Medicare expenditures and utilization under State hospital rate setting

Area of Science:

• Health Economics
• Healthcare Policy
• Hospital Management

Background:

• State prospective reimbursement (PR) programs were implemented to control hospital costs.
• The impact of these programs on Medicare expenditures and utilization required analysis.

Purpose of the Study:

• To evaluate the effects of State prospective reimbursement (PR) programs on Medicare expenditures.
• To assess the influence of PR programs on hospital utilization patterns for Medicare beneficiaries.

Main Methods:

• Analysis of National Hospital Rate-Setting Study data.
• Utilized Medicare beneficiary-based data from approximately 1,300 counties.
• Examined data from the 5-year period 1974-1978.

Main Results:

• Statistical evidence indicates stringent PR programs did not lead to Medicare cross-subsidization of losses.
• Medicare experienced regulatory benefits similar to PR-covered patients.
• Costs and intensity of care for Medicare patients were constrained.

Conclusions:

• State prospective reimbursement (PR) programs effectively controlled costs without negatively impacting Medicare finances.
• Medicare utilization and expenditures were positively influenced by the regulatory environment of PR programs.