/she may be to participate in Medicare assignment. This paper examines the effect of changes in Medicare reimbursement on the assignment rates of physicians. It also predicts Medicare assignment rates under a policy option which would increase Medicare reasonable fees to the level of prevailing fees.     

The spillover effects of Medicare managed care: Medicare Advantage and hospital utilization

More than a quarter of Medicare beneficiaries are enrolled in Medicare Advantage, which was created in large part to improve the efficiency of health care delivery by promoting competition among private managed care plans. This paper explores the spillover effects of the Medicare Advantage program on the traditional Medicare program and other patients, taking advantage of changes in Medicare Advantage payment policy to isolate exogenous increases in Medicare Advantage enrollment and trace out the effects of greater managed care penetration on hospital utilization and spending throughout the health care system. We find that when more seniors enroll in Medicare managed care, hospital costs decline for all seniors and for commercially insured younger populations. Greater managed care penetration is not associated with fewer hospitalizations, but is associated with lower costs and shorter stays per hospitalization. These spillovers are substantial – offsetting more than 10% of increased payments to Medicare Advantage plans.     

Utilization of Medicare services by beneficiaries having partial Medicare coverage.

With the rapid increases in Medicare expenditures, policymakers are constantly reevaluating the use of and the need for services provided. One approach to better understand these issues is to identify major subgroups of the Medicare population for more detailed evaluation. A disaggregation of the data can pinpoint critical high expenditure areas for further study and may suggest potential cost containment strategies. With funding from the Health Care Financing Administration (HCFA), a series of investigations were designed to study utilization of services by particular types of Medicare beneficiaries. These include: Those who are continuously enrolled in the program over time. Those who died. Those who recently joined Medicare. Those who have one part of Medicare without the other part. This article discusses findings concerning beneficiaries who have only partial Medicare coverage (such as those who are enrolled under one part of Medicare without the other part).     

Health insurance and the elderly: data from MCBS (Medicare Current Beneficiary Survey)

This article shows the supplemental insurance distribution and Medicare spending per capita by insurance status for elderly persons in 1991. The data are from the Medicare Current Beneficiary Survey (MCBS) and Medicare bill records. Persons with Medicare only are a fairly small share of the elderly (11.4 percent). About three-fourths of the Medicare elderly have some form of private insurance. The share with Medicaid is 11.9 percent, which has increased recently as qualified Medicare beneficiaries (QMBs) started to receive partial Medicaid benefits. In general, Medicare per capita spending levels increase as supplemental insurance comes closer to first dollar coverage. When the data were recalculated to control for differences in reported health status between the insurance groups, essentially the same spending differences were observed.     

The effects of Medicare Health Management Organizations on hospital operating profit in Florida.

Between 1992 and 1997, the number of members enrolled in Medicare Health Management Organizations (HMOs) nationwide in the USA more than doubled. During this period, managed care organizations wielded considerable influence over the health care of a large segment of the Medicare population in Florida. This study examined the impact on operational profit of 148 short-term, acute-care Florida hospitals in this period from Medicare HMO patients, as part of a hospital's payer mix. Three measures of hospital profitability were used: operating profit per actual bed, total operating profit with no adjustment for bed size, and operating margins. The multivariate statistical model employed in this study was a linear mixed model with an autoregressive order one (AR[1]) parametric structure on the covariance matrix. The results of the study indicate that Florida hospitals experienced greater profit pressures from Medicare HMO inpatients than from traditional Medicare inpatients. Further, these hospitals could have experienced positive profit effects with greater traditional Medicare participation and negative financial effects with greater Medicare HMO participation. Additionally, Medicare HMO patients appear to have been admitted to hospitals in worse health condition than those in traditional Medicare. Medicare HMO patients were more likely to have used emergency rooms as the source of admission than traditional Medicare patients. Also, Medicare HMO patients were more likely to have been admitted as emergent cases than traditional Medicare patients. Other research has shown that Medicare HMO patients, at the time of enrolment, are probably healthier than traditional Medicare enrollees, but here they appear to have been admitted to hospitals with higher levels of severity of illness. Explanations are offered for these findings.     

Medicare physician payment changes: impact on physicians and beneficiaries

The Balanced Budget Act (BBA) of 1997 generally reduced Medicare payments for surgical services while increasing them for other services. Concern about implications of these fee reductions prompted the Medicare Payment Advisory Commission to sponsor a national survey of physicians to learn their views on Medicare payment and whether access to care has changed for Medicare beneficiaries. Results suggest that beneficiaries' access to care has not declined. While physicians are concerned about Medicare reimbursement, they are more concerned about reimbursement from managed care plans and Medicaid. Continued monitoring will be important to detect any emerging access problems accompanying upcoming payment reductions.     

Web Chatter Before and After the Women's Health Initiative Results: A Content Analysis of On-line Menopause Message Boards

People aging into Medicare need to choose a health plan. Several challenges exist for consumers in choosing a Medicare health plan, including limited knowledge of Medicare, limited experience in using comparative health plan quality information, and limited experience and ability to pull together and use plan information from different sources like employers and the Medicare program. The Choose with Care System was developed to help consumers aging into Medicare make informed Medicare health plan choices. Choose with Care is an innovative decision support tool for employers to use to assist people approaching age 65 to learn about their Medicare health plan options and how to incorporate information on the quality of care and services offered by health plans into their choices. Employers are the targeted channel for distributing the Choose with Care materials because they are one of the most recognized and accessible formal intermediaries for information about health insurance. We used multiple methods to test the Choose with Care products. Product testing showed that the Choose with Care materials increase older consumers' knowledge of Medicare and how it relates to retiree health insurance and improves their comprehension and use of comparative quality information when choosing a health plan.     

The "choose with care system" - development of education materials to support informed Medicare health plan choices

People aging into Medicare need to choose a health plan. Several challenges exist for consumers in choosing a Medicare health plan, including limited knowledge of Medicare, limited experience in using comparative health plan quality information, and limited experience and ability to pull together and use plan information from different sources like employers and the Medicare program. The Choose with Care System was developed to help consumers aging into Medicare make informed Medicare health plan choices. Choose with Care is an innovative decision support tool for employers to use to assist people approaching age 65 to learn about their Medicare health plan options and how to incorporate information on the quality of care and services offered by health plans into their choices. Employers are the targeted channel for distributing the Choose with Care materials because they are one of the most recognized and accessible formal intermediaries for information about health insurance. We used multiple methods to test the Choose with Care products. Product testing showed that the Choose with Care materials increase older consumers' knowledge of Medicare and how it relates to retiree health insurance and improves their comprehension and use of comparative quality information when choosing a health plan.     

Medicare's common denominator: the covered population.

This report describes Medicare eligibility requirements: the processes to establish Medicare entitlement; types of coverage; the composition of the enrolled population; and outlines some differences in measurement techniques used in a decennial census in contrast to Medicaid enrollment. Current Medicare enrollment figures do not represent a complete count of any segment of the total United States population. Some persons age 65 and over are not eligible for Medicare; others are eligible but not entitled. However, the Medicare enrollment figures are frequently used as surrogate counts of the aged population because they provide excellent sources of detailed demographic and geographic information for a large proportion of those age 65 and over. The data are produced semi-annually, based on daily updates.     

Is premium support the right medicine for Medicare?

This paper assesses the desirability of transforming Medicare into a premium-support system. I focus on three areas crucial to the future of Medicare: cost savings, beneficiary choice, and the stability of traditional Medicare. Based on my analysis of the Bipartisan Commission on the Future of Medicare plan, I find substantial problems with adopting premium support for Medicare. In particular, projections of premium-support savings are based on questionable assumptions that the slowdown in health spending during 1993-1997 can be sustained and extrapolated to future Medicare performance. Consequently, premium support may inadvertently destabilize public Medicare and erode beneficiary choice without achieving substantial savings.     

Do financial incentives matter? Effects of Medicare price shocks on skilled nursing facility care

Skilled nursing facility (SNF) spending has been one of the fastest growing categories of Medicare spending over the past few decades, and reductions in SNF payments are often recommended as part of Medicare cost containment efforts. Using a quasi‐experiment resulting from a policy‐driven and facility‐specific Medicare payment change, we provide new evidence on how Medicare payment changes affect the amount of SNF care provided to Medicare patients. Specifically, we examine a one‐time, plausibly exogenous change in the hospital wage index, an area‐level adjustment to SNF payments that affected the majority of SNFs nationwide. Using a panel dataset of SNFs, we model the effects of these payment changes on more than 12,000 SNFs across the United States. We find that increases in Medicare payment rates to SNFs increased the total number of Medicare resident days at SNFs. Specifically, a 5% payment increase raised Medicare resident days by 2.33% at facilities with a 10% Medicare share relative to 0%. Further, the effects were asymmetric: Although Medicare payment increases affected Medicare days, payment decreases did not. Our results have important implications for policies that alter the Medicare base payment rates to SNFs and other health care providers.     

Do Medicare HMOs still reduce health services use after controlling for selection bias?

This study models the relationship between Medicare beneficiary decisions to join Medicare HMOs and subsequent health services utilization. The relationship between health plan choice and utilization is thought to be endogenous because of favorable selection into HMOs. Previous studies found significantly lower inpatient utilization among Medicare HMO enrollees than among nonenrollees, but lacked strong controls for selection bias. Thus, a firm conclusion could not be drawn as to whether the observed differences were attributable to the HMO practice setting or to baseline differences in the illness profiles of the two groups studied. The present study uses simultaneous equations methods, including discrete factor estimation, to test the effect of Medicare HMOs on utilization when strong controls for selection bias are imposed. The model was run on a panel of 1993-1996 data from the Medicare Current Beneficiary Survey, supplemented with linked data on Medicare HMO characteristics and area supply characteristics. The study found that even when favorable selection is controlled for, Medicare HMOs significantly reduce both the probability of hospitalization and the number of inpatient days used by those who are hospitalized. Medicare HMOs do not, however, appear to reduce the use of physician services.     

Venturing into new territory--health systems as Medicare risk contractors

With each congressional budget debate, hospital and health system executives are reminded of their vulnerability to Medicare reimbursement rates. As health maintenance organizations (HMOs) have entered into Medicare risk contracts and negotiated separate hospital reimbursement rates, hospital and health system executives have recognized even less control of their Medicare reimbursement. One way for health systems to regain control of the Medicare dollar is to develop a Medicare risk contract that directly receives and distributes the Medicare risk premium. Before hospital and health system executives invest in the start-up and operational capital necessary to bid for a risk contract, careful analysis of the efficacy of the contract's contribution to the margin should be undertaken. The following will review observations and lessons from HMO Medicare risk contracting and introduce a methodology that health system executives can use to evaluate the annual financial impact of entering the business of direct Medicare risk contracting.     

Voluntary partial capitation: the Community Nursing Organization Medicare demonstration

In a recently concluded Medicare demonstration, Community Nursing Organizations (CNOs) received capitated payment to provide a subset of Medicare services through a nursing case management delivery system. Demonstration participation was voluntary, both for CNOs and recruited beneficiaries, raising several challenging issues associated with selection. We investigate provider and beneficiary selection, as well as Medicare costs, using multiple evaluation methodologies. We find that CNO enrollment is associated with increased payment by Medicare for CNO-covered services. Results showing CNO enrollees to be more costly to Medicare for non-CNO services are consistent with cost shifting, but could also be accounted for by biased provider selection into the demonstration.     

Coming to a theater near you: Recovery Audit Contract Initiative

This article describes the expansion of a Medicare demonstration project called the Recovery Audit Contractor Initiative. The goal of this initiative is to identify overpayments by Medicare intermediaries and payors, and return the money to the Medicare program. The initial demonstration project, in Florida, California, and New York, recovered significant monies for Medicare. Medicare hires private contractors that select claims to review based on data analysis. The contractors are paid on a percentage-of-collections basis. Congress has mandated that the program be expanded to all states by 2010.     

Medicare cost controls and program compliance: the rationale of physician claims edits

This article attempts to demystify and create a context for the enactment of several Medicare cost control and compliance systems for physician reimbursement. The focus is on claims "edits" and Medicare compliance. Portions of Medicare, including health care provider reimbursement, remain fee-for-service programs that can be easily defrauded. To protect the Trust, the Centers for Medicare and Medicaid Services (CMS) has taken a multi-pronged approach, using program administration, enforcement, and rules-based claims editing systems. The Evaluation and Management codes, the Correct Coding Initiative (CCI), and medical necessity rules are claims edits that affect procedure codes. The Medicare program has a complicated system of billing procedures and an apparatus to enforce them. A solid compliance plan must incorporate proper claims editing, because consistent incorrect Medicare billing can be considered abuse. Many resources are available to aid physicians, including computerized tools, new CMS initiatives, and Internet materials.     

Prospective per diem rates for skilled nursing care

On July 1, 1998, Medicare's cost-related reimbursement method for skilled nursing facility care was replaced with a prospective payment system that includes a case-mix adjustment based on the Resource Utilization Groups to which Medicare residents are assigned. Shortly thereafter, Congress modified the new system in response to the industry's complaints about low payment rates. The new system aims to align Medicare payments more closely with the costs facility's incur in serving Medicare residents and slow Medicare spending growth. Recent rate increases have reduced the new system's ability to trim Medicare outlays.