Physician payments under health care reform

This study examines the impact of major health insurance reform on payments made in the health care sector. We study the prices of services paid to physicians in the privately insured market during the Massachusetts health care reform. The reform increased the number of insured individuals as well as introduced an online marketplace where insurers compete. We estimate that, over the reform period, physician payments increased at least 11 percentage points relative to control areas. Payment increases began around the time legislation passed the House and Senate—the period in which their was a high probability of the bill eventually becoming law. This result is consistent with fixed-duration payment contracts being negotiated in anticipation of future demand and competition.     

Medicaid physician payment reform: using the Medicare Fee Schedule for Medicaid payments.

OBJECTIVES. The purpose of this article is to provide estimates of the costs of basing Medicaid physician payment levels on the new resource-based Medicare Fee Schedule. Two possible policy options are considered: setting all Medicaid physician fees at the Medicare Fee Schedule level and setting only office visit fees at the new Medicare levels. METHODS. Data on Medicaid physician fees, use patterns, and the Medicare Fee Schedule are used to develop state-level estimates of expenditure changes under each option. RESULTS. Setting Medicaid rates at the Medicare Fee Schedule level could increase expenditures by $3.2 to $4.1 billion nationally; the other option would result in substantially lower increases in expenditures. Because of the current variations in Medicaid physician fees and in the breadth of eligibility across states, the cost of adopting the Medicare Fee Schedule varies considerably among states. CONCLUSIONS. Adopting the new Medicare Fee Schedule for Medicaid payments, proposed by policy-makers as a way to increase access to appropriate medical care, could double physician expenditures in some states. Adoption of more limited versions of the fee schedule might achieve some access gains at lower costs.     

Alternative geographic configurations for Medicare payments to health maintenance organizations

Under prevailing legislation, Medicare payments to health maintenance organizations (HMOs) are based upon projected fee-for-service reimbursement levels for enrollees' county of residence. These rates have been criticized in light of substantial variations in rates among neighboring counties and large fluctuations in rates over time. In this study, the use of nine alternative configurations and the county itself were evaluated on the basis of payment-area homogeneity, payment rate stability, and policy criteria, including the fiscal impacts of reconfiguration on HMOs. The results revealed rather modest differences among most alternative configurations and do not lend strong support for payment area reconfiguration at this time.     

Extreme under and overcompensation in morbidity-based health plan payments: The case of Switzerland

In 2020, the Swiss insurer payment model will include a set of sophisticated morbidity indicators in the form of Pharmaceutical Cost Groups (PCGs), added to a payment model currently largely based on age, gender, and a crude morbidity indicator. Adding powerful risk adjustors reduces underpayment for previously highly underpaid groups but creates a new group of the highly overpaid. We characterize the diseases and patterns of health care spending in most extremely under and overpaid in the new Swiss payment model. We define extremely under and overpaid to be those in the top and bottom 1 and .1 percentiles of the distribution of spending less payment, respectively. The under and overpaid share some of the same health conditions, among them kidney disease. The highly underpaid account for a massively disproportionate share of the unexplained variance in the new payment model. Membership in the tails of the distribution of spending residuals after risk adjustment is persistent, implying that the highly over and underpaid merit special attention in design of insurer payment models.     

Using prior utilization to determine payments for Medicare enrollees in health maintenance organizations.

The Tax Equity and Fiscal Responsibility Act of 1982 is expected to make it more attractive for health maintenance organizations (HMO's) to participate in the Medicare program on an at-risk basis. Currently, payments to at-risk HMO's are based on a formula known as the adjusted average per capita cost (AAPCC). This article describes the current formula and discusses a modification, based on prior use of Medicare services, that endeavors to more accurately predict risk. Using statistical simulations, formulas incorporating prior use performed better for some types of biased groups than a formula similar to the one currently employed. Major concerns involve the ability to "game the system." The prior-use model is now being tested in an HMO demonstration. This article also outlines the limitations of a prior-use model and areas for future research.     

Informal payments in transitional economies: implications for health sector reform

Since the collapse of the Soviet Union increasing evidence is emerging of informal payments by patients for health care services that are officially free. There is little information, however, on the characteristics of these payments and the effect that they have on health care reform initiatives. This paper examines these issues and concludes that the endemic and complex nature of such payments suggests that a range of policy tools are necessary to address the negative features of informal payments in those countries undergoing transition.     

Diagnosis-based risk adjustment for Medicare capitation payments

Using 1991-92 data for a 5-percent Medicare sample, we develop, estimate, and evaluate risk-adjustment models that utilize diagnostic information from both inpatient and ambulatory claims to adjust payments for aged and disabled Medicare enrollees. Hierarchical coexisting conditions (HCC) models achieve greater explanatory power than diagnostic cost group (DCG) models by taking account of multiple coexisting medical conditions. Prospective models predict average costs of individuals with chronic conditions nearly as well as concurrent models. All models predict medical costs far more accurately than the current health maintenance organization (HMO) payment formula.