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Medicare spending for beneficiaries receiving long-term care

October 26, 2010 in Medicare, Nursing Homes | 1 comment

Medicare spends a lot of money on beneficiaries living in nursing homes.  How expensive are these beneficiaries:

  • Six percent of Medicare beneficiaries spend some time in a long-term care facility, but these same beneficiaries make up 17% of total Medicare cost.
  • Three percent of Medicare beneficiaries spent an entire year in a long-term care facilities.  These beneficiaries make up 5% of all Medicare cost.
  • Of these 3% of these of Medicare beneficiaries who spent an entire year in a long-term care facilities, 41% where in the top quartile of spending and 17% were in the top decile.
  • Among beneficiaries who spend time in a LTC facility, but died before the end of the year, 69% of beneficiaries ranked in the top spending quartile and 31% in the top Medicare spending decile.
  • Thirty eight percent of beneficiaries living in a LTC facility were admitted to a hospital at some point during the year.  Over half (51%) of LTC residents had at least one emergency room visit.

So Medicare beneficiaries in long-term care facilities are expensive…who cares?  These beneficiaries are also likely sicker than other patients and need this skilled care.  Further, they would cost Medicare more money than a typical patient regardless of where they live.

Although LTC residents are expensive, much of their cost could be avoided.  According to a KFF report, 24 percent of all hospitalizations for long‐term care facility residents in 2006 were potentially preventable. In particular, “greater attention to transitions to and from the hospital could also help to minimize costs associated with preventable complications.”

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How Medicare payment policy affects SNF incentives to hospitalize patients

October 25, 2010 in Medicare, Nursing Homes | No comments

Under Medicare Part A, beneficiaries can receive coverage for care provided by skilled nursing facilities (SNFs), also known as nursing homes.  Between 2000 and 2007, however, the rate of potentially avoidable re-hospitalizations for five key conditions (congestive heart failure, respiratory infection, urinary tract infection, sepsis, and electrolyte imbalance) increased from 13.7% to 18.5%. One potential explanation for this increase is that Medicare reimbursement policy may incentivize SNFs to transfer patients to acute impatient care.  Today, I examine a Kaiser Family Foundation brief which examines these SNF incentives.

Background

A SNF is a long-term care facility  providing skilled care. This is different from general nursing facilities (NF) who provide custodial rather than skilled care. Medicare pays for most SNF care whereas Medicaid is the primary payor for most NF care.  All SNF Part A inpatient services  are paid under a prospective payment system (PPS). In the PPS, providers receive a daily base rate which is adjusted for case mix. “Assignment to a RUG is based on a number of considerations, such as the patient’s need for certain services, the presence of certain conditions, and an index based on the patient’s ability to perform independently four activities of daily living.”  SNFs can earn extra revenue through bed holds and reserved bed arrangements.   In the bed hold scenario, residents transferred to an inpatient facility pay the SNF to keep the same bed. States regulate bed holds.  For instance, California mandates that a bed must be held for 7 days while Wisconsin mandates a minimum bed-hold of 15 days.  Additionally, impatient facilities may reserve beds.  This way, the hospital will guarantee placement of their discharged patients.

Care is provided by a number of different provider types, but Medicare mandates that “each resident must be seen by a physician at least once every 30 days for the first 90 days after admission, and at least once every 60 days thereafter.”

There are two types of models for SNFs and NF. In a closed staffing model, the facility directly employs the physician and pays them a salary. In an open staffing model, community physicians care for residents.

The remainder of this post will examine how certain Medicare payment policies may or may not encourage SNFs to send residents to acute care facilities unnecessarily.
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Labor Day Post I: A Dangerous Occupation

September 5, 2010 in Nursing Homes | No comments

For Labor Day, I will profile a group of workers who are underappreciated: long-term care workers.  These posts are typically filled by certified nurse’s aids (CNAs).  Despite the importance of their job, their remuneration is far from generous.  In The Politics of Medicaid, Laura Katz Olson reports that CNA hourly wages were only $10.61 in 2008.  This compares to wages of $12.59 for customer service representatives or $11.78 for manufacturing receptionists.

In addition, being a nursing home caregiver is a dangerous job. These workers “…experience an exceedingly high rate of on-the-job injuries, 18.2 per 100 workers, as compared to people engaged in coal mining (6.2) construction (10.6) and warehousing or trucking (13.8).  In fact, nurse’s aides, attendants and orderlies have the third-highest rate of nonfatal occupation-related mishaps in the nation.“

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Income and Long Term Care

August 10, 2010 in Nursing Homes | No comments

Almost 7 out of every 10 of individuals living to age 65 will require some long-term care (LTC) assistance.  Of these, over one-third will spend some time in a nursing home.  In general, however, the elderly strongly prefer home based LTC if possible.   “Mattimore and colleagues (1997) found that 30% of elderly survey respondents would rather die than enter a nursing home and an additional 26% indicated they were very unwilling to move to an institutional setting.”

A recent paper Goda, Golberstein and Grabowski (GGG hereafter) examines how permanent income shocks affect LTC utilization.

The estimation equation used is the following:

  • Uhi = βIh + δXh + ε

where U refers to a LTC utilization measure (e.g., nursing home, paid home health care, unpaid care), I is annual household Social Security Income, and X is a set of exogenous controls.

Identifying income and LTC choices independently is difficult.  Individuals with a high probability of needing LTC may more years or longer hours per year to accumulate additional assets to fund LTC expenses.  Ideally, identification requires an income shock that is exogenous to the individual’s labor market choices.  For that purpose, GGG rely on natural experiment known as the “Social Security Benefits Notch” to serve as an instrument for the income variable.  The authors define the Notch as follows:

“Prior to 1972, neither lifetime earnings nor post-retirement payments were indexed for inflation, but rather periodically adjusted by the Congress. In 1972, Congress amended the Social Security Act to provide automatic indexation of credited earnings for those workers who had not yet retired, which created an unanticipated windfall for workers from certain birth cohorts because of an error that led the prior earnings of these workers to be doubly indexed for inflation. The high rate of inflation over the following years led to a large increase in benefits for the affected cohorts. In 1977, Congress passed another law to eliminate the double indexation for future cohorts of retirees.  This law change created a large reduction in Social Security payments for those cohorts born in 1917 or later relative to the preceding cohorts. Importantly however, cohorts born prior to 1917 (near retirement in 1977) retained doubly indexed benefits under a grandfather provision. Taken together, these law changes and the high rate of inflation over the mid 1970s created a large and permanent difference in Social Security payments across birth cohorts, which came to be called the Social Security Benefits Notch.”

Econometrically, GGG use a dummy variable for being born in the notch years (i.e., 1915-1917).  To apply their model, the authors use data from the 1993 and 1995 waves of the Assets and Health Dynamics Among the Oldest Old (AHEAD).  The authors find that this instrument is weak for richer households who have at least a high school education, but much stronger for households whose heads have at least a high school diploma.  Due to this result, GGG limit the sample only households without a high school education.  Using this specification,  the authors find the following results:

“…positive income shocks had a negative effect on nursing home entry, but a positive effect on the use of paid home care. Specifically, a $1,000 (or 10.2 percent) increase in annual Social Security income for those in this low-education group would decrease the likelihood of any nursing home use by 22%-30% (relative to mean) and increase the likelihood of receiving any paid home care use by 24%-34%. Social Security income was not systematically related to the receipt of any informal (unpaid) care across the different specifications.”

At first glance, one might perceive that increased income leads to less nursing home care due to substitution for home health care.  Alternatively, higher income could improve health directly and thus lessen the need for institutionalized care.

One obvious mechanism by which increased income would decrease nursing home use is through disqualification of Medicaid eligibility.  The authors claim that assets rather than income are the key driver of Medicaid eligibility for nursing home care, but do not investigate how asset accumulation and the Social Security notch are related.

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No Wrong Door

August 2, 2010 in Medicaid, Nursing Homes | No comments

In Virginia, there are over one million people age 60 and older and over 90,000 Virginians age 85 and older. These figures will only grow in the upcoming decades.  Thus will put increasing strain on public programs and will require service providers to reorient medical care toward providing continued, high-quality long term care services.  Long term care is of growing importance to health care sector.  Although the aged and disabled populations make up 30% of Virginia’s Medicaid population, these individuals account for 70% of the state’s $4 billion Medicaid budget.

Yet providing long term care to those in need is a confusing a bureaucratic process.  For instance, in Virgina, there are 6 agencies that provide long term care services:

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Atul Gawande’s Latest Article

July 30, 2010 in Nursing Homes, Supply of Medical Services | 2 comments

Atul Gawande has written yet another excellent article in the New Yorker.  This one about end of life care.  In the debate surrounding health reform, many politicians hijacked the serious discussion of end-of-life decisions and decisions to use non-invasive medical treatment were termed death panels.  But end-of-life decisions merit further investigation.  Not only can giving patients end-of-life treatment options lower cost, but it can also improve the patient remaining quality of life.  For instance:

“Coping with Cancer project published a study showing that terminally ill cancer patients who were put on a mechanical ventilator, given electrical defibrillation or chest compressions, or admitted, near death, to intensive care had a substantially worse quality of life in their last week than those who received no such interventions. And, six months after their death, their caregivers were three times as likely to suffer major depression.”

One reason that palliative care has not been adopted by more patients is that most hospice facilities compel patients to agree to forego more intensive services.  One innovative program convinced more terminal patients to use hospice facilities by allowing access to more intensive treatment while in hospice care.

“In late 2004, executives at Aetna, the insurance company, started an experiment. They knew that only a small percentage of the terminally ill ever halted efforts at curative treatment and enrolled in hospice, and that, when they did, it was usually not until the very end. So Aetna decided to let a group of policyholders with a life expectancy of less than a year receive hospice serviceswithout forgoing other treatments…A two-year study of this “concurrent care” program found that enrolled patients were much more likely to use hospice: the figure leaped from twenty-six per cent to seventy per cent. That was no surprise, since they weren’t forced to give up anything. The surprising result was that they did give up things. They visited the emergency room almost half as often as the control patients did. Their use of hospitals and I.C.U.s dropped by more than two-thirds. Over-all costs fell by almost a quarter.”

NPR’s Fresh Air also has an interview with Dr. Gawande.

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Should there be a mandated nurse/patient ratio in Nursing Home facilities?

July 17, 2008 in Nurses, Nursing Homes, Public Policy | 2 comments

A recent paper by Kitchener et al. (HSR 2008) investigates the actions of one nursing home chain to find how they maximized their profits. The authors find that Sun Healthcare Inc. employed three strategies to maximize shareholder value:

  1. rapid growth through debt-financed mergers;
  2. labor cost constraint through low nurse staffing levels; and
  3. a model of corporate governance that views sanctions for fraud and poor quality as a cost of business.

Should the government impose a minimum nurse/patient ratio in order that quality care continues?

Most libertarians abhor almost any form of regulation, but the case of the nursing homes may be an exception. The “customers” of nursing home care are elderly patients who–by definition–are in some way not able to take care of themselves. Thus, if the patient is treated poorly, it may be nearly impossible for them to change facilities or often it is even difficult for the elderly individual to communicate to their relatives that their care level is poor. The Kitchener paper found that one nursing home chain is sacrificing quality by using low nursing staffing level; should the government mandate a minimum nursing staffing level for nursing homes?

I would argue that they should not. While nurses are of course one of the most–if not the most–important input which affects the quality of nursing home care, regulating inputs is not ideal. This regulation will likely stifle innovation. If new technologies are developed–such as a digital scale monitoring device mentioned in Akshay Kapur’s blog–it may be possible to substitute capital (technology) for labor (nurses) and achieve better medical care for lower costs.

Should nursing homes be exempt from regulation? On this point, I believe that there should be some regulation. The government must continue to monitor nursing home quality and register complaints. Nursing homes with low quality scores or who abuse patients should not receive Medicare or Medicaid patients.

It is important for the government to play a role in helping those who cannot help themselves; yet the government should not mandate how nursing homes should run their business, but instead insure that some minimum quality of care threshold is met.

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How do the Amish pay for medical care?

July 8, 2008 in Health Insurance, Hospitals, Information, Nursing Homes | Permalink

There is an interesting article a few weeks back in the Wall Street Journal (“Opting Out“) which describes the plight of Amish and Old Order Mennonites who refuse to buy health insurance. Further, since these groups also refuse to participate in Medicaid government assistance will not bail them out either.

Nevertheless, these societies do have one form of insurance: mutual aid. When one member of the community becomes ill, the rest will pitch in to help finance the cost of the needed medical care. “Thousands of Amish families rely on the age-old system of churches paying bills members can’t afford, through voluntary donations.”

Because they are very closed societies, however, many Amish and Old Order Mennonite individuals marry distant cousins which can lead to a handful of genetic diseases. With such a high rate of expensive-to-treat diseases, this mutual aid system is faltering.

Further, since the Amish and Mennonite are uninsured, they actually pay more for medical care than would someone with private or public health insurance. This phenomenon was documented in my “Uncompensated Care” post.

What is the solution?

The Amish hope to persuade their local hospital to lower medical costs, but it is unlikely that a hospital will negotiate a lower rate for uninsured Amish compared to the uninsured non-Amish. The local Lancaster General hospital “…has increased its discount for uninsured patients to 25% from 15%…uninsured patients now receive the same discount that commercial insurers do, though not as much as the government does.”

The moral of the story is that it is very difficult to receive medical care in America today without health insurance.

A Side note: If everyone receives at least a 25% discount, isn’t that just the regular price?

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