what is being done to prevent high health care costs in elderly

Introduction

Spending on health care services for the elderly has been increasing since 1965; between 1977 and 1984 it increased at an annual rate of fourteen.v percent (Waldo and Lazenby, 1984). The increase in expenditures is reflected in the increasing price to the federal and state governments of operating the Medicare and Medicaid programs too equally in the increase in out-of-pocket payments made by the elderly. Every bit a consequence, health care financing has become one of the more disquisitional policy issues to exist addressed by the nation.

The methods used to finance health care services have important effects on the apply of health care services by the elderly and their level of health and well existence, besides as on the growth and evolution of the health intendance sector itself. In addition, the methods used to finance wellness care services influence the distribution of income between the ill and the well, the onetime and the young, the full general taxpayer and the recipients of intendance.

Many types of information are required to provide a factual ground for policy issues related to the financing of health care services for an aging population. Although a policy issue is seldom resolved past using only data from a national data organisation, such data are frequently used to address some elements of a policy issue. For instance, in the listing of policy issues that follows, the outset would probably require an evaluation study, but Medicare records could provide historical information on the price of the fee-for-service systems and the HMOs.

To accost the second issue, data from the National Medical Expenditure Survey could exist used to identify the most costly of the various chronic illnesses and help to limit the illnesses to exist addressed by the policy analyst. Selected emerging policy questions that demand to be addressed follow:

• Volition health maintenance organizations, social health maintenance organizations (SHMOs), and preferred provider organizations (PPOs) serve as less costly alternatives to the current fee-for-service system?

• How can nosotros control expenditures for wellness and long-term care in the face of the projected growth of the elderly who are at hazard of chronic illness ofttimes requiring all-encompassing medical and long-term care services? Will people accept to do without medical care?

• What aspects of the growing health needs of an aging society are most afflicted by the pressures to constrain budgetary and economic resource devoted to health intendance?

• What mechanisms are needed to share the burden of health care expenditures for an aging society more than equitably amidst all members of society?

• What is the impact of the Medicare prospective payment arrangement based on diagnosis-related groups on providers, patients, expenditures, and access to and quality of care?

• With the growing financial burden of out-of-pocket expenditures for certain groups of the elderly who are disabled and require extensive treatment, what are the alternative equitable financing mechanisms to pay for these services?

• What alternative financing mechanisms for the supply of long-term care services should be supported and past whom?

• What changes in funding mechanisms, legislation, and public policy are necessary to shift the emphasis abroad from hospital and nursing dwelling care toward less costly alternatives?

• Tin less plush and less restrictive alternative services to institutionalization be developed to maintain the independence of the elderly? Can economical incentives exist developed for in-domicile and customs-based services to maintain the elderly at home?

• What is the viability of tax credits, opposite mortgages, independent retirement accounts, and the like in assisting the elderly to pay for a greater share of their wellness and long-term intendance costs? Are in that location other private-sector alternatives?

• What are the costs (direct and indirect) of chronic illnesses such as Alzheimer's disease and what are the implications of helping to meet those costs through public funding?

• To what extent is there an emerging intergenerational inequity with the crumbling of the baby blast generation—Americans born between 1946 and 1964—and low fertility rates in which a smaller number of the working population will carry the burden of back up of the larger number of retired elderly outset near the year 2010?

This department of the written report focuses on specific aspects of the financing of health care services for the elderly population. First, it describes the major public programs that cover wellness care services for the aged also as the other sources of funding for health care. Since many of these programs are undergoing significant changes, the direction of that change is outlined. Side by side it presents information on the level of expenditures and source of payment by type of service for the aged, including the distribution of expenditures across the aged population. Data needs and recommendations are presented with reference to the policy issues emerging from the current proposed changes in financing mechanisms.

Sources of Funding

In describing the current methods of financing intendance for the elderly, it is appropriate to begin with a brief description of the public programs, in detail Medicare and Medicaid. These are the most important sources of funding, and the structure of these program affects the nature of the insurance policies that are offered by the individual sector.

Medicare

Approximately 95 pct of all people age 65 and over in the United States are covered by the Medicare program. Medicare consists of 2 separate but complementary programs: Hospital Insurance (HI) for services furnished in hospitals, in skilled nursing facilities, and by home wellness agencies; and Supplementary Medical Insurance (SMI) for the services of physicians, dwelling house health visits (for people who may not be covered by Hello), outpatient services, and the costs of durable medical equipment and prostheses. Coverage for outpatient mental health services is very restricted. In addition, some services oftentimes used by the elderly, such as outpatient drugs, dental services, and eyeglasses, are not covered.

The Medicare program was explicitly designed to encompass the major costs associated with episodes of acute illness or the acute manifestations of chronic illness. The extent to which the programme actually pays for services such as skilled nursing facilities and home health, commonly considered long-term care services is therefore very limited.

People are automatically enrolled in Hi inside a curt time of reaching their sixty-5th altogether. The costs of Hullo are covered by Social Security payroll taxes paid into a trust fund past employers and employees. Enrollment in SMI is contingent on paying a premium that covers about 25 percentage of the cost. There is some beneficiary price sharing on Medicare-covered services. The cost-sharing provisions were included in the original legislation both to control federal upkeep expenditures as well equally to deter unnecessary utilization. The actual toll-sharing provisions are complicated and vary from service to service.

When Medicare was first enacted, the Congress incorporated into the program many of the standard features of the Blue Cross/Blueish Shield plans that were and so the dominant form of private wellness insurance. The almost of import features were beneficiary freedom of choice of providers, cost-based reimbursement of institutional providers, and fee-for-service reimbursements based on reasonable charges for physicians' services. With the exception of long-term care services, there were few limitations placed on the use of covered services. In that location were no incentives for hospitals to control costs and no rewards for improving efficiency. The reimbursement provisions are currently undergoing major changes. In 1982, changes were made in the law to stimulate the enrollment of Medicare recipients into prepaid group practices; in 1983 the cost-based reimbursement system for hospitals was replaced with a prospective payment system nether which hospitals are paid a fixed corporeality for taking care of patients based on their belch diagnosis. In 1985 the Reagan assistants proposed replacing the current physician reimbursement arrangement with a fee schedule. The federal authorities is besides evaluating ways for bringing other providers of care under prospective payment (Davis and Rowland, 1986:Chapter 3).

Between 1977 and 1984, payments for services under Medicare increased at an almanac rate of 17.iii per centum per year. Past 1984 Medicare expenditures for the elderly amounted to $58.5 billion, making information technology the tertiary largest federal program (Waldo and Lazenby, 1984). As a result of the rapid escalation in the cost of the plan, the reimbursement changes outlined in a higher place were fabricated. In addition to those changes, the administration and Congress are seeking other ways of lowering the costs of the program, such as increasing the cost-sharing requirements, changing the historic period for eligibility, increasing the premium costs, making Medicare the 2d payer for those who are employed and eligible for employer-provided health insurance, increasing Medicare enrollment in HMOs, and changing the Medicare program to a voucher program. (This description of the Medicare program and the post-obit discussion of Medicaid are based heavily on Sawyer et al., 1983.)

Medicaid

Medicaid, a program to provide medical services to the poor, is administered by u.s.a. under federal guidelines. With respect to the elderly, Medicaid pays for the medical care for those who meet Supplementary Security Income (SSI) standards. States have the pick of covering medically needy individuals (those with incomes slightly above the SSI levels) and individuals who accept incurred sufficiently high medical expenditures that they "spend downward" to Medicaid income eligibility levels.

For dually eligible recipients, Medicare is the first payer for Medicare-covered services and Medicaid is the second payer; that is, Medicaid volition pay the cost-sharing amounts that would normally autumn to the patient. Depending on the state's programme, Medicaid may as well pay for the price of services non covered past Medicare, such as outpatient, drug, optical, and dental services. More of import, as Medicare fulfilled its purpose of covering near of the costs related to astute episodes, Medicaid has evolved into the primary public funding source for long-term services for the elderly.

Like the Medicare programme, the costs of the Medicaid plan have been increasing at a rapid rate. Betwixt 1977 and 1984, Medicaid expenditures on behalf of the elderly increased at an almanac rate of 14.2 percent—largely due to coverage of nursing home intendance. In 1984, expenditures for the population age 65 and over were approximately $12.viii billion (Waldo and Lazenby, 1984). As with Medicare, in that location is a concerted effort to reevaluate the structure of the program, in particular with respect to long-term services, to revise the methods used to reimburse providers, peculiarly nursing homes, and to alter the income eligibility levels.

The Veterans Administration

Until recently, all veterans age 65 years and over were eligible for Veterans Administration (VA) services. A recent law made several changes in a veteran's eligibility for VA health care regardless of historic period, which became effective July 1, 1986. Actual access to health care services is at present determined through an eligibility assessment, with first priority beingness given to veterans with service-connected disabilities or to those who see a ways exam known as the category A means test. These veterans are eligible for hospital intendance in VA facilities. Outpatient and nursing home care may exist provided in VA facilities if space is available. Veterans with nonservice-connected disabilities and with income above the category A ways test merely below a higher level, known as the category B ways examination, may receive hospital, outpatient, and nursing home intendance in VA facilities if space is bachelor. Veterans with nonservice-connected disabilities and with income above the category B means test may receive VA services if infinite is available, but they must agree to pay a deductible corporeality for intendance equivalent to the payment that would be required by Medicare. In improver to the VA-owned and operated facilities, which include hospitals and their associated outpatient departments and nursing homes, the Veterans Administration contracts for skilled and intermediate care at customs nursing homes on a per diem basis. Notwithstanding, with the exception of care provided to veterans with service-connected disabilities, the VA will not pay for more 6 months of care in community facilities. In 1984, $3.3 billion was spent for health care of anile veterans.

The actual use of the VA system by elderly veterans is contingent on the characteristics of the elderly that define eligibility, the availability of VA-owned facilities, and the access to the private sector by VA eligibles. Since most veterans are covered by Medicare, the service that is likely to be most attractive to the older veteran is nursing dwelling intendance. Still, the principal factor that will influence the veteran's apply of nursing abode services is the number of nursing dwelling beds available within the VA organization. Before July 1986, approximately x to 12 percent of elderly veterans actually used the system (U.S. Congressional Budget Role, 1984). This number may change as a outcome of the electric current and proposed changes in Medicare and the new eligibility procedures for VA health care.

Other Government Programs

There are a number of other programs that have been developed to finance wellness care expenditures for the elderly. Included are the Department of Defense Civilian Health and Medical Program of the Uniformed Services, which provides treat active and retired war machine forces and their dependents, state and local government hospitals providing community and psychiatric hospital services to older citizens, federal grant programs, and state and local public help programs providing services that are non eligible for federal matching funds nether the Medicaid programme. In 1984, a total of $3.4 billion was spent for the elderly by government programs other than Medicare, Medicaid, and the VA.

Private Insurance Programs

There are a number of private insurance policies that have been specifically designed for the elderly. In general, near of these policies fill the gaps in Medicare-covered services, such every bit the coinsurance and deductible provisions, rather than extending insurance protection against uncovered services such as long-term care services or outpatient drugs (Rice and McCall, 1985). With the projected large increment in the number of people age 65 and over, peculiarly those historic period 85 and over, in that location is increased interest in finding mechanisms for stimulating the development of private insurance coverage for long-term care services (Meiners, 1985a).

Of the noninstitutionalized elderly, approximately 65 percent have private policies that supplement Medicare, ten percent are covered past Medicaid, 20 per centum are covered by Medicare only, and four percent had some other form of coverage (Garfinkel and Corder, 1984). Among the elderly not eligible for Medicaid, those who are better educated, have higher incomes, and are in slightly improve health are more likely to purchase a supplemental health insurance policy.

Expenditures on Health Intendance

In 1984, personal health care expenditures for the elderly amounted to $119.9 billion, or $4,202 per person age 65 and over (Waldo and Lazenby, 1984). Of this full, 25.2 percent was paid by the consumer straight, vii.ii percent through private insurance, 48.eight percent past Medicare, 12.8 percent by Medicaid, and v.half-dozen percentage past other government programs, primarily the Veterans Administration. However, these averages mask the broad differences in the funding sources for different types of medical services. The extremes are represented by sources of expenditures on hospitals and nursing homes. In 1984, hospital expenditures for the elderly amounted to $54.ix billion ($1,900 per capita) of which 3.1 percentage was paid past the patient straight, seven.9 percent through private insurance, 74.8 percent by Medicare, iv.8 percent by Medicaid, and ix.1 percent past other government programs. Nursing home expenditures in the same year amounted to $25.1 billion ($880 per capita), of which 50.1 percent was paid for by the patient straight, 1.1 percent by private insurance, 2.1 percent past Medicare, 41.v percent past Medicaid, and iv.4 percent by other government programs (Waldo and Lazenby, 1984).

Since the elderly population is heterogeneous, average expenditures provide an incomplete flick of the cost of illness and the sources of funding. For example, consider the 1980 National Medical Care Utilization and Expenditure Survey expenditures data for three groups of the noninstitutionalized elderly: the "low-toll" users, those with expenditures less than $500, "medium-cost" users, with expenditures betwixt $500 and $iii,000, and the "high-toll" users, those with expenditures over $3,000. Although these categories are somewhat arbitrary, they help to plant the well-known fact that health care expenditures are concentrated on a small number of ill people. Every bit shown in Table eight.one, only fourteen per centum of the noninstitutionalized elderly had health intendance expenditures over $three,000, but they deemed for 75 percent of total expenditure of health care services made on behalf of the elderly.

TABLE viii.one

Health Care Expenditures for the Noninstitutionalized Elderly, 1980 (percentage).

Five percent of the elderly in the survey were institutionalized or died during 1980. Expenditures for this group emphasize even more strikingly the concentration of dollar costs for the seriously ill. During the part of the twelvemonth that these persons were in the community, they deemed for 22 percent of the total health care expenditures for the elderly.

Every bit noted earlier, the share of expenditures paid directly by the consumer likewise varied by the nature of the wellness care received. Elderly persons who were not hospitalized paid, on average, 67 percent of their medical care charges, while the elderly who had been hospitalized paid xviii percent. Considering the total hospital charges are high, this out-of-pocket charge for the hospitalized grouping was about $650, while the nonhospitalized paid $202 (Kovar, 1986). It should be stressed, moreover, that these numbers conceal differences in out-of-pocket liability for the institutionalized population. People in nursing homes, who incur large out-of-pocket expenditures—because both the cost of the service is and then high and insurance is then limited—are non included in the National Medical Intendance Utilization and Expenditure Survey, the source of the above information.

The Delicate Elderly

1 group of elderly that is receiving considerable attention are those with potential needs for long-term care services—the fragile and dependent elderly. In 1982 approximately nineteen percent of the elderly historic period 65 and over (4.6 1000000 people) needed help in activities of daily living or in instrumental activities of daily living, and the size of this group volition increase with the aging of the population (Liu et al., 1985). Nosotros actually know very little nigh the total toll of intendance for this population: they represent such a small office of the general population that they have not been fairly represented in national household surveys (such every bit the 1977 National Medical Intendance Expenditure Survey and the 1980 National Medical Care Utilization and Expenditure Survey), the major sources of information on the distribution of health intendance services beyond the aged population.

This grouping is of detail interest considering at that place is currently limited public and private insurance to assistance them meet the cost of long-term care services and because it is believed that fostering home-based care may offer a cost-constructive alternative to nursing domicile care. Thus, one major health financing consequence is the extent to which public insurance programs should support home-based programs.

This is a very complicated issue considering virtually of the home intendance services received past this group of people are provided past family members or by members of the helping organizations. In fact, approximately 72 pct of the services rendered are provided past family unit members (Liu et al., 1985). Although the apply of formal (i.e., paid for) services increases with the level of disability, 65 per centum of people with many limitations in activities of daily living relied solely on informal care (Liu et al., 1985). The current extensive use of unpaid health care makes information technology very hard to blueprint a public financing programme for health care services that will encourage the efficient commutation of abode-based services for nursing home services, because whatever such plan is likewise likely to lead to a substitution of services provided by the family or already paid for by the individuals or their families for publicly funded home care services.

Thus in evaluating proposals to change the financing of long-term care services for the elderly, data are needed to appraise the extent that financing mechanisms will lead to an increase in the use of services or to a substitution of publicly funded services for services previously provided past the family complimentary of charge or paid past the individuals and their families. If new services are used, to what extent volition they act as complements or as substitutes for nursing habitation intendance? In addition, what is the effect of the use of new services on the wellness status of the elderly, to what extent do these services lead to an increment in their quality of life, and what is the issue of this new financing on the proportion of the family unit's income that is spent on health care?

Time to come Changes

All aspects of health care financing programs are currently being reevaluated: plan eligibility, in item the extent to which income and avails should determine admission to public programs; appropriate roles of public versus private sources of funding; the scope of the covered services, appropriate levels of beneficiary price sharing; the level and basis of payments to providers; the level of quality of care that should be guaranteed by public funds; and the types of services to be promoted past public funds.

Every bit the system, delivery, and financing of medical intendance services are changed, we need data that will let us to address the following questions: How do the changes affect the cost of care, the distribution of the burden of paying for the intendance across public and individual sources of funding and among individuals, and the health status and quality of life of the elderly?

Data Requirements

In guild to develop and guide policy for financing health care for the elderly and to monitor the impact of changes in such financing, it is necessary to accept a variety of data, including person-based survey information, administrative record data, and actuarial data. Survey data should include data on health status, income, assets, medical care expenditures, and sources of payment for medical intendance. Information need to exist sufficiently detailed and then that reliable statistics can be created for the almost vulnerable of the elderly—the frail elderly, low-income elderly, and minorities. This information should be collected on both people residing in institutions and people living in the customs.

Additional data that are useful in the analysis of financing medical intendance services are the administrative records of the Health Care Financing Administration, the Social Security Administration and the Internal Acquirement Service. These data are by-products of administering big programs, and their statistical systems are reasonably cheap. There are two major constraints impeding the usefulness of these data for policy purposes. The first is that the agencies exercise not take adequate staffs to analyze the information, a fact that results in significant lags in the production of data and analyses. This problem is likely to become more acute over fourth dimension. The second is that there are many restrictions imposed on making public use of data tapes, a subject that is discussed in more detail in Chapter xi.

Actuarial information from private insurers are too needed for establishing the costs of culling long-term care policies. Minimal data are bachelor on costs and utilization of long-term care insurance and very petty of the data reflects actual experience. A further complicating cistron is that individual insurers are reluctant to share their limited data bases to enable the development and marketing of long-term care insurance. Although the number of companies providing long-term care insurance is growing, in that location is likewise active discussion of federal coverage of long-term intendance costs for the population not covered by Medicaid.

Timely Data on Expenditures for the Elderly

The Health Care Financing Administration periodically publishes data on health intendance expenditures of the population age 65 and over by type of expenditure and source of funds. These data are estimated from secondary sources, including authoritative records of the Medicare and Medicaid programs and surveys conducted by NCHS, HCFA, and NCHSR. Health expenditures of the elderly population are office of the national health expenditure accounts for the unabridged population published annually by HCFA.

National health expenditure information are widely used by policy makers to evaluate the extent of coverage of existing public programs, such every bit Medicare and Medicaid, of the full health care costs of the elderly population. They as well serve as a basis for assessing the possible consequences of changes in public policy and programs, although this is e'er a question of the relevance of current and past data to a possible futurity program that changes the eligibility rules of electric current or past programs. For example, current cost and utilization data reflect the effects of the current mix of individual and public insurance for the elderly. Changes in policy regarding long-term intendance financing would alter the situation, and it is important in the development of data to consider requirements to provide reasonable estimates of these effects.

Considering of the policy uses of these aggregate expenditures data for the elderly population past source of funds and type of expenditures, their publication on a regular basis is of import.

Recommendation 8.1: The panel recommends that the Health Intendance Financing Administration develop and publish timely annual estimates of the national health expenditures by historic period. These estimates should follow the publication of the estimates of expenditures for the total population by a few months at virtually. At a minimum, these health expenditures for the population historic period 65 and over should include estimates by type of expenditure and source of funds and by age (ages 65–74, ages 75–84, and age 85 and over).

National Medical Expenditure Survey

The 1987 National Medical Expenditure Survey follows a series of national medical expenditures surveys, including the 1980 National Medical Care Utilization and Expenditures Survey and the 1977 National Medical Care Expenditures Survey.

Like the NMCES and the NMCUES, the NMES surveys a national probability sample of the civilian noninstitutionalized population. The NMES Household Survey is a year-long panel collecting measures of health status, utilize of wellness care services, expenditures and sources of payment, insurance coverage, employment, income and assets, and demographic data. When information planned for collection is the aforementioned as that collected for the NMCES and the NMCUES, and the previously used questions were found satisfactory, the aforementioned wording was retained. A detail focus is customs-based long-term intendance. Household information are supplemented by surveys of medical and health insurance providers and by data from Medicare administrative files. In planning for future surveys, the panel urges the National Center for Wellness Services Enquiry and Health Intendance Technology to keep this policy of providing comparability of information items between surveys.

A major gap in the NMCES and the NMCUES is the lack of data for the institutionalized population. Since at least 85 pct of the institutionalized population is historic period 65 and over, the omission of expenditures for this population group presented serious gaps in accurately estimating the wellness intendance costs of the elderly population. An of import feature of the NMES is an Institutional Population Component (IPC), which will survey about 10,000 persons in nursing homes, facilities for the mentally retarded, and psychiatric hospitals and collect data like to those for the noninstitutionalized household population. The IPC universe includes all persons in these long-term care institutions for whatsoever part of 1987. IPC and household data will provide the first composite picture of the nation's use of long-term health care.

The institutional component will permit analysis of long-term treat the nation, including special attention to the increasing number in the age groups 75 and older. Current plans include the incorporation into the data base of iii groups of providers of long-term institutional intendance: nursing homes, facilities for the mentally retarded, and psychiatric hospitals. Each of these types of facilities provides intendance to substantial numbers of federal beneficiaries, primarily Medicaid recipients.

With this institutional component, the analytic potential of the NMES will comprehend national estimates of health services use, expenditures, and insurance coverage for: (1) the entire U.Due south. civilian population, including the institutionalized; (2) the entire long-term care population, whether residing in institutions or in the community; and (3) institutionalized groups of persons in nursing homes, facilities for the mentally retarded, and psychiatric hospitals.

The current sample design for the National Medical Expenditure Survey, as the panel understands it, will provide reliable estimates for two age groups, 65–74 and 75 and over. All the same, since the grouping age 85 and over is the well-nigh rapidly growing segment of the population and the grouping that makes the greatest use of health care services it will be critically important to collect information on their use of health intendance service.

Recommendation eight.2: The panel recommends that the sample of the elderly population for the household survey for time to come national medical expenditure surveys be large enough to provide accurate estimates to study utilization and expenditures for medical intendance for three elderly historic period groups: 65–74, 75–84, and 85 and over.

The National Medical Expenditure Survey will provide a rich source of data on the health services utilization and expenditure patterns of the customs-residing and institutionalized elderly. Its panel blueprint may permit assessment of the impact of changes in service commitment and payment systems experienced by some of its respondents during the course of a calendar yr on their utilization of health services and expenditures for health care. In improver, the planned linkage between the survey data nerveless during this year-long panel and the Medicare records of those persons age 65 and over in the samples should enhance the value of the utilization and expenditure data collected. However, to capture trends in utilization and expenditure patterns in response to changes in commitment and payment systems over time, a national medical care expenditure survey should be conducted periodically. These data are used for estimating the price of policy alternatives for wellness care—policy uses that require more than recent data than those currently available. In improver, changes in health care expenditures and utilization stimulate policy questions that touch decisions most public financing and regulation of services.

Recommendation 8.3: The panel recommends that a national medical care expenditure survey be conducted periodically. The periodicity should be adamant in relation to policy needs and the timing of other health-related surveys.

The NMES survey should be a joint effort of appropriate federal agencies (including the National Heart for Health Services Research and Wellness Care Technology, the Wellness Care Financing Assistants, and the National Eye for Health Statistics) in social club to take full reward of the various types of relevant expertise in those agencies.

Follow-Upwards Studies of the Elderly in the NMES through Administrative Records

A major gap in agreement the impact of changes in financing of medical care services in individuals and their families is the lack of longitudinal information on the use of and expenditures for medical care services as a person ages and is at risk of chronic illness requiring astute medical and long-term care services.

A considerable corporeality of information about the sampled individuals is too bachelor from administrative records of HCFA, SSA, and IRS. The National Death Alphabetize conducted by NCHS also provides information on an individual's expiry. This rich source of information from administrative records can raise the usefulness of the survey data collected in the NMES for longitudinal analyses at minimum costs.

Recommendation 8.four: The panel recommends that the National Centre for Wellness Services Enquiry and Wellness Intendance Engineering science identify and follow the population historic period 55 and over in the 1987 National Medical Expenditure Survey through the linking of administrative records, including Medicare reimbursements from Health Care Financing Administration records, and, to the extent feasible, Medicaid reimbursements from state record systems. In addition, the National Death Index of the Heart for Health Statistics should exist used to identify the year and cause of expiry of each sampled person.

In carrying out these record linkages, it would be essential that NCHSR comply with confidentiality restrictions.

Outreach Program for the NMES and Timely Release of NMES Tapes

The analytic potential of the NMES encompasses national estimates of wellness services use, expenditures, and insurance coverage. These data must be shared in a timely fashion with the researchers in the academic and private sectors as well as researchers in other government agencies, many of whom are directly involved with policy makers.

Several federal agencies, including the National Center for Wellness Statistics and the Census Bureau, have been successful in assisting exterior researchers in the efficient use of their public use data tapes by conducting conferences for data tape users throughout the country.

Recommendation 8.5: The panel recommends that the National Middle for Health Services Enquiry and the Wellness Care Financing Administration: (a) begin planning an outreach program, including the conduct of conferences for data tape users similar to those conducted by federal agencies such as the National Centre for Wellness Statistics and the Census Bureau, to inform and educate the policy and enquiry communities in the efficient use of the forthcoming 1987 NMES data tapes and (b) gear up a schedule for the timely release of the National Medical Expenditure Survey data tapes, prepare these public use information tapes as before long as feasible afterward the reference period, and make them available to the policy and enquiry communities outside the National Center for Health Services Inquiry.

Timely Data from the Medicare Statistical System

The Medicare Statistical System was designed to provide data to mensurate and evaluate the functioning and effectiveness of the Medicare programme. Information technology has also been a major source of information for evaluating many policy questions relating to disinterestedness and efficiency of the Medicare program. For case, data on the distribution of Medicare reimbursements for survivors and decedents and by type of service provide useful data on the high use of medical care services in the last year of life. Medical reimbursements per capita by land and county are useful measures of equity. Provider certification data related to population are important measures of the supply of facilities and services and their variation beyond the country. Geographic variations in surgical procedures among the elderly are important indicators of practice patterns.

The statistical organisation is a by-product of three administrative record systems that are centrally maintained in the operation of the Medicare programme: (1) the Wellness Insurance Principal File, which contains a record of each person who is enrolled in Medicare, (2) the Provider of Service File, which contains data on every hospital, skilled nursing facility, habitation health agency, independent laboratory, and other institutional provider that has been certified to participate in the program, and (3) the Utilization File, which is based on the Medicare billing data. Since each record in the utilization file contains the beneficiary's merits number and the provider'due south number, the utilization records can be matched to the enrollment and provider records. This and then provides the basis for developing population-based statistics or provider-based statistics.

In the past, HCFA has produced a variety of reports, including annual Medicare Programme Statistics, Health Care Financing Review, Health Care Financing Notes, Health Care Financing Grants and Contracts Reports series, Medicare Reimbursements past State and Canton Facilities certified under the Medicare Program, and Enrollees under the program. The latest published data are the Annual Medicare Program Statistics for 1984.

Recommendation viii.6: The panel recommends that the Health Care Financing Administration devote more resources, including budget and staff, to the timely release, publication, and analysis of information from the Medicare Statistical System, including national and geographic data on enrollees, providers, and reimbursements.

Improved Access to Medicare Information

The volume of information potentially available from the MSS is big and especially useful for evaluating dissimilar aspects of the Medicare programs as noted above. The console commends the Health Intendance Financing Administration for its efforts to develop useful files such as the Medicare Automated Retrieval System and the Medicare Provider Assay and Review (MEDPAR). The MEDPAR Public Employ File is a national sample of bills for short-stay hospital inpatient services for 20 percent of the Medicare beneficiaries selected according to predetermined digits of the health insurance merits number. The elements of the neb (SSA-1453) contained in the file are: age, sexual activity, Medicare status code; length of stay, discharge status; total and Medicare-covered charges; principal diagnosis in ICD-9-CM code and DRG code. The file has been maintained annually since 1980.

Despite the obvious attractiveness of the Medicare files for analytic purposes, information technology must be noted that these files were established primarily to assistance with assistants and monitoring of the Medicare program. In gild to make the Medicare authoritative information more accessible and less plush for research use, a new file has been designed—the Medicare Automatic Data Retrieval System. The MADRS is intended to reorganize and merge Medicare Part A and Role B claims files to shorten search time. Beginning with the 1982 data year, this file will comprise all Medicare claims data and patient provider identifiers. The claims records in the Medicare files will be sorted first past year of service rendered, adjacent past geographic region of residence of beneficiaries, and and then past the wellness insurance number of the beneficiaries. Information technology volition be possible to create a longitudinal file for accomplice analysis by combining information in the annual files (Role of Engineering science Assessment, 1985a, Appendix East:199; Lichtenstein et al., no date; National Inquiry Council, 1986).

The MADRS file will enable researchers to identify groups of special interest and analyze them past age, sex, and/or admitting diagnosis, for case, and examine the care they take received over time. The evolution of the Medicare Automated Data Retrieval System is a positive step toward facilitating the analysis of Medicare data, thus gaining a better understanding of health services utilization trends amidst the elderly.

Recommendation viii.7: The console recommends that the Health Intendance Financing Administration develop files designed for easy access to the Medicare Statistical System, including the Medicare Automated Information Retrieval System, that would facilitate use by researchers for policy analysis related to the Medicare program.

Making data from administrative records available to researchers would exist expected to result in data useful to both program agencies and policy makers. The Wellness Care Financing Administration should develop new approaches to improving access by nonfederal users, such equally interns and postdoctoral fellows. More use should also be made of the Intergovernmental Personnel Act of 1970, which provides for agreements between federal agencies and state agencies for assignment or exchange of personnel for a specified flow. Such exchanges are normally benign to both agencies.

Recommendation 8.eight: The panel recommends that the Wellness Care Financing Administration consummate the development of the Medicare Automatic Information Retrieval System and maintain it on a current basis.

The Health Care Financing Administration Information System for Capitation

An alternative to fee-for-service reimbursement types of insurance is payment on a per capita basis without regard to the volume or type of service. HMOs have been the major systems that accuse a fixed monthly fee (capitation fee) to cover all services except for small copayments. With the passage of the Tax Equity and Fiscal Responsibility Act (TEFRA) in 1982 and the issuance of regulations to implement the HMO provisions of TEFRA in January 1984, the number of HMOs participating in Medicare is expected to grow, as is the number of Medicare enrollees in HMOs. There are currently over 1 million Medicare beneficiaries in HMOs (i.e., prepayment for services). Historically, the Medicare Statistical Organisation has provided summary data on beneficiary demographics and all-encompassing information on the use and costs of Medicare benefits on both the beneficiary level and on the level of institutional providers (hospitals, skilled nursing facilities, home health agencies, hospital outpatient departments). The information accept been used for plan administration, monitoring, and evaluation. However, the utilize and price information are by and large derived from claims for payment of service. Capitated payment systems such every bit HMOs are paid an overall capitation amount past HCFA so there is no transaction tape to depict services rendered and payment fabricated. Every bit more beneficiaries leave the fee-for-service sector, the information gap on employ of services will abound.

Data will be needed from HMOs to monitor the care received past beneficiaries of public programs and to gather information required for setting and evaluating capitation rates. The console recognizes that, in some cases, HMOs may have to establish new data systems to obtain such data. HCFA volition need data from HMOs to address a number of bug, differences in patterns of care past plan type, admission to specialty services, and monitoring the appropriateness of payment formulas for HMOs. Some of these problems are common to the fee-for-service sector, but others, such as biased selection, are unique to capitation.

Recommendation eight.nine: The panel recommends that the Health Care Financing Administration develop a data system for information on Medicare beneficiaries in capitated systems that is beneficiary-based, able to accommodate different types of capitated plans, reflect differences in services offered and in cost sharing, and utilizes uniform and consistent data definitions and formats among different types of plans.

This recommendation complements the more general Recommendation 9.1 to modify national health data systems to reflect changing patterns and sources of service commitment.

Disability-Medicare Linked File

The long-term effects of disability are an important component of functional limitations in the older population, medical care, utilization, and expenditures. The Social Security Administration, which administers the Disability Insurance program, maintains a Continuous Disability History Sample, a file stratified by land and including from 5 to 20 per centum of each land's newly disabled individuals who have been determined to be eligible for future benefits awarded to the disabled population. The disabled are eligible for benefits under the Medicare program two years afterward the disability insurance award is made. In 1983, Medicare per capita expenditures for the disabled ($one,900) at ages nether 65 (excluding persons covered under the End Stage Renal Illness plan) were college than for the elderly ($i,724). The Medicare disabled, as a group, accounted for about $5.5 billion of a full $57.four billion, for the entire Medicare program (Health Care Financing Administration, 1985a). As the disabled population ages, they will establish a pregnant subgroup of the elderly population requiring considerable medical intendance outlays. The Medicare experience of the disabled population under age 65 should be analyzed equally a basis for forecasting their medical intendance utilization patterns and future Medicare outlays when they get 65 and older.

HCFA has developed a file detailing the Medicare feel for 1977–1981 for the cohort of persons becoming entitled to disability benefits in 1972. Utilization and expenditures for Medicare-covered services can thus be related to the diagnosis or type of disability that justified the disability accolade. Analyses of the linked file is now under way. When it is completed, it can serve as a baseline for a more current study, using the population entitled to inability benefits in 1980 linked to 1982–1986 data.

Recommendation 8.10: The panel recommends that studies of the Continuous Disability History Sample linked to Medicare files exist fully supported jointly by the Wellness Care Financing Administration and the Social Security Administration and that a public apply tape exist prepared for this linked file with identifiers deleted every bit necessary to comply with confidentiality requirements.

Information for Policy Assay of the Prospective Payment System

In 1983, HCFA introduced the prospective payment system (PPS) for reimbursing hospitals treating Medicare patients. Each discharged patient is classified into one of 468 diagnoses chosen diagnosis-related groups based on the information on the hospital bill. The hospital is paid the fixed predetermined amount for that DRG.

Implementation of the prospective payment organisation has resulted in shortening the average length of stay for Medicare patients. Studies are nether way to make up one's mind whether patients discharged under PPS were not yet ready for self-care and, if and so, where they obtained needed care. The HCFA infirmary bill includes items for patients discharged to dwelling house nether care of organized abode health services, discharged to skilled nursing home or to intermediate nursing facility, in addition to the items on the Compatible Hospital Discharge Information Set (UHDDS): routine discharge, left against medical communication, discharged to some other short-term infirmary, discharged to a long-term intendance establishment, died, and non stated.

The original Uniform Hospital Discharge Data Gear up was promulgated by the secretary of the Department of Health, Education, and Welfare in 1974. The additional detail for ''Disposition of Patient" has been made office of the Uniform Beak required for each hospital discharge by HCFA.

The UHDDS was reviewed without alter in 1980 (U.South. Department of Health and Human Services, 1980c) and by the Health Data Policy Council in 1984 (Federal Register, July 31, 1985:31038-9). The council review served to clarify some categories and definitions just did non add more detailed categories to "Disposition of Patient." More detailed information, like to that on the Medicare billing form, could be useful in studying length of hospital stay in conjunction with diagnostic information (including multiple diagnoses) and severity of illness. Diagnostic information is bachelor in hospital beak reports, which provide for up to five diagnoses for each discharge, and in the National Hospital Discharge Survey, which provides for seven. Severity of illness information is not available currently for analysis.

Recommendation viii.11: The panel recommends that the National Commission on Vital and Wellness Statistics reconsider the Disposition of Patient items on the Uniform Hospital Belch Data Ready with reference to the changing data needs resulting from implementation of the prospective payment system.

Medicaid Information

The Medicaid program is unlike the Medicare program, in which data are bachelor on the individual elderly or disabled and his or her use of medical intendance services. Medicaid is administered past u.s., and HCFA does not receive any person-level data on Medicaid eligibles, recipients, or payments fabricated for their medical services. The lack of detailed and uniform administrative data has limited evaluation of the programme at the national level.

The Medicaid Tape-To-Tape Project was initiated to expand HCFA'southward ability to collect data to analyze the Medicaid program. The main data base of operations consists of 100-percent data from five participating states (California, Georgia, Michigan, New York, and Tennessee) in uniform codes and formats. These states embrace nigh 1-third of the national Medicaid population. States transport HCFA their Medicaid Management Information System (MMIS) tapes, which are edited into a comparable format for analysis. Uniform files are produced for each participating land and year. Separated files are maintained for enrollment, claims, and provider data. Claims, provider, and reimbursements can be linked to the Medicaid enrollee who received the service and to the provider who furnished information technology. The 1980–1982 data from the five participating states have been collected and uniform files completed; 1983–1984 data from participating states are being collected at this time.

The tapes prepared by HCFA comprise utilization and expenditure data on all Medicaid enrollees in the five participating states. The tapes include 4 different person identifiers on each enrollee, making it possible to link the data with other data sets and national surveys. Experimental studies conducted inside and outside the Wellness Care Financing Administration—some of which have involved elderly utilization patterns—take yielded loftier match rates. In add-on, for that portion of elderly Medicaid users who are also enrolled in Medicare in these five states (a subset of the "dually eligible" elderly), it has also been establish that their Medicaid and Medicare records tin be reliably linked, with match rates as high as the high 70s to the low 90s (personal communication, David Baugh, Wellness Care Financing Administration). HCFA staff are currently working on linking the Medicaid tape-to-tape records to the Medicare files.

Recommendation viii.12: The panel recommends that the Medicaid Tape-to-Tape Project exist continued, and that the Wellness Care Financing Administration proceed to conduct studies on utilization patterns and expenditures of the elderly using this information base and create sample files and public utilize tapes for use by outside researchers.

HCFA has undertaken a project to modernize the agency'south information organisation called Project to Redesign Information Organisation Management (PRISM) (Health Care Financing Administration, 1985b). The first stage, development of the system's design concept, was completed in April 1985. Implementation of the unabridged system is projected for installation by the cease of fiscal 1989. Amid its goals are increased support of the Medicare/Medicaid Statistical Systems. Completion of PRISM will facilitate implementation of the panel's recommendation.

Medicaid Eligibility Quality Control Organization

The Medicaid Eligibility Quality Control system (MEQC) was designed to ensure that public funds are spent only on behalf of people who are eligible nether federal and state police. It is concerned with identifying ineligible people enrolled in Medicaid and with payments fabricated in mistake to providers on behalf of those persons. State-level samples are fatigued monthly from the Medicaid population in both civilian and institutionalized settings, using the Medicaid case equally the sampling unit. The sample cases are checked for errors.

In 1982, the federal agencies responsible for the AFDC, Medicaid, and Food Stamps programs completed a 7-twelvemonth endeavor to pattern a single course: the Integrated Quality Command System (IQCS) class for employ in all programs. Although the medical claims may not exist useful considering they are added together for the unabridged case and are not nerveless on a person-by-person basis, at that place are other valuable information on the form, such as demographics, detailed income and assets, employment, occupation, spend-downward amounts, insurance coverage, utilization, diagnoses, and types of services. The IQCS forms are used extensively past the research units in the AFDC and Food Stamps programs, but HCFA does not employ them for research.

The console recognizes that the MEQC system may have potential for research purposes. A national information base on Medicaid cases could be constructed from the re-review sample (a subsample of the IQC sample), which might be less costly than other alternatives, such equally sample surveys of individuals and their associated claims or obtaining the entire claims files. Many issues need to be resolved, and despite its interesting prospects, the panel is not making a recommendation on the MEQC system. The National Inquiry Quango'south Panel on Quality Control of Family Assistance Programs recently completed a report of other aspects of monitoring and analytic needs of the MEQC system (Kramer, 1988).

Information Resources Required to Study the Medicaid Spend-down Phenomenon

A minor group of the elderly have medical expenses that exceed the coverage provided by Medicare and whatsoever individual insurance they may take. These expenses are chiefly incurred for nursing home services. The costs are high, may continue for years, and are rarely covered by private insurance. Although many elderly people call up nursing home services are covered by Medicare, they are not. The Medicaid program is the principal source of public financing for nursing dwelling care, paying for services provided to the indigent and the "medically needy"—those whose income and avails autumn below a legally divers level.

Many elderly persons deplete both income and assets in meeting their medical expenses. When they have reached the "medically needy" level, they get eligible for the Medicaid program in the Commune of Columbia and in the 30 states that have programs for the medically needy. Medicaid and so covers all their medical expenses, with few exceptions. Income from pensions or Social Security benefits paid to retired wage-earners who demand nursing home intendance may support not only the retired person but also the spouse and other dependents. When the source of back up for a family must spend-down to required levels for nursing home care, the family may be left with insufficient income for survival. To revise the legislation for eligibility for Medicaid to eliminate family hardship, data will be required on how oftentimes spend-down occurs, the corporeality of out-of-pocket expenses paid earlier the Medicaid program takes over, and the result of the spend-downwardly on other family unit members.

There are two sources of information for persons in nursing homes. One is the National Nursing Home Survey. In 1985, this survey included an admissions component that collected data for a sample of admissions and was designed to produce estimates on the spend-downward issue.

A 2d source of information is the Medicaid Quality Control sample. The sample collects data (among other items) on how eligibility was established for Medicaid. Information on persons involved in the spend-down tin be compiled for the 5 percent of Medicaid beneficiaries who are in nursing homes and are selected in the Quality Control sample of 400,000 persons nationwide.

Information about the effect of spend-down on the family unit may be obtained from ii ongoing surveys. The Survey of Income and Programme Participation in its health care module collects information on insurance coverage, including Medicare and Medicaid for the sample household. It should exist possible to examine the detailed data on income and assets in relation to wellness insurance coverage during the ii ane/2 year menstruation in which the same panel remains in the sample. Changes in coverage and assets could exist related. The value of this data source would be greatly enhanced if the recommendation in Chapter 10 to increase the size of the sample of persons of historic period 65 and over is implemented. Sample augmentation would double the number of those ages 75–84, and 85 and over—the ages in which nursing dwelling house admissions are highest.

The NHIS Supplement on Aging, and the subsequent follow-up through the Longitudinal Study on Crumbling, will also develop data on the family unit and the individual admitted to the nursing dwelling, if console recommendation seven.3 on a biennial follow-upwards is implemented.

The console reaffirms the demand for the expansion of the SIPP sample of the elderly, and for continuation of the Longitudinal Study on Aging in order to study the spend-down phenomenon. In addition, data from the Medicaid quality command information base of operations and from the Nursing Home Survey should exist analyzed for data on this problem.

Private Insurance Information

Although at least 25 companies now offer free-continuing long-term intendance insurance, insurers are reluctant to offer and market place long-term care policies aggressively. Insurance industry representatives point to concerns about adverse selection, insurance-induced demand, pricing difficulties, and lack of consumer education as barriers to product development. Some insurers have expressed fear that the open-ended liability that tin can upshot from long-term care policies could be financially devastating to their companies. There is as well business organization about the long lag fourth dimension between buy of policies and payment of substantial long-term costs and that nonmedical, personal services such equally homemaker intendance and respite care are not insurable.

Insurers also find that actuarial estimates and premium determinations for long-term intendance policies are hard to make. Minimal data are available on costs and utilization of long-term care insurance, and very little of the data reflects bodily experience. Some are concerned that problems could occur if only high-chance individuals are attracted to long-term care insurance. Now, there is no reliable actuarial model applicable to a long-term care policy that would differentiate the high-hazard purchaser from the low-risk 1 and let for a variable rate scale.

Private insurance companies are starting time to gain experience with long-term care insurance. The panel recognizes the need for improved data on utilization of covered services, costs, hazard direction, marketing, and the impact of long-term care coverage.

Toll-of-Disease Data

Cost-of-illness data play an important role in decision making regarding the resource allotment of resources in the health sector. Illnesses, such as Alzheimer's disease, that primarily impact the elderly volition require more than resource in the future with the growing number of elderly persons who may exist at hazard. Alzheimer'south illness, affecting an estimated i.v million Americans, has get a major priority for federal research organizations (e.g., the National Institute on Aging, the National Institute of Neurological and Chatty Disorders and Stroke, and the National Institute of Mental Health). Many other diseases and impairments that impact the elderly include heart illness, cancer, arthritis, stroke, as well every bit visual and hearing impairments.

In addition to data on prevalence, incidence, and use of medical care and long-term intendance services for the elderly suffering from these and other conditions, the costs of these weather are needed by policy makers, health planners, and researchers to ready priorities, make program policy decisions, and prepare and deliver congressional testimony to support program policy decisions and bureau budgets.

The economic costs of affliction stand for the monetary brunt on society of illness and premature decease. They stand for foregone alternatives and are measured in terms of the straight and indirect costs. Direct costs are the value of resources that could be allocated to other uses in the absenteeism of affliction, and indirect costs are the value of lost output because of cessation or reduction of productivity due to morbidity and mortality. Morbidity costs are lost wages for people unable to work due to disease and inability and an imputed value for those persons too sick to perform their usual housekeeping services. Mortality costs are the present value of future earnings lost for people who dice prematurely, employing discounting to convert a stream of future earnings into present values.

Full economic costs of illness in 1980 amounted to $455 billion based on a four percentage discount rate of the value of productivity foregone in succeeding years as a result of premature mortality in that year. The elderly (persons age 65 and over) comprised 11.3 pct of the total population in 1980 and 18.2 percent of the full economical costs (Rice et al., 1985).

The rankings by major diagnostic category of the economic costs of affliction vary substantially by age. For the population under age 65, the medical condition that ranks highest in economic costs is "injury and poisoning," costing $78 billion, accounting for 21 percentage of the total for this age group, and reflecting the relatively high value of lost productivity for the large number of premature deaths at younger ages from this crusade. Diseases of the circulatory system rank second in economic costs for persons under age 65, representing 15 percent of the full. For the elderly, the economical costs of diseases of circulatory arrangement far outrank all other diseases, amounting to $29 billion, or 35 percent of the full. In second identify are neoplasms, constituting 11 per centum of total economic costs for the elderly.

These cost-of-illness estimates are for the major diagnostic categories and are not disaggregated to specific diseases. There take been more than than 200 split cost-of-disease studies in the final twenty years (Hu and Sandifer, 1981). Some of these are national in telescopic, but almost are limited to a selected population or geographic area, and all only a few are restricted to one or a few disease categories. Varying methodologies are used and so that the costs of different diseases cannot be compared.

Estimation of the costs of illness depend to a cracking extent on the data bachelor and on the methodologies used. Although the U.S. Public Health Service has developed guidelines for interpretation of the costs of illness (Hodgson and Meiners, 1982), few studies follow them rigorously. For the farther development of cost-of-affliction studies, data will exist available from several surveys including the 1987 National Medical Intendance Expenditure Survey, the 1985 National Nursing Home Survey, the annual National Hospital Discharge Survey, and the annual National Health Interview Survey. Additional sources of data are the Medicare, Medicaid, and other public program administrative records.

Recommendation 8.13: The panel recommends that the National Centre for Health Services Enquiry, the National Center for Health Statistics, and the Health Care Financing Administration continue to collect the detailed data necessary to estimate the economic costs of illnesses, especially those affecting the elderly population, and that the National Centre for Health Services Research back up price-of-illness studies using available guidelines for uniform methodology.

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Source: https://www.ncbi.nlm.nih.gov/books/NBK217723/