Quality of care

1
Quality of care followed by publicly provided
care
2
How to improve quality

• Role of malpractice
• Role of Report Cards and other measures of quality

3
Reason for Malpractice System

• Policing issue of how to insure quality of
  care. The objective is to create incentives for
  providers to only provide care for which they are
  competent and take appropriate care focus both
  on process and care.
• Compensation compensate if care fail to meet
  community standard.
• Role based on asymmetric information.

4
Does system work?Do we know?

• For system to operate to send correct signal need
  case to be brought whenever there is any
  significant negligence. Amount of remedy must
  signal correct or full loss. Cost of medical
  care, cost of lost time, and loss of utility.
  The last is the justification for payment for
  pain and suffering.
• Similarly for system to work, all unjustified
  cases must be correctly identified with no
  payment made.
• Signal should be to provider today we have
  major role of insurer which weaken system.
• Penalty to provider to be involved in case. Loss
  of time, reputation.
• Problem if reduction in those providing certain
  types of risky care? Ex. Primary provider stop
  activities re risky pregnancy. (Often desired
  outcome of system.)
• Evidence re defensive medicine? Easier to show
  did tests, etc. then spent time providing
  information or asking relevant questions.
• In studies of medical accidents fine many more
  reported than cases ever brought (10 to 1)
• Most cases settled out of court (if expectations
  for outcome similar). Less than 5 go to trial.

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Question for discussion

• What modifications of existing malpractice law
  would improve signals regarding quality of care?
  
• Can you think of any modifications that would
  reduce defensive medicine? How do you know if we
  have defensive medicine?

7
Report Cards and other quality measures are they
beneficial?

• Goal send signal to provider to improve care or
  drop out of care in particular specialtyimprove
  quality
• Danger provide incentive to not care for the
  riskiest patients.
• Study New York State heart bypass operations
• Find a reduction in volume to hospitals with low
  ratings
• Find an improvement in outcomes for hospitals
  with low ratings.

8
Market for nurses - monoponistic

• MFC as hospital hires more nurses, need pay more
  but also to all other nurses this line is cost
  of hiring an additional nurse

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9
Public Programs

• Reasons for Intervention.
• Risk sharing
• Equity
• Market Failures
• Types of Public Programs
• Supply Side
• Demand side
• A Comparison to Other Countries
• Our Programs
• Medicare
• Medicaid
• Others
• Incentive Effects
• Problems

10
What lies behind a role for government subsidies?

• 1. Externalities in consumption
• Healthier and wealthier persons in community may
  not wish to see those less fortunate go without
  medical caree and are willing to contribute to
  such care. Their utility depends on this
  consumption. Then those who contribute benefit
  but so do those who do not contribute.
  Government is an efficient way to gather and
  distribute contributions.
• Implication design of program to satisfy donors
  rather than recipients.

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11
What lies behind a role for government
subsidies?-2

• 2.Public health reduce spread of disease.
  Improve productivity.
• Immunizations
• Clean water
• 3.If person self insures and faces catastrophe,
  community pays. Not equitable across areas and
  ability to pay.

12
Types of Public Subsidies

• Demand side
• Subsidize insurance via tax system
• Medicare for elderly and disabled
• Medicaid for certain low income groups
• SCHIP for lower income children and in some cases
  parents

• Supply side
• Community health centers
• VA system
• Subsidies to educate providers
• Subsidies to build facilities

13
Design

• Target program to those with low income and of
  poor health. If reach high income, inefficient
  (could achieve at lower cost re taxes, increase
  in demand for medical care.

14
The Community Health Center (CHC) Program is a
Federal grant program funded
under Section 330 of the Public Health Service
Act to provide for primary and preventive health
care services in medically-underserved areas
throughout the U.S. and its territories.
The FY 2002 appropriation for this program is
1.3 billion. Program Statistics from the
2000 Uniform Data System (UDS)
Total Users - 9.6 M of that 3.9 are
uninsured users Total
Physicians - 4,803 (19,220,237encounters)
Total NPs/PAs - 2,367
(6,657,449 encounters)
Total Dentists - 977 (2,606,326 encounters)
Total Hygienists - 283
(401,946 encounters)
15

• Community Health Centers (CHCs) were first funded
  by the Federal Government as part of the War on
  Poverty in the mid-1960s.
• By the early 1970s, about 100 neighborhood
  health centers had been established under the
  Economic Opportunity Act (OEO). These centers
  were designed to provide accessible, affordable
  personal health care services to low income
  families.
• The Public Health Service began funding
  neighborhood health centers in 1969. With the
  phaseout of OEO in the early 1970s the centers
  supported under this authority were transferred
  to the Public Health Service. Currently, the CHC
  Federal grant program is authorized under section
  330 of the Health Centers Consolidation Act of
  1996.
• CHCs provide family-oriented primary and
  preventive health care services for people
  living in rural and urban medically underserved
  communities. CHCs exist in areas where economic,
  geographic, or cultural barriers limit access to
  primary health care for a substantial portion of
  the population and they tailor services to the
  needs of the community.
• Provide services that include primary and
  preventive health care, outreach and dental care.
  
• Provide essential ancillary services such as
  laboratory tests, X-ray, environmental health,
  and pharmacy services as well as related services
  such as health education, transportation,
  translation, and prenatal services.
• Provide links to welfare, Medicaid, mental health
  and substance abuse
  treatment, WIC, and related services. Provide
  access to a full range of specialty care
  services.
• CHCs are a catalyst for economic development,
  generating jobs, assuring the presence of health
  professionals and facilities in underserved
  areas, and utilizing local services. In FY
  2000, the CHC investment generated over 3
  billion in revenues for impoverished underserved
  communities across the country.

16
Administered grants to over 700 community-based
public and private nonprofit organizations that
develop and operate CHCs, and in turn support
over 3,000 clinics. Supported CHCs that serve
over 11 million people in FY 2000, of whom 66
percent live below the poverty level. CHCs
demonstrate cost effective responsiveness,
empower underserved communities, reduce infant
mortality rates, lower hospital admission rates
and length of hospital stays for patients, lower
Medicaid patients health costs, and provide
care for specific conditions that meets or
exceeds protocols for the general population.
Supported Integrated Services Delivery System
grantees to improve the quality and reduce the
cost of health care services for underserved,
uninsured people. Administered new Facilities
and Managed Care loan guarantee programs, as
well as a national technical assistance strategy
in partnership with the National Association of
Community Health Centers and the Primary Care
Associations in Massachusetts, North Carolina,
Texas, and Illinois.
17
The Migrant Health Act was enacted in September
1962 by Public Health Law
87-692, which added Section 310 to the Public
Health Service Act. The Migrant Health Program
(MHP) provides a broad array of medical and
support services to migrant and seasonal
farmworkers and their families. The Migrant
Health Program is currently authorized under
Section 330(g) of the Public Health Service Act.
The vision of the MHP
is the universal accessibility to quality and
appropriate health care for our Nations Migrant
and Seasonal Farmworkers (MSFW) and their
families. The MHP provides MSFW and their
families access to comprehensive, culturally
competent, primary care services. Budget, FY
2002 107 million. Indian Health Service is
another example though it is becoming
increasingly similar to Medicaid.
18
Demand Subsidies

• Basic reason externalities in consumption but
  what is goal?
• Minimum to poor equal financial access? Equal
  treatment for equal needs? Equal health status?
• How achieve each of these? Equal price does not
  create equal utilization. High income consume
  more.

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Medicaid

• Joint federal state program- Each state
  establishes its own eligibility standards,
  benefits package, payment rates and program
  administration under broad federal guidelines. As
  a result, there are essentially 56 different
  Medicaid programs one for each state, territory
  and the District of Columbia.
• Begun in 1965
• Financing
• The Medicaid program is jointly financed by the
  states and the federal government. Medicaid is an
  entitlement program and the federal spending
  levels are determined by the number of people
  participating in the program and services
  provided. Federal funding comes from general
  revenues.
• The federal government contributes between 50
  percent and 83 percent of the payments for
  services provided under each state Medicaid
  program. The federal matching rate for
  administrative costs is uniform for all states
  and is generally 50 percent, although certain
• administrative costs receive a higher federal
  matching rate.
• Categorically eligible
• Families who meet states Aid to Families with
  Dependent Children (AFDC) eligibility
  requirements in effect on July 16, 1996.
• Pregnant women and children under age 6 whose
  family income is at or below 133 of the Federal
  poverty level.
• Children ages 6 to 19 with family income up to
  100 of the Federal poverty level.
• Caretakers (relatives or legal guardians who
  take care of children under age 18 (or 19 if
  still in high school)).
• Supplemental Security Income (SSI) recipients
  (or, in certain states, aged, blind, and disabled
  people who meet requirements that are more
  restrictive than those of the SSI program).
• Individuals and couples who are living in
  medical institutions and who have monthly income
  up to 300 of the SSI income standard (Federal
  benefit rate).

21
Medicaid eligibility - 2

• Medically Needy
• The medically needy have too much money (and in
  some cases resources like savings) to be eligible
  as categorically needy. If a state has a
  medically needy program, it must include pregnant
  women through a 60-day postpartum period,
  children under age 18, certain newborns for one
  year, certain protected blind persons and persons
  required to sign up for their employers health
  plan if it is cost-effective.
• States may also include Children under age 21,
  20, 19, or under age 19 who are full-time
  students. If a state doesnt want to cover all of
  these children, it can limit eligibility to
  reasonable groups of such children.
• Caretaker relatives. Aged persons (age 65
  and older). Blind persons (blindness is
  determined using the SSI program standards or
  state standards). Disabled persons (disability
  is determined using the SSI program standards or
  state standards). Persons who would be eligible
  if not enrolled in a health maintenance
  organization.
• 37 states have medically needy programs Alaska
  Hawaii Maine Nebraska Oklahoma Utah Arkansas
  Illinois Maryland New Hampshire Pennsylvania
  Vermont California Iowa Massachusetts New Jersey
  Puerto Rico Virginia Connecticut Kansas Michigan
  New York Rhode Island Washington Dist. of
  Columbia Kentucky Minnesota North Carolina
  Tennessee West Virginia Florida Louisiana Montana
  North Dakota Texas Wisconsin Georgia
• Texas' medically needy program covers only the
  mandatory" medically needy groups. It does not
  cover the aged, blind and disabled. 2

22
Medicaid eligibility-3

• SPECIAL GROUPS Medicare BeneficiariesMedicaid
  pays Medicare premiums, deductibles and
  coinsurance for Qualified Medicare Beneficiaries
  (QMB)individuals whose income is at or below
  100 of the Federal poverty level and whose
  resources are at or below the standard allowed
  under SSI.
• There are additional groups for whom Medicare
  related expenses are paid by MedicaidMedicare
  beneficiaries with income greater than 100 but
  less than 120 of the Federal poverty level and
  those whose income is at least 120 but less than
  135 of the Federal poverty level.
• Qualified Working Disabled IndividualsMedicaid
  can pay Medicare Part A premiums for certain
  disabled individuals who lose Medicare coverage
  because of work. These individuals have income
  below 200 of the Federal poverty level and
  resources that are no more than twice the
  standard allowed under SSI.
• States may also improve access to employment,
  training and placement of people with
  disabilities who want to work through expanded
  Medicaid eligibility. Eligibility can be extended
  to working disabled people between ages 16 and 65
  who have income and resources greater than that
  allowed under the SSI program.
• States can extend eligibility even more to
  include working individuals who become ineligible
  for the group described above because their
  medical conditions improve. States may require
  such individuals to share in the cost of their
  medical care.
• There are two additional eligibility groups that
  states may include under their Medicaid plans
• women who have breast or cervical cancer
• People with tuberculosis (TB) who are uninsured.
• Women with breast or cervical cancer receive all
  plan services TB patients receive only services
  related to the treatment of TB.

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What is covered under Medicaid?

• States are required to offer the following
  services to those covered under Medicaid
• Inpatient and outpatient hospital services
  laboratory and x-ray services, nursing facility
  services for those over age 21
• home health services, prenatal care vaccines for
  children, physician services, family planning
  services,
• rural health clinic services, pediatric and
  family nurse practitioner services, diagnosis and
  treatment for
• those under age 21, nurse-midwife services, and
  ambulatory services by federally qualified health
  centers.
• States may also receive matching funds for
  providing optional services such as drugs,
  eyeglasses, and inpatient psychiatric care for
  individuals under age 21 or over 65, diagnostic
  services, clinic services, transportation
  services, rehabilitation and physical therapy
  services, and home and community-based care to
  certain persons with chronic impairments.

26
Medicaid enrollment in managed care trends
27
Financial Aspects of Medicaid

• The federal government helps states pay the cost
  of Medicaid services by means of a variable
• matching formula which is adjusted annually. This
  share is known as the Federal Medical Assistance
  Percentage (FMAP). The FMAP is a matching rate
  inversely related to a states per capita income
  and can range between 50 to 83 percent. The
  federal share of administrative costs is 50
  percent for all states.
• Medicaid operates as a vendor payment program.
  Within federal guidelines states have broad
• discretion in determining payment methodology and
  rates. States have the option of paying providers
  directly or paying for Medicaid services through
  various prepayment arrangements, such as health
  maintenance organizations (HMOs). Payments must
  be sufficient to enlist enough providers so that
  covered services are available at least to the
  extent that comparable care and services are
  available to the general population within that
  geographic area. Providers participating in
  Medicaid must accept Medicaid payment rates as
  payment in full, except where nominal
  cost-sharing charges may be required. States may
  impose nominal deductibles, coinsurance, or
  copayments on some Medicaid recipients for
  certain services. Some, however, must be excluded
  from cost-sharing pregnant women, children under
  age 18,
• hospital or nursing-home patients, who are
  expected to contribute most of their income to
  the cost of institutional care. In addition, all
  Medicaid recipients must be exempt from
  copayments for emergency services and family
  planning services.

28
Medicare Beneficiaries Source of Eligibility and
Coverage, 2002
Source of Eligibility
Source of Coverage
ESRD 0.6
MedicareChoice Cost HMOs 13
Disabled 14
Elderly 85
Fee-for-Service 87
Beneficiaries 40 million
Notes 1) Totals may not sum due to rounding
2) ESRD refers to beneficiaries under age 65 with
End-Stage Renal Disease 3) the Disabled
category refers to beneficiaries under age 65
without ESRD. Source Elderly, disabled, and
ESRD data from CMSs Office of the Actuary
MedicareChoice and cost plan data from CMSs
Medicare Managed Care Contract Report, March 2002.
29
Number of Medicare Beneficiaries
The number of people Medicare serves will nearly
double by 2030.
76.8
61.0
45.9
Medicare Enrollment (millions)
39.6
34.3
28.4
20.4
Numbers may not sum due to rounding. Source
CMS, Office of the Actuary.
30
Medicare Premiums for 2005 Part A (Hospital
Insurance) Premium Most people do not pay a
monthly Part A premium because they or a spouse
has 40 or more quarters of Medicare-covered
employment. The Part A premium is 206.00 for
people having 30-39 quarters of Medicare-covered
employment. The Part A premium is 375.00 per
month for people who are not otherwise eligible
for premium-free hospital insurance and have less
than 30 quarters of Medicare-covered employment.
Part B (Medical Insurance) Premium 78.20 per
month. Medicare Deductible and Coinsurance
Amounts for 2005 Part A (pays for inpatient
hospital, skilled nursing facility, and some home
health care) For each benefit period Medicare
pays all covered costs except the Medicare Part A
deductible (2005 912) during the first 60 days
and coinsurance amounts for hospital stays that
last beyond 60 days and no more than 150
days. For each benefit period you pay A total of
912 for a hospital stay of 1-60 days. 228 per
day for days 61-90 of a hospital stay. 456 per
day for days 91-150 of a hospital stay (Lifetime
Reserve Days). All costs for each day beyond 150
days Skilled Nursing Facility Coinsurance 114.00
per day for days 21 through 100 each benefit
period. Part B (covers Medicare eligible
physician services, outpatient hospital services,
certain home health services, durable medical
equipment) 110.00 per year. (Note You pay 20
of the Medicare-approved amount for services
after you meet the 110.00 deductible.)
31
National Personal Health Care Expenditures, by
Type of Service and Percent Medicare Paid, CY 2000
Total national personal health care spending in
CY 2000 was 1.1 trillionMedicare accounted for
19 percent.
412 Billion Medicare pays 31
286 Billion Medicare pays 21
1
122 Billion Medicare pays 2
92 Billion Medicare pays 10
60 Billion Medicare pays 0
39 Billion Medicare pays 12
37 Billion Medicare pays 0
32 Billion Medicare pays 29
31 Billion Medicare pays 4
19 Billion Medicare pays 25
1 Medicare payments are from managed care plans
only, since fee-for-service Medicare does not
generally cover outpatient prescription
drugs. Source CMS, Office of the Actuary,
National Health Statistics Group
32
Where the Medicare Claims Dollar Went, FY 2001
Total 236 billion
Inpatient Hospital 93 billion
Managed Care 42 billion
Skilled Nursing 13 billion
Hospice 3 billion
Home Health 9 billion
DME, Supplies, Independent Labs and Other
Services 2 16 billion
Hospital Outpatient and Other Outpatient
Facilities1 20 billion
Physicians 40 billion
1 Other outpatient facilities include ESRD
freestanding dialysis facilities, RHCs,
outpatient rehabilitation facilities, and
federally qualified health centers. 2 Other
services include ambulatory surgical center
facility costs and ambulance services. Note
Spending includes benefit dollars only. Data do
not sum due to rounding. Source CMS, Office
of the Actuary
33
Sources of Payment for Medicare Beneficiaries
Medical Services, 1999
Medicare pays a little more than half of the
total cost of beneficiaries medical care.
Medicaid 12 (1,103)
Medicare 53 (5,043)
Private Insurance 12 (1,161)
Direct Out-of-Pocket 19 (1,825)
Other Sources 5 (441)
Overall Medical Expenses per Medicare Beneficiary
9,573
Beneficiary out-of-pocket spending does not
include their payments for Medicare Part B
premiums, private insurance premiums, or HMO
premiums. Note Data are for all beneficiaries,
both fee-for-service and MedicareChoice
enrollees. Source CMS, Office of Research,
Development, and Information Data From the
Medicare Current Beneficiary Survey (MCBS) 1999
Cost and Use File.
34
Types of Supplemental Health Insurance Heldby
Fee-for-Service Medicare Beneficiaries, 2000
Most beneficiaries using fee-for-service Medicare
have private, supplemental health plans.
No Supplemental Insurance 15
Medicaid 19
Other 2
Individual Medigap 27
Employer-Sponsored 33
Medigap Employer-Sponsored Insurance 5
Note Medicaid (shown above) includes both
Qualified Medicare Beneficiaries (QMBs) and
Specified Low-Income Medicare Beneficiaries
(SLMBs). Source CMS, Office of Research,
Development, and Information Data From the
Medicare Current Beneficiary Survey (MCBS) 2000
Access to Care File.
35
Why does supplementary insurance matter?

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Elderly Health Spending as a Percentage of
Income, 2000
Most elderly households have incomes below
40,000 and spend a high percentageof their
income on health care.
Elderly Households Health Spending as a
Percentage of Income
Percent of Elderly Households by Income
Percent of Elderly Households
Percent of Income Spent on Health
Income in Thousands
Income in Thousands
The Elderly Poor Spend a GreaterPortion of Their
Income on Health
Most Elderly Households Have Incomes Below 40,000
Source CMS, Office of the Actuary data from the
Bureau of Labor Statistics, Consumer Expenditure
Survey, 1999-2000.
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Per Capita Total Health Care Expenses, by Payer,
for Beneficiaries Living in Long-Term Care
Facilities and the Community, 1999
Beneficiaries in assisted living facilities have
lower total expenses than those in nursing homes,
but higher out-of-pocket costs.
40,036
40,442
32,616
6,366
2
1
Notes 1) Because a Skilled Nursing Facility stay
is a Medicare covered benefit, Medicare covers a
large portion of the expenses for beneficiaries
in this group. 2) Assisted Living/Retirement Home
also includes Domiciliary Care Homes, Board and
Care Homes, and Independent Living Units. All of
these arrangements offer some level of assistance
to the beneficiary. Source CMS, Office of
Research, Development, and Information Data from
the Medicare Current Beneficiary Survey (MCBS)
1999 Cost and Use File.
40
Provider Reimbursement under Medicare

• Medicare Physician Fee Schedule (MPFS).
• provides more than 10,000 physician services,
• the associated relative value units,
• a fee schedule status indicator, and various
  payment policy indicators needed for payment
  adjustment (i.e., payment of assistant at
  surgery, team surgery, bilateral surgery, etc.).
• The Medicare physician fee schedule pricing
  amounts are adjusted to reflect the variation in
  practice costs from area to area.
• A geographic practice cost index (GPCI) has been
  established for every Medicare payment locality
  for each of the three components of a procedure's
  relative value unit (i.e., the RVUs for work,
  practice expense, and malpractice). The GPCIs are
  applied in the calculation of a fee schedule
  payment amount by multiplying the RVU for each
  component times the GPCI for that component.
• Hospitals are paid using DRGs for inpatient care
  and by another diagnosis or treatment based
  payment system for outpatient care.

41
Issues tied to income tested programs such as
Medicaid and SCHIP

• Stigma?
• Incentive effects re maintaining eligibility
• Zero one nature of eligibility
• Provider willingness to provide services

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43
Inadequacies of Public Programs

• Difficulties obtaining care
• Medicaid recipients face a number of
  difficulties obtaining care. They often find that
  their coverage is limited to a specific provider,
  usually an HMO, which may or may not have a
  facility near by may require changing providers
  may not be open when the adults in the family are
  not working may have long delays to get an
  appointment or long waits at the time of the
  appointment.
• Access problems have gotten worse. Some children
  in a family may be covered while others are not.
  Recent evidence suggests that welfare reform,
  which broke the tie between Medicaid and other
  programs, has reduced the take-up of Medicaid
  coverage.
• The all or nothing character of Medicaid, means
  that persons are either eligible or they are not.
  If the family income goes up by one dollar,
  Medicaid eligibility is lost. This notch effect
  creates an incentive to become eligible and stay
  on Medicaid. The effect is stronger, the less
  likely women are to receive private insurance at
  their place of employment, should they work.
• Moffitt and Wolfe (1992) found that Medicaid did
  keep some women on AFDC and out of the labor
  force, but the impact was likely to be large only
  for women whose families have high expected
  medical care expenditures.
• This notch problem has been reduced somewhat by
  mandating coverage of poor pregnant women and
  young children below the 185 percent of the
  poverty line.

44
Inadequacies of Public Programs-2

• Medicaid coverage is inequitable. Because it
  varies by state, the eligibility income levelthe
  income cutoffvaries considerably. States also
  differ in the service limitations they have
  imposed. Some states have limits on the number of
  inpatient days covered some states require a
  second opinion for certain surgery many states
  have limits on the quantity of any prescription
  and a few states have a limit on the number of
  physician office visits. Thus, a poor single
  mother with income at 75 percent of the poverty
  line may receive no coverage in one state, full
  coverage with few constraints in a second, and
  have limited benefits covered and difficulty in
  finding a provider in a third state.
• The level of reimbursement is another factor that
  influences access to quality care. In a study of
  childbirths, physician-reimbursement policies
  were found to influence physicians choices of
  treatment modalities so that relatively low
  reimbursement rates (specifically, Medicaid
  reimbursement rates) result in reductions in the
  intensity with which patients under the care of
  low-reimbursement providers are treated (Gruber
  et al., 1999).
• Disproportion Share Reimbursement may create
  incentives to care more for those covered than
  those not covered.

45
Inadequacies of Public Programs-3

• Medicare reflects coverage in effect in 60s no
  outpatient pharmaceutical coverage, No stop-loss
  coverage limited coverage of inpatient care (90
  days), freedom of choice of providers.
• Medicares inpatient reimbursement (DRGs which
  are a weight) creates issues of fairness in terms
  of formula for reimbursement and creates
  incentives for hospitals to shift costs to other
  parts of hospital outpatient, SNF, rehab unit.
  Issues re why same service reimbursed at
  different levels depending on site of care.
• Incentives to join Managed care and for Managed
  Care (HMOs) to offer package risk adjustment
  (95 when first established). Increase in
  enrollment increases awareness of differences in
  payment generosity and creates pressure to redo
  formula. HMOs get positive selection but how far
  can regulators go re reflecting this and still
  get HMOs to be part of program? Who bears risk?
  Rural areas with few options of HMOs raises
  equity issue. Payment rates vary year to year and
  across nearby counties though since 2000 a blend
  of national and county rate. Floors set mean
  disequilibrium re traditional FFS plans.
• The Medicare Hospital Insurance program is
  projected to become insolvent in 2019, and
  Medicare expenditures are projected to rise
  rapidly in coming decades as the baby-boom
  generation retires and health care costs continue
  to increase.