Healing cuts for Medicare

September 4, 2012

Medicare payment reforms mandated in the Affordable Care Act (ACA) for postacute care have great potential to lower costs without harming patients, a new study reports.

However, researchers caution, policymakers will need to be vigilant to ensure that these cuts don't result in one-time savings that revert to rising costs.

"We expect that the Act's dramatic cuts in payments to providers for postacute care will lead to decreased utilization and lower spending," said David Grabowski, Harvard Medical School professor of health care policy and lead author of the study. "Our work suggests that those changes will not have a dramatic effect on outcomes, based on analysis of patient mortality and hospital readmissions under previous cuts."

These findings are reported in the September issue of Health Affairs.

Each year, more than 10 million Medicare beneficiaries are discharged from acute care hospitals into postacute care settings: long-term care hospitals, inpatient rehabilitation facilities, skilled nursing facilities and patients' homes with services from home health agencies.

"These four sectors were among the fastest growing part of the during much of the nineties," Grabowski said. Despite several efforts to curb spending, postacute care remains a major driver of rising .

ACA-mandated changes in payments for Medicare postacute care services are intended to contain spending in the long run and help ensure the program's financial sustainability. In addition to reducing annual payment increases to providers, the act calls for bundled payment models, accountable care organizations and other strategies to promote care coordination and reduce spending.

The researchers studied the effects of payment reforms from 1997, 1998 and 2002. The group also analyzed Medicare claims data to measure the impact of reforms on patient mortality and hospital readmissions for postacute care recipients.

Each of these previous payment reforms caused a steep downtick in postacute care costs immediately after implementation. However, expenses quickly resumed their upward trend as reimbursements were renegotiated and providers changed the ways they managed patient care.

The researchers recommend that policymakers will need to be vigilant in monitoring the impact of the ACA reforms and be prepared to amend policies as necessary to ensure that the reforms exert persistent controls on spending without compromising the delivery of patient-appropriate postacute services.

In the mandated demonstration projects, providers and health care systems are experimenting with different models of payment that all aim to lower costs, for example, providing a lump sum per patient per year, or a single fee for a healthy recovery from an illness or injury to be shared among physicians, hospitals and postacute care facilities.

"If it works the way it's meant to, patients will use only those services that are the most efficient," Grabowski said. That could mean moving patients from high-cost skilled inpatient rehabilitation facilities to lower-cost skilled nursing facilities. It could also mean that providers find creative new ways to avoid costly treatments altogether, like inspecting homes for tripping hazards to prevent painful and costly falls. In the current system, there's no incentive for providers to perform these kinds of interventions, he said, since Medicare has no mechanism to reward these kinds of savings.

"The overall goal of these experiments is to find ways to improve overall care and make services more cost effective. In any system this complex, there are always going to be tradeoffs, so monitoring results closely to minimize any issues will be critical," Grabowski said.

Explore further: New health-care payment system slows spending while improving patient care

More information: "Medicare Postacute Care Payment Reforms Have Potential To Improve Efficiency Of Care, But May Need Changes To Cut Costs" by Grabowski et al. Health Affairs, Sept. 4, 2012

Related Stories

New health-care payment system slows spending while improving patient care

July 16, 2011
In a new study with implications for state and federal efforts to reform payments to doctors and hospitals to encourage greater coordination of care, Harvard Medical School researchers found that a global payment system underway ...

The Affordable Care Act could have negative consequences for elderly recipients

June 22, 2012
Three provisions of the Affordable Care Act (ACA) intended to enhance care transitions and prevent avoidable outcomes for the Medicare population are found to have inadequately addressed the needs of older, vulnerable recipients ...

Study examines federal government payments to separate managed care programs for same patients

June 26, 2012
An analysis that included 1.2 million veterans enrolled in the Veterans Affairs health care system and Medicare Advantage plan finds that the federal government spends a substantial and increasing amount of potentially duplicative ...

Hospital at Home program improves patient outcomes while lowering health care costs

June 4, 2012
Using a Johns Hopkins-developed program that allows medical professionals to provide acute hospital-level care within a patient's home, a New Mexico health system was able to reduce costs by roughly 20 percent and provide ...

Internists say physician-led quality initiatives could be solution to Medicare payment problems

July 24, 2012
"Repeal of Medicare's Sustainable Growth Rate (SGR) is essential, but repeal by itself will not move Medicare to better ways to deliver care," David L. Bronson, MD, FACP, president of the American College of Physicians (ACP), ...

Recommended for you

One in 4 women and 1 in 6 men aged 65+ will be physically disabled in Europe by 2047

October 23, 2017
By 2047 one in four women and one in six men aged 65 and above is expected to be living with a physical disability that will severely restrict everyday activities, reveals an analysis published in the online journal BMJ Open.

Protein regulates vitamin A metabolic pathways, prevents inflammation

October 23, 2017
A team of researchers from Case Western Reserve University School of Medicine have discovered how uncontrolled vitamin A metabolism in the gut can cause harmful inflammation. The discovery links diet to inflammatory diseases, ...

New insights into controversial diagnosis of adolescent chronic fatigue

October 23, 2017
Crucial new research could provide some clarity around the controversy surrounding the diagnosis and treatment of chronic fatigue syndrome (CFS) in adolescents. The research by the Murdoch Children's Research Institute published ...

Do boys really have a testosterone spurt at age four?

October 23, 2017
The idea that four-year-old boys have a spurt of testosterone is often used to explain challenging behaviour at this age.

Our laws don't do enough to protect our health data

October 23, 2017
Have you ever wondered why your computer often shows you ads that seem tailor-made for your interests? The answer is big data. By combing through extremely large datasets, analysts can reveal patterns in your behavior.

New prevention exercise programme to reduce rugby injuries

October 23, 2017
A new dynamic 20-minute exercise programme, performed by rugby players before training and pre-match, could dramatically reduce injuries in the sport according to a benchmark study published today (Sunday 22 October).

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.