Payment Policy and Inefficient Benefits in the Medicare+Choice Program

We investigated whether constraints on premium rebates by health plans in the Medicare+Choice program result in inefficient benefits. Since relationships between revenue and benefits could be confounded by unobserved variation in the cost of coverage, we took advantage of a natural experiment that occurred following passage of the Benefits Improvement and Protection Act of 2000. Our findings indicate that benefits in zero premium plans were more sensitive to changes in payment rates than were benefits in plans that charged nonzero premiums. These results strongly suggest that current Medicare policy induces plans to offer benefits that are not valued by enrollees at or above their cost.     

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.     

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.     

A tale of four cities: Medicare reform and competitive pricing

The current payment system for Medicare + Choice (M + C) plans is based on prices calculated from administrative records. This system has been criticized as arbitrary, inefficient, and unfair. Most Medicare reform proposals would replace the current payment system with some form of competitive pricing. However, efforts over the past five years to demonstrate competitive pricing for M + C plans have been blocked repeatedly by Congress, even when the demonstrations were directly responsive to a congressional mandate. In the absence of political support, a demonstration of competitive pricing may be infeasible, and Congress could be forced to take the risky step of implementing broad Medicare reforms with very little information about their effects.     

家庭医生签约背景下竞争机制引入对医生行为影响的实验研究

目的：检验支付方式结合竞争“双机制”对医生行为的影响,为家庭医生签约制度的完善提供实验经济学证据。方法：通过受控实验研究,设计非竞争和竞争场景,结合按人头付费(CAP)和按项目付费(FFS)支付方式,开展实验经济学研究。利用随机效应模型分析竞争机制对医疗服务数量和患者健康效益的影响;通过费舍尔组合检验,探讨不同支付方式引入竞争机制对医生行为影响的差异。结果：竞争机制引入后会减少CAP(FFS)支付方式下服务量供给不足(供给过度)的程度。对于健康状况差(好)的患者,竞争机制在CAP(FFS)支付方式下对医生行为改变程度更大。竞争机制组间系数比较显示,相比于FFS,“CAP+竞争机制”患者健康效益损失更少。在竞争转为不竞争场景下医生提供服务量与患者健康效益最优服务量的偏移程度增加。结论：引入竞争机制可以改善家庭医生医疗服务质量,按人头付费结合竞争的双机制设计具有一定的优势。     

Competitive bidding in Medicare Advantage: Effect of benchmark changes on plan bids

Bidding has been proposed to replace or complement the administered prices that Medicare pays to hospitals and health plans. In 2006, the Medicare Advantage program implemented a competitive bidding system to determine plan payments. In perfectly competitive models, plans bid their costs and thus bids are insensitive to the benchmark. Under many other models of competition, bids respond to changes in the benchmark. We conceptualize the bidding system and use an instrumental variable approach to study the effect of benchmark changes on bids. We use 2006–2010 plan payment data from the Centers for Medicare and Medicaid Services, published county benchmarks, actual realized fee-for-service costs, and Medicare Advantage enrollment. We find that a $1 increase in the benchmark leads to about a $0.53 increase in bids, suggesting that plans in the Medicare Advantage market have meaningful market power.     

Complex Medicare advantage choices may overwhelm seniors--especially those with impaired decision making

The proliferation of Medicare Advantage plans has given Medicare enrollees more choices, but these could be overwhelming for some, especially for those with impaired decision-making capabilities. We analyzed national survey data and linked Medicare enrollment data for the period 2004-07 to examine the effects on enrollment of expanded choices and benefits in the Medicare Advantage program. The availability of more plan options was associated with increased enrollment in Medicare Advantage when elderly Medicare beneficiaries chose from a limited number of plans-for example, fewer than fifteen plans. Enrollment was unchanged or decreased in Medicare Advantage when beneficiaries chose from larger numbers of plans-for example, fifteen to thirty, or more than thirty. Elderly adults with low cognitive function were less responsive to the generosity of available benefits than those with high cognitive function when choosing between traditional Medicare and Medicare Advantage. Simplifying choices in Medicare Advantage could improve beneficiaries' enrollment decisions, strengthen value-based competition among plans, and extend the benefits of choice to seniors with impaired cognition. It could also lower their out-of-pocket costs.     

Effects of Medicare payment reform: Evidence from the home health interim and prospective payment systems

Medicare continues to implement payment reforms that shift reimbursement from fee-for-service toward episode-based payment, affecting average and marginal payment. We contrast the effects of two reforms for home health agencies. The home health interim payment system in 1997 lowered both types of payment; our conceptual model predicts a decline in the likelihood of use and costs, both of which we find. The home health prospective payment system in 2000 raised average but lowered marginal payment with theoretically ambiguous effects; we find a modest increase in use and costs. We find little substantive effect of either policy on readmissions or mortality.     

How Medicare could use comparative effectiveness research in deciding on new coverage and reimbursement

Medicare must find new ways to achieve cost control without limiting access to beneficial services. We propose a payment model incorporating comparative effectiveness research to encourage Medicare to pay equally for services that provide comparable patient outcomes. The model would include higher payments for services demonstrated by adequate evidence to provide superior health benefits compared to alternative options. New services without such evidence would receive usual reimbursement rates for a limited time but then be reevaluated as evidence emerged. In spite of the substantial political hurdles to changing Medicare reimbursement, efforts should be made to use comparative effectiveness research to reward superior services, improve incentives for cost-effective innovation, and place Medicare on a more sustainable financial footing.     

Experience with Medicare's new technology add-on payment program

We describe the new technology add-on payment (NTAP) program used by the Centers for Medicare and Medicaid Services (CMS) to provide additional payment for breakthrough technologies in the Medicare hospital inpatient prospective payment system (IPPS). We also evaluate spending under the program. Our findings suggest that the criteria established by the CMS to limit qualifying technologies, combined with an improvement in overall payment adequacy for the new technologies that qualify for NTAPs, may represent important steps toward improving value in Medicare.     

Risk-adjustment system for the Medicare capitated ESRD program

Medicare is the principal payer for medical services for those in the U.S. population suffering from end-stage renal disease (ESRD). By law, beneficiaries diagnosed with ESRD may not subsequently enroll in Medicare Advantage (MA) plans, however, the potential benefits of managed care for this population have stimulated interest in changing the law and developing demonstration plans. We describe a new risk-adjustment system developed for Medicare to pay for ESRD beneficiaries in managed care plans. The model improves on current payment methodology by adjusting payments for treatment status and comorbidities.     

Modeling the impact of Medicare Advantage payment cuts on ambulatory care sensitive and elective hospitalizations

Objective. To assess relationships between changes in Medicare Advantage (MA) payment rates and Medicare beneficiary hospitalizations and to simulate the effects of scheduled payment cuts on ambulatory care sensitive (ACS) and elective hospitalization rates. Data. State Inpatient Database discharge abstracts from Arizona, Florida, and New York merged with administrative Medicare enrollment and MA payment data. Study Design. Retrospective, fixed effect regression analysis of the relationship between MA payment rates and rates of ACS and elective hospitalizations among Medicare beneficiaries in counties with at least 10,000 Medicare beneficiaries and 3 percent MA penetration from 1999 to 2005. Principal Findings. MA payment rates were negatively related to rates of ACS admissions. Simulations suggest that payment cuts could be associated with higher rates of ACS admissions. No relationship between MA payments and rates of elective hospitalizations was found. Conclusions. Reductions in MA payment rates may result in a small increase in ACS admissions. Trends in ACS admissions among chronically ill Medicare beneficiaries should be tracked following MA payment cuts.     

Medicare Payment Reform and Provider Entry and Exit in the Post‐Acute Care Market

Objective

To understand the impacts of Medicare payment reform on the entry and exit of post-acute providers.

Data Sources

Medicare Provider of Services data, Cost Reports, and Census data from 1991 through 2010.

Study Design

We examined market-level changes in entry and exit after payment reforms relative to a preexisting time trend. We also compared changes in high Medicare share markets relative to lower Medicare share markets and for freestanding relative to hospital-based facilities.

Data Extraction Methods

We calculated market-level entry, exit, and total stock of home health agencies, skilled nursing facilities, and inpatient rehabilitation facilities from Provider of Services files between 1992 and 2010. We linked these measures with demographic information from the Census and American Community Survey, information on Certificate of Need laws, and Medicare share of facilities in each market drawn from Cost Report data.

Principal Findings

Payment reforms reducing average and marginal payments reduced entries and increased exits from the market. Entry effects were larger and more persistent than exit effects. Entry and exit rates fluctuated more for home health agencies than skilled nursing facilities. Effects on number of providers were consistent with entry and exit effects.

Conclusions

Payment reform affects market entry and exit, which in turn may affect market structure, access to care, quality and cost of care, and patient outcomes. Policy makers should consider potential impacts of payment reforms on post-acute care market structure when implementing these reforms.Provisions in the Affordable Care Act represent an important restructuring of payment for health care providers. Accountable care organizations and “bundled” payments for acute and post-acute care create incentives for coordinating and reorganizing the delivery of health care by changing provider payment for an episode of care, where care during an episode can be provided across multiple settings. These reforms affect both the average payment received by providers for an episode of care and the “marginal” or additional payment received for the provision of additional services during the episode. These latest policies are a continuation of earlier reforms implementing prospective payment systems for acute care (1983) and post-acute care (1997–2003) that replaced prior cost-based systems of payment. As now, the earlier reforms were conceived to reduce unnecessary utilization, and considerable research has studied how these policies affected health care costs and patient outcomes (e.g., McKnight 2006; Sood, Buntin, and Escarce 2008; Grabowski, Afendulis, and McGuire 2011).Payment reforms impact providers'' profitability and financial risks through changes in both the overall level of payment and the marginal payment for additional services. Consequently, payment reform may impact provider entry and exit, market concentration, and providers'' organizational structure (e.g., vertical integration). Such changes may have important consequences for provider competition, access to care, and patient choice. While prior research has considered the impact of specific reforms on entry and exit, there is limited evidence of how the design of payment systems more generally affects market structure. In this article, we use a series of Medicare payment reforms for post-acute care providers to investigate how payment system design affects provider entry and exit, and the implications for market structure.     

The costs of decedents in the Medicare program: implications for payments to Medicare + Choice plans

OBJECTIVE: To discuss and quantify the incentives that Medicare managed care plans have to avoid (through selective enrollment or disenrollment) people who are at risk for very high costs, focusing on Medicare beneficiaries in the last year of life-a group that accounts for more than one-quarter of Medicare's annual expenditures. DATA SOURCE: Medicare administrative claims for 1994 and 1995. STUDY DESIGN: We calculated the payment a plan would have received under three risk-adjustment systems for each beneficiary in our 1995 sample based on his or her age, gender, county of residence, original reason for Medicare entitlement, and principal inpatient diagnoses received during any hospital stays in 1994. We compared these amounts to the actual costs incurred by those beneficiaries. We then looked for clinical categories that were predictive of costs, including costs in a beneficiary's last year of life, not accounted for by the risk adjusters. DATA EXTRACTION METHODS: The analyses were conducted using claims for a 5 percent random sample of Medicare beneficiaries who died in 1995 and a matched group of survivors. PRINCIPAL FINDINGS: Medicare is currently implementing the Principal Inpatient Diagnostic Cost Groups (PIP-DCG) risk adjustment payment system to address the problem of risk selection in the Medicare+Choice program. We quantify the strong financial disincentives to enroll terminally ill beneficiaries that plans still have under this risk adjustment system. We also show that up to one-third of the selection observed between Medicare HMOs and the traditional fee-for-service system could be due to differential enrollment of decedents. A risk adjustment system that incorporated more of the available diagnostic information would attenuate this disincentive; however, plans could still use clinical information (not included in the risk adjustment scheme) to identify beneficiaries whose expected costs exceed expected payments. CONCLUSIONS: More disaggregated prospective risk adjustment methods and alternative payment systems that compensate plans for delivering care to certain classes of patients should be considered to ensure access to high-quality managed care for all beneficiaries.     

Issues regarding health plan payments under Medicare and recommendations for reform.

The failures of the market for current Medicare health plans include poor information and price distortions and can be attributed to government policy. Reforms that could improve its structure are annual open enrollment periods, premium rebates from health management organizations (HMOs) to members, and termination of the federal government's subsidy of Medicare supplementary insurance. However, the price for a basic Medicare benefits package would still be distorted because Medicare bases its contribution on the cost of a comparable package in the fee-for-service (FFS) sector rather than on the cost of the most efficient plan available to beneficiaries in each market area. The present Medicare HMO program almost certainly increases total Medicare costs and actually discourages HMO growth by shielding beneficiaries from the true price difference between basic benefits in the HMO and FFS sectors. Lacking payment reforms, the Medicare HMO program should be terminated.     

Kaiser-Permanente's Medicare Plus Project: a successful Medicare prospective payment demonstration.

The Medicare Plus project of the Oregon Region Kaiser-Permanente Medical Care Program was designed as a model for prospective payment to increase Health Maintenance Organization (HMO) participation in the Medicare program. The project demonstrated that it is possible to design a prospective payment system that costs the Medicare program less than services purchased in the community from fee-for-service providers; would provide appropriate payment to the HMO; and in addition, creates a "savings" to return to beneficiaries in the form of comprehensive benefits to motivate them to enroll in the HMO. Medicare Plus was highly successful in recruiting 5,500 new and 1,800 conversion members into the demonstration, through use of a media campaign, a recruitment brochure, and a telephone information center. Members recruited were a representative age and geographic cross section of the senior citizen population in the Portland, Oregon metropolitan area. Utilization of inpatient services by Medicare Plus members in the first full year (1981) was 1679 days per thousand members and decreased to 1607 in the second full year (1982). New members made an average of eight visits per year to ambulatory care facilities.     

Reimagining Financing and Payment of Long-Term Care

The COVID-19 pandemic revealed fundamental problems with the structure of long-term care financing and payment in the United States. The piecemeal system that exists suffers from several key problems, including underfunding, fragmentation across types and sites of care, and substantial variation in payment across states and populations. These problems result in inefficient allocation of resources, limited access to care, substandard quality, and inequities in both access and quality. We propose a new federal benefit for long-term care, most likely as part of the Medicare program. Essential features of this benefit include taxpayer subsidies, along the lines of other Medicare benefits, and coverage across the range of long-term care services, including both residential and home- and community-based care. A new federal benefit has the most potential to break down administrative barriers and improve resource allocation, to ensure adequate payment rates across all states, to expand access to care by spreading risk across the entire Medicare population, and to improve equity by extending coverage to all Medicare beneficiaries who want it. A new federal benefit is politically challenging, requiring bold action by Congress, and entails the risks of administrative challenges and unintended consequences. However, in this case, retaining the status quo remains the far greater risk.     

Medicare payment changes and nursing home quality: effects on long-stay residents

The Balanced Budget Act of 1997 dramatically changed the way that Medicare pays skilled nursing facilities, providing a natural experiment in nursing home behavior. Medicare payment policy (directed at short-stay residents) may have affected outcomes for long-stay, chronic-care residents if services for these residents were subsidized through cost-shifting prior to implementation of Medicare prospective payment for nursing homes. We link changes in both the form and level of Medicare payment at the facility level with changes in resident-level quality, as represented by pressure sores and urinary tract infections in Minimum Data Set (MDS) assessments. Results show that long-stay residents experienced increased adverse outcomes with the elimination of Medicare cost reimbursement.     

M+C plan county exit decisions 1999-2001: implications for payment policy

The primary legislative response to diminishing private plan participation in the Medicare+Choice (M+C) program since 1999 has been substantial payment increases. Analysis of M+C decisions to continue serving or drop counties from 1999-2000 and 2000-2001 reveals that payment amounts, although important, did not have a consistent impact on these decisions. Plan decisions varied depending on the year and the intention to continue participating in M+C at all. Simulations show that M+C plans were better off, on average, with the payment methodology imposed by the Balanced Budget Act (BBA) of 1997 than under the previous payment system and that large payment increases would increase plan retention.