Malpractice litigation and medical costs in Mississippi

This paper examines the impact of varying levels of malpractice litigation on area medical costs. Using a fixed-effects model and Medicare Part B as the dependent variable, the results indicate that per enrollee medical expenditures are positively related to the incidence of medical malpractice lawsuits. The higher cost is presumed to be attributable to 'defensive practices' by area physicians based on varying degrees of perceived risk. The results suggest the addition to cost is substantial, possibly adding up to 25% in some jurisdictions with the impact exceeding annual dollar amounts of malpractice judgments and settlements.     

Trends in Medicare Part B mental health utilization and expenditures: 1987-92

This article examines the impact of expanding Medicare Part B coverage of mental health services, based on analysis of 6 years of Medicare Part B claims data (1987-92). Inflation-adjusted per capita spending more than doubled (from $9.91 to $21.63) following the elimination of the annual outpatient treatment limit and extension of direct reimbursement to clinical psychologists and social workers. There was a 73-percent increase in the user rate (from 23.25 to 40.20 per 1,000 Medicare beneficiaries), and a 27-percent increase in the average number of services per user (from 8.9 to 11.3). Mental health spending increased from 1 percent to 2 percent of expenditures for Part B professional services. Ongoing monitoring of mental health utilization is desirable to ensure that recent access gains are not eroded with the increasing shift to managed care and implementation of gatekeeper mechanisms.     

Analysis of underwriting factors for AAPCC (adjusted average per capita cost)

The adjusted average per capita cost (AAPCC) formula is used to determine payment to health maintenance organizations (HMOs) by Medicare. The four original underwriting factors (i.e., age, sex, institutional status, and welfare status) for the AAPCC were calibrated from the Current Medicare Surveys for 1974-76. Those factors have been updated by various actuarial adjustments. Revised calculations of the AAPCC underwriting factors are presented using survey data from the 1984 National Long-Term Care Survey and expenditure data from the Medicare Part A and Part B bill files. Also examined is the effect on the underwriting factors of chronic functional disability, defined as having one or more chronic limitations in activities of daily living. Comparison of alternative underwriting factors is conducted by simulating the dollar impact on payment to HMOs for select enrollee populations.     

State variations in Medicare expenditures.

OBJECTIVES: This study examined variations in Medicare expenditures across states. METHODS: 1992 data on average Medicare expenditures per enrollee, users of services per 1000 enrollees, service use per user, and payment per unit of service were compared across states for various services. Weighted least squares regression analysis was employed to examine total Medicare expenditures per enrollee by state. RESULTS: Variation in Medicare expenditures across states is driven more by average number of service users per 1000 enrollees and average service units per user than by average payment per service unit. Medicare expenditures per enrollee by state are primarily a function of Medicare HMO penetration rate (P = .000), urban area (P = .001), hospital bed supply (P = .005), elderly mortality rate (P = .012), Medicare physician assignment rate (P = .026), percentage of primary care practitioners (P = .042), and interactions between urban elderly and percentage of primary care physicians (P = .005) and Black elderly and nursing home bed supply (P = .012). CONCLUSIONS: Before sweeping Medicare cuts are undertaken or excessive reliance on managed care occurs, attention should be focused on the current disproportionate distribution of expenditures across states.     

An approach to forecasting health expenditures,with application to the U.S. Medicare system

OBJECTIVE: To quantify uncertainty in forecasts of health expenditures. STUDY DESIGN: Stochastic time series models are estimated for historical variations in fertility, mortality, and health spending per capita in the United States, and used to generate stochastic simulations of the growth of Medicare expenditures. Individual health spending is modeled to depend on the number of years until death. DATA SOURCES/STUDY SETTING: A simple accounting model is developed for forecasting health expenditures, using the U.S. Medicare system as an example. PRINCIPAL FINDINGS: Medicare expenditures are projected to rise from 2.2 percent of GDP (gross domestic product) to about 8 percent of GDP by 2075. This increase is due in equal measure to increasing health spending per beneficiary and to population aging. The traditional projection method constructs high, medium, and low scenarios to assess uncertainty, an approach that has many problems. Using stochastic forecasting, we find a 95 percent probability that Medicare spending in 2075 will fall between 4 percent and 18 percent of GDP, indicating a wide band of uncertainty. Although there is substantial uncertainty about future mortality decline, it contributed little to uncertainty about future Medicare spending, since lower mortality both raises the number of elderly, tending to raise spending, and is associated with improved health of the elderly, tending to reduce spending. Uncertainty about fertility, by contrast, leads to great uncertainty about the future size of the labor force, and therefore adds importantly to uncertainty about the health-share of GDP. In the shorter term, the major source of uncertainty is health spending per capita. CONCLUSIONS: History is a valuable guide for quantifying our uncertainty about future health expenditures. The probabilistic model we present has several advantages over the high-low scenario approach to forecasting. It indicates great uncertainty about future Medicare expenditures relative to GDP.     

Options for change under Medicare: impact of a cap on catastrophic illness expense.

This study analyzes the total deductibles and coinsurance Medicare beneficiaries accrued in 1980. The study shows that Part B services accounted for 70 percent of all liability and Part A for 30 percent. Only 21 percent of enrollees exceeded $270 in liability from Part A and Part B combined. In 1980, if every enrollee had paid a surcharge of about $70, all liability over $270 could have been capped--without any additional program outlays. Similarly, projections for 1984 indicate that a surcharge of $98 could cap all liability over $800. For Part B alone, a surcharge of $113 could cover all liability over $200.     

Medicare payment cuts for osteoporosis testing reduced use despite tests' benefit in reducing fractures

Bone imaging known as DXA ("dexa")-dual energy x-ray absorptiometry of the central skeleton--is considered the "gold standard" test for osteoporosis, which affects more than fifty million Americans. The tests are associated with improved clinical outcomes through preventing bone fractures. Cuts in Medicare Part B reimbursement for the provision of this preventive imaging in a physician's office began in 2007 and reached 56 percent below the 2006 level in January 2010. To encourage the use of DXA testing, the Affordable Care Act of 2010 provided partial relief from the cuts for two years (2010-11). Our study found that after a decade of growth, DXA testing in all Part B settings plateaued in 2007-09, resulting in 800,000 fewer tests than expected for Medicare beneficiaries--tests that might have prevented approximately 12,000 fractures. Testing declined in 2010, when the start of reimbursement relief under the Affordable Care Act was delayed, and increased outpatient testing failed to offset reduced use in physician offices. Our findings strongly suggest that the payment cuts reduced beneficiary access and that the tests were underused by elderly female Medicare beneficiaries despite strong association with fracture prevention. We recommend that Congress extend the payment relief granted under the Affordable Care Act for at least another two years.     

Incorporating Added Therapeutic Benefit and Domestic Reference Pricing Into Medicare Payment for Expensive Part B Drugs

ObjectivesIdentify expensive Part B drugs and evidence for each drug’s added benefit and model a reimbursement policy for Medicare that integrates added benefit assessment and domestic reference pricing.MethodsA retrospective analysis using a 20% nationally representative sample of 2015 to 2019 traditional Medicare Part B claims. Expensive drugs were defined as having average annual spending per beneficiary exceeding the average annual social security benefit ($17 532 in 2019). For expensive drugs identified in 2019, added benefit assessments conducted by the French Haute Autorité de Santé were collected. For expensive drugs with a low added benefit rating, comparator drugs were identified in French Haute Autorité de Santé reports. For each comparator, average annual spending per beneficiary in Part B was computed. Potential savings from 2 reference pricing scenarios were calculated: reimbursing expensive Part B drugs with low added benefit at the level of each drug's (1) lowest cost comparator and (2) beneficiary-weighted-average cost of all comparators.ResultsThe number of expensive Part B drugs grew from 56 in 2015 to 92 in 2019. Of the 92 expensive drugs in 2019, 34 offer low added benefit. Implementing reference pricing for these expensive drugs with low added benefit could have saved an estimated $2.1 billion if prices were set based on spending for their lowest cost comparator, or $1 billion if prices were set based on the weighted average of spending for comparators.ConclusionReference pricing based on added benefit assessment could be used to address the launch prices for expensive Part B drugs with low added benefit.     

Factors affecting differences in Medicare reimbursements for physicians' services.

Under Medicare's Part B program, wide variations are found in average reimbursements for physicians' services by demographic and geographic characteristics of the beneficiaries. Average reimbursements per beneficiary enrolled in the program depend upon the percentage of enrolled persons who exceed the deductible and receive reimbursements, the average allowed charge per service, and the number of services used. This study analyzes differences in average reimbursements per beneficiary for physicians' services in 1975 and discusses allowed charges and use factors that affect average reimbursements. Differences in the level of allowed charges and their impact on meeting the annual deductible are also discussed. The study indicates that average reimbursements per beneficiary are likely to continue to vary significantly year after year under the present Part B cost-sharing and reimbursement mechanisms.     

Medicare Part B reimbursement and the perceived quality of physician care

The maximum amount physicians can charge Medicare patients for Part B services depends on Medicare reimbursement rates and on federal and state restrictions regarding balance billing. This study evaluates whether Part B payment rates, state restrictions on balance billing beyond the federal limit, and physician balance billing influence how beneficiaries rate the quality of their doctor’s care. Using nationally representative data from the 2001 to 2003 Medicare Current Beneficiary Survey, this paper finds strong evidence that Medicare reimbursement rates, and state balance billing restrictions influence a wide range of perceived care quality measures. Lower Medicare reimbursement and restrictions on physicians’ ability to balance bill significantly reduce the perceived quality of care under Part B.     

Health spending rebound continues in 2002

U.S. health care spending climbed to dollars 1.6 trillion in 2002, or dollars 5,440 per person. Health spending rose 8.5 percent in 2001 and 9.3 percent in 2002, contributing to a spike of 1.6 percentage points in the health share of gross domestic product (GDP) since 2000. Hospital spending accounted for nearly a third of the aggregate increase. During the past three decades, per enrollee spending for a common benefit package has grown at a slightly slower average annual rate for Medicare than for private health insurance, with more pronounced growth differences recently reflecting legislated Medicare reimbursement changes and consumers' calls for more loosely managed care.     

Illustrating Potential Efficiency Gains from Using Cost-Effectiveness Evidence to Reallocate Medicare Expenditures

ObjectivesThe Centers for Medicare & Medicaid Services does not explicitly use cost-effectiveness information in national coverage determinations. The objective of this study was to illustrate potential efficiency gains from reallocating Medicare expenditures by using cost-effectiveness information, and the consequences for health gains among Medicare beneficiaries.MethodsWe included national coverage determinations from 1999 through 2007. Estimates of cost-effectiveness were identified through a literature review. For coverage decisions with an associated cost-effectiveness estimate, we estimated utilization and size of the “unserved” eligible population by using a Medicare claims database (2007) and diagnostic and reimbursement codes. Technology costs originated from the cost-effectiveness literature or were estimated by using reimbursement codes. We illustrated potential aggregate health gains from increasing utilization of dominant interventions (i.e., cost saving and health increasing) and from reallocating expenditures by decreasing investment in cost-ineffective interventions and increasing investment in relatively cost-effective interventions.ResultsComplete information was available for 36 interventions. Increasing investment in dominant interventions alone led to an increase of 270,000 quality-adjusted life-years (QALYs) and savings of $12.9 billion. Reallocation of a broader array of interventions yielded an additional 1.8 million QALYs, approximately 0.17 QALYs per affected Medicare beneficiary. Compared with the distribution of resources prior to reallocation, following reallocation a greater proportion was directed to oncology, diagnostic imaging/tests, and the most prevalent diseases. A smaller proportion of resources went to cardiology, treatments (including drugs, surgeries, and medical devices, as opposed to nontreatments such as preventive services), and the least prevalent diseases.ConclusionsUsing cost-effectiveness information has the potential to increase the aggregate health of Medicare beneficiaries while maintaining existing spending levels.     

Medicare preferred provider organization demonstration: plan offerings and beneficiary enrollment

As preferred provider organizations (PPOs) become the dominant model of managed health care in the private sector, policymakers have increasingly viewed PPOs as an attractive option for Medicare. In part to understand how PPOs might operate under the Medicare Program, CMS launched the Medicare PPO demonstration in January 2003. In this article, we examine how PPOs have operated so far under the demonstration, including PPO availability and market entry; premiums, benefits, and beneficiary cost sharing; and enrollment, market share, enrollee characteristics, and disenrollment to date.     

Out-of-plan use by Medicare enrollees in a risk-sharing health maintenance organization.

In this study, we analyzed the cost and volume effects of a waiver that eliminated lock-in restrictions on out-of-plan use in a health maintenance organization (HMO) with a Medicare risk-sharing contract. We compared out-of-plan cost and number of claims during a 15-month base line period when the lock-in was in effect, with a 24-month waiver period when the lock-in was removed. The results demonstrate that average per capita cost and claims increased significantly for both Medicare Part A (hospital insurance) and Part B (supplementary medical insurance) out-of-plan services during the waiver. Self-referred out-of-plan use normally prohibited by lock-in, accounted for 20 percent of all out-of-plan costs during the waiver and 57 percent of the increase in out-of-plan costs from the lock-in to the waiver. The combination of risk-sharing and lock-in provisions holds promise as a method for reducing expenditures for the Medicare program.     

Equal treatment and unequal benefits: a re-examination of the use of Medicare services by race, 1967-1976.

In the early years of the Medicare program, proportionally more whites than non-whites among the aged used Medicare services. This article examines the use and reimbursement of Medicare services by the aged between 1967 and 1976 to determine if racial differences still exist. To do so, three measures are studied. The first, the number of persons reimbursed for Medicare service per 1,000 enrollees, measures access to Medicare's reimbursement system. The second, reimbursement per person using reimbursed services, measures the amount of reimbursement received after persons exceed Medicare deductibles. The third, reimbursement per enrollee, indicates the combined effect of access and reimbursement and represents a measure of equity for the population at risk. Analysis of the three measures by type of Medicare service found that the disparities in use and reimbursement of services by race decreased considerably between 1967 and 1976. This trend was found both at the national and at the regional level. Overall, the decreases in the disparity measured are note-worthy. By type of service, proportionally more whites than non-whites still receive reimbursement. However, once non-whites exceed deductibles, the reimbursements per person using reimbursed services are generally comparable or higher than reimbursement to whites.     

Epidemiology of end stage renal disease and implications for public policy

In 1972 the Congress extended Medicare coverage to all persons under age 65 suffering from end stage renal disease (ESRD). The intent of this law (PL 92-603, the Social Security Amendments of 1972) was to allow all Americans access to an emerging and very expensive technology, regardless of their ability to pay. The legislation had an immediate and dramatic impact on the population receiving dialysis. Prior to the passage of the legislation the dialysis population was white, educated, young, married, employed, and male. Within 4 years after implementation of the law, the dialysis population was more than one-third nonwhite, less well educated, significantly older, and about half female--making it more representative of the population as a whole. During consideration of this legislation the dialysis population was expected to increase from 5,000 to 7,000 patients and cost $135 million in the first year. Actually, in the first year of the program, there were 10,300 patients and the cost was $241 million. Today, while patients with ESRD represent only 0.25 percent of Medicare beneficiaries, they consume approximately 10 percent of the Medicare Part B budget. The humanitarian goals of the legislation have been met, but the costs of this program continue to rise as enrollment continues to grow. It is hoped that, through research and reimbursement policies, the per capita costs can be controlled and total costs can be reduced by shifts in treatment patterns and improvement in successful transplantation rates. There will, however, continue to be demands on our health care financing system to include reimbursement for new therapeutic modalities such as artificial hearts and heart and liver transplants.The lesson from the ESRD Program is that sound decisions require accurate epidemiologic data and cost projections.It is a challenge not easily met.     

Cost differences between hospice and nonhospice care. A comparison of insurer payments and provider charges.

Although it has been postulated that hospice care savings are "biased" when costs are measured in terms of insurer payments instead of provider charges, this claim has not been documented by research. This article examines cost differences between hospice and nonhospice care, first, by analyzing Medicare Part A payments and, second, by studying provider charges for services rendered to a population of 24 cancer patients during their last 24 weeks of life. The exploratory results of the study showed that although the cost savings derived from analyzing provider charges were about double those based on Medicare Part A payments, both approaches to the measurement of cost strongly indicated that hospice home care was less costly than nonhospice care. Further analysis showed that variations in the rates of Medicare reimbursement accounted for 22 to 42% of the differences in the derived cost savings between the two approaches to measuring cost, and that payments to hospitals played a major role in determining this outcome.