The Effect of TEFRA and BBA 1997-2001 on Hospital Performance - Research Paper Example

? The affects of the Tax Equity and Fiscal Responsibility Act (TEFRA) and the Balanced Budget Amendment (BBA 1997-2001) on Hospital Performance TEFRA(Tax Equality and Fiscal Responsibility Act 1982): TEFRA, The tax Equality and Fiscal Responsibility Act of Federal government was implemented in 1982, due to the increase in the financial fee of services provided by the health care sector. All over the USA, hospitals followed the trend of keeping patients unnecessarily, to increase the number of days and number of tests for the sake of increment in the bills which were payable by the government. Thus, the government decided to change the payment method to enable a fair and safe Health Care Program for Medicare and Medicaid people. The reimbursement due to retrospective payment method which led astounding increase in Medicare expenses for government, TEFRA was approved by congress to apply the new prospective payment method to change the Medicare’s repayment plan. The two major characteristics of TEFRA were; the theory of case-mixed was made a part of repayment system and a maximum value was fixed on the permissible rate of increase in the fee per hospital discharge. The hospitals under the Medicare program followed (PPS) after the establishment of Social Security Reform Act which was passed by Congress to facilitate PPS features. Payment system was activated according to the category defined by the government as DRG, Diagnose Related Group patient categorization method. Hospitals would receive a probable payment against per DRG and they were aimed to cover all the operating cost of the patient. ( Lave, 1989) The addition of Medicaid patients were later made on the basis of State to State provision. Prospective Payment System (PPS) was a profitable method for both parties. The hospitals gained a profit if the amount of money spent on the patient services was less than the PPS payment, set according to the preset fee limit of diagnose and service by the government. On the other hand, if the amount spent on a patient’s care and service is more than the set PPS fee then hospitals have to pay from its own pocket for additional charges. (Patrick, 2001) The aim of TEFRA was to control the Medicare expenditure and to supervise the inpatient working cost of all hospitals. Some of the hospitals preferred to stick with TEFRA policy as PPS was considered as a weak analyst of the essential requirements of specific units in the hospitals throughout the country. In the acute care (PPS) the average cost payment weren’t contemplated to be suitable due to the low number of Medicare patients, especially in children’s hospitals. (Medicare Payment Advisory Commission, 1999) Acute care prospective payment system was mainly dependent upon (DRGs), thus the success and savings extracted from it encouraged the government to implement it for upcoming years and expand it to non acute health care setting. However, it had the negative impacts on hospitals as some of them faced closure and bankruptcy as well. The decrease in the amount of Medicare and Medicare program due to (DRGs) and the increases in medical inflation, hospitals faced serious quandary with the provided fixed amount of budget. Government reinforced the same strategy of TEFRA with the help of skilled nurses to gain or lose the amount of money produced while categorizing data of patients with the help of Resource Utilization Group (RUG-III) payment method. Outpatient prospective payment method was introduced in 2001 by the government to categorize radiology and surgical services on fractional medical visits. Thus, APCs Ambulatory Payment Classification verifies the fixed payment rates, which enabled the government to monitor the expenses closely and to refrain from extra expenses. TEFRA facilities programs like rehabilitation, psychiatric care, and alcoholic and drug treatment along with it children’s cancer and long term care with the exemption of PPS. The rate for rehabilitation and psychiatric facilities weren’t fixed due to the fact that they both require different type of care and diverse means. Therefore, these two categories weren’t added in the DRGs system. (Schneider, 1993) Medicaid program of TEFRA enables parents of disabled children to benefit the services of hospitals. The intensity of disability of a child entitles him or her to gain the services, but the amount of fee is obtained by assessing the assets and income of parents. The amount is fairly small comparatively to the amount contributed by government in this regard. Therefore, TEFRA provided long term care to the disabled children in Minnesota and reduced the medical expenses of care which weren’t covered with the private health plan and benefited the parents to help sustain the health of their child. (Chan, 1998) The increase in the number of patients in psychiatric wards of hospitals, were observed after the implication of TEFRA. The estimated amount of patients which were paid by TEFRA increased by one-third and simultaneously increased the Medicare discharge also. The decrease in amount of Medicare profits were observed from 1986-1888. Negative decline was estimated in all the four facilities. Psychiatric, long term care and children’s cases and rehabilitation treated different types of patient and required a different system to examine their estimated expenses. Rehabilitation and Psychiatric wards were more affected by TEFRA due to their dependency on it. The profit rates decreased quickly due to the rehabilitation facility in the hospitals. Thus, the need was to view the unit’s requirement more than the hospital’s, as a whole. Distributional mechanism of TEFRA was intended to keep the profit rates around zero. Therefore, the Medicare profits for the hospitals kept declining with an alarming rate for the hospital. However, facilities with critical financial aid could apply for target exception more over the consistent decrease in profit rates for hospitals was not an intentional policy. The proportion of profit or loss from any unit of a hospital shows its Medicare financial status. The difference in rural and urban location of the hospital has also affected the profits, thus rural services lost more than urban services and smaller units lost more than larger units. Loss in profits also varied according to the region for example, West South central and south Atlantic (Schneider, 1993). Rehabilitation unit in hospitals have laid a positive impact towards Medicare repayment system. It has enabled the profits to flow easily due to the extra cost and increased number of days for the patient as a necessary requirement. Thus, it enables the hospitals to avail extra payment due to the designed mechanism of TEFRA. (Chan, 1997) TEFRA enabled government to benefit from the amount of taxes paid in return for Medicare and Medicaid sectors. Therefore, majority of profit has been directed to government instead of hospitals after the amplification of TEFRA which resulted in constrained facilities provided by the hospitals. Balanced Budget Amendment (BBA 1997-2001): Since history, USA has witnessed the struggles of government to grant the maximum health care services within the controlled cost and along with the best quality. Therefore, the policy to check and maintain the efficiency of these sectors has always been a regulatory reform. The Balanced Budget Amendment (BBA) came into existence due to the sole reason to minimize the rise of debt on States. The purpose of it was to remind the federal government to keep the expenditures lower than the income or at least at the same level. Democrat party of USA strongly opposed the idea of BBA however Republican acted in the favor of it as the aim was to control the rising debts of States. The need to balance the budgets by some States was a dire requirement and the legal amendment could enable it. It subsequently raised the taxes which were highly objected by Clinton and Democrats as the idea in the time of recession would only adversely affect the revenue and unnecessary social security check would jeopardize the Federal government stability. According to Democrats BBA would leave Federal government with no choice or decision power to manage the revenue in times of decline and would leave them with the constrained restrictions of BBA. BBA was only applicable to the operating budget and not onto the capital budget. It was the same pattern followed by Federal government, to deal the capital expenditure. The enforcement of BBA was a bit complex due to the fact that it violates legal social and economic policies; therefore drafting report for BBA was considered a probable act to maintain the integrity of Federal government and its needs. Thus, it acted as a motivation budget program to balance the budget according to law of State (Tannenwald, 1998). The aim of BBA was to sort out the increased crises through compressing the permitted and limited exceptions to stable the budget for the steadiness of federal government. However it eradicated the minimum payment set by the government to meet as a repayment rate for health center, nursing homes and hospitals. It also enabled the recipient of Medicaid to register with the care provider for the sake of revenue. It helped to expand the services of healthcare, especially to children. It included some new Medicaid expansions for the immigrants who were disabled after the implication of BBA would benefit from Supplement Security Income (SSI). Disabled children would also be eligible for welfare fund for 12 months without the re-registration for entitlement. Along with it also allowed the presumed entitlement as allowable in case of children with disability. Although, it increased the expenditures by $4.9 billion in five years but it benefited the families For uninsured low income earning families, Child health grant was introduced and it promoted the child welfare even if the State expenditure increase comparatively with the revenue. It submerged the two programs Medicaid and insurance into one package for children. BBA also introduced the support of Medicare services to the low income recipients, who would fall into the category of poorly adequate to support health care. (Schneider, 1997). Hospitals faced chaotic situation with the inpatient services but BBA covered it under the Medicaid and required them to pay set rates in return to the nursing home payment rates. The additional payment for DSH hospitals was a requirement from the State. Although, BBA; did reduced the marginal Medicare for the hospital comparatively with the National aggregated Medicare margin. BBA adversely affected Health Care sector due to the reductions in Medicare payment to hospitals, especially the decline payments affected rural hospitals. The increase in the price of goods required by the hospitals increased but the budget fixation limited the services offered by hospitals. Medicare payment after the BBA implication reduced the In-patient acute care services, the hospitals gaining from these sub acute care services met their end. Hospitals based on health care and acute care services along with rehabilitation care faced serious payment problems with new PPS suggested by BBA (Schoenman, 1997). It has a positive impact when assessing it in the skilled nursing based hospital care. It enhances the quality of education and facilitates the patients with services like outpatient rehabilitation and laboratory. BBA provided a choice care program and sustained the payment method even for the risk based plans. However, physicians consider the Medicare and Medicaid program as an intervention and it would reduce the salaries of health care staff but BBA proved to be a sufficient system for both. The change in the receiving end made the physicians uncomfortable. The increased change in Medicare rate and cost per treatment consequently shows the marginal difference in the inflation rate and costly treatment it provides. Therefore, the chances to earn profit from psychiatric unit or rehabilitation remain thin. Difference between TEFRA and BBA: TEFRA provided the payment for units in the general hospitals like psychiatry and repayment system consisted on the cost per discharge method. However, after the implication of BBA in 1997, hospitals faced crisis due to cut down in payments for the specific wards while dealing with the elderly patients; who suffered from serious medical problems. The affects of BBA were unlikable because it didn’t support the psychiatric units of hospitals like TEFRA and became a cause of reductions for Medicare (Goldberg, 2000). BBA provided better support to fund the medical research and education at National hospitals. It changed the Medicare payment with the help of Academic health care centers, thus produced a way in which patient would pay for graduate educational program with the services. This system would enable a teaching and service mechanism, which would enhance the quality of services provided to the Medicare patients. BBA would permit the reduction in the payment of service of teaching and educating at the hospitals and eventually would strengthen the Medicare with a revenue generating mechanism AHCs (Academic Health Centers) would peruse with their academic missions and sustain their shares in market as well. Therefore, BBA led the reduction indirect cost of medical education by dollar 5.6 billion in 5 years. (Reuter, 1997). The objective of TEFRA and BBA was to expand the facilities of Health care to the rural areas of the country and to control the cost of health care services along with the quality of care. Thus, both of them enabled the Medicare recipient to benefit from the risk plan availability. (Riley, 2006) BBA changed the payment method for many Medicare services and products. PPS was considered weak predictor of viewing the required resources thus BBA changed the pattern of cost limit reduced increase in rates. It managed the equilibrium between the hospitals’ operating cost and the target amount provided by the government. Increase in the budget for certain facilities was actively enabled after the implication of BBA like ambulance, prosthetic, orthotics, and hospice. TEFRA payment method consisted on per discharge which enabled modified rate of PPS by TEFRA. The payment system of TEFRA consisted upon the characteristics of patients. Some percentage of services was relived, which included the in-patient services and psychiatric facilities. The operating cost was determined as target amount and it consisted on the operating cost of each hospital. It proceeded for 12 months and the annual increase was referred to as a update factor. In 1997 the cost of compensation psychiatric and other non liable to PPS received criticism from congress and the amendment was made consisting on the operating cost of the hospital rather than the characteristic of the patient. A check was put on the psychiatric service provider through BBA. It determined that the limit could not exceed from 75% of the target amount of the hospital. TEFRA required all the patients categorized according to the DRG (diagnose related group), who would receive similar treatment with the same cost. Thus the patients didn’t fall into the same category every time, which complexes the matter of cost and payment for the hospitals. The plan was much more difficult to apply in the psychiatric hospital rather than in any acute care hospital. Thus, the need to change the policy for psychiatric hospitals activated with the additional funds for the unknown expenses. BBA unlike TEFRA didn’t use the program of categorizing (DRGs) system, patients according to their disease, which had a drawback of mix up and leaves the hospital in confusion due to the diverse requirement of the treatment and cost per treatment. After the activation of BBA psychiatric fund was capped and target amount was multiplied by the applicable update in the fiscal payment method. The control in TEFRA provisions was a debatable prospect for congress. The intention of congress through the implication of BBA was to expire PPS for psychiatric hospitals and to revive the repayment method with accordance to the hospitals in a statutory language. (Goldberg, 2000) Conclusion: Most prominently TEFRA was endorsed in 1983 and remained a part of constitution since then. The Balanced Budget Amendment was an altered and modified version of TEFRA. Its advantages could easily be observed from the Health care services provided to the patient and the quality check system enabled due to it. The working procedure of TEFRA and BBA were significantly different, as the compensation rates were further restricted by BBA. The change in legislation of TEFRA included BBA and BBRA but the originality of system supplied by TEFRA was never replaced. The aim of TEFRA, BBA and the hospitals were to provide Medicare and Medicaid services to the patients within their capacity. Thus, the fruitful effects of TEFRA and BBA were mainly enjoyed by the patients and public, which eventually shows the betterment in the attainment of health care services along with the efforts of government and hospitals. REFERENCES: Top of Form Chan, L., Koepsell, T. D., Deyo, R. A., Esselman, P. C., Haselkorn, J. K., Lowery, J. K., & Stolov, W. C. (January 01, 1997). The effect of Medicare's payment system for rehabilitation hospitals on length of stay, charges, and total payments. The New England Journal of Medicine, 337, 14, 978-85.Bottom of Form Top of Form Chan, B., & Vanderburg, N. (January 01, 1999). Medicaid TEFRA option in Minnesota: implications for patient rights.Health Care Financing Review, 21, 1, 65-78. Top of Form Goldberg, R. J., & Kathol, R. (January 01, 2000). Implications of the Balanced Budget Act of 1997 for general hospital psychiatry inpatient units providing medical and psychiatric services. General Hospital Psychiatry, 22, 1.) Top of Form Reuter, J. A., & Commonwealth Fund. (1997). The Balanced Budget Act of 1997: Implications for graduate medical education. New York, NY (1 E. 75th St., New York 10021-2692: Commonwealth Fund, Task Force on Academic Health Centers. Top of Form Riley, G., & Zarabozo, C. (January 01, 2006). Trends in the health status of medicare risk contract enrollees.Health Care Financing Review, 28, 2, 81-95. Bottom of Form Top of Form Schneider, A., & Center on Budget and Policy Priorities (Washington, D.C.). (1997). Overview of Medicaid provisions in the Balanced Budget Act of 1997, P.L. 105-33. Washington, DC: Center on Budget and Policy Priorities. Bottom of Form Bottom of Form Bottom of Form Top of Form Schneider, J. E., Cromwell, J., & McGuire, T. P. (January 01, 1993). Excluded facility financial status and options for payment system modification. Health Care Financing Review, 15, 2, 7-30. Top of Form Schoenman, J. A. (1997). Impact of the Balanced Budget Act of 1997 on Medicare risk plan payment rates for rural areas. Bethesda, Md: Project HOPE Walsh Center for Rural Health Analysis. Top of Form Tannenwald, R. (January 01, 1998). Implications of the Balanced Budget Act of 1997 for the "Devolution Revolution". Publius, 28, 1, 23-48. Bottom of Form Bottom of Form Bottom of Form Bottom of Form Top of Form Lave, J. R. (January 01, 1989). The effect of the Medicare prospective payment system. Annual Review of Public Health, 10, 141-61. Top of Form Patrick, A. R., & Kai-Li, T. (January 01, 2001). Managing costs and managing care. International Journal of Health Care Quality Assurance, 14, 7, 302-307. Top of Form Medicare Payment Advisory Commission (U.S.). (1999).Report to the Congress, Medicare payment policy. Washington, DC (1730 K Street, NW, Suite 800, Washington 20006: The Commission. Bottom of Form Bottom of Form Bottom of Form Read More