Health Care Costs and Financing

Both uninsured and privately insured patients report fewer illness episodes than Medicare and Medicaid patients

Both Medicare and Medicaid as sources of payment are associated with more reported episodes of ill health requiring health care visits than private insurance, according to a recent study supported by the Agency for Health Care Policy and Research (HS05760). These episodes arise from chronic conditions such as diabetes and high blood pressure and acute problems such as shortness of breath and nonhealing sores.

On the other hand, uninsured persons report no more illness episodes than the privately insured. This is somewhat surprising, comments Keith Mueller, Ph.D., of the University of Nebraska Medical Center, the study's principal investigator. He points out, however, that persons without insurance are likely to be in households with low to moderate incomes, to be working for small businesses, and to be 18 to 25 years of age. These individuals may be as healthy as their insured counterparts because they actually share some lifestyle and other variables that influence health.

Dr. Mueller and his colleagues interviewed 1,235 Nebraskans in 1992 to correlate changes in insurance status with changes in use of health services (number of physician visits for acute and chronic conditions) and self-reported health status. Their findings confirm the comparatively ill health of the Medicare and Medicaid populations. The researchers conclude that health professionals interested in improving the quality of health care should focus attention on the Medicare and Medicaid populations.

This study demonstrates the use of data collected through a population survey and the use of findings to help health care providers both anticipate demand for services and focus their efforts on particular populations most in need of care.

Details are in "Health insurance status and ill health: Implications for health professionals," by Suzanne Ortega, Ph.D., Dr. Mueller, and Martha Metroka, M.A., in the October 1995 Journal of Nursing Care Quality 10(1), pp. 46-54.

Medicare's PPS does not reduce overall clinical services for depressed elderly persons

Depression is the most frequent psychiatric reason that elderly persons are admitted to the hospital, making this type of hospitalization costly for Medicare. Yet the financial incentives offered to hospitals by Medicare's prospective payment system (PPS) to reduce hospital stays for depressed elderly patients do not necessarily reduce costs per admission. These patients simply use more intense clinical services to shorten their hospital stays and more psychiatric units that are exempt from PPS, according to a recent study supported in part by the Agency for Health Care Policy and Research (HS08349).

The researchers reviewed the medical records of 297 acute care general hospitals with and without psychiatric units in five States. They examined length of hospital stay and intensity of clinical services for depressed elderly patients hospitalized before and after implementation of PPS, which began in 1983. Under DRG-based PPS, hospitals receive a fixed payment per admission depending on the patient's diagnosis-related group or DRG. Exempt psychiatric units of general hospitals and psychiatric hospitals are reimbursed a flat payment per case based on the hospital's historical charges. Both payment schemes provide hospitals with an incentive to reduce intensity of services.

As expected, the length of stay for elderly depressed Medicare patients decreased on average by 3 days after PPS implementation in each acute care treatment setting, especially in hospitals without a psychiatric unit. This decline, however, was offset by a tendency after implementation to admit proportionately more patients to psychiatric units, which typically have longer lengths of stay. As a result, overall length of stay did not significantly decrease over time, and intensity of services, especially doctor and other therapists' visits, increased. Faced with shorter lengths of stay, clinicians may have increased the number of services provided (such as lab tests) to help stabilize patients more quickly, note the researchers. Any cost savings from the change in payment structure for depressed patients would have been from reducing rates of admission rather than less costly hospitalizations, conclude the researchers.

See "Effects of Medicare's prospective payment system on service use by depressed elderly inpatients," by Lois M. Davis, Ph.D., Kenneth B. Wells, M.D., William H. Rogers, Ph.D., and others, in the November 1995 issue of Psychiatric Services 46(11), pp. 1178-1184.

Self-insurance of employee health benefits gains in popularity among certain types of employers

The rapid increase in health care costs in the United States has prompted a growing number of employers to self-insure their employees. Self-insured plans can be less expensive for an employer than purchased insurance because such plans eliminate the risk premium charged by insurers and allow employers to retain ownership of and accrue interest on funds used to pay claims until the time claims are paid. Furthermore, these plans are exempt from State premium taxes, mandated health plan benefits, and insurance regulation. As such, they limit the ability of States to implement health insurance reform efforts such as standardization of health benefits and transportability of coverage, explains Steven A. Garfinkel, Ph.D., of Research Triangle Institute.

In a study supported in part by the Agency for Health Care Policy and Research (HS06732), he used the 1989 Survey of Private Health Insurance Plans (SHIP) to explain the decision to self-insure employment-related health benefits. Dr. Garfinkel found that firms with less than 100 plan subscribers were much less likely to self-insure than firms with 5,000 or more subscribers. These results suggest a threshold for private employers at 100 covered workers and at 200 covered workers when unions, associations, and public employers are included.

The probability of self-insuring increased significantly with the proportion of covered employees who were retired. The total number of State-mandated health benefits was not significant; however, self-insurance was more likely in the presence of an alcohol treatment mandate but less likely with a mental health services mandate. None of the variables associated with State taxation of health insurance premiums significantly affected the likelihood that private employers would self-insure their employees.

Details are in "Self-insuring employee health benefits," by Dr. Garfinkel, in the December 1995 Medical Care Research and Review 52(4), pp. 475-491.

Return to Contents
Proceed to Next Section