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

When traveling on public transport, you may want to cover your ears

November 22, 2017
The noise levels commuters are exposed to while using public transport or while biking, could induce hearing loss if experienced repeatedly and over long periods of time, according to a study published in the open access ...

Different types of alcohol elicit different emotional responses

November 22, 2017
Different types of alcohol elicit different emotional responses, but spirits are most frequently associated with feelings of aggression, suggests research published in the online journal BMJ Open.

Air pollution linked to poorer quality sperm

November 22, 2017
Air pollution, particularly levels of fine particulate matter (PM2.5), is associated with poorer quality sperm, suggests research published online in Occupational & Environmental Medicine.

Sunrise and sunset guide daily activities of city-dwellers

November 21, 2017
Despite artificial lightning and social conventions, the dynamics of daylight still influence the daily activities of people living in modern, urban environments, according to new research published in PLOS Computational ...

Older men need more protein to maintain muscles

November 21, 2017
The amount of protein recommended by international guidelines is not sufficient to maintain muscle size and strength in older men, according to a new study.

Exercising and eating well are greater contributors to health than standing at work

November 21, 2017
By now you've probably heard the edict from the health community: Sitting is the new smoking. Perhaps you've converted to a standing desk, or maybe you have a reminder on your phone to get up once an hour and walk around ...

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.