Medicare history lessons

Rick Mayes has written some outstanding papers, and a book, on Medicare payment policy history. At the end of this post is a complete list of such papers by him, lifted from his CV, all of which I’ve read. I’ve read his book too (Mayes kindly sent me a copy), which is also listed. They are all chock full juicy detail and interesting interpretation, like this from Mayes and Hurley (2006):

[A] prominent feature of the 1997 Medicare reforms was policy makers’ creation of ‘Medicare+Choice’. Republicans’ broad vision was to dramatically increase the number of Medicare beneficiaries in participating (private) managed care plans (Biles et al., 2002). The concept of shifting financial risk away from the government by moving Medicare beneficiaries into private managed care plans originated in the early 1970s, but the enrollment in such plans had been trivial.  …

The [1997] Balanced Budget Act provided a redesigned payment formula that was intended to address earlier payment methodology problems that had resulted in significant geographic disparities, with most enrollment being clustered in counties where payment rates to HMOs were very high and plans could purchase care for their members at lower costs (Hurley et al., 2003). The main thrust of the BBA formula was to increase payments to private HMOs in areas of the country with low payment rates based on fee-for-service spending, while (at the same time) limiting increases in HMO payments in relatively high-payment counties, thereby compressing the range of payments and theoretically unlinking ‘Medicare+Choice’ payments and county-level spending for the fee-for-service part of the Medicare programme (Berenson and Dowd, 2002).

The multiple agendas of the Balanced Budget Act fostered an internal paradox within the legislation and led to many unanticipated effects. … In short, the BBA represented a historic milestone by virtue of its aspirations for a significant expansion of private, managed care elements within the Medicare programme. Yet it also continued the process of moving Medicare closer to a government-controlled, single-payer model by calling for the development of prospective payment systems for Medicare’s remaining cost-based service components. As Jonathan Oberlander explains:

These new regulatory reforms, as well as reducing payments to providers under already established regulations, generated the savings in programme spending, not the procompetitive elements of the legislation. In this the BBA echoed a familiar theme from Medicare politics during the 1980s. In 1997, as in 1983, when the prospective payment system for hospitals was adopted, the rhetoric was all about markets and competition. But the reality was that the savings were all from regulation. The secret of the BBA was that the move to competition was not projected to save Medicare any money. Given budgetary pressures for Medicare savings, Republicans and Democrats once again embraced more regulation and lower payments to providers as the best way to achieve short-term budgetary goals. (Oberlander, 2003, 183)

… Another paradoxical aspect of the Balanced Budget Act is that … future increases for all HMOs were smaller than initially anticipated, because the BBA’s success in reducing payments to providers in the Medicare programme meant that the payment base for HMOs grew more slowly (Hurley et al., 2003). Congress had for a long time based its payments to HMOs in the private sector on what it was spending on the traditional Medicare programme in the public sector. Thus, by doing so well in decreasing payments to hospitals, physicians and other health care providers (such as home health agencies and skilled nursing facilities), Congress inadvertently reduced payments to HMOs just as they were losing control over their expenses (Berenson, 2001). In 1997, health care inflation began rising again at twice the rate of consumer price inflation, and by the late 1990s growing numbers of HMOs were teetering on the verge of bankruptcy (Cutler, 2005). Once again, the lack of synchronization between public sector and private sector cost containment came into play and – in the case of Medicare’s efforts to rely on private sector managed care – this proved to be particularly self-defeating.

The book, coauthored by Bob Berenson: Medicare Prospective Payment and the Shaping of U.S. Health Care.

Here’s the list of papers by Mayes that relate to Medicare payment history.

R. Mayes, “The Origins, Development and Passage of Medicare’s Revolutionary Prospective Payment System,” Journal of the History of Medicine & Allied Sciences (Vol. 62, No. 3, January 2007: 21-55).

R. Mayes, “The Origins of and Momentum behind ‘Pay for Performance’ Reimbursement,” Health Law Review (Vol. 15, No. 2, December 2006: 17-22).

R. Mayes, R. Hurley, “Pursuing Health Care Cost Containment in a Pluralistic Payer Environment,” Journal of Health Economics, Policy & Law (Vol. 1, No. 3, Summer 2006: 237-261).

R. Mayes, J. Lee, “Medicare Payment Policy and the Controversy Over Hospital Cost Shifting,” Journal of Applied Health Economics & Health Policy (Vol. 3, No. 3, 2004: 153-159).

R. Mayes, “Causal Chains and Cost Shifting: How Medicare’s Rescue Inadvertently Triggered the Managed Care Revolution,” Journal of Policy History (Vol. 16, No. 2, April 2004: 144-174).

J. Lee, R. Berenson, R. Mayes, A. Gauthier, “Medicare Payment Policy: Does Cost Shifting Matter?” Health Affairs (Vol. 22, No. 6, October 2003).

R. Mayes, “Medicare and America’s Health Care System in Transition: From the Death of Managed Care to the Medicare Modernization Act of 2003 and Beyond,” Journal of Health Law (Vol. 38, Summer 2005: 391-422).

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