The Medicare Reimbursement Systems in the United States - Research Paper Example

? Changes to Medical reimbursement in the United s Changes were made to the Medicare reimbursement systems in the United s in 2008. The objective of those reforms was to lessen the load on hospitals by treating patients for some conditions on an outpatient basis. These reforms did not however meet the required objective of improving the quality of care at hospitals. As a result, further reforms are being instituted that will come into force in 2013. These reforms propose to reward those hospitals which are able to provide high standards of quality of care, or are able to achieve a significant improvement in quality when measured against an objective standard. This study evaluates the benefits and disadvantages of these proposed reforms. On the one hand, the reforms could improve quality of service by providing incentive for hospitals and increasing competition among them but on the other hand, ordinary citizens could also be affected because many expenses that were earlier applied against FSA and HSA accounts may no longer be possible. Medical reimbursement in the United States Introduction: The costs of health care in the United States are prohibitive and only a few people in the country can afford to avail of health care without any form of insurance. Private health insur4ance plans are available in the country and most employees have access to some form of health insurance through group insurance plans that are offered by their employers. Most people in the United States however, fall under the category of Medicare or Medicaid insurance plans to cover their health care costs. Medicaid is available to individuals who are from the poorer socio economic backgrounds and have no insurance at all. Medicare is the public health insurance program which has been formulated to provide for the health care of the elderly and the disabled. It covers individuals who are aged 65 or over, or under 65 but with certain disabilities and those of any age with permanent kidney failure (www.medicare.gov). In the year 2003, Medicare expenses cost the U.S. Government a sum of $271 billion, representing 13% of the federal budget (Frankes and Evans, 2006). The program comprises two parts – Part A which covers hospitalization and nursing facilities, and Part B which covers physician and outpatient services, laboratory charges and medical equipment. Since costs for the Medicare program were turning out to be prohibitive, changes were introduced to the reimbursement policies in 2008, in an effort to reduce some of the expenditures and thereby bring about some trimming of the federal government budget on health care. The sweeping changes proposed reduced payments for complex medical treatment procedures by 20 to 30%. Some of the major changes which were introduced and came into legal existence in 2008 were as follows (www.seniorjournal.com): (a) reducing reimbursement for procedures such an angioplasties and implanting of drug coated stents by 33% (b) reducing reimbursement for implanting defibrillators by 23% (c) Reducing reimbursements for hip and knee replacements by 10% Reimbursement for other diseases was also cut down; hospitals and health care professionals fully reimbursed only if their patients were suffering from one of 13 diseases which have been listed. The Medicare reimbursement policies for Inpatient Rehabilitation Facilities were revised further in 2009, validated legally from 2010. The patients are classified into different categories based upon their clinical symptoms and payments for clinical conditions that are secondary to the major one are no longer reimbursed (Ingenix, 2009). Cost outliner payments have also been readjusted to 3% of total estimated payments for Inpatient rehabilitation facilities. Coverage criteria were further revised for inpatient rehabilitation facilities with several pre-conditions being exposed, such as mandating therapy treatments to begin with 36 hours of the midnight of the day the patient was admitted.(Ingenix, 2009). It may be noted that the changes which had been instituted as stated above, had the net effect of reducing reimbursement to hospitals while simultaneously increasing the number of patients seeking admission into them, while also increasing the costs of health care for those individuals suffering from any of the diseases mentioned above. Hence, in effect, these changes have not however been successful in achieving the desired objectives; as a result, more radical changes have been instituted in the medical reimbursement systems which will become operational in 2013. Under the proposed new rules, the nature of reimbursement is to be changed, i.e., the level of payments offered by the medical centers is going to change in 2013. The higher the level of service the hospital offers and the higher the levels of improvement in the hospital performance, the higher will be the level of Medicare reimbursement the hospital will receive (Millsaps, 2011). This policy could thus have a significantly different outcome from the earlier reforms and this report will examine the changes that have been instituted in more detail, compare them to the existing policies and changes that had been instituted earlier and determine whether this reform is likely to be positive or negative on an overall basis. Thesis statement: On the basis of the above, the thesis statement that is proposed to be covered in this study is: Do the new Medicare reimbursement reform proposals have more positive features overall as compared to earlier reforms? Literature Review: In a study that was carried out by Samson (2010) on patients suffering from bladder cancer, the new Medicare reimbursement policies instituted in 2008 have actually increased costs. The revised reimbursement policies were intended to transfer the costs of endoscopic procedures from hospitals where they were expensive to perform and get them carried out on an outpatient basis by doctors. While the objective was to shift the load from hospitals to outpatient surgeries, what happened instead was that the numbers of patients enrolling in hospitals did not reduce, but the number of patients who were being treated on an outpatient basis shot up, thereby leading to more patients receiving endoscopic procedures totally. With new Medicare policies including bladder cancer as one of the 13 diseases where costs are to be reimbursed, the Government is now obliged to reimburse more surgeries rather than exchanging the expensive hospital procedures for less expensive ones to be performed on an outpatient basis. Research has also shown that by applying the 2008 reimbursement criteria may be quite inadequate to address the needs for inpatient rehabilitation facilities, where the lion’s share of expenses arises out of the incidental expenses and the treatment of associated symptoms, which are not covered for reimbursement. Applying the new reimbursement rules, fewer than 13% of the inpatient facilities qualify for reimbursement, which is a significant demotivating factor for quality hospitals faced with higher costs that are not reimbursed (Ingenix 2009). The new payment system which has been included under the new Medicare guidelines also aims to pay hospitals more accurately for the actual costs of care. For example, according to Mr. Slotnik, the director of Medicare policy at the Biotechnology Industry organization, the basis costs per person for treating stroke patients with clot busting drugs amounts to $11,578, but this is likely to be reduced by 35% with the new reimbursement guidelines (Pear, 2006). Similarly, there are likely to be significant reductions in other medical procedures as well. But while such claims are made, it must also be borne in mind that when the reimbursement amounts paid to hospitals and health care providers is reduced, then they are likely to seek higher reimbursements from private insurers, which in turn is likely to produce disruptions in the health insurance market. (Pear, 2006). Changes proposed in 2013: The Centers for Medicare and Medicaid services has published a rule that proposes to encourage those hospitals that provide a high level of quality care for their patients. This new rule has been formulated under Section 3001 of the Patient Protection and Affordable Care Act. Under this provision, hospitals which perform better and provide a high standard and quality of care are more likely to be eligible for reimbursement of Medicare expenses, while those who fail on quality may not receive reimbursement(Millsaps, 2011). This is akin to an extension of the decision that was taken by the CMS in 2007 to stop reimbursing hospitals for those payments and expenses that they deemed to be preventable, Such expenses include those extra costs and expenses that came about due to carelessness or negligence on the part of hospitals in contributing to preventable complications that could have been avoided if proper care had been administered (Rosenthal, 2007). The application of the provision 3001 under the Act from 2013 would make quality and the maintenance of a high standard of acre more important in the context of hospitals under a program known as the Hospital inpatients value purchasing program, which would apply to 3000 acute care hospitals form the year 2013. Under this program, hospitals would be monitored to ensure compliance with certain quality standards and would also be observed in order to evaluate their performance in terms of the quality and standard of care they are providing to their acute care patients. The levels of quality at every hospital would be measured against certain quality measures and incentive payments would be made to a hospital if it is able to achieve those measures, or alternatively, if it demonstrates improvement in its quality standards as compared to baseline criteria. The higher the level of quality of service and care that a hospital provides, the higher the incentive payment that it is likely to get and the Hospital inpatients value purchasing program would also reward those hospitals who are able to provide positive data supporting their improvements in quality. In order to offset the high costs of conventional treatment methods and Mediare reimbursements, another option that is being increasing used is CAM, which stands for Complementary and Alternative Medicine. This includes treatments using plant and animal sources for example, prayer or by taking vitamin supplements. As Carlson (2002) has pointed out, in general one could argue that since pharmaceutical products are generally covered by third party insurance, they may actually turn out to be less costly for consumers. But the reality is that in order to cut down their own high costs of insurance, most insurers have begun to cover reimbursement only for certain forms of alternative therapy, such as acupuncture, massage and chiropractic treatment. Since these alternative methods were being used, this was a further disincentive for hospitals to actively work towards providing a high standard of care that would have ensured that patients chose traditional treatment methods over alternative treatment methods, which are cheaper but may not necessarily be as effective in every instance. While this was one of the methods that was being used as an alternative to the high costs of medicare, it is also not quite as successful and the hospital inpatient value purchasing program is likely to be. Advantages of new regulations proposed to be implemented in 2013: It may be observed that the new program is likely to have a significant impact on hospitals in terms of encouraging them to improve the standards and quality of the care that they provide. The effect of these reforms is not however, likely to be restricted to the hospitals. Although the reforms are primarily directed at hospitals and in particular, acute care hospitals, they are also likely to involve other health care providers such as hospices and care homes, because with the new regulations, there is an all encompassing focus on quality. As Fader et al (2010) have pointed out, post acute care centers, the independent payment advisory board and lab centers where tests are carried out for diagnosis for acute care conditions are all likely to be affected by the new reforms, because the focus on quality in hospitals would also mean that these entities would need to step up their performance in order to meet those quality standards. President Obama’s new Medicare plan institutes sweeping changes in the Medicare system, because it will draw millions of Americans who are currently uninsured due to the high costs of medical insurance into the insurance system, with the Government providing health care coverage for such individuals. The new plan proposes to charge a surtax of 3.8% on Medicare, it is referred to as the unearned Income Medicare contribution and charges 3.8% Medicare surtax, which is payable by single individuals who make an income of over $200,000, or individuals filing taxes jointly who have an income of over $250,000 (Reiner, 2010). Individuals who do not take steps to get insurance and remain uninsured in 2014 will have to start paying a penalty from 2014. Disadvantages of the regulations: The new legislation however, also has some significant disadvantages. At the outset, the new regulations propose to bring about overall deductions in the amounts paid by the government towards Medicare reimbursement, which may affect all hospitals. As Mulvany (2010, p55) states, the proposed law reforms mean that “the legislation places a download adjustment for productivity that reduces hospital reimbursement by $112.6 billion over the next 10 years.” The net effect of this is that all hospitals, irrespective of their quality standards are likely to face a general reduction in Medicare reimbursements compared to what they have been receiving. The method of computing the level of reimbursements is also set to change, While earlier, the levels of reimbursement were determined on the basis of work units, both for hospitals and for physicians, this is set to change. Work units will not be taken into account and this is likely to reduce the amount of reimbursement that is provided (Kellis. 2010). The new regulation is also likely to cause problems among the general population, because people such as the elderly who generally have received reimbursements on their prescription medication may find that there will be a requirement that prescriptions must be produced in order to be eligible for reimbursement. As Ladika (2011) and Hupert (2011) have both noted, the perception that the new regulations are likely to only affect hospitals may be mistaken, because tighter controls on finances mean that pharmacies are not necessarily guaranteed reimbursement of all their sales of prescription drugs from the flexible savings account(FSA) or the health savings account (HSA). Rather, they will be able to get reimbursed only for those sales where patients are able to produce the relevant prescription. Analysis: The objective of the Medicare reimbursement policies in 2008 was to bring about a reduction in overall health care costs. The effect of these new policies however, was to make care almost prohibitively expensive for those suffering from any acute disease that was one of the 13 in the list of reimbursable ones under Medicare policies. The overall impact of these policies has been detrimental, not only to patients, but also to doctors and other health care providers, as demonstrated through the studies mentioned earlier. The overall objective of the existing Medicare regulations was to reduce costs by streamlining and reducing payouts, such that the introduction of the new system has caused radical shifts of money among hospitals and health care providers. The overall impact of the existing regulations however, is negative; therefore it is detrimental to the U.S. health care system in general, because it does not cover many acute health conditions, neither does it adequately cover the costs of nursing and rehabilitation. All it manages to achieve is a shifting around of the beneficiaries, but in the process, it leaves many acute conditions and rehabilitative care unprotected. The lack of coverage in these areas makes health care virtually inaccessible to the elderly and infirm, the very people Medicare is supposed to reach. It also impacts negatively on health care providers such as doctors, because Medicare will no longer compensate their expenses unless they fall under particular categories. As a result, with Medicare opting out of several areas, private health insurers have stepped in to fill those gaps, which in turn has jack up insurance costs and produce a detrimental effect on the U.S. health care system. As Carlson (2002) has also shown, even areas complementary and alternative medicine are becoming subject to high costs by insurers, although strictly speaking, they should be lower. Thus, on an overall basis, it appears that while the objective of the existing regulations was to reduce costs, what is actually being achieved is quite the opposite. The regulations proposed to be introduced in 2013 are however likely to be quite beneficial because it immediately brings out a rise in quality. The amount of money a hospital is likely to get will depend upon the quality of care it provides, but this level of quality would be assessed taking a variety of factors into account, including factors such as the number of patients in the hospital, the age of the patients, the severity of their acute conditions and their past records of quality in care, among other factors (Thomspon, 2010). Another area where the new regulations are likely to impact positively upon the health care system is the provision of bonuses, which is likely to have a significant effect in terms of improving general standards of quality across all hospitals. The new regulations propose that hospitals “with performance above the 75 percentile in a performance measurement system that includes both quality and patient satisfaction measures” (Andrews and Wessels, 2009, p. 46) are the hospitals that are likely to not only get more reimbursements from the government, they are also likely to be rewarded even more with a bonus. This would provide the motivation for most hospitals to work hard at improving their quality standards in order that they can also quality for both reimbursements and bonuses. The most significant negative aspect of the regulations as pointed out earlier is the reduction in levels of reimbursements, which is likely to create hardships for everyone in the health care industry, including hospitals, physicians, pharmacists and members of the general public. While the objective of the reforms are to reduce Medicare costs while also improving quality, the achievement of these objectives may be a painful process. As mentioned earlier, the regulations instituted in 2008 had the same objective of improving quality of care and reducing costs by passing on some of the burden of care to the outpatient centers to reduce the load on hospitals. But in practice, it has not had the desired effect. Similarly, the new regulations seek to improve quality and undoubtedly, it is likely that this objective will be attained, because it provides sufficient motivation to hospitals to improve their performance through actual monetary rewards. When viewed in conjunction with the overall reductions in reimbursement that the new legislation is likely to institute however, the results may be unpredictable. Conclusions: In summation, the advantages of the new reform are as follows: (a) Improvement in quality of service (b) Creation of competition through bonuses which is likely to further enhance quality and performance of hospitals (c) Extended health care coverage for all individuals. The disadvantages of the legislation are: (a) Overall cut in the amounts available for reimbursement (b) Change in system of computing reimbursement which might reduce payments further (c) Problems for population because reimbursement would only be available with a prescription. It could be concluded on this basis that there would be an overall improvement in quality of care and hospitals stand to benefit; members of the public also stand to benefit from coverage. But the net result would be a reduction in reimbursements, and these increased costs are likely to fall upon members of the public and affect all units of the health care industry somewhat negatively. References: Andrews, H., & Wessels, G. (2009). Healthcare reformers are focusing on value; are you?. HFM (Healthcare Financial Management), 63(8), 45. Bendix, J. (2010). Healthcare reform. What it means to you, your patients, and your practice . Medical Economics, 87(10), 18. Carlson, L. (2002). Reimbursement of complementary and alternative medicine in the context of the future of healthcare. Alternative Therapies in Health And Medicine, 8(1), 36. Fader, E. D., Levinson, L.J., Stocker, E. D., and Szabo, D. S. (2010). Provider Reimbursement Changes in Healthcare Reform Law. Edwards Angell Palmer & Dodge. Retrieved from http://www.eapdhealthcarelaw.com/providerreimbursement/ Frankes, Michael A and Evans, Tracylain, 2006. “An overview of Medicare reimbursement regulations for advanced practice nurses,” Nursing Economics, March 1, 2006. Retrieved from: http://www.highbeam.com/doc/1G1-144605619.html “Ingenix: Industry Insights”, 2009. Retrieved March 6, 2011 from: http://www.ingenix.com/content/attachments/insight480.pdf Millsaps, W. (2011). CMS proposes rule to pay hospitals for delivering quality care to inpatients. Health Care Law Reform. Retrieved from http://www.healthcarelawreform.com/articles/reimbursementfraud-abuse/ Pear, Robert, 2006. “Bush administration plans Medicare changes”, The New York Times, July 17, 2006; Retrieved from: http://www.nytimes.com/2006/07/17/us/17medicare.html?_r=2&hp&ex=1153108800&en=b831d4b18fa6636a&ei=5094&partner=homepage&oref=slogin Reiner, E. (2010). Coming down the pike. Financial advisor Magazine. June 2010 at pp 149- 156. Thompson, M. (2010).Health care law changes reimbursement system. PostStar.com. Retrieved from http://poststar.com/news/local/article_d8d14682-45b1-11df-9822- 001cc4c03286.html What is Medicare? from: http://www.medicare.gov/publications/pubs/pdf/11306.pdf. Read More