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Report: Medicare Changes Lower Hospital Use

Price cuts reduce inpatient hospital use by non-elderly patients

A recent study published in Health Services Research suggests that cuts in Medicare prices under the Patient Protection and Affordable Care Act (PPACA) may slow the growth in total overall hospital spending.

“Our findings indicate that when Medicare tightly reins in its inpatient hospital prices, hospitals scale back overall capacity, resulting in less hospital use by non-elderly patients, not just elderly patients,” said lead author Chapin White, PhD.

White added that this kind of “spillover effect” is important because it exemplifies the way that changes in Medicare prices can affect the health system broadly. Medicare is by far the largest payer of hospital bills in the U.S., accounting for approximately 30% of total hospital revenues.

White and his colleagues analyzed hospital discharge data from 1995 to 2009 in 116 metropolitan statistical areas (MSAs) in ten geographically diverse states. The MSAs included about one-third of the U.S. population: 97 million residents in 2000, including 84 million non-elderly residents. The authors found that a 10% Medicare price cut was associated with approximately a 5% decrease in discharges among non-elderly patients and about a 6% decrease in hospital bed-days.

Some health care analysts have suggested that efforts to reduce health care spending in one area, such as lowering payments to hospitals, will result in higher costs elsewhere. The current findings indicate otherwise, instead suggesting that Medicare spending cuts will broadly slow hospital spending among all age groups.

Lauren Hersch Nicholas, PhD, assistant professor at the Johns Hopkins School of Public Health, who was not involved in the study, noted: “Health economists believe that providers, such as physicians and hospitals, typically adopt a single practice style to treat all patients.” So, she says, when one large payer incentivizes providers to offer more efficient care, all of their patients receive that kind of care. Nicholas surmises that the slowdown in Medicare costs anticipated due to PPACA reforms may bring about fewer admissions and fewer inpatient days for all patients.

According to Nicholas, Medicare is trying to accomplish two important goals: to slow down growth in health care spending and to improve the quality of care for its beneficiaries. The study, she says, “suggests that benefits of these policies may extend to non-elderly patients, potentially reducing insurance costs and out-of-pocket health care spending for working-age populations.”

Source: CFAH; August 5, 2014.

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