Citation URL: http://www.urban.org/StephanieMaxwell

This paper demonstrates that while fees for physician evaluation and management increased over the first ten years of the Medicare Fee Schedule, the quantity of imaging services and non-major procedures increased even more, making the share of program spending on evaluation and management services in 2002 the same as it was in 1992. Two factors explained the differential spending growth across types of services: the introduction of new services and the process for reviewing and revising fees. The authors argue that differences in expenditure growth across service types affect Medicare's costs and should be considered in the program's spending control policies.

Medicare has paid skilled nursing facilities (SNFs) using a prospective payment system (PPS) since 1998. This report offers policy options to refine Medicare’s payment of SNF services by developing alternative patient classification models. Three models classify patients according to expected non-therapy ancillary (NTA) costs: two models use data from the SNF to model NTA costs; a third adds data from prior hospital stays. A fourth model predicts rehabilitation therapy costs using patient characteristics. The fifth uses Diagnostic Related Groups to predict total SNF care costs. The report also simulates options for outlier payments for exceptionally high-cost cases.

This paper provides policy analysis of the geographic adjusters used in the Medicare physician payment system. In 2003, Medicare set a floor on the adjuster for the work component of each fee so that every area is paid at least at the average, regardless of its relative costs. We review the conceptual foundation for the geographic practice cost adjusters, emphasizing why researchers and policymakers included an adjustment for geographic differences in the costs of physicians' work. Finally, we discuss the floor provision in the context of the broader aims of its proponents—to increase access to physician services in those areas affected by the floor.

This concept paper extends and develops an idea for an alternative methodology Medicare might use to determine capitation payments to health plans that participate in the Medicare+Choice program. The Direct Payment Method, first suggested by Greenwald et al. (1998), would shift the basis of payment away from the current approach, which builds on county-based Medicare fee-for-service (FFS) expenditures, to a national model that predicts expenditures for individual Medicare enrollees. Ideally, the Direct Payment Method would use detailed encounter data for Medicare+Choice enrollees, information on the cost of the services they received, and a health-based risk adjuster to predict expenditures for individual enrollees. When combined with geographic adjustments for input prices and local market conditions, the resulting payment would be independent of the extreme and highly problematic geographic variations in Medicare's FFS payments per enrollee.

Medicare spending on Part B rehabilitation services rose 15 percent per year on average in the early and mid-1990s. The 1997 Balanced Budget Act required that the program replace cost-based payments with a fee schedule and apply coverage limits to the services. This study analyzes Part B rehabilitation spending during this period of policy change—1998 to 2000. In 1999 (during fee schedule payments and coverage limits), aggregate and per user payments declined by more than 30 percent. In 2000 (during a coverage limit moratorium) payments rose about 35 percent, placing spending at near-1998 levels. Decompositions of per user payments suggest that up to two-thirds of the 1999 decline was attributable to payment rate reductions, rather than coverage limits. The study also found that provider type is a substantial predictor of annual payments per user, controlling for diagnosis, type of therapy used, payment method, and coverage policy. Published by the Health Care Financing Administration; 2001 September.

Medicare spending on Part B rehabilitation services rose 15 percent per year on average in the early and mid-1990s. The 1997 Balanced Budget Act required that the program replace cost-based payments with a fee schedule and apply coverage limits to the services. This study analyzes Part B rehabilitation spending during this period of policy change—1998 to 2000. In 1999 (during fee schedule payments and coverage limits), aggregate and per user payments declined by more than 30 percent. In 2000 (during a coverage limit moratorium) payments rose about 35 percent, placing spending at near-1998 levels. Decompositions of per user payments suggest that up to two-thirds of the 1999 decline was attributable to payment rate reductions, rather than coverage limits. The study also found that provider type is a substantial predictor of annual payments per user, controlling for diagnosis, type of therapy used, payment method, and coverage policy. Published by the Health Care Financing Administration; 2001 September 2001.

This paper analyzes an illustrative range of conservative and expansive options to modernize the Medicare benefit package. The most generous option modeled would eliminate all Medicare deductibles and coinsurance except for a $200 annual Part B deductible, and would introduce a $105 monthly Part B premium to offset the increase otherwise occurring in Federal spending. Assuming the elderly would drop their Medigap policies because of the benefit expansion, this option would reduce average out-of-pocket spending by 24 percent. A Medicare prescription drug benefit similar to many Congressional proposals also was modeled. A mandatory drug benefit with a 50 percent coinsurance requirement, a $2,500 beneficiary cost-sharing limit, and a $26 monthly premium would increase Federal spending by 6 percent in 2000. (Published by the Commonwealth Fund; 2001 May.)

Though accounting for only a small percentage of total Medicare spending, long-term care hospitals (LTCHs) (defined as having an average length of stay [LOS] of 25 days or more) have been growing, in number and in Medicare expenditures, at a rapid rate in recent years. Because they have not been widely studied, we conducted research to describe the characteristics of this increasingly important Medicare provider type. We found that most LTCHs specialize in the provision of respiratory care or rehabilitation. Information from this study can help inform the development of a Medicare prospective payment system for LTCHs. . (Health Care Financing Review 2001 Winter; 23(2):1-18).

Though accounting for only a small percentage of total Medicare spending, long-term care hospitals (LTCHs) (defined as having an average length of stay [LOS] of 25 days or more) have been growing, in number and in Medicare expenditures, at a rapid rate in recent years. Because they have not been widely studied, we conducted research to describe the characteristics of this increasingly important Medicare provider type. We found that most LTCHs specialize in the provision of respiratory care or rehabilitation. Information from this study can help inform the development of a Medicare prospective payment system for LTCHs. (Health Care Financing Review 2001 Winter; 23(2):1-18).

Medicare, the nation's largest public health insurance program, faces formidable challenges in the years ahead. To ensure its stability, the program will have to come to grips with the combined impact of escalating health care spending, insufficient revenues, and a burgeoning elderly population. Proposals for changes in the program itself and its financing have been put on the table. As policymakers debate the merits of these various options, they must consider the effect on Medicare beneficiaries and protect vulnerable elderly and disabled people from overwhelming out-of-pocket costs.

Return to list of authors