Home Health Care Policy System Reform Medicare ReformAppendix A

Appendix A: Endnotes

American Nurses' Association, "Statement on Status and Operation of Medicare and Medicaid Programs", (Committee on Finance, United States Senate (May 7, 1969)).

The National Bipartisan Commission on the Future of Medicare (the "Bipartisan Commission") was established by the Balanced Budget Act of 1997 (Public Law 105-33). This 17-member commission was charged with studying the long-term reform and financing challenges of the Medicare program, with a heavy emphasis on recommending solutions to the financial problems that Medicare will face early in the next century. The Bipartisan Commission had subcommittees addressing reforms of the existing program, wholesale restructuring of Medicare, and graduate medical education. The Bipartisan Commission was unable to reach the required 11-6 vote on a refrom proposal before its authority expired in the spring of 1999.

Board of Trustees B. The 1998 Annual Report of the Board of Trustees of the Federal Supplementary Medical Insurance Trust Fund. U.S. Government Printing Office, (Washington, DC: June 1998).

U.S. Bureau of the Census, Statistical Abstract of the United States, 1997 (117^th edition), (Washington, DC: 1997).

The Trustees do not recommend these levels of taxation; they merely use them to summarize the size of the financing needs.

Board of Trustees A. The 1998 Annual Report of the Board of Trustees of the Federal Hospital Insurance Fund. U.S. Government Printing Office, (Washington, DC: June 1998).

Board of Trustees B. The 1998 Annual Report of the Board of Trustees of the Federal Supplementary Medical Insurance Trust Fund. U.S. Government Printing Office, (Washington, DC: June 1998). These projections for Medicare costs are significantly lower than they were prior to the passage of the Balanced Budget Act of 1997. In 1996, the Trustees calculated that the hospital insurance payroll tax would have to increase immediately to 7.1 percent to keep the Part A Trust Fund financially sound (Board of Trustees A. The 1996 Annual Report of the Board of Trustees of the Federal Hospital Insurance Fund. U.S. Government Printing Office, (Washington, DC: June 1998)). The significant cost reductions of the Balanced Budget Act of 1997, coupled with a slowdown in spending, resulted in a much lower projected financing burden.

The most commonly suggested target reduction in costs is approximately one-third below the projected baseline. Congressional Budget Office. Long-term Budgetary Pressures and Policy Options, (Washington, DC: May 1998). Such savings could be achieved, for example, by reducing Medicare cost growth by two percentage points per year from now until 2030.

For example, reducing Medicare projected annual spending growth from 8 percent to 7 percent results in a nearly 25 percent reduction in projected costs in 2030.

Calculated from Board of Trustees A. The 1998 Annual Report of the Board of Trustees of the Federal Hospital Insurance Fund. U.S. Government Printing Office, (Washington, DC: June 1998).

Statement of American Nurses' Association, "Nursing Concerns in Health Insurance for the Aged," August 24, 1965.
Board of Trustees A. The 1998 Annual Report of the Board of Trustees of the Federal Hospital Insurance Fund. U.S. Government Printing Office, (Washington, DC: June 1998).

There are some co-payments for extremely long hospital stays. There is a daily co-payment for skilled nursing facility (SNF) stays ($95.50 per day for days 21-100 of any SNF stay). There is also a separate deductible for blood products, but that is rarely used and is limited in cost.

Currently, hospital outpatient services and outpatient psychiatric services co-payments exceed 20 percent. Lab tests conducted in hospital outpatient departments currently require no co-payment at all.

Medicare+Choice is not a "supplemental" plan; instead, it replaces Medicare altogether. It is included here simply because Medicare+Choice plans do offer benefits beyond those required by traditional Medicare in an effort to entice beneficiaries to abandon the traditional government plan and become a member of the private company's managed care plan.

While some of the proposed changes will result in duplicative coverage for those who have employer-sponsored retiree health benefits, ANA's proposal addresses some of those problems.

While lower-income beneficiaries who have no secondary insurance coverage will, on average, be better off under ANA's revised Medicare program because they will receive prescription drug benefits (see page 10) and "stop-loss" coverage (see page 9) which they currently lack. Some individuals -- those who are not hospitalized during the year but use a moderate amount of Part B services -- will pay more under this proposal due to the combined A/B deductible. This is of significant concern to ANA and may require modification of the existing programs targeting the near poor, such as the Qualified Medicare Beneficiary (QMB) and Specified Low-Income Medicare Beneficiary (SLMB) programs.

Medigap drug coverage is incomplete, with the most commonly sold plans offering a $250 deductible, 50 percent co-payment, and a maximum payment from the insurer of $1,250 annually.
While inclusion of a "stop-loss" might duplicate the benefits some retirees receive through employer-sponsored health benefits (and while implementation of this provision would require ensuring that employers cannot drop their retiree coverage in favor of the revised Medicare program in order to save costs) , the elimination of Medigap plans will solve the duplication problem as to Medigap, and will result in savings to the Federal and state governments through savings in the Medicaid program. In addition, Medicare+Choice plans will have to offer additional benefits or compete more favorably on cost to attract beneficiaries away from the traditional program, offering additional competition on cost.

As Medicare's fiscal situation improves, ANA might endorse the provision of subsidies for those who wish to join but cannot afford to do so.

Cost estimates for these benefits are provided in Appendix B.

ANA has long supported the inclusion of long-term care as a Medicare benefit. However, at this time, ANA is not recommending its inclusion due to its high costs to the Medicare program. We intend to continue to pursue this benefit once Medicare's fiscal future has been secured.

Waldo, D., "Estimating the cost of a Medicare outpatient prescription drug benefit," Health Care Financing Review, 15(3): 103-112 (1994).

Only plans H, I, and J provide drug coverage, and those account for about 14 percent of Medigap policies sold. (Physician Payment Review Commission, Annual Report to Congress, 1996. Washington, DC: 1996). Thus, only about 5 percent of Medicare beneficiaries receive drug coverage via Medigap, probably due to the very limited drug benefit provided (50 percent co-payment; maximum coverage of $1,250 in drug costs).

Inclusion of a prescription drug benefit would require implementation of a system ensuring that Medicare bargains vigorously for the lowest price suppliers of drugs to avoid being "gouged" by drug companies eager for the large Medicare "market."

If Medicare's experience with mammograms is a guide, then allowing screening use of cholesterol, blood glucose, and thyroid blood tests may have little impact on overall use of (and therefore cost of) these services. That experience suggests that the addition of a screening benefit for already-covered diagnostic tests may have little impact on program spending. Medicare's benefit for screening mammography began January 1, 1991. Between 1990 and 1994, however, the total number of mammograms per enrollee paid by Medicare increased less than 2 percent. There was a significant shift, however, from bills for bilateral diagnostic mammograms to bills for bilateral screening mammograms, (Physician Payment Review Commission, Annual Report to Congress, 1995, Washington, DC: 1995). Physicians had been providing mammograms all along, but had simply been recording and billing the diagnostic test used to rule out the presence of breast cancer.

The preventive care guidelines of the Agency for Health Care Policy and Research's (AHCPR) guidelines for preventive care place major emphasis on lifestyle and environmental factors that are major determinants of health status.

Medicare could have a direct contract with the agency actually providing the telenurse services, rather than paying any willing provider for those services on a call-by-call basis. This arrangement -- a specific contract for telenurse services -- makes this ideal for a Medicare demonstration. By contracting in a limited number of areas, the Medicare program could determine whether telenurse services reduce beneficiaries' need for expensive services such as emergency room visits and whether they help to reduce potentially avoidable hospitalizations in the Medicare program.

American Medical Association, Report 3 of the Council on Medical Services (CMS3-I-97). Disease Management and Demand Management (Reference Committee G). (Chicago, Illinois: 1997). Also, some case management approaches have included providing beneficiaries with 24-hour access to a nurse to ask questions about symptoms, care, and medications.

APRNs include nurse practitioners (NPs), clinical nurse specialists (CNSs), nurse midwives, and nurse anesthetists (CRNA).

It is important to emphasize the success of case management approaches in providing for cost-effective care hinges on case managers' abilities and authority to appropriately coordinate care.

Naylor, M., Brooten, D., Campbell, R., Jacobsen, B., Mezey, M., Pauly, M., and Schwartz, J.S., "Comprehensive Discharge Planning and Home Follow-up of Hospitalized Elders," Journal of the American Medical Association, Vol. 281, No.7, 613-20; 620, (February 17, 1999).

Edwards J., Kaplan, A., Barnett, J., Logan, C., "Nurse-managed primary care in a rural community: Outcomes of five years of practice.," Nursing and Health Care Perspectives. 19(1): 21-25, and Hatcher, A., Scarinzi, G., Kreider, M., "Meeting the need: A primary health care model for a community-based/ nurse-managed health center" Nursing and Health Care Perspectives. 19(1): 12-19 (1998).

American Heart Association. Economic Cost of Cardiovascular Diseases. Washington, D.C.: American Heart Association, 1999. Online. Available: http:\\www.Americanheart.org/statistics. January 25, 1999.

National Diabetes Information Clearinghouse, Diabetes Statistics: NIDDK. NIH Publication No. 98-3926, Bethesda, MD: 1997.

Public Sector Contract Report, "Disease management program saves $850 PMPM for CHF seniors enrolled in Medicare risk," Public Sector Contract Report. 4(2):23-27 (1998).

Burns, L., Lamb, G., Wholey, D., "Impact of integrated community nursing services on hospital utilization and costs in a Medicare risk plan," Inquiry, 33(1): 30-41 (1996) .

United States General Accounting Office, Medicaid Long Term Care: Successful State Efforts to Expand Home Services While Limiting Costs. Report to the Chairman, Subcommittee on Oversight and Investigations, Committee on Energy and Commerce, House of Representatives, (Publication: GAO/HEHS-94-167, August 1994.)

Wagner, E., Austin, B., & Von Korff, M., "Improving outcomes in chronic illness." Managed Care Quarterly. 4(2): 12-25 (1996).

Lake Sosnin Snell Perry & Associates, March 1998.

Nurse practitioners (NPs) and clinical nurse specialists (CNSs) are registered nurses who have education and clinical experience beyond the two-four years of registered nurse education. They deliver a variety of services in diverse settings; some are primary care providers, while others deliver a mix of primary and specialty care. NPs are qualified to handle a wide range of basic health problems. Usually, the NP focuses on populations such as adults, women, the elderly, children, newborns or families. Recent changes in Medicare reimbursement law now define CNSs as licensed RNs who hold a master's degree in a defined clinical area of nursing from an accredited educational institution.

Shaw, E., "Should a Nurse Be Your Doctor?" American Health, January/February 1998, and Cohen, S., Mason, D., Arsence, L., Sargese, S., and Needham, D., "Focus Groups Reveal Perils and Promises of Managed Care for Nurse Practitioners," The Nurse Practitioner, Vol. 23, No. 6, (June 1998).

Nurse Practitioners, Physician Assistants and Certified Nurse Midwives: A Policy Analysis. (HC 37), Congress of the United States, Office of Technology Assessment, (December 1986).

Mason, D., Cohen, S., O'Donnell, J., Baxter, K., and Chase, A., "Managed Care Organizations' Arrangements with Nurse Practitioners," Nursing Economics, Vol. 15, No. 6, (November/December 1997).

Congressional Budget Office, Budgetary Implications of the Balanced Budget Act of 1997. CBO cost estimate, (Washington, DC: 1997).

Prices for most Medicare services are updated annually by some default rate, typically based on some measure of inflation. In some cases, Medicare relies on the Consumer Price Index (CPI), but for most services Medicare constructs an index of inflation that is specific to some subset of health care costs. For hospitals and other institutional providers this is known as the market basket index, while for physicians this was termed the Medicare Economic Index (MEI). (Physicians services updates are now tied to overall growth in the gross domestic product rather than the MEI.) These indices try to measure inflation in the costs of the labor and materials that are used to produce these elements of health care. Background materials from the Bipartisan Commission suggest that these update reductions typically range from 1 to 2 percent below the underlying market basket index of the inflation in costs for each type of provider.

Whether or not such payment reductions can be sustained depends largely on whether the cumulative reductions become large enough to compromise beneficiaries' access to care. On the one hand, Medicare has instituted much larger selective payment reductions without loss of access. Medicare fees for cataract surgery, for example, fell by more than 50 percent in real terms between 1986 and 1996 without any apparent loss of access to these services (Physician Payment Review Commission, Annual Report to Congress, 1997, (Washington, DC: 1997). On the other hand, Medicare's recent large revisions of home health payments have raised significant fears of loss of access to those services.

Bipartisan Commission background projections. Projected reductions in outlays understate the size of the reductions in payment per service. (Congressional budget scoring assumes that some of the reductions in payment per service will be offset by an increase in the volume and complexity of services billed to Medicare.) For example, the Balanced Budget Act of 1997 calls for reducing the hospital update by 1.72 percent below the market basket. Extending that from 2003 to 2020 would mean cumulative erosion of roughly one-quarter of the real (inflation-adjusted) value of Medicare's inpatient hospital payment rates over the course of 18 years.

Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment Policy, (Washington, DC: March 1998).

Miller, M., Welch, W., Analysis of Hospital Medical Staff Volume Performance Standards: Technical Report, Urban Institute, (Washington, DC: March 1993).

Mitchell, J., "Physician DRGs," New England Journal of Medicine, 313 (11): 670-5. (1985).

Several factors may limit potential savings in this area, however. First, cost pressures have significantly reduced the number of zero-premium plans in recent years. Second, the pending implementation of risk adjustment, along with ongoing rate revisions due to provisions of the Balanced Budget Act of 1997, will further reduce Medicare payments in those areas where rates are currently highest (and zero premium plans are currently most common).

In terms of the total health care costs of the elderly, Medicare currently pays for slightly more than half, with out-of-pocket payments, Medicaid, and private insurance paying most of the remainder. Health Care Financing Administration (HCFA), 1998.

Board of Trustees A, The 1998 Annual Report of the Board of Trustees of the Federal Hospital Insurance Fund. U.S. Government Printing Office, (Washington, DC: June 1998).

Board of Trustees B, The 1998 Annual Report of the Board of Trustees of the Federal Supplementary Medical Insurance Trust Fund. U.S. Government Printing Office, (Washington, DC: June 1998).

Possible sources for additional revenue include applying the federal budget surplus, raising income taxes, or increasing excise taxes on the sale of tobacco products, alcohol, firearms, and ammunition.

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Appendix A: Endnotes