The impact of Medicaid adoption of the Medicare fee schedule

In this article, the authors simulate the effects on Federal and State Medicaid expenditures of increasing Medicaid fees to Medicare fee schedule (MFS) levels. Strict adoption of the MFS by the States would increase total Medicaid spending by approximately 4 percent, $2.5 to $2.9 billion. Because Medicaid fees vary across States, so does the impact of adopting the MFS. Medicaid spending would increase significantly in some wealthy States with large Medicaid populations and in a few small, relatively poor States. Some States currently pay more than the MFS for obstetrical services. If these fees continued at higher levels for obstetrical care, total Medicaid spending would increase by $3.5 to $4.0 billion.     

Trends in Medicaid physician fees, 1993-1998

This study uses data on Medicaid physician fees in 1993 and 1998 to document variation in fees across the country, describe changes in these fees, and contrast how they changed relative to those in Medicare. The results show that 1998 Medicaid fees varied widely. Medicaid fees grew 4.6 percent between 1993 and 1998, lagging behind the general rate of inflation. This growth was greater for primary care services than for other services studied. Relative to Medicare physician fees, Medicaid fees fell by 14.3 percent between 1993 and 1998. Medicaid's low fees and slow growth rates suggest that potential access problems among Medicaid enrollees remain a policy issue that should be monitored.     

Physician response to a change in Medicaid fees.

This study examines the effects of a change in Medicaid fees on the volume of physician services provided to beneficiaries. The data set includes price and volume at the procedure-level for Medicaid physician services in Texas in 1991, 1993, and 1995. The empirical analysis compares the volume of services provided to Medicaid participants before and after a 1992 change in reimbursement method. The results indicate that, over the period 1991 to 1993, the change in Texas Medicaid physician fees did not have a statistically significant effect on the volume of services provided. When measured over a longer period of time (1991-1995), however, volume increased significantly when price decreased, but, when price increased, there was no significant effect on volume. The results thus provide empirical support for the behavioural offset assumption underlying the switch to Medicare's Resource-Based Relative Value Scale (RBRVS) method of physician payment. A key policy implication is that reduced fees did not lead to a lower volume of physician services provided to Medicaid patients at least over the period of analysis. However, the new Medicaid fee schedule did not have the desired effect of controlling Medicaid expenditures on physician services.     

Do Medicaid physician fees for prenatal services affect birth outcomes?

This study exploits a natural experiment to examine the relationship between Medicaid physician fees and birth outcomes among a national sample of pregnant women. Applying a cohort difference-in-differences methodology, I find a significant negative association between these fees and the risk of low birth weight. I estimate that a 10% higher than average relative Medicaid fee is independently associated with a 0.074% lower absolute risk of low birth weight (<2.5 kg) and a 0.035% lower risk of very low birth weight (<1.5kg) among Medicaid-insured women. For low-income women, this association grows significantly. Lastly, I find a moderate association between these fees and use of first trimester prenatal services.     

State Medicaid fees and access to primary care physicians

Medicaid and uninsured patients are disadvantaged in access to care and are disproportionately Black and Hispanic. Using a national audit of primary care physicians, we examine the relationship between state Medicaid fees for primary care services and access for Medicaid, Medicare, uninsured, and privately insured patients who differ by race/ethnicity and sex. We found that states with higher Medicaid fees had higher probabilities of appointment offers and shorter wait times for Medicaid patients, and lower probabilities of appointment offers and longer wait times for uninsured patients. Appointment offers and wait times for Medicare and privately insured patients were unaffected by Medicaid fees. At mean state Medicaid fees, our analysis predicts a 27‐percentage‐point disadvantage for Medicaid versus Medicare in appointment offers. This decreases to 6 percentage points when Medicaid and Medicare fees are equal, suggesting that permanent fee parity with Medicare could eliminate most of the disparity in appointment offers for Medicaid patients. The predicted decrease in the disparity is smaller for Black and Hispanic patients than for White patients. Our research highlights the importance of considering the effects of policy on nontarget patient groups, and the consequences of seemingly race‐neutral policies on racial/ethnic and sex‐based disparities.     

Evidence of cost shifting in California hospitals

We used 1993-2001 data from private hospitals in California to investigate whether decreases in Medicare and Medicaid prices were associated with increases in prices paid for privately insured patients. We found that a 1 percent relative decrease in the average Medicare price is associated with a 0.17 percent increase in the corresponding price paid by privately insured patients; similarly, a 1 percent relative reduction in the average Medicaid price is associated with a 0.04 percent increase. These relationships imply that cost shifting from Medicare and Medicaid to private payers accounted for 12.3 percent of the total increase in private payers' prices from 1997 to 2001.     

Medicaid policy and the substitution of hospital outpatient care for physician care.

This article explores the effects of reimbursement and utilization control policies on utilization patterns and spending for physician and hospital outpatient services under state Medicaid programs. The empirical work shows a negative relationship between the level of Medicaid physician fees relative to Medicare and private fees, and the numbers of outpatient care recipients, suggesting that outpatient care substitutes for physician care in states with low fee levels. In addition, it shows a positive relationship between Medicaid physician fees and outpatient spending per recipient, suggesting that in low-fee states outpatient departments are providing some types of care that could be provided in a physician's office. Finally, the analysis demonstrates that reimbursement and utilization control policies have significant effects in the expected directions on aggregate Medicaid spending for physician and outpatient services.     

Public funding of contraceptive, sterilization and abortion services, fiscal year 1990.

In FY 1990, the federal and state governments spent $504 million to provide contraceptive services and supplies, according to results of a survey of state health, social services and Medicaid agencies conducted by The Alan Guttmacher Institute. Medicaid accounted for 38 percent of all public funds spent on contraceptive services, Title X provided 22 percent, and two federal block-grant programs--Social Services and Maternal and Child Health--together were responsible for 12 percent of public expenditures. State governments accounted for the remaining 28 percent of public funding. Although public expenditures for contraceptive services have risen by $154 million over the past decade, when inflation is taken into account, expenditures have actually fallen by one-third. Since 1980, the proportion of public contraceptive expenditures contributed by Title X has been cut virtually in half, while the proportion contributed by state governments has nearly doubled. When inflation is taken into account, Title X expenditures for contraceptive services have fallen by almost two-thirds since 1980. The federal and state governments together spent $95 million to subsidize sterilization services in 1990, and $65 million to provide abortion services. The federal government was the major source of funding for sterilization services but provided less than one percent of the cost of abortion services. Because of changes over time in survey methodology and the difficulties some states had in separating out expenditures by type of care, these data are approximations.     

End of life Medicare and Medicaid expenditures for dually eligible beneficiaries

In 1995, combined Medicare and Medicaid spending in the last year of life for dually eligible beneficiaries was more than $40,000 per beneficiary. Medicaid's share, primarily for long-term care (LTC), constituted about 40 percent of the total. Beneficiaries under age 65, Black persons, and individuals who died in a hospital had higher than average expenditures. The vast majority (86 percent) received some form of supportive services (nursing home, home care, hospice services). It is critical that policy deliberations consider both acute and LTC use concurrently because of their extensive use by dually eligible beneficiaries, as well as the interaction of the two funding sources (Medicare and Medicaid) that cover them.     

Do the Medicaid and Medicare programs compete for access to health care services? A longitudinal analysis of physician fees, 1998–2004

As the demand for publicly funded health care continues to rise in the U.S., there is increasing pressure on state governments to ensure patient access through adjustments in provider compensation policies. This paper longitudinally examines the fees that states paid physicians for services covered by the Medicaid program over the period 1998–2004. Controlling for an extensive set of economic and health care industry characteristics, the elasticity of states’ Medicaid fees, with respect to Medicare fees, is estimated to be in the range of 0.2–0.7 depending on the type of physician service examined. The findings indicate a significant degree of price competition between the Medicaid and Medicare programs for physician services that is more pronounced for cardiology and critical care, but not hospital care. The results also suggest several policy levers that work to either increase patient access or reduce total program costs through changes in fees.     

National health expenditure projections, 1994-2005

Using 1993 as a baseline and assuming that current laws and practices continue, the authors project U.S. health expenditures through the year 2005. Annual spending growth has declined since 1990, and, in the scenario reported here, that trend continues in 1994. Growth of health spending increases thereafter, but remains below the average experience of the past decade. Even so, health expenditures grow faster than the gross domestic product (GDP), and by 2005, account for 17.9 percent of the GDP. Unless the system changes, Medicare and Medicaid are projected to pay for an increasing share of total spending during the next decade.     

The effects of federal funding cuts on family planning services, 1980-1983

According to data from surveys conducted in the past two years, some changes occurred in the provision of family planning services between 1980, the year before the 1981 federal budget cuts, and 1983. Six percent of the family planning agencies that were operating in 1980 had closed or had stopped offering medical family planning services by 1983. The annual income of the family planning agencies that continued to operate, adjusted for inflation, was lower in 1983 than in 1980. While Title X remains the principal source of family planning funding, the proportion of clinics receiving income from Title X declined substantially during the period under study; this drop occurred among all types of providers. There was a slight decline in the proportion receiving funding from the Social Services block grant (formerly Title XX) in 1983, but there was no change in the contribution made by the Maternal and Child Health (MCH) block grant (formerly Title V). The proportion of total clinic income represented by Title XIX (Medicaid) funds rose slightly during this period. Decreases in federal funding appear to have been partly offset by an increase in the proportion of total income contributed by state and local governments and by private sources, particularly patient fees. Indeed, the number of agencies that collected patient fees, the proportion of clinic income derived from such fees and the proportion of patients who paid at least part of the cost of their family planning services all increased between 1980 and 1983. A separate survey of providers shows that fees varied widely, depending on a woman's income and on the type of agency.(ABSTRACT TRUNCATED AT 250 WORDS)     

The relationship of post-acute home care use to Medicaid utilization and expenditures

RESEARCH OBJECTIVES: To describe the use of post-acute home care (PAHC) and total Medicaid expenditures among hospitalized nonelderly adult Medicaid eligibles and to test whether health services utilization rates or total Medicaid expenditures were lower among Medicaid eligibles who used PAHC compared to those who did not. STUDY POPULATION: 5,299 Medicaid patients aged 18-64 discharged in 1992-1996 from 29 hospitals in the Cleveland Health Quality Choice (CHQC) project. DATA SOURCES: Linked Ohio Medicaid claims and CHQC medical record abstract data. DATA EXTRACTION: One stay per patient was randomly selected. DESIGN: Observational study. To control for treatment selection bias, we developed a model predicting the probability (propensity) a patient would be referred to PAHC, as a proxy for the patient's need for PAHC. We matched 430 patients who used Medicaid-covered PAHC ("USE") to patients who did not ("NO USE") by their propensity scores. Study outcomes were inpatient re-admission rates and days of stay (DOS), nursing home admission rates and DOS, and mean total Medicaid expenditures 90 and 180 days after discharge. PRINCIPAL FINDINGS: Of 3,788 medical patients, 12.1 percent were referred to PAHC; 64 percent of those referred used PAHC. Of 1,511 surgical patients, 10.9 percent were referred; 99 percent of those referred used PAHC. In 430 pairs of patients matched by propensity score, mean total Medicaid expenditures within 90 days after discharge were $7,649 in the USE group and $5,761 in the NO USE group. Total Medicaid expenditures were significantly higher in the USE group compared to the NO USE group for medical patients after 180 days (p < .05) and surgical patients after 90 and 180 days (p < .001). There were no significant differences for any other outcome. Sensitivity analysis indicates the results may be influenced by unmeasured variables, most likely functional status and/or care-giver support. CONCLUSIONS: Thirty-six percent of the medical patients referred to PAHC did not receive Medicaid-covered services. This suggests potential underuse among medical patients. The high post-discharge expenditures suggest opportunities for reducing costs through coordinating utilization or diverting it to lower-cost settings. Controlling for patients' need for services, PAHC utilization was not associated with lower utilization rates or lower total Medicaid expenditures. Medicaid programs are advised to proceed cautiously before expanding PAHC utilization and to monitor its use carefully. Further study, incorporating non-economic outcomes and additional factors influencing PAHC use, is warranted.     

How do Medicare physician fees compare with private payers?

Under the new fee schedule, Medicare physician fees are 76 percent of private fees. Consistent with the intent of payment reform, Medicare physician fees more closely approximate private fees for visits (93 percent) than for surgery (51 percent) and in rural areas as compared with large metropolitan areas. Variation in private fees across the country is considerably greater than it is for Medicare fees. Consequently, Medicare fees are most generous in areas that compare least favorably with the private market because private fees in these areas are well above average. These results shed light on the impact of the fee schedule and on the implications of using Medicare payment methods as part of a broad-based health reform.     

Methadone Maintenance and State Medicaid Managed Care Programs

Coverage for methadone services in state Medicaid plans may facilitate access to the most effective therapy for heroin dependence. State Medicaid plans were reviewed to assess coverage for methadone services, methadone benefits in managed care, and limitations on methadone treatment. Medicaid does not cover methadone maintenance medication in 25 states (59 percent). Only 12 states (24percent) include methadone services in Medicaid managed care plans. Moreover, two of the 12 states limit coverage for counseling or medication and others permit health plans to set limits. State authorities for Medicaid and substance abuse can collaborate to ensure that appropriate medication and treatment services are available for Medicaid recipients who are dependent on opioids andto construct payment mechanisms that minimize incentives that discourage enrollment among heroin-dependent individuals.     

Is Medicaid sustainable? Spending projections for the program's second forty years

We constructed long-term projections of Medicaid spending and compared projected growth in spending with that of state and federal revenues. Notwithstanding the anticipated decline in employer-sponsored insurance and the long-term care needs of the baby boomers, we project that Medicaid spending as a share of national health spending will average 16.6 percent from 2006 to 2025--roughly unchanged from 16.5 percent in 2005--and then increase slowly to 19.0 percent by 2045. Growth in government revenues is projected to be large enough to sustain both Medicaid spending increases and substantial real growth in spending for other services.     

Medicaid support of alcohol, drug abuse, and mental health services

Medicaid expenditures for alcohol, drug abuse, and mental health (ADM) services in 1984 were examined for the States of California and Michigan. Persons receiving such services constituted 9 to 10 percent of the total Medicaid population in the two States and accounted for 22 to 23 percent of total Medicaid expenditures. ADM expenditures were 11 to 12 percent of the total. Although the two States had similar proportions of overall expenditures for these services, Michigan appeared to emphasize inpatient psychiatric care, while California emphasized ambulatory and nursing home care. Based on the experience of the two States, national Medicaid expenditures for ADM services exclusive of long-term care were estimated to be $3.5 to $4.9 billion in 1984, two to three times the level suggested by earlier estimates.