Improving the AAPCC (adjusted average per capita cost) with health-status measures from the MCBS (Medicare Current Beneficiary Survey).

Using data from the 1991 Medicare Current Beneficiary Survey (MCBS), multiple regression-based models predicting 1992 Medicare costs are developed and compared. A comprehensive model incorporating demographic, diagnostic, perceived health, and disability variables is shown to be stable and to fit the data well over the full range of Medicare-covered annual per capita expenses and for a variety of beneficiary subgroups defined by their health and functional status. This model produces stable unbiased estimates of expenditures on validation samples. A variant of this model is being considered for use in setting Medicare capitation payments for the second phase of the social/health maintenance organization (S/HMO) demonstration.

Pricing strategies for capitated delivery systems.

This article discusses alternative methods for establishing a fairer pricing mechanism for Medicare recipients who enroll in health maintenance organizations and other competitive medical plans. The current method, based upon the adjusted average per capita cost, is inadequate because it fails to adjust premium levels for differences in health status; it establishes undesirable incentives that may lead to underservice, and it is tied to costs in the fee-for-service system. Alternative methods would incorporate health status, have Medicare share the risk with HMO's, and base payment on HMO experience.

Adjusting Medicare capitation payments using prior hospitalization data.

The diagnostic cost group approach to a reimbursement model for health maintenance organizations is presented. Diagnostic information about previous hospitalizations is used to create empirically determined risk groups, using only diagnoses involving little or no discretion in the decision to hospitalize. Diagnostic cost group and other models (including Medicare's current formula and other prior-use models) are tested for their ability to predict future costs, using R2 values and new measures of predictive performance. The diagnostic cost group models perform relatively well with respect to a range of criteria, including administrative feasibility, resistance to provider manipulation, and statistical accuracy.

Discretionary hospital use and diagnostic risk adjustment of Medicare HMO capitation rates.

The health maintenance organization (HMO) industry has expressed concern that implementation of a diagnostic risk adjustment model based solely on diagnoses from inpatient hospitalizations will penalize Medicare HMOs that have been successful in controlling costs by reducing discretionary hospitalizations. This study compares the diagnostic composition of HMO and fee-for-service (FFS) hospitalizations in four states to test the proposition that lower Medicare HMO hospital admission rates are the result of lower rates of "high-discretion" hospitalizations. The empirical findings show very little difference in the proportion of Medicare HMO and FFS hospitalizations with principal diagnoses rated as high discretion, and do not suggest that Medicare HMOs have been more successful in reducing discretionary hospitalizations than nondiscretionary ones.

PACE and the Medicare+Choice risk-adjusted payment model.

This paper investigates the impact of the Medicare principal inpatient diagnostic cost group (PIP-DCG) payment model on the Program of All-Inclusive Care for the Elderly (PACE). Currently, more than 6,000 Medicare beneficiaries who are nursing home certifiable receive care from PACE, a program poised for expansion under the Balanced Budget Act of 1997. Overall, our analysis suggests that the application of the PIP-DCG model to the PACE program would reduce Medicare payments to PACE, on average, by 38%. The PIP-DCG payment model bases its risk adjustment on inpatient diagnoses and does not capture adequately the risk of caring for a population with functional impairments.

Targeting long-term care for the frail elderly: models from the Social/HMO demonstration.

This study examined the effect of differing eligibility rules for receipt of long-term care services in the four sites of the Social/HMO National Demonstration Program. Data from the first year of Social/HMO enrollment were used to model the probability of receiving a comprehensive assessment of need for long-term care benefits. Sites using state criteria for Medicaid reimbursement of a nursing home stay were more likely to give assessments to elders with functional impairment problems, whereas those using broader eligibility criteria gave assessments to enrollees with a wider range of characteristics. The results indicate that decisions about eligibility for care have important access and cost implications for consumers, payers, and providers.

The health status and utilization patterns of the elderly: implications for setting Medicare payments to HMOs.

In this paper we have examined various aspects of the patterns of medical care use and costs of the elderly Medicare population. First, to summarize the major points, we found the following: 1. Although per capita costs increase with age among the elderly, the distribution of costs among individuals does not vary much across different age groups. Small changes in the shape of the cost distribution were observed, including a small decrease with age in the coefficient of variation of Medicare costs, and a spreading out or diffusion of the degree concentration of acute hospital utilization over single- and multiyear time frames. 2. Costs associated with mortality account for a large proportion of Medicare reimbursements; the 20 percent of elderly who are in their last 4 years of life account for over half of all Medicare expenditures over that period. The cost levels and the time span over which costs are high prior to death appears to vary systematically with the cause of death and with age. 3. The elderly population is quite similar to the younger population in that there is a subpopulation of individuals who are found to be frequent users of acute hospital care over an extended period of time. Among the elderly, we estimate that 85 percent are only routine users of the hospital, requiring one hospitalization every 8 years. The remaining 15 percent are frequent hospital users who often live on for many years. A key requirement of a Medicare payment system will be to identify these high-cost users and establish a fair payment for them. 4. Acute hospital use associated with certain marker conditions--heart attacks, strokes, and cancer, among others, is found to be associated with future high Medicare reimbursements, and the high costs persist over an extended period of time. Moreover, it may be possible to use these hospitalizations as morbidity indicators that are not sensitive to the discretionary behavior of physicians and can thus be used to detect differences in the expected costs of different groups of individuals. 5. There is a significant relationship between Medicare reimbursements and the extent of functional impairments. Disability level is an independent predictor of higher costs, even after controlling for prior utilization. In practice, the acute care utilization observed among severely impaired individuals participating in long-term care demonstrations is substantially higher than what is predicted from unidimensional measures of disability.

23. The long-term care component of the Massachusetts Cooperative Health Statistics Program.

The Office of Health Planning and Statistics of the Massachusetts Department of Public Health, with the support of the National Center for Health Statistics, has over the past two years established two data programs in long-term care. The first of these involves experimentation with large-scale collection of patient-specific data from long-term care facilities, with the goal of developing statistically valid algorithms to predict the most appropirate level of care for individual patients. The second program has been the development of a data base for home health care agencies, the elements of which are an agency-specific annual statistical report and a patient-specific discharge abstract program. These two programs mark an effort to document home health care activities so as to provide a base of information for program development and evaluation.

Hospital discharge queues in Massachusetts.

There is growing concern over the inappropriate utilization of health care facilities. The high cost of hospital care and the apparent shortage of nursing home beds have focused attention on one aspect of this problem: the clinically unnecessary days (sometimes called "administrative days" or "ADs") spent in hospitals by patients who are awaiting placement in long-term care facilities. In this study, data from a 1976 Massachusetts Department of Public Health survey of patients backed up in hospitals were analyzed to determine the magnitude of the problem and to examine the influence of several major factors that had been hypothesized in previous studies to contribute to the backup. We demonstrate that the average delay of a patient found waiting in a "snapshot" survey (which is often used to estimate the magnitude of the problem) is significantly greater than the average delay experienced by a typical discharged patient. We show that there are at least two major factors that influence the delay time: nursing home preferences in accepting certain types of patients and nursing home occupancy rates in the hospital service area. Neither medical-surgical occupancy rate nor the number of AD patients waiting in the hospital was significantly correlated with the delay time.

Effect of abnormal levels of serum components on antibiotic activity.

Antibiotic activity in serum from a model for type II diabetes was similar to that in normal sera or media containing cholesterol but lacking glucose, insulin, or both. The ratio of effects of broth plus obese-rat serum to effects of broth plus lean-rat serum supplemented with cholesterol approached or equaled 1.