Recent changes in service use patterns of disabled Medicare beneficiaries

Health Care Financing Review, Spring, 1990 by Kenneth G. Manton, Korbin Liu

Recent changes in service use patterns of disabled Medicare beneficiaries

Introduction

Medicare's prospective payment system (PPS) for hospital inpatient care was implemented in October 1983. Under this system, payment for care is made on a fixed price per case, based on the average cost for a patient in a given diagnosis-related group (DRG). This system of payment provides incentives for hospitals to use resources efficiently. It also contains incentives both to avoid patients who are more costly than the DRG average and to discharge patients as early as possible (Iezzoni, 1986). These latter incentives might also cause nursing homes and home health agencies with lower per diem costs to be employed as substitutes for hospital days. They may also increase the risk of readmission to the hospital of patients who are discharged inappropriately. In light of the potential effects of PPS on the utilization, costs, and quality of care for Medicare beneficiaries, assessments of the effects of the new reimbursement policy have been of interest to the Administration and congressional policymakers.

Because PPS has been introduced only recently, evaluations of the effects of the policy on Medicare beneficiaries have been limited.

In an analysis of 729 acute care hospitals for 1980-84, DesHarnais, Kobrinski, and Chesney et al. (1987) found that total Medicare discharges and length of stay of Medicare hospital patients decreased in the post-PPS period. The analysis also found significant decreases in the proportions of hospital patients discharged home to self-care (3 percent) and increases in the proportion discharged home to home health care (2 percent). It has been suggested that shorter Medicare stays are being supplemented with increased use of home health agencies for post-discharge care. In-hospital mortality rates for Medicare patients declined slightly in 1984 although the decline was not statistically significant.

In analyses of the same data on 729 acute care hospitals, Long et al. (1987) used more detailed measures of "productivity" (e.g., inputs per patient type) and found that this had increased because of PPS. They also found no adverse mortality effects and no large increases in the proportion of persons discharged to home health services.

In other studies of PPS effects on utilization and outcomes, Hall and Sangl (1987) and Neu and Harrison (1987) generally found reductions in hospital length of stay associated with PPS and increases in post-acute care use of home health agencies (HHAs) and skilled nursing facilities (SNFs). No significant changes in hospital readmission rates were found. Changes in mortality patterns were found, but these could be attributable to case-mix changes pre- and post-PPS (Conklin and Houchens, 1987).

Distinct from prior studies, which addressed the general Medicare population, our specific aim was to measure PPS effects on Medicare service use of disabled elderly Medicare beneficiaries. In the following sections, we describe data sources and methodology, present findings, and discuss the implications of our findings and review the limitations of this study.

Methods and data

The National Long-Term Care Surveys

The data sources for this study were the 1982 and 1984 National Long-Term Care Surveys (Health Care Financing Administration, 1982 and 1984) of disabled elderly Medicare beneficiaries and their Medicare Part A bills and Medicare records on mortality. The National Long-Term Care Surveys (NLTCSs) contain detailed information on the health and functional characteristics of nationally representative samples (about 6,000 each) of noninstitutionalized disabled Medicare beneficiaries in 1982 and in 1984. These characteristics included medical conditions and dependencies in activities of daily living (ADLs) and instrumental activities of daily living (IADLs). For these samples, Medicare Part A bills on hospital, skilled nursing facility (SNF), and home health agency (HHA) use were obtained from the Health Care Financing Administration (HCFA). In addition, mortality events from Medicare enrollment files were obtained. Hence, the research file contained detailed information on patient characteristics for two points in time, straddling the implementation of PPS, and complete Medicare Part A hospital, SNF, and home health utilization and mortality information. Because the exact dates of service were available from the Medicare Part A bills, it was possible to define periods of Medicare hospital, SNF, and HHA service use as well as periods when such services were not used.

The NLTCS allowed a broad characterization of cases, including multiple chronic complications or comorbidities and physical and cognitive impairments. Our use of Medicare Part A bills permitted tracking of persons in the NLTCS samples through different parts of the health care system (i.e., Medicare hospital, SNF, and HHA) so that we could examine transitions from acute care hospitals to Medicare SNF or HHA use. Finally, use of the Medicare enrollment files allowed us to measure mortality both when individuals were receiving Medicare Part A services and when they were not.