Racial disparities in access to long-term care: the illusive pursuit of equity

While nursing homes were insulated from civil-rights enforcement at the time of the implementation of the Medicare program and lagged behind other parts of the health sector in providing comparable access to minorities, they are the only providers for which current reporting requirements make it possible to fully assess racial disparities in use and quality of care. We find that African Americans' use of nursing homes in 2000 in the United States was 14 percent higher than Caucasians' use. The largest relative African American use of nursing homes in 2000 took place in the South and West. Average nursing-home case-mix acuity for African Americans and Caucasians were essentially identical, suggesting that shifts in payment incentives have eliminated the selective admission of easy-care private-pay (predominantly Caucasian) patients and helped fuel the growth of private pay home care and assisted living for this segment of the population. While these shifts in incentives helped increase the use of nursing homes by African Americans, a high degree of segregation and disparity in the quality of the nursing homes used by African Americans persists. Parity in use is an illusive benchmark for measuring progress in assuring equity in treatment.     

Case mix reimbursement for nursing homes

Nursing home care is growing in importance as the population ages and as Medicare's prospective payment system encourages earlier discharges from acute care settings to nursing homes. Nursing home reimbursement policy is primarily a Medicaid issue, since Medicaid pays for about half the nation's nursing home care. The research reviewed in this article suggests a strong association between case mix and cost, and a weaker but still positive association between quality and cost. The research also implies that traditional nursing home reimbursement methodologies may impede access and may lower quality for Medicaid (and Medicare) recipients. To offset these problems, several states have recently begun to incorporate case mix directly into the reimbursement process. These systems deserve careful policy consideration.     

Case-mix payment for nursing home care: lessons from Maryland

Even before Medicare adopted case-based payments for hospitals, some state Medicaid programs employed case-mix payment systems for nursing home care. Their purpose was less to promote cost containment than to improve access to nursing homes for the most costly patients. This paper evaluates one such system, adopted by the state of Maryland in 1983 as part of an overall reimbursement reform. Using data on nursing home patient characteristics, costs, and staffing, as well as interviews with officials and various providers of care, the article shows that Maryland's system was successful in shifting nursing home service away from light-care and toward heavy-care patients. Furthermore, the shift occurred without inducing readily measurable declines in quality of care and with little additional administrative cost (partly because the state built its case-mix system on preexisting patient review activities). Although states could learn from and improve upon Maryland's experience--most notably in offering incentives to improve quality of care and in targeting community care on the light-care patients that nursing homes become less willing to serve--Maryland demonstrates that case-mix payment can change nursing home behavior in desired directions without substantial negative consequences.     

Physicians' decisions to limit Medicaid participation: determinants and policy implications

Although most primary care physicians participate in state Medicaid programs, they may accept all Medicaid patients, or they may choose to limit their participation. This decision allows physicians to adjust their Medicaid caseloads to a desired level, and it has important implications for the access of low-income patients to health care. Surveys of pediatricians in 1978 and 1983 indicate that the proportion of pediatricians limiting their Medicaid participation increased significantly from 26 percent to 35 percent (p less than .001). In addition, in both 1978 and 1983, limited participants saw significantly fewer Medicaid patients than full participants. This paper describes a number of strategies available to federal and state policymakers for fostering full Medicaid participation. Multivariate analyses indicate that increasing reimbursement levels is an important strategy for encouraging full Medicaid participation. In addition, full participants will increase their Medicaid caseloads in response to a variety of Medicaid policy incentives, while limited participants are found to respond to fewer policy incentives. The authors conclude that caution will be needed to ensure that health care cost-containment strategies such as capitation or selective contracting do not inadvertently discourage participation among both full and limited Medicaid participants.     

Administrative and policy issues in reimbursement for nursing home capital investment.

The way in which states reimburse for nursing home capital costs can create incentives for nursing home owners to use the home primarily as a vehicle for real estate speculation, with potentially adverse consequences for patient care. In order to help promote and control the stability, adequacy, and quality of capital investment in long-term care, an increasing number of states are using a fair-rental approach for calculating capital reimbursement. In this article we compare the fair-rental approach with traditional cost-based capital reimbursement in terms of administration and policy. We discuss issues of concern to the state (cost and reimbursement design options) and the investor (after-tax cash flows, rate of return, etc.). Our analysis suggests that fair-rental systems may be superior to traditional cost-based reimbursement in promoting and controlling industry stability, while at the same time providing an adequate return to investors, without incurring long-term increases in the costs of administering programs.     

Reducing Medicaid expenditures through family responsibility: critique of a recent proposal.

The Massachusetts Department of Public Welfare recently proposed a "Family Responsibility Plan" which would impose a financial obligation upon adult children in the state for the nursing-home care of their parents who receive Medicaid. By examining the Massachusetts plan, this Note seeks to evaluate the viability of a concept of family responsibility, under which adult children contribute to the state Medicaid expenses of their medically indigent parents in nursing homes, as a means of combating the increase in state Medicaid expenditures. The Note examines the legal and policy issues raised by the Massachusetts welfare department's plan in particular, and by the concept of family responsibility in general. The author concludes that alternative methods of cost containment, such as positive financial incentives, would be more appropriate mechanisms for reducing state Medicaid expenditures than family--that is, adult child--responsibility plans.     

Cross-subsidies and payment for hospital care

This study uses hospital data from the 1979 American Hospital Association Reimbursement Survey in a multivariate framework to assess the impact of discounts and third-party reimbursement on hospital costs and profitability. Three central issues are addressed: (1) Is a differential payment justified for Medicare, Medicaid, and/or Blue Cross on the basis of differential costs? (2) Have the cost-containment efforts of the dominant payers reduced total payments to hospitals? and (3) What part of the overall savings in payments to hospitals is in the form of reduced costs rather than reduced profits? On the basis of the evidence in this study, we find (1) that the differential payment is not justified; (2) that the cost-containment efforts of the dominant payers have reduced total payments to hospitals somewhat, but a substantial amount of cost-shifting remains; and (3) that the savings is in profits, rather than in costs.     

Reimbursement schemes for hospitals, malpractice liability, and intrinsic motivation

We develop a simple multi-task principal-agent model to analyze the interplay between optimal reimbursement schemes for hospitals and liability rules (basic model). We then extend our model and assume that the hospital is intrinsically motivated to exert positive effort for quality and cost reduction. This effort, however, is biased towards quality. Moreover, the intrinsic motivation may be crowded out by monetary incentives. In such a setting, we find that a pure prospective payment system (PPS) that has become widespread in recent years can only be optimal in the unlikely case where malpractice liability holds hospitals fully responsible for expected harm. For other cases, we confirm the prejudice that PPS may lead to inefficiently low quality. Then, the traditional fee-for-service (FFS) system is superior if the intrinsic motivation is high and relatively little biased towards quality, whereas mixed systems should be chosen otherwise. Our model sheds light on why countries like the USA with a tough liability system haven been less reluctant to switch from FFS to PPS than Germany, for instance.     

Has the erosion of the medical marketplace ended?

This paper updates tests of the validity of three models of medical price inflation: a standard model, in which changes in demand press against inelastic supply; a dynamic version of the standard model, in which high levels of insurance induce high rates of product innovation and development; and a model of increasing inefficiency, in which consumers have weak incentives to search out efficient suppliers. Earlier statistical support for the third model has weakened, which provides some evidence that the regulatory and competitive initiatives of the last decade are having their intended effects. But time series measures of medical prices upon which the statistical evidence relies have important methodological problems, so other types of evidence are useful. Trends in expenditure in other countries and in HMOs suggest that the most important explanation of medical price inflation is the dynamic version of the standard model, although the other models have some validity as well.     

Improving direct-care compensation in nursing homes: Medicaid wage pass-through adoption, 1999-2004

Because states play such a prominent role in the U.S. health care system, they have long grappled with how to best control health care costs while maintaining high quality of care. There are many policy tools available to address efficiency and quality concerns--from pure state regulation to market-oriented competition designs. Given public discourse and official party platforms, one would assume that states controlled by Democrats would be more likely to adopt regulatory reforms. This study examines whether party control, as well as other economic and political factors, is associated with adopting wage pass-through (WPT) policies, which direct a portion of Medicaid reimbursement or its increase toward nursing home staff in an effort to reduce staff turnover, thereby increasing efficiency and the quality of care provided. Contrary to expectations, results indicate that states with Republican governors were against WPT adoption only when for-profit industry pressure increased; otherwise, they were more likely to favor adoption than their Democratic counterparts. This suggests a more complex relationship between partisanship and state-level policy adoption than is typically assumed. Results also indicate that state officials reacted predictably to prevailing political and economic conditions affecting state fiscal-year decisions but required sufficient governing capacity to successfully integrate WPTs into existing reimbursement system arrangements. This suggests that WPTs represent a hybrid between comprehensive and incremental policy change.     

Medicare program; photocopying reimbursement methodology. Final rule

This final rule increases the rate of reimbursement for expenses incurred by prospective payment system PPS) hospitals for photocopying medical records requested by Quality Improvement Organizations (QIOs), formerly known as Utilization and Quality Control Peer Review Organizations (PROs). We are increasing the rate from 7 cents per page to 12 cents per page to reflect inflationary changes in the labor and supply cost components of the formula. This final rule also provides for the periodic review and adjustment of the per-page reimbursement rate to account for inflation and changes in technology. The methodology for calculating the per-page reimbursement rate will remain unchanged. We are also providing for the payment of the expenses of furnishing photocopies to QIOs, to other providers subject to a PPS (for example, skilled nursing facilities and home health agencies), in accordance with the rules established for reimbursing PPS hospitals for these expenses.     

National health insurance and the new health occupations: nurse practitioners and physicians' assistants

This article considers a number of issues which might arise in formulating policy for new health occupations. Its particular focus is on nurse practitioners and physicians' assistants and their treatment under potential national health insurance arrangements. The development and expansion of these occupations are described, as is the evidence on their performance with respect to the quality of medical care provided, the impact on the cost of such care, and changes in access to care. We then discuss several issues which might arise in the context of national health insurance legislation, including reimbursement rates and methods, certification and licensure, training subsidies, deployment incentives, and compatibility with an increased supply of physicians.     

Politics and economics of hospital cost containment

Voluntary and regulatory efforts toward hospital cost-containment have accelerated with rapid increases in those costs and under pressures of national health insurance. Possible causes of hospital cost inflation are examined in the context of market analysis and with reference to the nature of hospitals as institutions facing special combinations of economic and political conditions and pressures. Some details of voluntary experiments and state regulatory efforts are examined in order to assess the elements of experience to date and their relationships to causes of hospital cost inflation. Federal proposals for a regulatory cap on costs are also discussed along with a view of how such proposals are related to probable causes of hospital cost inflation and of the relevance of other experience.     

Desirability and effects of campaign spending limits

This paper measures the influence of campaign spending on incumbent and challenger votes in Canadian federal elections. The goal is to assess the influence of spending ceilings on political competition and on voter welfare. It is found that in the 1984 and 1988 Canadian federal elections challengers could increase their voteshare by spending but that incumbents could not. These results are used in a simulation to show that if ceilings were lowered, incumbent voteshare would rise. On this evidence it is argued that spending ceilings may tilt the playing field in favour of incumbents and reduce political competition.     

Child and Adult Care Food Program: improved targeting of day care home reimbursements--Food and Consumer Service, USDA. Final rule

This final rule amends the Child and Adult Care Food Program regulations governing reimbursement for meals served in family day care homes by incorporating changes resulting from the Department's review of comments received on a January 7, 1997, interim rule. These changes and clarifications involve: The appropriate use of school and census data for making tier I day care home determinations; documentation requirements for tier I classifications; tier II day care home options for reimbursement, including use of child care vouchers; calculating claiming percentages/blended rates using attendance and enrollment lists; and procedures for verifying household applications of children enrolled in day care homes. This final rule also amends the National School Lunch Program regulations to facilitate tier I day care home determinations by requiring school food authorities to provide elementary school attendance area information to sponsoring organizations. These revisions implement in final form the provisions of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 to target higher CACFP reimbursements to low-income children and providers.     

National health policy: Efficiency-equity synchretism

A new emphasis in national health policy to encourage efficiency has been born in an environment of slower economic growth and an aging population. The increased reliance on market incentives to reduce health care costs does not signal the abandonment of equity as a social objective. To the contrary, the new emphasis on efficiency is intended to provide more and better health care through the generation of savings from the use of management systems to improve productivity. Market incentives and new management systems to increase efficiency are not the antithesis of equity but tools to provide better health care to the poor and to the elderly in an environment of fiscal constraints.     

Emission Trading Restrictions with Endogenous Technological Change

In this paper we use a simple climate model for endogenous environmental technical change in order to analyse the effects on equity and efficiency of placing different degrees of restrictions on trade in the market of pollution permits. The model is obtained by incorporating in Nordhaus and Yang (1996)'s RICE model a notion of induced technical change close to the one proposed in Goulder and Mathai (2000). With the help of such a model, we assess the pros and cons of introducing ceilings on emission trading. In particular, we analyse both the cost effectiveness and the distributional effects of placing restrictions of trading emissions. The analysis takes into account the role of environmental technical change that could be enhanced by emission trade limitations. However, this effect is shown to be offset by the increased abatement cost induced by the larger than optimal adoption of domestic policy measures when ceilings are made binding. Hence, our analysis provides little support for quantitative restrictions of emission trading, even when these restrictions actually have a positive impact of technical change. Even in terms of equity, ceilings find no justification within our theoretical and modelling framework. Indeed, we find that flexibility mechanisms in the presence of endogenous technical change increase equity and that the highest equity levels are achieved without ceilings, both in the short and in the long run.     

Nonlinear convergence in Asian interest and inflation rates: evidence from Asian countries

We examine the dynamics of convergence in seven Asian countries for nominal and real interest rates, and inflation rates. We test for convergence relative to the U.S. and Japan, using quarterly data 1973:2–2011:3, employing nonlinear unit root tests. The linearity test shows evidence of nonlinearity in all the cases. In most cases, we find evidence of logistic smooth transition autoregression-type non-linearity. Moreover, nonlinear unit root tests reveal evidence of nonlinear stationary nominal and real interest rates and inflation differentials in all cases. We interpret these results as convergence in inflation rates and real and nominal interest rates.     

PPS waivers: implications for Medicare, Medicaid, and commercial insurers

This paper compares the Medicare prospective payment system (PPS) to four all-payer rate-setting systems that operated under HCFA waiver authority. The study examines the experience of Medicare, Medicaid, and commercial insurers under the two approaches. Data from several American Hospital Association surveys and from Medicaid 2082 report forms are analyzed. The paper concludes that the all-payer waiver programs have been as successful as PPS in controlling the rate of growth in Medicare costs. In addition, Medicaid programs are more successful in controlling their outlays in all-payer rate-setting environments than when they "go alone." Finally, there is no evidence to suggest that hospitals can increase charges in response to greater financial need under either PPS or the state waivers. Nevertheless, it appears that commercial insurers are better able to compete with Blue Cross plans in all-payer rate-setting states than elsewhere.     

No-Fault for Motor Vehicles: An Economic Analysis

This article compares incentives and efficiency under the puretort system (the comparative negligence rule) to those underpure and mixed no-fault systems. Under no-fault systems, driversare allowed to opt out of no-fault and file lawsuits if theirdamages exceed a certain threshold. We find that no single liabilitysystem always dominates on efficiency grounds, but the puretort system does best when costs of care are low, and pure no-faultdoes best when costs of care are high. Choice systems, in whichdrivers choose between no-fault or pure tort systems, lead toless efficient results because drivers choose the pure tortrule too often.