Reductions in Medicare Hospital Readmissions: Real or Illusory?

Source: Lehigh Valley Hospital-Muhlenberg

Hospital readmissions pose serious risks to patients, especially to Medicare patients who are older and typically sicker than other patients. Hospital stays increase the risk of infection and medication error, put patients through physical and psychological stress (i.e. being woken up multiple times a night, falls on the way to the bathroom), and increase Medicare expenditures. Under the Hospital Readmission Reduction Program (HRRP) created by the Affordable Care Act, hospitals are penalized by Medicare if beneficiaries are readmitted (to any hospital) within 30 days of discharge. The goals of the HRRP are to:

  1. Improve care transitions
  2. Reduce the burden of readmission for Medicare beneficiaries
  3. Reduce the cost of readmissions to the taxpayer
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Makin’ Money: How Residents Are Paid

So you’re in medical school. And eventually you’ll be a resident. And then you’ll have to start paying back all those loans–the median debt level for medical school graduates is close to $200,000. But while you might make anywhere from $200,000 to more than $500,000 once you’re out of residency, your average salary while completing residency will be in the neighborhood of $51,000.

How is that salary determined? And why, if adjusted for inflation, has residency compensation not increased in four decades? The number of residency positions [and by extension residency salaries] is constrained by the 1997 Balanced Budget Act (BBA) which sets the level of Medicare financing for training residents at teaching hospitals. If the number of allopathic or osteopathic residents at a teaching hospital exceeds the cap set by the BBA, teaching hospitals will not receive additional funding, which come from two sources: Medicare indirect medical education (IME) and direct graduate medical education (DGME) reimbursement. Between IME and DGME payments, Medicare finances 90%–around $10 billion–of the funds teaching hospitals use to train and pay residents. A report from the Government Accountability Office (GAO) found that the two types of reimbursement are not equal–$3 billion are DGME payments and $7 billion are IME payments.

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A Tale of Medicare Payment Models: From Volume to Value

Yes, it costs a lot of money to become a doctor. And yes, you will likely get paid a lot of money once you are a doctor. So it was surprising that a recent survey of internal medicine providers found that nearly two-thirds of respondents lacked familiarity with MACRA, the Medicare Access and CHIP Reauthorization Act of 2015, which fundamentally alters how doctors are paid for caring for Medicare beneficiaries.

In 2017, Medicare spending accounted for 15 percent of all federal spending and is projected to increase to 18 percent by 2028. Medicare benefits payments cost $702 billion in 2017 (up from $425 billion in 2007). Add in our aging population (by 2035, there will be more Americans older than 65 than kids under 18) and costly medical advancements that can sustain and prolong life, and we’re looking at a serious problem. [The solvency of the Medicare trust fund is a hot issue on the Hill.]In one attempt to rein in Medicare spending, MACRA shifts a growing percentage of physician payment from a volume-based model to a value-based model. MACRA has four main provisions: (1) repeal of the sustainable growth rate (SGR), which determined Medicare Part B reimbursement rates; (2) change how Medicare rewards providers for value over volume; (3) streamline various quality programs under the Merit-based incentive program (MIPS); and (4) give bonus payments for participation in eligible alternative payment models (APM).

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Impact of Proposed Medicare Payment Changes on Chronic Care Management

In 2015, Medicare beneficiaries (65 and older) accounted for only 15% of the population but 34% of annual healthcare expenditures. Medicare spending steadily increases as beneficiaries age, in part due to the management of multiple chronic conditions (MCC) that require primary and specialist care, medication, and/or hospitalization, among other health expenses. MCC, or comorbidities, affect nearly one in four Americans. Chronic conditions include physical conditions (i.e. arthritis, cancer, hypertension, high cholesterol) and mental/cognitive conditions (i.e. dementia, depression, substance abuse) that last longer than one year and require continual medical attention and/or impact daily activities. According to a recent RAND report, 81% of those over 65 have MCC, including nearly two-thirds of Medicare beneficiaries.

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The ACA & Medicare

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Medicare provides health insurance to nearly 57 million individuals (17% of the U.S. population) in three categories: those who are over the age of 65; those under 65 who receive social security disability insurance; and those under 65 with end-stage renal disease (ESRD). As described by the Commonwealth Fund’s Medicare at 50 Years series, Medicare beneficiaries are “the nation’s oldest, sickest, and most disabled citizens.” In 2013, 30% of Medicare beneficiaries were either over 85 or disabled and under 65. Seventy-five percent of beneficiaries have one or more chronic condition and 25% rate their health status as fair or poor.

Before the Medicare program, 48% of adults over the age of 65 did not have health insurance; that figure has fallen to 2%. The intentions of the Medicare program were and are two-fold: (1) ensure that beneficiaries have access to health care; and (2) protect beneficiaries from health care-related financial hardship. By the numbers, Medicare has been an immense success. Only 13% of older Americans now pay out of pocket for their health care costs (versus 56% in 1966). Medicare has also increased life expectancy at 65 by five years.

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The Medicare Essentials

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Source: Kaiser Family Foundation

The Medicare program was enacted by President Johnson in 1965 under Title XVIII of the Social Security Act to provide those over the age of 65 with health care, regardless of income or medical history. It is a single-payer program funded by the federal government through payroll taxes, premiums paid by beneficiaries, and general revenue.In 2016, the federal government spent $675 billion [or 15% of total federal spending] on Medicare coverage. 

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