Medicare physician payment reform: its effect on access to care

Health Care Financing Review, Winter, 1995 by Thomas W. Reilly

INTRODUCTION

The Medicare program provides health care coverage, including coverage for physician services, for more than 35 million of America's most vulnerable citizens. A central program concern is the extent to which there are barriers that may impede beneficiaries' access to needed care. Such barriers can come from a variety of sources, including incentives implicit in payment policies.

The Omnibus Budget Reconciliation Act of 1989 enacted important changes in the way Medicare pays for physician services. Specifically, beginning in 1992, this legislation (1) mandated a fee schedule that was designed to shift payments from procedural services to evaluation and management services; (2) set limits on the amount physicians could charge above the fee schedule; and (3) established a process to set target growth rates for expenditures for physician services (U.S. Department of Health and Human Services, 1994).

These changes produced a complex set of new incentives for physician services. On the one hand, increasing fees for evaluation and management services should encourage physicians to provide ambulatory care. On the other hand, increasing copayments for these same services could discourage patients from seeking care.(1) Me latter effect may be mitigated in part, however, by the availability of supplemental insurance coverage. The limits on balance billing could increase access by reducing beneficiary liability for charges above the fee schedule or decrease access by discouraging physician participation.

Because of such complexity, it is important to monitor the effect of PPR on access to physician services for Medicare beneficiaries. Of particular concern is whether PPR has inadvertently reduced access to important ambulatory care services.

There are a number of approaches to monitoring access. One approach is to study "indicator" conditions (Billings et al., 1991; Robert Wood Johnson Foundation, 1993; Rutstein et al., 1976). These are medical conditions on which one would expect the effects of PPR,if present, to be most apparent. In examining access to ambulatory care services, one important indicator condition for the Medicare population is CHF.

The appropriate management of congestive heart disease requires consistent and ongoing monitoring of the condition by a physician. If a patient does not receive adequate monitoring, adverse health events are more likely to occur. For example, if a patient does not receive appropriate evaluation and management services, a hospitalization for CHF becomes more likely Institute of Medicine, 1993; Physician Payment Review Commission, 1995).

This study focused on patterns of hospitalization for CHF in the Medicare population to determine possible effects of PPR on access to primary care services. If there was a decrease in access, one would expect to see an increase in hospitalizations for CHF following the implementation of PPR (i.e., if Medicare patients were less able to obtain the required monitoring, the adverse event would be more likely to occur). On the other hand, if there was equal or greater access to ambulatory care services with PPR, one would expect to see no change or a decrease in hospitalizations for CHF. This study analyzes the trend in rates of hospitalization for CHF from 1987 through 1993, to see if there is a discontinuity associated with the implementation of PPR.

A few prior studies have examined the early effects of PPR on access (U.S. Department of Health and Human Services, 1993, 1994; Physician Payment Review Commission, 1993, 1994). However, these studies largely provide descriptive analyses of changes in access measures occurring around the implementation of PPR, They have not sufficiently estimated the extent to which the policy change produced a discontinuity in existing trends, as is required for a thorough evaluation. Me present study begins to fill this gap.

A number of subgroups in the Medicare population may be particularly vulnerable to changes in access to physician services. Beneficiaries who tend to be physically frail or socioeconomically disadvantaged, or who live in areas where the supply of physicians tends to be low may be especially vulnerable to changes produced by PPR. An evaluation of PPR therefore needs to be especially concerned with decreases in access for such vulnerable groups. Thus, the results of this analysis are presented not only for the overall Medicare population, but also for subgroups that would be expected to be especially vulnerable to changes in access, including very old beneficiaries, beneficiaries living in non-metropolitan areas, and black beneficiaries.

METHODS

Calculation of Rates of Hospitalization for CHF

To calculate rates of hospitalization for CHF in the Medicare population, data from Medicare administrative files were used. Data for the numerator of the rates (i.e., the number of hospitalizations for CHF) came from the Medicare Provider Analysis and Review (MEDPAR) files. MEDPAR contains a summarized record of hospital claims for all Medicare hospitalizations in a given calendar year. These records include up to five diagnosis codes.