August 2009

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Quotation of the Day

August 31, 2009 in Miscellaneous | No comments

“The whole notion that the music industry has been operating under for the last 10, 15 years is that every download represents a lost sale. You know, what has radio been except for a free download?  People want to hear the music first before they invest in it. If it’s good, they’re going to want more of it, not less.”

  • Greg Kot, music critic for the Chicago Tribune, on Marketplace.

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Medicare Reimbursement Information I

August 31, 2009 in Medicaid/Medicare | 3 comments

This week, I will be discussing Medicare Reimbursement in detail.  The Medicare Payment Advisory Commission (MedPAC) has a high-quality series of reports analyzing Medicare’s reimbursement system. Findings from these reports includes:

Physician Services

  • In 2006, about 569,000 physicians billed Medicare.
  • In 2007, Medicare paid $60 billion for physician services.
  • All physician services are reported to CMS according to the Healthcare Common Procedure Coding System (HCPCS), which contains codes for about 6,700 distinct services. Payment rates are based on RVUs.
  • Under the Medicare incentive payment program, physicians receive bonus payments when they provide services in health professional shortage areas (HPSAs).
  • For most physician services, Medicare pays the provider 80 percent of the fee schedule amount. The beneficiary is liable for the remaining 20 percent coinsurance.
  • Services billed separately and provided by nurse practitioners are paid at 85 percent of physicians’ fees.

Oxygen and Oxygen Equipment

  • “Beginning in January 2006, section 510(b) of the Deficit Reduction Act of 2005 (DRA) limited rental of oxygen equipment to a period of 36 months of continuous usage. After 36 months, Medicare only pays for contents and non-routine maintenance…According to the Office of Inspector General (OIG), 22 percent of beneficiaries who started renting equipment in 2001 rented for 36 months or longer.”
  • Medicare has instituted competitive billing for the purchase of Durable Medical Equipment. A demonstration showed that “competitive bidding lowered prices for home oxygen between 17 and 21 percent.”

Psychiatric Hospital Services

  • Medicare payments to psychiatric facilities are estimated to be $4.1 billion in 2007.
  • In 2006, 312,000 beneficiaries had 473,500 Medicare discharges from Inpatient Psychiatric Facilities (IPF) for a psychiatric or substance abuse disorder.
  • Beneficiaries treated in IPFs are responsible for a $1,024 deductible for the first admission during a spell of illness, and for a $256 copayment for the 61st through 90th days.
  • IPFs recieve a base payment rate of $638 per day (in 2009) which is increase with patient age, severity of diagnosis, and the presence of comorbidities and payment declines with the length of the hospital stay. Payments are also adjusted based on geographic factors, if the hospital is a teaching hospital, and whether or not there is an emergency room.

Inpatient Rehabilitation Facilities (IRFs) and Skilled Nursing Facilities, (SNFs) and

  • For treatment after an illness, injury or surgery, some patients need to visit an inpatient rehabilitation facility (IRF).
  • Medicare payments to IRFs were an estimated $5.6 billion in 2007. Medicare accounts for about 70 percent of IRF cases. In 2006, there were about 404,000 Medicare discharges from IRFs.
  • Similar to psychiatric services, beneficiaries are responsible for a $1,024 deductible as the first admission during a spell of illness, and for a $256 copayment for the 61st through 90th days.
  • Reimbursement is based on the severity of patient illness.  Patients are classified into one of 92 case mix categories and one of four tiers based on comorbidities.  Patients with very short stays (less than 4 days) receive a discounted rate and those with very long stays get more generous reimbursement.
  • To be considered an IRF, you must meet the 60% rule.  This means that 60% of all admissions must fall into one of these categories: stroke, spinal cord injury, congenital deformity, amputation, major multiple trauma, hip fracture, brain injury, neurological disorders, burns, severe arthritis conditions, joint replacement for both knees or hips.
  • Skilled Nursing Facilities (SNFs) are used for short-term inpatient skilled care a hospital stay. Medicare reimburses SNFs prospectively, giving them a flat rate for every day of care, up to 100 days in the facility. Payments for SNF are adjusted for: differences in local labor costs and type of patients through Resource Utilization Groups (RUGs). Patients with more severe conditions, worse ADL scores, and who need more therapy get higher RUGs scores and thus a higher reimbursement rate.

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Paying for Le Treatment

August 29, 2009 in International Health Care Systems | No comments

When a N.Y. Times journalist’s husband felt chest pain during their stay in France, they  went to the emergency room.  Although it turned out to be pneumonia, the journalist generally lauds French health care system, despite some excessive bureaucracy.    

  • N.Y. Times: “For X-rays, an EKG, 10 hours in the emergency room, a doctor, a cardiologist, technicians, nurses, drugs and even the surly gatekeeper, we were required to pay $220.  I might put up with a lot of ugly bureaucrats for that.”

How can these services be so cheap?  Easy, it is funded by the French–and even American–taxpayers.

The French System is characterized by large premiums, paid for by taxpayers, a little out of pocket payments.  Whole Foods, on the other hand, supports expanding the amount of money patients pay out of their own pocket.  According to 20/20, Whole Foods advocates Health Savings Accounts for their employees.

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Growth Rates of National Health Expenditures and GDP: 1960-2007

August 28, 2009 in HC Statistics | 3 comments

From a NCPA report.

  • From 1960 to 2006, GDP grew at 2.27% per year. Over this time period, GDP increased cumulatively by 174%.
  • From 1960 to 2006, national health expenditures (NHE) grew at 4.79% per year. Over this time period, NHE increased cumulatively by 721%.

For more details, see this chart.

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Friday Links

August 28, 2009 in Uncategorized | No comments

Does Hospice Care Reduce Medicare’s cost for end-of-life care?

August 27, 2009 in Medicaid/Medicare | No comments

Historically, Medicare recipients in their final year of life generated about six times the expenditures of the average surviving Medicare enrollee and accounted for almost 30 percent of total program spending. However, in the late 1980s, a confluence of two forces helped increase the use of hospice care among Medicare beneficiaries.

First, in 1984, Medicare instituted the Prospective Payment System (PPS). Hospitals began receiving fixed payments for each admission based on patient diagnosis (DRG). Thus, hospitals had an incentive to move long-term care patients to alternative facilities, such as hospices. Secondly, in 1988, the Duggan v. Bowen court ruling held that the HCFA (now CMS) had to expend their interpretation of home health benefits. Soon after, Medicare began to cover more hospice and home health services. Because of these two forces, the supply of home health services and hospices boomed.

Did the rise in popularity of hospice decrease Medicare’s end-of-life expenditures? A paper by Garber, MaCurdy and McClellan find that the answer is no.

Hospice and home health care did substitute for some inpatient hospital services. Between 1988 and 1995, “the percentage of Medicare recipients who died in an acute hospital fell from about 42 percent to less than 35 percent. The percentage who died without any Medicare-covered services fell much more dramatically, from about 40 percent in 1988 to about 25 percent in 1995.” Hospice care rose from about 2% in 1988 to 10% in 1995.

This growth in the utilization of hospice care was strongest in patients who had chronic diseases such as lung cancer. Predictably, individuals who died of sudden illnesses such as acute myocardial infarction (AMI) or hemorrhagic stroke did not increase their use of hospice care.

However, although the hospice care did substitute for inpatient hospital care expenditures for end-of-life medical continued to increased. “…per-decedent total expenditures in the final month of life rose from about $5,400 in 1988 to $7400 in 1995, expressed in 1995 dollars.” Even though inpatient hospital utilization decreased at the end of life, the cost of this care increased dramatically. For instance, for patients who died of AMI—where inpatient hospitalization at the end of life varied little over time—the cost of care in the final month of life rose by nearly 50 percent in real terms between 1988 and 1995.

In summary, although hospice utilization increased and inpatient hospital care decreased, “the simultaneous rise in the use of hospice and other services, however, meant that the number of days that patients received Medicare-covered services rose between 1988 and 1995.” the net effect of these changes in utilization was an increase in monthly Medicare expenditures before death, rising from about $5,500 in 1988 to more than $7,000 in 1995 (in 1995 dollars).

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Cavalcade of Risk #86: Rate-This-Post edition

August 26, 2009 in Carnivals | No comments

The latest edition of the CoR is up at Political Calculations.  It even has a Moody’s/S&P-style rating system telling you which posts you need to read.

CBO Health Care Expenditure Forecasts

August 26, 2009 in Medicaid/Medicare, Supply of Medical Services | 3 comments

The Congressional Budget Office (CBO) periodically releases its 75-year health care spending projections. Current projections forecast the following health care spending levels:

  • Total spending on health care would rise from 16% of GDP in 2007 to 25% in 2025, 37% in 2050 and 49% in 2082.
  • Federal spending on Medicare (net of beneficiaries premiums) and Medicaid would rise from 4% of GDP in 2007 to 7% in 2025, 12% in 2050 and 19% in 2082.

U.S. Health Care System Overview

The distribution of health care spending between public and private sources can in this chart. Currently health insurance although public health insurance is gaining ground, employer-provided health insurance still covers most Americans. Overall, healthcare spending has increased from 4.7% of GDP in 1960 to about 16% of GDP now. According to the CBO (as well as most other researchers) the major driver of this long term cost growth “has been the emergence, adoption, and widespread diffusion of new medical technologies and services.”

CBO Projection Methodology

The simplest way the CBO projects health expenditures is to use excess cost growth models. Excess cost growth measures increases in health care spending above the level of GDP growth. For instance, between 1975 to 2009 excess cost growth was 1.9 percentage points. Medicare excess cost growth was 2.3%, Medicaid excess cost growth was 1.9% and all other insurance (e.g., private health insurance, other public programs) had excess cost growth of 1.8%.

In reality, the forecasting method is much more detailed.

  • Medicare and Medicaid Projections. The CBO projects total spending for Medicare and Medicaid less the contributions from states and enrollee premium contributions. Premiums are assumed to be a flat percentage of part B and Part D premiums. State contributions for Medicaid are held constant at 57% of total projections after the expiration of the temporary increase enacted in the American Recovery and Reinvestment Act of 2009.
  • Budget Scenarios. The CBO uses two budget scenarios. The extended-baseline scenario assumes current laws do not change and that physician payment formulas will continue to apply and will necessitate large reductions in these payments over the next several years. The alternative fiscal scenario assumes that Medicare physician payment will increase with inflation. Spending on the alternative fiscal scenario is greater because the physician reimbursement rates are assumed not to be cut.
  • Long term projection Details.
    • CBO projections from 2009-2019 used the projections from the CBO March 2009 budget report under both the extended-baseline and alternative fiscal scenario.
    • In 2020, excess cost growth for spending in Medicare and Medicaid will equal its historical levels of 2.3 percentage points and 1.9 percentage points respectively.
    • From 2009 through 2020, excess growth in all other spending (e.g., private health care and other public programs) will equal its historical average of 1.8 percentage points.
    • Excess growth in all three categories–Medicare, Medicaid and other spending–slows beginning in 2021. The slowdown in Medicare spending is one-third the rate of slowdown in non-Medicare spending.
    • Excess cost growth for other health spending declines smoothly from 1.8 percentage points in 2020 to 0.1 percentage points in 2083.
    • The rate of excess cost growth from Medicare drops from 2.3 percentage points in 2020 to 0.9 percentage points in 2083. For Medicaid, excess cost drops from 1.9 to 0.1 percentage points between 2020 and 2083.
    • Overall, average excess growth of all health care drops from 1.9 percentage points in 2020 to 0.5 percentage points in 2083, averaging 0.8 percent over that period.

Why will excess cost growth slow? The CBO gives four reasons: i) higher cost sharing, ii) increased utilization management, iii) reduced insurance coverage by employers, and iv) greater scrutiny of new technologies (e.g., cost effectiveness review). Under these projections, “spending per person by 2035 would have growth by more than $14,000 (in 2009 dollars) but more than 80 percent of that extra money would be spent on health care. Although spending for other goods and services would grow by just 14 percent, spending for health care would nearly triple.”

Source:

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Does a bad economy increase blood donation?

August 25, 2009 in Labor Economics | 1 comment

A bad economy should increase blood donation.  As more individuals lose their job, they now have more free time to donate blood.  The opportunity cost of their time is lower, since they don’t have to miss work to donate blood.  A bad economy also creates more sympathy for those in need; thus, donor morale may increase.

Alas, Marketplace reveals that a bad economy in fact decreases blood donations:

“The Red Cross says it’s feeling a new side effect from the recession. All those job losses mean fewer people available to donate at corporate blood drives. It says up to 80 percent of donated blood comes from companies hosting those drives.“

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Today’s Hot Links

August 25, 2009 in Uncategorized | No comments

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