Showing papers in "Health Care Financing Review in 1992"

Medicare's prospective payment system: a critical appraisal.

Abstract: Implementation of the Medicare prospective payment system (PPS) for hospital payment has produced major changes in the hospital industry and in the way hospital services are used by physicians and their patients. The substantial published literature that examines these changes is reviewed in this article. This literature suggests that most of the intended effects of PPS on costs and intensity of care have been realized. But the literature fails to answer fundamental questions about the effectiveness and equity of administered pricing as a policy tool for cost containment. The literature offers some hope that the worst fears about the effects of PPS on quality of care and the health of the hospital industry have not materialized. But because of data lags, the studies done to date seem to tell us more about the effects of the early, more generous period of PPS than about the opportunity costs of reducing hospital cost inflation.

National health expenditures projections through 2030.

Abstract: If current laws and practices continue, health expenditures in the United States will reach $1.7 trillion by the year 2000, an amount equal to 18.1 percent of the Nation's gross domestic product (GDP). By the year 2030, as America's baby boomers enter their seventies and eighties, health spending will top $16 trillion, or 32 percent of GDP. The projections presented here incorporate the assumptions and conclusions of the Medicare trustees in their 1992 report to Congress on the status of Medicare, and the 1992 President's budget estimates of Medicaid outlays.

U.S. health expenditure performance: an international comparison and data update.

Abstract: In this article, the authors present the most recently available data on the health care financing and delivery systems of the 24 industrialized member countries of the Organization for Economic Cooperation and Development (OECD). U.S. health expenditure performance is compared with the performance of other OECD countries. Thirty-six tables of data from 1960-90 are presented on health expenditures, health care prices, availability and utilization of health care services, health outcomes, and basic economic and demographic factors.

National health expenditures, 1991.

Abstract: Spending for health care rose to $751.8 billion in 1991, an increase of 11.4 percent from the 1990 level. National health expenditures as a share of gross domestic product increased to 13.2 percent, up from 12.2 percent in 1990. The health care sector exhibited strong growth, despite slow growth in the overall economy. This combination resulted in the largest increase in the share of the Nation's output consumed by health care in the past three decades. In this article, the authors present estimates of health spending in the United States for 1991. The authors also examine reasons for the unusually large growth in Medicaid expenditures and highlight recent trends in the hospital sector.

Americans' health insurance coverage, 1980-91.

Abstract: The authors of this article have used Current Population Surveys to summarize public and private health insurance trends in the United States over the last 12 years. Key findings include the declining percentage of the non-elderly population with employer-sponsored coverage and increasing numbers of low- and middle-income uninsured. That is, in a period of fast-rising health care costs, the poor and the near-poor in working families have been losing coverage for health care and facing increasing risks of inadequate care and financial loss. These data highlight health care access and financing problems now facing the Nation.

International infant mortality rankings: a look behind the numbers.

Abstract: The very unfavorable infant mortality ranking of the United States in international comparisons is often used to question the quality of health care there. Infant mortality rates, however, implicitly capture a complicated story, measuring much more than differences in health care across countries. This article examines reasons behind international infant mortality rate rankings, including variations in the measurement of vital events, and differences in risk factors across countries. Its goal is to offer a broader context for more informed debate on the meaning of international infant mortality statistics. These statistics offer opportunities to identify strategies for improving the U.S. health care system and learn from other countries that have been more successful.

Hospital financing reform and case-mix measurement: an international review.

Abstract: A review of reforms in the financing of hospital services in eight European countries and Australia reveals a commitment to a common objective of relating resource use to hospital workload by means of a standardized case-mix framework in the pursuit of greater efficiency. While this objective is also shared with the U.S. prospective payment system (PPS), it is noteworthy that the majority of countries reviewed favor a global budgeting approach to financing hospital services. Ongoing evaluation of these reforms should facilitate an assessment of the merits of case-mix adjusted global budgeting relative to the patient-based alternative.

A layman's guide to the U.S. health care system.

Abstract: This article provides an overview of the U.S. health care system and recent proposals for health system reform. Prepared for a 15-nation comparative study for the Organization for Economic Cooperation and Development (OECD), the article summarizes descriptive data on the financing, utilization, access, and supply of U.S. health services; analyzes health system cost growth and trends; reviews health reforms adopted in the 1980s; and discusses proposals in the current health system reform debate.

National health accounts: lessons from the U.S. experience.

Abstract: The national health accounts (NHA) are the framework within which type of services and sources of funding for health care expenditures are measured. NHA, devised to portray the structure of health care delivery and financing in the United States, provide essential information necessary for the formulation of public health policy and for international comparison. In this article, the authors describe the importance of the NHA nationally and internationally, and provide a blueprint of the definitions, sources, and methods used to create this system of NHA in the United States.

Nursing home resident assessment and case-mix classification: Cross-national perspectives

Abstract: Two broadly applied systems in the United States, the National Resident Assessment Instrument/Minimum Data Set and the Resource Utilization Groups, have provided new insight into the quality, delivery, and financing of nursing home care. In this article, the authors describe research efforts in eight other nations to translate, validate, and use one or both systems to understand their own long-term care systems. This consortium of studies, using common instruments, provides potential cross-national analyses that capitalize on differences in practice patterns and system designs to address critical policy issues.

What affects rural beneficiaries use of urban and rural hospitals

Abstract: Analysis of the Medicare provider analysis record (MEDPAR) data during fiscal years 1984 through 1989 indicates that the proportion of rural Medicare beneficiaries hospitalized in urban hospitals has remained constant during the prospective payment system (PPS). Much of the use of urban hospitals by rural beneficiaries during this period was to obtain specialized care or surgery, as suggested by the analysis, and is consistent with historical patterns of referral of rural patients. Thus, the bypassing of rural hospitals by rural beneficiaries for treatment in urban hospitals has probably not increased during PPS.

Transitional funding: changing Ontario's global budgeting system

Abstract: In 1988, Ontario introduced transitional funding, a collaborative process between the Ministry of Health and the hospitals to modify Ontario's global budgeting system. The goals are to achieve greater equity; encourage hospital efficiency, and promote a shift from inpatient to outpatient services. To implement these goals, inpatient care is being measured in terms of case-mix groups, i.e., a classification system comparable to the diagnosis-related groups. However, since there is no patient level cost data, cost weights are being derived from patient-level data from New York State. Transitional funding draws attention to both positive and negative aspects of global budgeting.

New Jersey's Medicaid waiver for acquired immunodeficiency syndrome.

Abstract: This article contains data from a study of New Jersey's home and community-based Medicaid waiver program for persons with symptomatic human immunodeficiency virus illness. Major findings include lower hospital costs and utilization for waiver participants compared with general Medicaid acquired immunodeficiency syndrome admissions in New Jersey. Average program expenditures were $2,400 per person per month. Based on study findings, it is evident that the waiver program is an important means of providing financial benefits and access to services and that comprehensive case management is a critical factor in assuring program quality.

Do hospitals behave like consumers? An analysis of expenditures and revenues.

Abstract: Hospitals adjust expenditures to be a constant proportion of their revenues. An unexpected 10-percent change in hospital revenue generates a 3.5 - 4.8 percent expenditure change (in the same direction) the year it occurs, with declining changes thereafter (10 percent in total). Non-profit and government hospitals adjust expenditures about 80 percent of the way toward their longrun change near the end of the third year of the revenue change; for-profit hospitals do this at the end of the fourth year. Hospitals with revenue increases make an 80-percent adjustment toward the end of the third year; those with revenue declines do so near the end of the fourth year.

Measuring inpatient and outpatient costs: A cost-function approach

Abstract: In this article, the authors estimate a multiple-output cost function for a sample of 2,235 hospitals during the period 1984-88 to disaggregate total costs into inpatient and outpatient components. The results suggest that outpatient cost growth is roughly proportional to that of inpatient cost, despite much higher relative growth in revenues and utilization on the outpatient side. The stability in the outpatient/inpatient cost ratio implies that the increase in the outpatient-to-inpatient utilization ratio was offset by a decline in their relative unit costs.

Utilization management as a cost-containment strategy

Abstract: Utilization management (UM) is now an integral part of most public and private health plans. Hospital review, until recently the primary focus of UM, is associated with a reduction in bed days and rate of hospital cost increases. These reductions appear to have had limited impact on aggregate health care costs because of increases in unmanaged services. In the future, with electronic connectivity between payers and providers and the use of clinical guidelines and computer-based decision-support systems, the need for prospective case-level reviews will be reduced. With these changes, UM programs are likely to become more acceptable to providers and patients.

Administrative costs in selected industrialized countries.

Abstract: The costs of health administration are compared across several countries, accompanied by discussion of some of the variations in the definition of health administration. The influence of American health accounting on other countries is examined, and findings are presented regarding the relative costs of insurance-based and direct-delivery systems. Data are presented on health administrative spending providing gross as well as per capita measures.

An outlier pool for Medicare HMO payments.

Abstract: Medicare pays "at-risk" health maintenance organizations a prospective capitation amount that is established by the adjusted average per capita cost (AAPCC) formula for estimating the amount enrollees would have cost had they remained in the fee-for-service sector. Because the AAPCC accounts for a very small percentage of the variation in beneficiary costs, considerable research has been devoted to improving the formula. A way to improve the explained variance is to remove the most expensive beneficiaries from the AAPCC payment system and pay for them separately. This article examines one approach to a payment system that combines the AAPCC with an outlier payment mechanism.

What does the Consumer Price Index for prescription drugs really measure

Abstract: This article examines the conceptually desirable attributes of a fully quality-adjusted prescription drug price index. It provides an understanding of how the Consumer Price Index for prescription drugs and medical supplies treats quality changes in prescription drugs and, in particular, quality changes associated with the introduction of new drugs.

Using chronic disease risk factors to adjust Medicare capitation payments.

Abstract: This study evaluates the use of risk factors for chronic disease as health status adjusters for Medicare's capitation formula, the average adjusted per capita costs (AAPCC). Risk factor data for the surviving members of the Framingham Study cohort who were examined in 1982-83 were merged with 100 percent Medicare payment data for 1984 and 1985, matching on Social Security number and sex. Seven different AAPCC models were estimated to assess the independent contributions of risk factors and measures of prior utilization and disability in increasing the explanatory power of AAPCC. The findings suggest that inclusion of risk factors for chronic disease as health status adjusters can improve substantially the predictive accuracy of AAPCC.

Measuring the Relationship between Income and NHEs

Abstract: This article uses recently published time series data for the Organization for Economic Cooperation and Development countries to estimate income elasticities for health care expenditures. Several different models and alternative specifications are examined to determine the sensitivity and robustness of the estimated relationships. Income is the dominant-determinant of health care spending and longrun income elasticity for health care is significantly greater than unity. This implies that health care is a luxury good, and expenditures will tend to rise with the level of national income. There is little evidence that the degree of public finance reduces the level of health care expenditures.

Good quality care increases hospital profits under prospective payment.

Abstract: This study shows that, contrary to popular belief, the prospective payment system discourages skimping on medically indicated care The quality of care on a nationally representative sample of Medicare discharges underwent judgmental review using implicit criteria The reviewing physicians identified hospitalizations that omitted medically indicated services and diagnoses overlooked because of this skimping After deduction for the cost of the omitted services and probability of negative diagnostic tests, good quality care would have increased hospital profits a significant 79 percent As the specificity of diagnosis and intensity of treatment increase, the DRG payment rises faster than the cost of providing medically indicated services

Contributions of Case Mix and Intensity Change to Hospital Cost Increases

Abstract: The 28-percent change in average Medicare inpatient cost per case between 1984 and 1987 is decomposed into three components: input price inflation, changes in average cost within diagnosis-related groups (DRGs) (intensity), and changes in the distribution of cases across DRGs (case mix). We estimate the contributions of technology diffusion and outpatient shifts to within-DRG and across-DRG cost changes. We also use California data to estimate the contribution of changes in the quantity of services provided during a stay. The factors examined account for approximately 80 percent of the real increase in average cost per case.

Managed care: Practice, pitfalls, and potential

Abstract: The results of coordinating and changing patterns of health care using managed care activities and organizations are reviewed in this article. Although utilization review and high-cost case management programs reduce the use of expensive services, incentives for providers of care, placing them at risk, are important for managing the intensity of health care. Managed care appears capable of reducing health care costs substantially. However, this increased efficiency has not translated to lower insurance premiums or modulated total health care expenditures because either purchasers are not aware or are not concerned about securing care at the least cost. To correct these deficiencies and deliver the potential of managed care, the author suggests the need to separate insurance into its three components parts (financing, risk spreading, and program management) and developed policies for each.

Recent health policy initiatives in Nordic countries

Abstract: Health care systems in Sweden, Finland, and Denmark are in the midst of substantial organizational reconfiguration. Although retaining their tax-based single source financing arrangements, they have begun experiments that introduce a limited measure of competitive behavior in the delivery of health services. The emphasis has been on restructuring public operated hospitals and health centers into various forms of public firms, rather than on the privatization of ownership of institutions. If successful, the reforms will enable these Nordic countries to combine their existing macroeconomic controls with enhanced microeconomic efficiency, effectiveness, and responsiveness to patients.

Hospital and Medicare financial performance under PPS, 1985-90

Abstract: Although an increasing number of hospitals are reporting net losses from the Medicare prospective payment system (PPS) for inpatient care, overall hospital facility profit rates remain stable. Hospitals that reported net profits in the Medicare inpatient PPS sector in PPS 7 (1990) had smaller increases in Medicare expenses than hospitals that reported PPS losses in PPS 7. Medicare PPS inpatient net losses in PPS 7 were more than offset by non-Medicare net profits. Even though Medicare PPS revenues grew more slowly than the gross domestic product from 1985 to 1990, other hospital revenues grew more rapidly.

Comparing physician fee schedules in Canada and the United States.

Abstract: Although Canada and the United States have fundamentally different systems for financing health care, there are many similarities between the two countries in their approaches to physician payment. The similarities have increased recently with the adoption of the Medicare fee schedule. Canadian provinces have been using fee schedules for more than 20 years. This article provides an overview of the fee schedules used by Medicare and the four largest Canadian provinces, highlighting specific similarities and differences. We conclude that, although some differences in service definitions exist, the major areas of contrast relate to what services are paid for and how fees are updated. Updating fees is important because it affects how rapidly expenditures grow.

Introducing fees for services with professional uncertainty

Abstract: A change in payment system of general practitioners from capitation to a mix of one-half capitation and one-half fee for service in Copenhagen, Denmark, resulted in a significant overall increase in diagnostic and curative services. The rate of increase differs between services. In this article, it is assumed that the rate of increase varies with doctors' professional uncertainty relative to the services studied. Professional uncertainty is measured as the degree to which performances of a service are determined by diagnoses made. The data validate the measure given the assumption.

A longitudinal comparison of charge-based weights with cost-based weights

Abstract: The diagnosis-related group weights that determine prices for Medicare hospital stays are recalibrated annually using charge data. Using data from fiscal years 1985 through 1987, the authors show that differences between these charge-based weights and cost-based weights are increasing only slightly. Charge-based weights are available in a more timely manner and, based on temporal changes in the weights, we show that this is an important consideration. Charge-based weights provide higher payments than cost-based weights to hospitals with higher case-mix indexes, but have little effect on hospitals with low cost-to-charge ratios, high capital costs, or high teaching costs.