Performance Improvement 2002. Healthcare Financing


Evaluation of the Program of All-Inclusive Care for the Elderly Demonstration: Comparison of the Pace Capitation Rates to Projected Costs in the First Year of Enrollment

The Program of All-Inclusive Care for the Elderly (PACE) is designed to provide a complete range of integrated preventative, acute, and long term care services for the frail elderly by combining Medicaid and Medicare capitation in contracts with community providers of such services. This evaluation sought to estimate the economic costs and benefits of enrollment during the first 12 months of participation in PACE.

Eleven PACE programs operating under dual capitation were involved in the evaluation, which was based on a comparison group design. The treatment group included individuals who expressed interest in PACE, had a home visit, decided to enroll in PACE, and were accepted into the PACE program prior to the collection of site visit data. The comparison group consisted of individuals who had the same screening process and submitted initial applications, but decided not to enroll. During the study enrollment period, 3,009 individuals met the study criteria. Multivariate statistical procedures were used to control for selection bias and to adjust the impact measures. Regression models were used to analyze the relationships between background characteristics and subsequent Medicare and Medicaid reimbursement for comparison group members. Regression coefficients were then combined with information on the baseline characteristics of enrollees to estimate their projected Medicare and Medicaid costs.

Findings indicated that projected costs at the 11 PACE sites were about 10 percent lower than the combined Medicaid and Medicare capitation payments. When two high-cost sites were excluded from the analysis, estimated Medicare and Medicaid costs approximated the reimbursement rates. There was a differential impact on Medicare and Medicaid, with PACE representing savings for the Medicare program, but additional costs for Medicaid.
PIC ID: 6309; AGENCY SPONSOR: Centers for Medicare and Medicaid Services; CONTACT: Fred Thomas, 410-786-6675; PERFORMER: Abt Associates, Inc.

Outstanding Evaluation

The Final Evaluation Report on the National Home Health Prospective Payment Demonstration: Agencies Reduce Visits While Preserving Quality

This evaluation presents findings from Phase II of the National Home Health Prospective Payment Demonstration, which ran from 1995 to 1998 and was designed to test the effects of a predetermined per-episode payment rate. In that demonstration, 91 Medicare certified home health agencies from five states were randomly assigned to the control (i.e., cost reimbursement) and treatment (i.e., per-episode payment) groups.

The five studies reported here examined impacts on service delivery; patients’ use of Medicare services other than home health; costs per episode, per visit, and profit potential; and quality of care. Multiple data sources were used, including Medicare cost reports, Medicare claims data (including UB-92 bill records that include patient characteristics), CMS’s Enrollment Data Base, Area Resource File (for agency information), a quality assurance database constructed for the demonstration, a patient survey, and site visits.

The main finding was that agencies in the treatment group (per-episode payment) dramatically reduced their number of home health visits, primarily due to earlier discharge, without substantial adverse effects on quality of care. However, the evaluators noted that control agencies also reduced their visits, in response to various changes in the environment of home health. Other findings indicated that the overwhelming majority of patients in both groups were satisfied with their home health service. The evaluation also identified methods that agency staff found successful in reducing home health utilization, including more careful supervision of visiting staff and improved patient education. While treatment group agencies reduced costs per episode, their per-visit costs rose more for skilled nursing and aide visits than did the same costs for control group agencies. In other words, although the volume of services fell, the treatment agencies’ fixed costs could not adjust as rapidly. As well, some of the strategies used to reduce visits actually resulted in higher overhead costs.
PIC ID: 7738.4; AGENCY SPONSOR: Centers for Medicare and Medicaid Services; CONTACT: Ann Meadow; PERFORMER: Mathematica Policy Research, Inc., Princeton, NJ

Prospective Pymt (a) Prospective Payment Demonstration for Medicare Home Health: No Clear Signs that Quality of Care Suffered

This report represents a summary of the quality of home health care throughout the three years demonstration project noted in earlier reports (7738, 7738.1, 7738.2). It provides an update to the previous report which covered the first two years of the demonstration. The demonstration tests the extent to which a fixed, lump-sum prospective payment to home health agencies for the first 120 days of each episode of care provided to Medicare beneficiaries increases efficiency in service provision. By allowing agencies to retain most of any surplus payments over cost, this payment method gives agencies an incentive to provide home health care in a cost-efficient manner.

The main findings are that, despite prospectively paid agencies’ progressive reduction of services over time, there were no serious adverse effects on major outcomes of care. There were a few small negative effects in Year 3 on stabilization in functioning, as well as several large positive effects in all three years on improvement in symptoms. These could be viewed either as subtle signs of negative effects late in the demonstration or, just as easily, as the absence of any true impacts.
PIC ID: 7738.3; AGENCY SPONSOR: Centers for Medicare and Medicaid Services; CONTACT: Ann Meadow; PERFORMER: Mathematica Policy Research, Inc., Princeton, NJ

Prospective Pymt (b) Per-Episode Prospective Payment for Medicare Home Health Care Sharply Reduces Service Use

As part of its ongoing effort to study methods of providing more cost-effective care, the Centers for Medicare and Medicaid Services (CMS) implemented the Per-Episode Home Health Prospective Payment Demonstration. Under the demonstration, participating home health agencies are paid a fixed, lump-sum payment for the first 120 days of each episode of care provided to Medicare beneficiaries and a predetermined rate for each visit thereafter. By allowing agencies to retain most of any surplus payments over cost, this payment method gives agencies an incentive to provide home health care in a cost-efficient manner.

It was found that prospective payment reduced the average number of visits to a patient in the year following admission by 24 percent compared to their levels under cost-based reimbursement. Prospectively paid agencies achieved these reductions by shortening the overall length of service and by lowering the frequency of visits provided. These results strongly suggest that prospective payment is a highly successful method for controlling the costs of Medicare home health care; further analyses must evaluate the consequences of these declines on patient health and access, non-home health expenditures, and other outcomes before final recommendations can be made.
PIC ID: 7738; AGENCY SPONSOR: Centers for Medicare and Medicaid Services; CONTACT: Ann Meadow; PERFORMER: Mathematica Policy Research, Inc., Princeton, NJ

Prospective Pymt. (c) Prospective Payment for Medicare Home Health: A Promising System to Save Resources

(See Prospective Pymt (b) above for background.)

It was found that the typical agency in the demonstration was able to earn small profits under the prospective payment system. They were able to do so by reducing their cost per episode by 14 percent--a decrease achieved by reducing service use. However, efforts also to reduce service use resulted in increases in the agencies cost per visit. The outcome effectively reduced profits, as approximately half an average agency’s visits were paid according to the per-visit methodology, at a predetermined rate. Furthermore, the agencies’ Medicare revenues fell by 20 percent, largely because the number of visits rendered after 120 days of care dropped as well. Although the small number of some types of agencies in the sample makes it difficult to draw firm conclusions, it appears that almost all types of agencies experiences these financial changes. These results suggest that CMS could save resources relative to cost-reimbursement by implementing a prospective payment system.

PIC ID: 7738.1; AGENCY SPONSOR: Centers for Medicare and Medicaid Services; CONTACT: Ann Meadow; PERFORMER: Mathematica Policy Research, Inc., Princeton, NJ

Study of Pharmaceutical Benefit Management

The purpose of this study was to assist the Centers for Medicare and Medicaid Services in selecting a pharmacy benefit manager (PBM) as it implements a Medicare drug benefit. As the possibility of extending a Medicare benefit moves through legislation, Congress and the CMS will need to decide how to obtain discounted pricing, the benefits and services it will offer, and whether it will use the PBM’s formulary and clinical services or design its own.

PBMs have emerged as the national standard for the administration of prescription drug insurance in the United States. They manage drug benefits of approximately 70% of Americans, including 65% of the country’s seniors. This is also a very successful industry in that PBMs have the ability to reduce costs, provide national pharmacy access, and administer benefits that are customized to meet the needs of a wide range of clients in a highly automated environment.

The PBM industry, suggests the report, would not be overwhelmed by providing services to the Medicare population because the industry is relatively insensitive to volume increases. However, better rebates and administrative fees could result from the creation of a Medicare formulary, which could help control Medicare drug costs. A PBM could be contracted with for administrative services, such as claims processing, Medicare formulary, management, member services, and clinical control. This scenario would maximize price discounts and rebates.
PIC ID: 7591; AGENCY SPONSOR: Centers for Medicare and Medicaid Services; CONTACT: Peri Iz; PERFORMER: Price Waterhouse, Washington, DC

Discontinuous Coverage in Medicaid and the Implications of 12-Month Continuous Coverage for Children

This report is a policy analysis that examines the implication of 12-month Continuous Coverage for children under the Medicaid program by simulating enrollment based on 1994-95 State Medicaid Resource File (SMRF) data from California, Michigan, Missouri, and New Jersey.

The researchers modeled what the enrollment, payments, and ER use would have been had the states implemented this policy. Four types of yearly claims files were included: inpatient hospitalization, drugs, long-term care, and other services. Claims data from California were also used to examine impacts on quality of care as reflected in use and payments for ER care. Analyses included only children who could be eligible for Continuous Coverage; thus, medically needy, SSI, special refugee status, and other groups were excluded.

Findings indicated that a policy of 12-month Continuous Coverage would reduce, but not eliminate, the problem of discontinuous coverage; the policy does extend coverage to more than half of children who would otherwise lose it. In addition, results showed that Continuous Coverage would increase total Medicaid payments, but that over time, this policy could decrease overall health costs as acute episodes are presented. Continuous Coverage would also reduce estimated administrative costs related to enrollment and disenrollment as children move in and out of plans, but only by a small percentage. Findings were inconclusive with regard to analyses of costs. The researchers conclude that Continuous Coverage holds promise as a policy option that could improve continuity of care and costs for children under Medicaid. They state that future analyses should be conducted to examine the implications of these findings.
PIC ID: 7774; AGENCY SPONSOR: Health Resources and Services Administration; CONTACT: Jacob Tenenbaum; PERFORMER: Mathematica Policy Research, Inc., Princeton, NJ

The Medicaid DSH Program and Providing Health Care Services to the Uninsured: A Look at Five Programs

Perhaps one of the most important health policy issues facing the United States is how to care for the uninsured. Uninsured individuals often lack access to appropriate care, but they still use health services when they become ill and, in many cases, they do not have the financial resources to fully pay for their care. Through various public programs--local, state, and federal--many hospitals receive subsidies to help pay for the costs associated with uncompensated care.

One of the largest subsidy programs is the Medicaid disproportionate share hospital (DSH) program. This study provides some insights on the experience of five programs that have used Medicaid DSH funds to enhance care for the uninsured. Those programs were: Denver County (Denver), Colorado; Marion County (Indianapolis), Indiana; Ingham County (Lansing), Michigan; Wayne County (Detroit), Michigan; and Bexar County (San Antonio), Texas. These programs reflect diversity in target population, organization, financing, delivery system and services provided.

The findings indicate the Medicaid DSH funds were an important source of funding for all programs. The programs examined here highlight how DSH funds have been used in a positive way: To provide health care services to the uninsured. By emphasizing primary care services, all of these programs, as diverse as they are, aim to reduce hospitals’ uncompensated care burdens, one of the principal goals of the DSH program. The programs in this study provide models by which states and localities could provide primary care services using Medicaid DSH funding.
PIC ID: 6703; AGENCY SPONSOR: Office of the Assistant Secretary for Planning and Evaluation; CONTACT: George Greenberg; PERFORMER: Urban Institute, Washington, DC