Medicare maximization by state medicaid programs

Home care services funded by Medicare and Medicaid grew rapidly throughout most of the s. During this period some state Medicaid programs transferred costs for home care claims to the Medicare program to reduce their liability and increase beneficiary access to Medicare coverage. Wayne L. Anderson, Genevieve S. Kenney, Donna J. Home care services funded by Medicare and Medicaid grew rapidly throughout most of the s.

During this period some state Medicaid programs transferred costs for home care claims to the Medicare program to reduce their liability and increase beneficiary access to Medicare coverage. This article reports the findings of the first national study of these Medicare maximization billing practices for home care services. Primary data were collected to determine which states conduct retrospective Medicare billing practices and the amounts recovered from Medicare.

Ratios of recovered expenditures-to-costs incurred for retrospective billing practices conducted in Connecticut, New York, and Massachusetts are between and While retrospective billing practices may aid states in reducing Medicaid outlays and potentially help dual Medicare beneficiaries gain coverage for their home care claims, they increase Medicare expenditures for home care at a time of concern for the long-term financial viability of Medicare and illustrate the need for reforming our national long-term care financing policy.

Sign In or Create an Account. Advanced Search. User Tools. Home Health Care Services Quarterly , 22 3 , Some state Medicaid programs have attempted to shift home health care costs to Medicare by using retrospective Medicare maximization billing practices. We used a two-part model with random effects to analyze whether retrospective billing practices increase Medicare expenditures for dual eligibles by analyzing primary data collected from 47 state Medicaid offices supplemented with Medicare Current Beneficiary Survey MCBS data from Some states also require a minimal occupancy rate before allowing bed-hold payments.

The goal of bed-hold is to provide a continuous place of residence for the nursing home resident. In the absence of a bed-hold policy, some residents may refuse a needed hospitalization to avoid losing their bed Nohlgren Conversely, if the marginal profit associated with the Medicaid bed-hold payment is greater than the marginal profit associated with the nursing home's Medicaid payment for continued care in the nursing home, then bed-hold introduces a financial incentive to hospitalize nursing home residents.

Once again, recent research shows that the odds of hospitalization were 36 percent higher in states with bed-hold policies Intrator et al. Thus, although many hospitalized nursing home residents could be effectively cared for in nursing homes that were given additional resources, state Medicaid programs have less incentive to increase Medicaid payment rates or repeal bed-hold policies because the savings associated with fewer hospitalizations will largely accrue to Medicare.

In addition to increasing overall costs, the hospitalization of nursing home patients may also have negative implications for quality. In a review of the literature on hospitalizations from nursing homes, Castle and Mor concluded that admission to an acute-care hospital can be traumatic for a nursing home resident.

Frail older patients can suffer a number of iatrogenic problems while in the hospital for acute care. These include delirium, falls, incontinence, dehydration, adverse drug events, and nosocomial infections.

Indeed, after being hospitalized, many nursing home residents return to the nursing home more functionally and cognitively impaired Ouslander, Weinberg, and Phillips Research has suggested that certain conditions—such as pneumonia Fried, Gillick, and Lipsitz ; Kruse et al.

Accordingly, the planned Medicare Nursing Home Value-Based Purchasing Demonstration recently proposed avoidable hospitalizations as a negative performance measure. The hospitalization of community-dwelling dual eligibles also introduces potentially conflicting incentives. The proportion of total Medicaid long-term care expenditures directed to home- and community-based services HCBS grew from 11 percent in to 27 percent in , although some of this change can be attributed to spending for persons with mental retardation and persons with developmental disabilities Wiener, Tilly, and Alecxih Medicare is the payer of hospital services for dually eligible enrollees in these programs.

Medicaid's HCBS programs that invest in the clinical services necessary to reduce the likelihood of hospitalization generate savings for Medicare. Again, therefore, state Medicaid programs have little incentive to adopt policies to discourage hospitalizations.

Miller and Weissert , p. Those are Medicare dollars. For us that's development money. We don't want to reduce Medicare expenditures in our state. As the study notes, the Medicaid HCBS contractor is responsible for paying only the Medicare deductibles and copayments when a dually eligible enrollee is hospitalized, with Medicare paying the bulk of the hospital expenditures.

If the dually eligible enrollee is not hospitalized, the HCBS contractor must pay the full cost of services, such as respite care. Thus, the program has an incentive to shift costs to Medicare by hospitalizing clients, which also introduces a number of potential health complications associated with hospitalization.

Another implication of the bifurcated coverage of HCBS and hospital care is a systematic lack of coordination among primary, acute, and long-term care providers Peters Medicare and Medicaid focus on meeting specific covered service needs rather than addressing the interaction of acute and chronic needs. Even though case management is often an important component of Medicaid HCBS, the case manager is typically not responsible for enrollees when an acute care episode results in hospitalization or entry into a skilled nursing facility.

This lack of coordination may increase the likelihood that the individual will not return to the community following an acute care episode. If Medicaid's HCBS programs had to pay the costs of their actions directly, this would produce a greater incentive to coordinate or manage services across acute and chronic care settings. The previous two examples focused on cost shifting from Medicaid's chronic care settings to Medicare's acute care settings, but costs also may shift in the opposite direction.

Although this type of cost shifting has not received much attention from the research community, it stands to reason that Medicare's investment in acute care services will affect Medicaid's spending on long-term care services.

Because the use of long-term care services is often far downstream, it is hard to tie Medicare's investment in acute or primary care services directly to Medicaid's spending on custodial services.

This change in payment contributed to the growth in Medicare-covered postacute nursing home care in the years following PPS Dalton and Howard Given that more than half of all Medicaid nursing home stays began as a Medicare-covered postacute care admission following a hospital stay, it seems clear that Medicare's hospital PPS ultimately had downstream implications for the custodial Medicaid nursing home population.

For example, there is evidence that custodial nursing home residents were more disabled after PPS in compared with those before PPS in Shaughnessy and Kramer The transfer of patients from the hospital to the nursing home also raises issues related to the coordination of care and the beneficiaries' health.

Under the Medicare hospital PPS, discharge planners have more incentive to discharge patients as soon as safely possible but less incentive to consider the long-term cost and health implications of the initial discharge placement. For example, given the high number of Medicare nursing home stays that ultimately become Medicaid nursing home stays, it is desirable that the nursing home to which a hospitalized patient is discharged participate in Medicaid, even if the initial nursing home stay is financed by Medicare.

Such placements would remove the need to transfer the patient when his or her Medicare coverage ends, thereby avoiding the adverse health consequences of transfers. Similarly, hospital discharge planners ideally should avoid transfers to nursing homes when adequate home care is available to support a community-based placement. This could improve the patient's welfare and lower Medicaid's spending, but under the current Medicare hospital payment system, discharge planners are not rewarded for placing patients in the most appropriate setting.

They have little incentive to consider the long-term implications of the discharge placement for either the beneficiary's long-term health or Medicaid's budget. Several policy options are available to address the conflicting incentives outlined in the previous section. The key objective of such policies is to have Medicare and Medicaid internalize each other's costs while also sharing any potential savings.

They could do this by means of either broad or focused policy measures. The broader policy measures include capitation, which could blend the financing of the two programs, and the federalization of the Medicaid program. A more focused approach, such as pay-for-performance, could address the misalignment of particular incentives, such as the hospitalization of nursing home residents.

One mechanism that has been proposed to address the bifurcation of Medicaid and Medicare is capitated managed care Rudolph and Lubitz Demonstration programs have waived certain provisions of the Medicare and Medicaid programs, thereby allowing payment for services that would otherwise not be covered and the use of different methods to pay for these services.

Some programs combine postacute and long-term care services through managed care. Although the nature and scope of the demonstration programs are quite diverse, the use of capitated payments may encourage a more efficient production of health care services.

Comprehensive reviews of these capitated managed care plans have been conducted elsewhere Grabowski ; Miller and Weissert ; Saucier, Burwell, and Gerst The focus here is on programs that combine Medicaid and Medicare financing and address the two programs' conflicting incentives Tritz Overall, relatively few long-term care recipients are covered under capitated arrangements.

In , less than 3 percent of the publicly funded, long-term care population received their long-term care benefits through a managed care program Saucier, Burwell, and Gerst , and this number included programs that did not combine Medicare financing. Programs combining Medicare and Medicaid financing are not currently available in most parts of the country, and even in those areas with such programs, enrollment typically is voluntary.

Medicare's freedom of choice gives beneficiaries the right to choose between a managed Medicare program and Medicare's fee-for-service, without being locked in to a particular choice over time. A lack of enrollment can partially be explained by dual eligibles' concerns that the managed care programs mean that they must change doctors, go to locations for care, and have fewer choices Peters As noted in the previous section, neither Medicare nor Medicaid has a strong incentive to offer case management under fee-for-service payment, because neither program would fully internalize the potential savings.

Managed care programs have used a number of service delivery models to coordinate the care for dually eligible beneficiaries enrolled in integrated plans Bishop et al.

For example, MSHO uses a single nurse or social worker to coordinate services; the Wisconsin Partnership Program employs a multidisciplinary team that includes a nurse practitioner; and the Massachusetts SCO program utilizes a team of nurses and social workers. In Wisconsin, nurse practitioners accompany patients on their visits to physicians as a means of more closely connecting community and medical care.

Specifically, the total capitated payment to PACE enrollees was 9. The costs for both Medicaid and Medicare were higher for MSHO enrollees compared with the FFS costs for a control group of both community-dwelling individuals and nursing home residents after adjusting for demographic factors and prior health care utilization Kane and Homyak Thus, even though a primary goal of capitation is to lower spending, the two most rigorous evaluations of this model actually indicated higher costs.

The reasons for this result could be the failure to target services to enrollees through a stringent preadmission process and the inability to contain spending on particular services. Specifically, PACE was associated with the following statistically significant outcomes for enrollees: greater use of adult day health care, fewer home visits by nurses, fewer hospitalizations, fewer nursing home admissions, a higher probability of receiving ambulatory care, greater survival, an increased number of days in the community, better health, better quality of life, greater satisfaction with overall care arrangements, and better functional status.

The PACE enrollees with the most severely limiting conditions at baseline had the largest gain. A multivariate analysis of the MSHO did not show substantial differences across a number of outcomes, including mortality, nursing home admissions, functioning, satisfaction, and caregiver burden across the treatment and control groups.

Thus, the best evidence to date from the PACE and MSHO programs does not suggest that integrated capitation models are cost-effective relative to fee-for-service comparison groups.

One recent policy innovation toward coordinating Medicare and Medicaid is the establishment of Medicare Advantage special needs plans SNPs. From the perspective of program coordination, SNPs allow states the opportunity to combine Medicare's and Medicaid's managed care contracting for dually eligible beneficiaries without having to secure special Medicare demonstration authority from the CMS. However, the MMA gave Medicaid plans a one-time opportunity to seek SNP designation and to automatically unless the beneficiary notified the plan otherwise enroll dually eligible members into their companion Medicare plans as part of the initial Medicare Part D enrollment process.

It remains to be seen whether SNPs will ultimately become a vehicle for significantly increasing the integration of Medicare and Medicaid. SNPs do not, however, address the underlying conflict between federal and state approaches to managed care.

The federal approach to Medicare Advantage plans is based on consumer choice, with a strong preference for variation across plans in the marketplace. Medicare freedom of choice is an important beneficiary right, but it can confound coordination if dually eligibles enroll in different Medicare and Medicaid plans.

In contrast to Medicare, state Medicaid plans typically emphasize long-term investments with a limited number of plans and uniform benefits to promote equity in a publicly funded program. Moreover, a potential issue for the states is the alignment of incentives under a combined Medicare-Medicaid product. Capitated managed care is a global mechanism for aligning Medicare and Medicaid financing. A more focused measure to address the high rate hospitalizations of nursing home residents—an important area of disconnect between Medicare and Medicaid policy—is pay-for-performance.

Although the existing empirical literature offers little evidence to support the effectiveness of paying for quality in the health care sector Rosenthal and Frank , a controlled experiment in San Diego found that nursing homes were responsive to monetary incentives for reducing the residents' level of dependency and the need for special nursing services Norton ; Weissert et al. Thus, there is some previous support for paying for quality in nursing homes. The federal nursing home pay-for-performance demonstration is currently in the planning stages.

The demonstration will focus on four performance measures: avoidable hospitalizations, quality indicators e. Given the requirement that the demonstration must be budget neutral, the plan is for the Medicare savings from fewer avoidable hospitalizations to fund the incentive-based payments to nursing homes. It is unclear whether the level of reward will be sufficient to encourage fewer hospitalizations. Moreover, a pay-for-performance type demonstration will not address many of the other inconsistencies between Medicaid and Medicare policy, although it certainly could with a broader design.

Pay-for-performance has some appeal at the federal level, but there is less incentive for state Medicaid programs to incorporate avoidable hospitalizations into similar payment systems.