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Medicare expenditures and utilization under State hospital rate setting.

J Cromwell, H Hewes

Health Care Financing Review

|March 6, 1986

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State prospective reimbursement (PR) programs did not cause hospitals to cross-subsidize losses using Medicare. Medicare also benefited from constrained costs and intensity of care under these stringent programs.

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:

Related Experiment Videos

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.