Medicare's operational history and impact on health care

Medicare was originally designed in the 1960s to fit into the existing health care delivery system. However, the program's early years showed an inflationary impact on health care costs. Medicare was the second largest federal domestic program and the fastest growing one, making it a target for those concerned about the size of government in general. By 1980, Medicare constituted 15% of the nation's expenditures for personal health care; and Medicare's administrators recommended substantive changes in provider payments through the introduction of the prospective payment system. Prospective payment system legislation impacted hospitals initially and later skilled nursing facilities and home health agencies. As policymakers made changes in Medicare payments to providers, providers made changes in the way services were delivered. What eventually evolved, in an insidious manner, was implicit management of the nation's health care delivery system by the Medicare program.     

Medicare Drug Price Negotiation in the United States: Implications and Unanswered Questions

The United States is a relatively free-pricing market for pharmaceutical manufacturers to set list prices at the product launch. Few drug price controls exist, and federal price negotiation as a policy has historically been politically untenable. After decades of debate on whether the federal government, specifically the Medicare program, should more actively manage drug prices, the US Congress passed legislation authorizing Medicare to directly negotiate prices with manufacturers. The purpose of this article is to describe elements and implementation of the price negotiation provisions and then comment on the potential impacts on payers, innovations, and the pharmaceutical industry. While impacting only a few drugs each year in the beginning, price negotiation in the Medicare program will have secondary and long-term effects in the US market and beyond. It is clear that in the United States, the Medicare market for drugs will no longer be a free-pricing environment in the industry.     

Quality improvement in health care. A brief history of the Medicare Peer Review Organization (PRO) initiative.

The Medicare Peer Review Organization (PRO) program began in the mid 1980s in response to concerns with medical necessity and quality of care of services delivered to the elderly and disabled, and paid for by the federal Medicare program. As part of their legislated oversight, PROs reviewed a random sample of hospital medical records. Using locally developed and maintained clinical criteria, PRO nurse and physician reviewers made determinations about the medical necessity of the inpatient stay and services, and identified issues with the quality of care delivered. Within 10 years of its initiation, however, criticisms of the PRO program, based in the reliability and validity of review findings, combined with national interest in quality improvement, led HCFA to refocus the program. PROs currently emphasize clinical and process quality improvement, through collaborative working relationships with providers and consumers.     

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.     

Privatization of Medicare: toward disentitlement and betrayal of a social contract.

An intense political battle is being waged over the future of U.S. Medicare. The 40-year social contract established with the nation's elderly and disabled is seriously threatened. The basic issue is whether Medicare will remain a universal entitlement program or be privatized and dismantled as an obligation of government. Faced with the growing costs of the Medicare program, changing demographics of an aging population, and long-term federal deficits, conservative interests are promoting further privatization of the program under the guise of increasing beneficiaries' choice and the claimed efficiency of the private marketplace. Following a historical overview of past efforts to privatize Medicare, this article reviews the track record of private Medicare plans over the last 20 years with regard to choice, reliability, cost containment, benefits, quality of care, efficiency, public satisfaction, and fraud. In all of these areas, privatized Medicare has performed less well than original Medicare. Based on the evidence, one has to conclude that privatization of Medicare is detrimental to the elderly and disabled, the most vulnerable groups in our society, and that the only winners in that transformation are private market interests.     

Cost containment: a national policy.

Guaranteeing access to high-quality care became a firmly established national policy with the advent of Medicaid and Medicare programs. However, since 1970, the federal government has gradually shifted the emphasis of national policy on hospital care. Cost containment efforts on the part of President Carter's Administration have made cost containment, rather than guaranteed access, the major national policy on hospital care.     

Hospital Choice of Rural Medicare Beneficiaries: Patient, Hospital Attributes, and the Patient–Physician Relationship

Objective. To examine how patient and hospital attributes and the patient–physician relationship influence hospital choice of rural Medicare beneficiaries.
Data Sources. Medicare Current Beneficiary Survey (MCBS), Health Care Financing Administration (HCFA) Provider of Services (POS) file, American Hospital Association (AHA) Annual Survey, and Medicare Hospital Service Area (HSA) files for 1994 and 1995.
Study Design. The study sample consisted of 1,702 hospitalizations of rural Medicare beneficiaries. McFadden's conditional logit model was used to analyze hospital choices of rural Medicare beneficiaries. The model included independent variables to control for patients' and hospitals' attributes and the distance to hospital alternatives.
Principal Findings. The empirical results show strong preferences of aged patients for closer hospitals and those of greater scale and service capacity. Patients with complex acute medical conditions and those with more resources were more likely to bypass their closest rural hospitals. Beneficiaries were more likely to bypass their closest rural hospital if they had no regular physician, had a shorter patient–physician tie, were dissatisfied with the availability of health care, and had a longer travel time to their physician's office.
Conclusions. The significant influences of patients' socioeconomic, health, and functional status, their satisfaction with and access to primary care, and their strong preferences for certain hospital attributes should inform federal program initiatives about the likely impacts of policy changes on hospital bypassing behavior.     

Beyond managed care

Even as the federal government tries to prop up Medicare managed care, HMOs continue to pull out of the program. But a Centers for Medicare & Medicaid Services demonstration project aims to show that one concept of managed care can keep chronically ill patients healthier and lower overall costs. The concept, coordinated care, blends case management and disease management, giving patients the resources to manage their own care more actively. But, please, just don't call it managed care.     

Cost-benefit analyses of California family practice residencies

Several national commissions have recommended that family practice residency training be subsidized, but without stating how much support is needed. Financial studies of graduate medical education have used the methods of cost allocation or joint-products cost analysis. Previous cost-allocation studies indicate that one third of family practice residency costs are met by extramural subsidy. Cost reports of eight California public hospitals with a single family practice residency program were evaluated for the 1984-85 fiscal year. Discrepancies in the education costs reported to Medicare and those reported in state hospital disclosure reports demonstrate the arbitrary nature of the cost-allocation method. The Medicare medical education reimbursement was an average of $20,444 per resident. State and federal grants provided an average of $5,190 per resident. The Medicare payments and grants met an average of 35.7% of the education costs reported to Medicare. A joint-products cost analysis was used to estimate the pure cost of education in an 18-resident family practice residency. Replacing the residency with salaried physicians would have decreased the hospital's net return by $143,534. If neither grants nor Medicare education payments had been received, elimination of the program would have increased hospital net return by $428,083.     

The political economy of federal health programs in the United States: an historical review.

In the 1960s the federal government of the United States added a wide range of new health programs--Medicare, Medicaid, health manpower training, occupational safety, and others--to its long-established support for biomedical research and hospital construction. Total federal health outlays rose from $5 billion in 1965 to almost $37 billion in 1975. This paper describes the legislative history of federal health programs and reports the recent trends in expenditures by functional category. The expenditures of major programs are related to the populations they serve and data are presented to document the enormous inflow of resources to medical care during the last 10 years. This inflow has been induced by the structural changes in the medical care market first set in motion by private health insurance, and accelerated by the new federal programs. Designing some way to control it is a major problem in health policy for the late 1970s.     

The politics of racial disparities: desegregating the hospitals in Jackson, Mississippi

As health care policymakers and providers focus on eliminating the persistent racial disparities in treatment, it is useful to explore how resistance to hospital desegregation was overcome. Jackson, Mississippi, provides an instructive case study of how largely concealed deliberations achieved the necessary concessions in a still rigidly segregated community. The Veterans Administration hospital, the medical school hospital, and the private nonprofit facilities were successively desegregated, owing mainly to the threatened loss of federal dollars. Many of the changes, however, were cosmetic. In contrast to the powerful financial incentives offered to hospitals to desegregate and ensure equal access in the early years of the Medicare program, current trends in federal reimbursement encourage segregation and disparities in treatment.     

MEDICARE

Many Medicare recipients and social work advocates assume this program of federal health care insurance for the elderly and disabled to be relatively trouble free and, therefore, not relevant for advocacy efforts. Only when confronted with a reimbursement denial do the internal complexities and contradictions of the Medicare program, and the resultant need for advocacy, become apparent to recipient and worker alike. This paper presents a conceptual framework and advocacy perspective on Medicare's structure, benefits, and appeals procedures in order to aid a social work advocate in deciding whether to deal with recurrent Medicare problems through techniques to maximize benefits, appeals procedures, or legislative advocacy.     

Crisis, leadership, consensus: The past and future federal role in health

This paper touches on patterns of federal government involvement in the health sector since the late 18th century to the present and speculates on its role in the early decades of the 21st century. Throughout the history of the US, government involvement in the health sector came only in the face of crisis, only when there was widespread consensus, and only through sustained leadership. One of the first health-related acts of Congress came about as a matter of interstate commerce regarding the dilemma as to what to do about treating merchant seamen who had no affiliation with any state. Further federal actions were implemented to address epidemics, such as from yellow fever, that traveled from state to state through commercial ships. Each federal action was met with concern and resistance from states'' rights advocates, who asserted that the health of the public was best left to the states and localities. It was not until the early part of the 20th century that a concern for social well-being, not merely commerce, drove the agenda for public health action. Two separate campaigns for national health insurance, as well as a rapid expansion of programs to serve the specific health needs of specific populations, led finally to the introduction of Medicaid and Medicare in the 1960s, the most dramatic example of government intervention in shaping the personal health care delivery system in the latter half of the 20th century. As health costs continued to rise and more and more Americans lacked adequate health insurance, a perceived crisis led President Clinton to launch his 1993 campaign to insure every American—the third attempt in this century to provide universal coverage. While the crisis was perceived by many, there was no consensus on action, and leadership outside government was missing. Today, the health care crisis still looms. Despite an economic boom, 1 million Americans lose their health insurance each year, with 41 million Americans, or 15% of the population, lacking coverage. Private premiums are going up again as federal programs are capped and the lack of a federal framework for quality assurance leads to growing problems of access and quality that will need to be addressed as we enter the 21st century. What role will government play?     

High-tech software sleuthing. New computer tools give government tighter handle on hard-to-track healthcare fraud

After developing new data-mining techniques, the government no longer needs to rely on outdated methods when investigating allegations of hard-to-track healthcare fraud. Today, federal officials, such as U.S. Deputy Attorney General Eric Holder Jr. (left), have an enhanced ability to collect and analyze massive amounts of financial and medical information necessary to successfully prosecute perpetrators of crimes that drain the Medicare program.     

The physician quality reporting initiative--a gateway to pay for performance: what every health care professional should know

The Physician Quality Reporting Initiative (PQRI) is a pay-for-reporting (P4R) program sponsored by the Centers for Medicare & Medicaid Services open to all health care providers that treat Medicare patients. This P4R initiative provides financial incentives for participation and unlike most pay-for-performance (P4P) programs, there are no penalties for poor performance. PQRI therefore offers Medicare providers nationwide a low-risk opportunity to gain experience with reporting procedures likely to be incorporated into P4P reimbursement schemes. The 74 measures used during the first reporting period are applicable to both generalist and specialist providers and open participation in PQRI to a much broader audience compared with previous federal initiatives. Also in contrast to programs that measure hospital or group quality and reimburse for services at the health system level, measurement and reimbursement in PQRI directly affects individual Medicare providers. The combination of provider-level measurement and reimbursement and efforts to assess care delivered by both generalist and specialist Medicare providers highlights how this P4R initiative is truly a gateway to a P4P reimbursement system. Participation in the PQRI program provides useful experience to Medicare providers and their staff in preparing for future initiatives that try to tie quality to reimbursement.     

Extending the P4P agenda, part 2: how Medicare can reduce waste and improve the care of the chronically ill

The care of Americans with severe chronic illnesses is disorganized, unnecessarily costly, and undisciplined by sound clinical science. The federal government should invest in a crash program to improve the scientific basis of managing chronic illness, and the Centers for Medicare and Medicaid Services (CMS) should extend its pay-for-performance (P4P) agenda to ensure that within ten years all Americans with severe chronic illnesses have access to accountable health care organizations providing evidence-based prospective care. This paper recommends a strategy for achieving this goal.     

Impact of Medicare's prospective payment system on hospitals, skilled nursing facilities, and home health agencies: how the Balanced Budget Act of 1997 may have altered service patterns for Medicare providers

The prospective payment system is one of many changes in reimbursement that has affected the delivery of health care. Originally developed for the payment of inpatient hospital services, it has become a major factor in how all health insurance is reimbursed. The policy implications extend beyond the Medicare program and affect the entire health care delivery system. Initially implemented in 1982 for payments to hospitals, prospective payment system was extended to payments for skilled nursing facility and home health agency services by the Balanced Budget Act of 1997. The intent of the Balanced Budget Act was to bring into balance the federal budget through reductions in spending. The decisions that providers have made to mitigate the impact are a function of ownership type, organizational mission, and current level of Medicare participation. This article summarizes the findings of several initial studies on the Balanced Budget Act's impact and discusses how changes in Medicare reimbursement policy have influenced the delivery of health care for the general public and for Medicare beneficiaries.     

The Early Years of Title V: Extending and Improving Care for Children with Special Health Care Needs, 1935–1941

This historical study examines the early years of the federal program of services for children with physical disabilities in the United States (US) during the 1930s, known today as services for Children with Special Health Care Needs (CSHCN). Established as part of the Social Security Act (SSA) of 1935, the Crippled Children Services (CCS) program was one of the first medical programs for children supported by the federal government. Under the SSA, states and territories quickly developed state-level CCS programs during the late 1930s. The US Children’s Bureau administered the program for the federal government and helped states to incorporate preventive services and interdisciplinary approaches to service provision into state-level CCS programs. Factors that influenced the implementation of these programs included the availability of matching state funds, the establishment of state programs for crippled children prior to the SSA, and the accessibility of qualified health care professionals and facilities. The early efforts of this federal program on behalf of children with disabilities can be seen in services for CSHCN today.