Publications

Briefing Chartbook on the Effect of the Balanced Budget Act of 1997 and the Balanced Budget Refinement Act of 1999 on Medicare Payments to Skilled Nursing Facilities

May 2000

A new Lewin study shows that Medicare's funding of skilled nursing care has been significantly reduced by nearly twice as much as Congress intended. Currently, CBO budget figures show Medicare spending for SNF services from 1998 to 2002 will be $12.2 billion less than originally projected when the Balance Budget Act (BBA) was enacted in 1997; and $15.8 billion less when extended to 2004. Due to BBA payment reductions, the current low inflation rate, provider concerns about fraud and abuse, etc., Medicare SNF spending actually decreased from $13.6 billion in 1998 to $12.3 billion in 1999. These funding reductions have forced approximately 1600 SNFs that participate in Medicare into bankruptcy, and have markedly diminished the industry's ability to attract capital financing.

Client Area: Associations
Expertise Area: Medicare

The Impact of the Medicare Balanced Budget Refinement Act on Medicare Payments to Hospitals

February 2000

In May of 1999, The Lewin Group prepared a report for the American Hospital Association (AHA) showing the impact of the Balanced Budget Act of 1997 (BBA) Medicare provisions on America's hospitals and health systems. The BBA reduced payments for most hospital-based services, e.g. inpatient acute care, outpatient care, home health care, skilled nursing care, medical education, indigent care, and many other services.

Client Area: Associations
Expertise Area: Medicare

Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients

November 1999

The Lewin Group was commissioned by the Institute of Medicine (IOM) Committee on Medicare Coverage Extensions to prepare cost estimates for selected expanded Medicare benefits. Congress in the Balanced Budget Act of 1997 mandated that the IOM examine Medicare coverage for certain preventive benefits. The Lewin Group prepared cost estimates for the following services: Skin cancer screening Medically necessary dental services (in connection with treatment of specific diagnoses) Elimination of the three-year limit on immunosuppressive therapy. The purpose of these cost estimates is to support the Committee's analysis of their efficacy based upon the clinical evidence available. The following sections summarize our cost estimates for these services, the data sources used for these estimates, and the key assumptions that underlie these estimates. Congressional Budget Office (CBO) type budget-neutral procedures ("pay as you go") apply to each of these extended benefits. Under these congressional budget scoring rules, additional Medicare benefits must be estimated to at least break even over a five-year time period, or funding must be reappropriated from an existing budgetary source. Our analytic process required estimations of both gross and net costs to Medicare for the five- year period of 2000 through 2004. Gross costs are the direct costs to Medicare of the services, and net costs are the gross costs minus the potential cost offsets Medicare would realize as a result of covering these services. We also reduced our cost estimates to account for cost sharing offsets of 20% and premium offsets of 25% per CBO standards. Cost offsets are derived from the Committee's analysis of the research evidence available and expert judgement. Projections of the Medicare Part B population for the years 2000 through 2004, as well as other sources of Medicare Part A and Part B population statistics (such as race and sex) were provided by the HCFA Office of the Actuary.

Client Area: Federal Government
Expertise Area: Medicare

The Impacts of an Increase in the Social Security Retirement Age and Medicare Eligibility Age on Social Security Disability Insurance, Medicare, and Employment

August 1999

AARP's Public Policy Institute published a Lewin Group report on the potential impacts of jointly raising the Normal Age of Retirement (NAR) and Medicare Eligibilty Age (MEA) from age 65 to 67. Under this proposed policy, a significant portion of peopled aged 65 to 66 would lose their Social Security benefits and Medicare coverage. Some portion of these individuals, however, could potentially retain both their Social Security benefits and Medicare eligiblity by meeting the qualifications for the Social Security Disability Insurance (DI) program. Using data from the Survey of Income and Program Participation and Medicare Current Beneficiary Survey, we estimate that 11.7 percent of the population aged 65 to 66 would have retained their benefits under DI if the NAR and MEA were increased in 1993 to age 67. We also estimated that 11.4 percent of the population aged 65 to 66 would have retained their Medicare coverage under this policy change.

Client Area: Associations
Expertise Area: Medicare

Implications of the Medicare Home Health Interim Payment System of the 1997 Balanced Budget Act

May 1999

The Medicare Home Health Interim Payment System (IPS) raises concerns for beneficiaries and providers. A temporary plan proposed until HCFA develops a home care PPS, the IPS may cause the number of home health agencies (HHAs) exceeding the Medicare cost limits to more than double and the published cost limits to decrease 21% on average overall. HHAs may operate without knowing the per-beneficiary limits for up to 6 months of the initial IPS cost reporting period. Strategies developed by HHAs to cope with this reduction may include increasing the proportion of low-end users with fewer visits and restraining costs per visit and number of visits per beneficiary. Some of these strategies could have considerable consequences for high-use home health clients.

Client Area: Associations
Expertise Area: Medicare

The Balanced Budget Act and Hospitals: The Dollars and Cents of Medicare Payment Cuts

May 1999

The Balanced Budget Act (BBA) of 1997 is projected to cut $71 billion in Medicare payments to hospitals, which may cause 7 out of 10 hospitals to have negative total Medicare margins by the year 2002. For all hospitals, total Medicare margins are projected to be around negative 4.4 percent, and margins for outpatient, hospital-based home health, and PPS-exempt services will all be negative under the BBA. The BBA reduced payments for most hospital services, including inpatient acute care, outpatient care, home health care, skilled-nursing care, medical education, and indigent care. The study included hospital specific analyses for inpatient PPS and PPS-exempt hospital services, hospital-based home health services, and outpatient hospital services. The findings report Medicare payments and margins for these services, as well as total Medicare payments and margins.

Client Area: Associations
Expertise Area: Medicare

Current Knowledge of Third Party Outpatient Drug Coverage for Medicare Beneficiaries

February 1999

Elderly patients paid for more than half (52%) the cost of their prescriptions out of their own pockets, according to a recent study for the Pharmaceutical Research and Manufacturers of America. This is not surprising since Medicare does not, for the most part, cover outpatient prescribed medications. The study reviewed third party coverage options for pharmacy coverage (total average per beneficiary spending of $571 per person) as based on 1995 data. It showed that employers were the second largest source of payment (26%) through supplemental insurance. Beneficiaries with employer supplemental insurance drug coverage spent 31% out-of-pocket, while those with Medigap spent 60%, and those with Medicare HMO coverage spent 37% out-of-pocket. Additionally, only about 36% of beneficiaries with less than $10,000 in income had drug coverage, compared to 71% among those with $50,000 or more in income. The study also showed that Medicare beneficiaries at the extreme ends of the income spectrum (that is, those poor enough to qualify for full dual Medicare/ Medicaid coverage or those with full coverage from employer-provided supplemental health plans) had the most extensive coverage. Those at greatest risk were the middle group: beneficiaries with individually purchased Medigap coverage have no or limited drug benefits.

Client Area: Associations
Expertise Area: Medicare

Quality Health Care: New Challenges as Medicare Evolves

February 1999

The Health Care Financing Administration (HCFA) should promote "best practice" methods and educate providers. This study outlines ways in which the government can improve the quality of health care in Medicare programs. The cause for concern is due to the large gaps between the care that people should receive and the care they do receive. Medicare reforms must affect the whole system, and should not be tacked on as an afterthought.

Client Area: Associations
Expertise Area: Medicare

Implications of the Medicare Home Health Interim Payment System of the 1997 Balanced Budget Act

March 1998

The Medicare Home Health Interim Payment System (IPS) raises concerns for beneficiaries and providers. A temporary plan proposed until HCFA develops a home care PPS, the IPS may cause the number of home health agencies (HHAs) exceeding the Medicare cost limits to more than double and the published cost limits to decrease 21% on average overall. HHAs may operate without knowing the per-beneficiary limits for up to 6 months of the initial IPS cost reporting period. Strategies developed by HHAs to cope with this reduction may include increasing the proportion of low-end users with fewer visits and restraining costs per visit and number of visits per beneficiary. Some of these strategies could have considerable consequences for high-use home health clients.

Client Area: Associations
Expertise Area: Aging and Disability, Medicare

Out-of-Pocket Health Spending by Medicare Beneficiaries Age 65 and Older: 1997 Projections

December 1997

This study found that Medicare beneficiaries spend on average two out of every ten dollars in income on out-of-pocket health expenses, excluding the costs of home health and nursing home care. In addition, the report found that older Medicare beneficiaries living below the poverty line spend on average more than one-third of their yearly income on out-of-pocket health care costs. A first-time look at the magnitude of out-of-pocket spending for the nearly 60 percent of poor Medicare beneficiaries who do not receive Medicaid, the study provides the first comparison of out-of-pocket costs paid by beneficiaries enrolled in HMOs versus those in traditional fee-for-service programs.

Client Area: Associations
Expertise Area: Medicare