Impact of critical access hospital conversion on beneficiary liability.

CONTEXT: While the Medicare Critical Access Hospital (CAH) program has improved the financial viability of small rural hospitals and enhanced access to care in rural communities, the program puts beneficiaries at risk for paying a larger share of the cost of services covered under the Medicare part B benefit. PURPOSE: This paper examines the impact of hospital conversion to CAH status on beneficiary out-of-pocket coinsurance payments for hospital outpatient services. METHODS: The study is based on a retrospective observational design using administrative data from Medicare hospital cost reports and fee-for-service beneficiary claims from 1999 to 2003. The study compares changes in beneficiary co-payments before versus after CAH conversion with payment trends among small rural non-converting hospitals over the same period. FINDINGS: Conversion to CAH status is associated with an increase in beneficiary coinsurance payments per outpatient visit of $17.19, equivalent to 34% of the sample average. However, CAH designation had no significant effect on the share of outpatient costs paid by the beneficiary. Most of the increase in beneficiary liability associated with conversion is attributable to the provision of more services per outpatient visit. CONCLUSIONS: While this and other studies show that conversion to CAH status results in more intensive outpatient care, CAH conversion does not appear to inadvertently create financial barriers to accessing ambulatory services in remote rural communities by forcing beneficiaries to pay a higher share of their Medicare part B costs.

Understanding the variation in costs among HIV primary care providers.

The paper uses a hybrid cost model to identify the determinants of cost variation among programs that offer early intervention services to people living with HIV and AIDS in the US. The model combines the effects of input price and output volume measures from traditional economic cost functions with institutional factors based on program and patient characteristics on the cost of providing primary medical care and support services to people living with HIV and AIDS. The impact of economic factors conforms to conventional theory and reveals the potential for cost savings through greater economies of scale and substitutability of low cost for high cost labor inputs. Similarly, programs that use staff more efficiently and share an affiliation with other organizations exhibit lower costs than more labor intensive and non-affiliated providers. However, patient characteristics are equally important determinants of program spending. Minority patients use services less frequently and generate fewer costs, while patients facing fewer barriers to care, such as those with Medicaid coverage, access services more frequently and incur higher costs. Uninsured patients also generate higher costs, but the higher costs associated with this subgroup more likely stem from a lack of continuity in care and, thus, poorer health status and greater healthcare needs when treatment is sought. Injection drug users require less expensive services, but access services more frequently than other risk groups, while patients with an AIDS diagnosis and those who are co-infected with hepatitis C require more program resources. By separately estimating the economic and institutional determinants of program costs, the study highlights the relative importance of factors that are amendable to internal cost control efforts versus those that reflect the resource needs of local communities.

Impact of multitiered copayments on the use and cost of prescription drugs among Medicare beneficiaries.

OBJECTIVES: To assess the impact of multitiered copayments on the cost and use of prescription drugs among Medicare beneficiaries. DATA SOURCES: Marketscan 2002 Medicare Supplemental and Coordination of Benefits database and Plan Benefit Design database. STUDY DESIGN: The study uses cross-sectional variation in copayment structures among firms with a self-insured retiree health plan to measure the impact of number of copayment tiers on total and enrollee drug payments, number of prescriptions filled, and generic substitution. The study also assesses the effect of enrollee cost sharing on the cost and use of prescription medications for the long-term treatment of chronic conditions. DATA COLLECTION METHODS: We linked plan enrollment and benefit data with medical and drug claims for 352,760 Medicare beneficiaries with employer-sponsored retiree drug coverage. PRIMARY FINDINGS: Medicare beneficiaries in three-tiered plans had 14.3 percent lower total drug expenditures, 14.6 percent fewer prescriptions filled, and 57.6 percent higher out-of-pocket costs than individuals in lower tiered plans. They also had fewer brand name and generic prescriptions filled, and a higher percentage of generics. The estimated price elasticity of demand for prescription drug expenditures was -0.23. Finally, for maintenance medications used for the long-term treatment of chronic conditions, members in three-tiered plans had 11.5 percent fewer prescriptions filled. CONCLUSIONS: Higher tiered drug plans reduce overall expenditures and the number of prescriptions purchased by Medicare beneficiaries. Beneficiaries are less responsive to cost sharing incentives when using drugs to treat chronic conditions.

Consumer response to dual incentives under multitiered prescription drug formularies.

OBJECTIVE: To decompose the overall effect of multitiered formularies on drug utilization and spending into the following 2 observed effects on consumer behavior: first, higher copayments on drug equivalents create an incentive to reduce the number of prescriptions, and, second, wider differential copayments between drug equivalents create an incentive to use a greater proportion of generics. STUDY DESIGN: We merged drug claims for 352,760 retired Medicare enrollees having employer-sponsored health insurance with benefit information. Our unit of analysis was the enrollee. We used cross-sectional variation in incentive-based formularies to compare the effects of increased copayment amounts for drug equivalents with those of increased copayment differentials between drug equivalents. The study sample may not be representative of the Medicare population. METHODS: Multivariate regression analysis using the 2002 MarketScan Medicare Supplemental and Coordination of Benefits database and Benefit Plan Design database. RESULTS: A 10% increase in copayments for drug equivalents was associated with a 1.3% reduction in total drug spending, a 16.0% increase in out-of-pocket expenditures, a 2.0% reduction in the number of prescriptions filled, and a 0.7% reduction in proportion of prescriptions filled with generics. A 10% increase in copayment differentials between drug equivalents was associated with a 1.0% reduction in total drug spending, a 4.1% increase in out-of-pocket expenditures, a 1.0% reduction in the number of prescriptions filled, and a 0.7% increase in proportion of prescriptions filled with generics. CONCLUSION: Increasing copayment differentials between drug equivalents is as effective a strategy for reducing total drug spending as increasing copayment amounts for drug equivalents but better maintains access to prescription medications.

Impact of influenza immunization on medical expenditures among Medicare elderly, 1999-2003.

BACKGROUND: The impact of influenza immunization on expenditures for inpatient, outpatient, and professional services among elderly Medicare beneficiaries between 1999 and 2003 was examined. METHODS: Data were from independent annual survey samples of 175,000 beneficiaries. Response rates ranged from 64% to 71%. Survey data included beneficiaries' demographics, education, supplemental insurance, perceived health, and influenza vaccination. Baseline measures, derived from Medicare claims for the year prior to influenza season, included service utilization, comorbidities, influenza immunization, and health status. The outcome measure was medical expenditures for acute and chronic respiratory conditions (ACRCs) for each 33-week annual influenza season. RESULTS: Total expenditures for ACRCs were lower among the immunized population during all four seasons. The amount and statistical significance of the savings varied with the severity of the virus and the vaccine match to the prevalent influenza strains. During the 1999-2000 influenza season, which had the most severe virus and a close vaccine match, average costs for ACRCs were $88 lower among immunized beneficiaries than among nonimmunized beneficiaries (equivalent to a 3.06% savings). During the 2002-2003 season, which had a less severe virus but the highest vaccine match rate, average costs for ACRCs were $103 lower for immunized beneficiaries than for nonvaccinated beneficiaries (equivalent to a 3.12% savings). The relative reduction in ACRC expenditures among vaccinated beneficiaries is attributable to less frequent use of inpatient services. CONCLUSIONS: In addition to improving the health of older Americans, meeting the Healthy People 2010 influenza immunization goal of 90% among the elderly should also result in lower Medicare expenditures.

Impact of drug coverage on medical expenditures among the elderly.

Our study compares expenditures for Medicare covered medical services among enrollees in three State pharmacy assistance programs with spending among low-income residents eligible or near-eligible for, but not enrolled in such State-sponsored programs after controlling for between-group differences in demographic, socioeconomic, health status, and insurance status characteristics. We estimate a two-part model in total and by type of service (inpatient, outpatient, and professional) and chronic condition (hypertension, heart disease, and arthritis). We find that drug coverage has no discernible effect on the use and cost of inpatient services, but is associated with a statistically significant increase in Medicare spending for physician services.

The costs associated with adverse drug events among older adults in the ambulatory setting.

BACKGROUND: Reducing the rate of adverse drug events in the ambulatory setting may require large investments in quality improvement efforts and technologic innovations. Little evidence is available on the potential resulting savings. OBJECTIVE: The objective of this study was to estimate the costs associated with adverse drug events among older adults in the ambulatory setting. RESEARCH DESIGN: This study consisted of a 1-year retrospective cohort study among Medicare enrollees of a large multispecialty group practice. The study included 1210 older adults with an adverse drug event. A matched comparison group was randomly selected from enrollees with recent healthcare encounters and medication dispenses. OUTCOME MEASURE: Difference between estimated costs for medical care utilization during the 6 weeks before and 6 weeks beginning on the day of an adverse drug event. RESULTS: For all adverse drug events, the increase in postevent costs over the preevent period was $1310 (95% confidence interval [CI], $625-$1995) greater for those experiencing an adverse drug event than the comparison group after controlling for age, sex, comorbidity, number of scheduled medications, and having been hospitalized during the preevent period. For preventable adverse drug events, the adjusted increase was $1983 (95% CI, $193-$3773) greater for cases. Based on rates of adverse drug events and these cost estimates, 1000 older adults would have annual costs related to adverse drug events in the ambulatory setting of $65,631 with $27,365 of this associated with preventable events. CONCLUSIONS: Adverse drug events in the ambulatory setting substantially increase the healthcare costs of elderly persons.

Expansion of Medicare's definition of post-acute care transfers.

In October 1998, the definition of a transfer in Medicare's hospital prospective payment system was expanded to include several post-acute care (PAC) providers in 10 high-volume PAC diagnosis-related groups (DRGs). In this methodological article, the authors respond to a congressional mandate to consider more DRGs in the definition. Empirical results support expansion to many more DRGs that are split in ways that understate total PAC volumes, including 25 DRG pairs (with/without complications) and DRG bundles (e.g., infections) that together exhibit high PAC volumes. By contrast, some DRGs (e.g., craniotomy) are questionable PAC candidates because of their heterogenous procedure mix.