Medicaid myths: trends in Medicaid expenditures and the prospects for reform

Medicaid expenditures, which had reached more than +32 billion by 1981, have grown substantially throughout the program's history. As a result, the conventional wisdom is that Medicaid expenditures represent a significant public-policy problem. Using other measures, however, it can be shown that the program is much less of a problem than it appears to be. By 1981, spending for Medicaid represented only 12.7 percent of total state spending and had contributed only 14.2 percent to the overall growth in state expenditures since 1965. Moreover, considering only the funds which states raise from in-state sources, the median share of state budgets accounted for by Medicaid was just 5.6 percent, and only 7 states spent as much as 9 percent of their own money on the program. These figures suggest that the marginal reductions in Medicaid expenditures which would result from typical program changes are likely to be so small that rational state officials might be unwilling to incur the political opposition of powerful provider groups or the resistance of large state bureaucracies by proposing substantial reforms. The major exceptions are the few states with very large programs where even small proportional savings would amount to millions of dollars. We conclude that, given its present federal-state form and the current distribution of expenditures, it is unlikely that major reforms will be enacted because the stakes are too small for most states and the federal interest is too diffused.     

Interest groups and state Medicaid drug programs

A simultaneous equations model is estimated to analyze the interaction between state Medicaid pharmaceutical drug reimbursement rates, drug recipients per capita, and expenditures per drug recipient. Interest groups are shown to have a strong positive impact on pharmacy reimbursement rates, which, in turn, have an impact on pharmacy participation rates and drug utilization and expenditure patterns. Finally, a strong inverse relationship exists between expenditures per recipient and program size. The results verify the existence of substantial variation in state Medicaid programs and point to potentially growing disparities as a result of current policies.     

The prospects for prepaid long-term care: the Arizona Medicaid experiment

Arizona is adding long-term care to its prepaid, capitated alternative to Medicaid. This article discusses the potential for this major cost-control experiment. Experience suggests that those able to quality for long-term care will fare better than the poor did in the previous system. However, limiting eligibility will be the primary means of controlling costs; significant price competition is not likely to develop. The bidding process will serve more to transfer risk to contract providers than to improve program efficiency. Potential cost savings will be more than offset by an increased identification of need.     

On the ubiquity of drug selling among youthful offenders in Washington,D.C., 1985–1991: Age,period, or cohort effect?

We present a multiple-cohort analysis of rates of participation in drug offenses versus other crime in an urban sample, based on official charge data on young adults from the Pretrial Services Agency in the District of Columbia for the years 1985 to 1991. We make lower-bound estimates of how many individuals from particular population groups residing in the District are involved in drug-related criminal activities, examine trends in drug and nondrug charges in Washington, D.C., and disentangle the age, cohort, and period effects in the variation in participation in drug offenses across multiple birth cohorts in the city. We estimate that up to 30% of the young, black male populationof the District of Columbia were charged with drug distribution during this time. Charge rates for drug distribution activities appear to peak around age 24, decreasing slowly thereafter. Large and nonlinear period effects were observed for all drug-related charge rates, while increasing linear period effects were found for nondrug misdemeanors. Cohort effects in drug-related charge rates were also observed. Levels of participation in drug distribution charge rates were lower for older cohorts, while the cohort share with a drug possession charge declined for younger cohorts. However, when age and period effects are included in the models, these cohort effects are muted or disappear, except in the case of nondrug misdemeanors.     

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.     

Show Me the Money: Child Welfare Cost Savings of a Family Drug Court

Family drug courts are programs that serve the complex needs of families involved with the child welfare system due to parental substance abuse. This article summarizes the results of outcomes and selected costs of a system‐wide reform located in Baltimore, Maryland. Results from this study found that parents served by the program entered treatment faster, stayed in treatment longer, and completed treatment more often than non‐served parents. Children in program families spent less time in foster care and were more likely to be reunified with their biological parents. These outcomes resulted in cost savings, including reduced foster care expenditures.     

Medicaid program; state plan requirements and other provisions relating to state third party liability programs--HCFA. Final rule

This final rule implements certain Medicaid State plan requirements and other provisions relating to State third party liability (TPL) programs. Its provisions deal with: (1) The integration of a State's pursuit of third party claims with its Mechanized Claims Processing and Information Retrieval System; (2) exceptions to the cost avoidance method of claims payment in TPL situations; and (3) provider restrictions and penalties related to attempts at collection of cost sharing or portions of those amounts from Medicaid recipients when TPL has been established. These regulations implement portions of section 9503 of the Consolidated Omnibus Budget Reconciliation Act of 1985.     

The evolution of an innovation: variations in medicaid managed care program extensiveness

This article utilizes a theoretical framework of policy innovation, diffusion, and reinvention to investigate the evolving nature of Medicaid managed care programs over time. By estimating two separate models, one for primary care case management (PCCM) and a second for risk-based program enrollment, this study seeks to disentangle two different paths of learning (internal and external), investigate the potential effects of vertical diffusion of policy, and examine the impact of internal state characteristics on the extent of Medicaid managed care. With respect to diffusion and learning, the data reveal that earlier adopters implement more extensive programs. The data fail to reveal much internal learning, although there is evidence of some. External impacts are clear: managed care enrollments in neighboring states and changes in the federal waiver process affect states' decisions. Other policy choices are important: states with more generous Medicaid eligibility rules implement more extensive managed care programs. Complementing other studies of Medicaid, we find that politics and economics make a difference for the extent of managed care programs; unlike other Medicaid studies, we find no effect of race and ethnicity.     

Medicaid program; third party liability (TPL) cost-effectiveness waivers--HCFA. Final rule

This final rule revises regulations concerning Medicaid agencies' actions where third party liability (TPL) may exist for expenditures for medical assistance covered under the State plan. It allows the Medicaid agencies to request waivers from certain procedures in our regulations that are not expressly required by the Social Security Act. We will consider waiving nonstatutorily required procedures relating to identifying possible TPL where the agency finds that following a given required procedure is not cost-effective and is duplicative of another State activity. A nonstatutorily required activity is eligible for a waiver if the cost of the required activity exceeds the TPL recoupment and the required activity accomplishes, at the same or at a higher cost, the same objective as another activity that is being performed by the States. This change gives States greater flexibility in managing their Medicaid programs.     

Medicaid reimbursement of teaching hospitals

This paper examines current Medicaid policies on the reimbursement of hospitals' medical education expenses. These policies are of interest because of the pressure on Medicaid programs to reduce expenditures. Data for the paper come mainly from two sources: a survey of Medicaid programs and a survey of teaching hospitals. Teaching hospitals receive a disproportionate share, nearly 70 percent in 1978, of Medicaid short-term hospital payments. Nevertheless, most Medicaid programs either have no explicit policies in this area or have not acted aggressively to limit reimbursement of hospitals' teaching expenses. Revenues from Medicaid are most important to public teaching hospitals. Thus, across-the-board reductions in Medicaid's reimbursement of teaching expenses would most severely affect public institutions, many of which already face cuts in their local government appropriations. Savings to Medicaid would also be short-lived, since teaching hospitals would have the incentive to reduce teaching program size and substitute reimbursable personnel (nurses and staff physicians) for residents.     

Escaping from the crime of inner cities: Church attendance and religious salience among disadvantaged youth

With the theoretical backdrop of social disorganization and “resilient youth” perspectives, we hypothesize that individual religiosity is protective in helping at-risk youths such as those living in poor inner-city areas to escape from drug use and other illegal activities. To test this hypothesis, we draw data from an interview survey of 2,358 youth black males from tracts in poverty in Boston, Chicago, and Philadelphia, conducted in 1979 and 1980. Results from a series of multilevel analyses indicate that church attendance (the frequency of attending religious services) has significant inverse effects on nondrug illegal activities, drug use, and drug selling among disadvantaged youths. Religious salience (the perceived importance of religion in one's life), however, is not significantly linked to reductions in juvenile delinquency. We discuss the implications of our findings, focusing on individual religiosity as a potentially important protective factor for disadvantaged youths.     

DEALERS,THIEVES, AND THE COMMON DETERMINANTS OF DRUG AND NONDRUG ILLEGAL EARNINGS*

Drug crime often is viewed as distinctive from other types of crime, meriting greater or lesser punishment. In view of this special status, this article asks whether and how illegal earnings attainment differs between drug sales and other forms of economic crime. We estimate monthly illegal earnings with fixed‐effects models, based on data from the National Supported Work Demonstration Project and the National Longitudinal Survey of Youth. Although drug sales clearly differ from other types of income‐generating crime, we find few differences in their determinants. For example, the use of cocaine or heroin increases illegal earnings from both drug and nondrug crimes, indicating some degree of fungibility in the sources of illegal income. More generally, the same set of factors—particularly legal and illegal opportunities and embeddedness in criminal and conventional networks—predicts both drug earnings and nondrug illegal earnings.     

Burnout among corrections-based drug treatment staff: impact of individual and organizational factors

As a result of limited budgets, many treatment programs are forced to operate for extended periods at or beyond their capacity. The resulting pressure and stress on treatment staff can be taxing and lead to serious problems, including job burnout. Although the concept of burnout within other social service professions has been broadly researched, less attention has been given to burnout among drug abuse treatment staff, especially among corrections-based drug treatment staff. The goal of this article is to extend this area of research by exploring the impact of individual factors and organizational factors on burnout. Findings revealed that although a number of factors were related to staff burnout, younger counselor age, lower adaptability, poorer clarity of agency mission, and higher stress were most significant. Ways in which treatment programs might address these issues affecting staff burnout are discussed.     

Medicare and Medicaid programs; surety bond and capitalization requirements for home health agencies--HCFA. Final rule with comment period

The Balanced Budget Act of 1997-(BBA '97) requires each home health agency (HHA) to secure a surety bond in order to participate in the Medicare and Medicaid programs. This requirement applies to all participating Medicare and Medicaid HHAs, regardless of the date their participation began. This final rule with comment period requires that each HHA participating in Medicare must obtain from an acceptable authorized Surety a surety bond that is the greater of $50,000 or 15 percent of the annual amount paid to the HHA by the Medicare program, as reflected in the HHA's most recently accepted cost report. The BBA '97 also requires that provider agreements be amended to incorporate the surety bond requirement; this rule deems such agreements to be amended accordingly. The BBA '97 prohibits payment to a State for home health services under Medicaid unless the HHA has furnished the State with a surety bond that meets Medicare requirements. This final rule with comment period requires that, in order to participate in Medicaid, each HHA must obtain from an acceptable authorized Surety, a surety bond that is the greater of $50,000 or 15 percent of the annual Medicaid payments made to the HHA by the Medicaid agency for home health services for which Federal Financial Participation (FFP) is available. In addition to the surety bond requirement, an HHA entering the Medicare or Medicaid program on or after January 1, 1998 must demonstrate that it actually has available sufficient capital to start and operate the HHA for the first 3 months. Undercapitalized providers represent a threat to the quality of patient care.     

Family Drug Treatment Courts As Comprehensive Service Models: Cost Considerations

Literature on family drug treatment courts (FDTCs) suggests that parental participation in these courts is associated with improved substance abuse treatment and child welfare system outcomes. Despite these beneficial outcomes, FDTCs serve only 7‐10% of eligible child welfare involved families. As part of a FDTC evaluation, this FDTC site sought to provide stakeholders with information about costs and benefits. Considering the program costs alongside the cost avoidance from reduced time in foster care, this analysis determined that FDTC participation resulted in a net savings per child of $9,710. The cost component of the evaluation proved valuable, challenging, and informative.     

Medicaid program; cost limit for providers operated by units of government and provisions to ensure the integrity of federal-state financial partnership. Final rule with comment period

This regulation clarifies that entities involved in the financing of the non-Federal share of Medicaid payments must be a unit of government; clarifies the documentation required to support a Medicaid certified public expenditure; limits Medicaid reimbursement for health care providers that are operated by units of government to an amount that does not exceed the health care provider's cost of providing services to Medicaid individuals; requires all health care providers to receive and retain the full amount of total computable payments for services furnished under the approved Medicaid State plan; and makes conforming changes to provisions governing the State Child Health Insurance Program (SCHIP) to make the same requirements applicable, with the exception of the cost limit on reimbursement. The Medicaid cost limit provision of this regulation does not apply to: Stand-alone SCHIP program payments made to governmentally-operated health care providers; Indian Health Service (IHS) facilities and tribal 638 facilities that are paid at the all-inclusive IHS rate; Medicaid Managed Care Organizations (MCOs), Prepaid Inpatient Health Plans (PIHPs), and Prepaid Ambulatory Health Plans (PAHPs); Federally Qualified Health Centers (FQHCs) and Rural Health Clinics (RHCs). Moreover, disproportionate share hospital (DSH) payments and payments authorized under Section 701(d) and Section 705 of the Benefits Improvement Protection Act of 2000 are not subject to the newly established Medicaid cost limit for governmentally-operated health care providers. Except as noted above, all Medicaid payments and SCHIP payments made under the authority of the State plan and under waiver and demonstration authorities, as well as associated State Medicaid and SCHIP financing arrangements, are subject to all provisions of this regulation. Finally, this regulation solicits comments from the public on issues related to the definition of the Unit of Government.     

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.     

Geographic and technological R&;D spillovers within the triad: micro evidence from US patents

This paper aims at assessing the magnitude of R&D spillover effects on large international R&D companies’ productivity growth. In particular, we investigate the extent to which R&D spillover effects are intensified by both geographic and technological proximities between spillover generating and receiving firms. We also control for the firm’s ability to identify, assimilate and absorb the external knowledge stock. The results estimated by means of panel data econometric methods (system GMM) indicate a positive and significant impact of both types of R&D spillovers and of absorptive capacity on productivity performance.

A new pretrial screening program

Pretrial screening of defendants for competency to stand trial and responsibility at the time of the crime reduces unnecessary hospitalization. It can be developed on a statewide basis at little cost, resulting in great savings. Such programs should be established in every state.