Jun 11 Data Book Entire Reportw

J U N E
2 0 1 1
A DATA BOOK
Health Care Spending and the Medicare Program
Introduction
MedPACs Data Book is the result of discussions with congressional staff members regarding ways that MedPAC can better support them. It contains the type of information that MedPAC provides in publications like the March and June reports; it also combines data from other sources, such as CMS. The format is condensed into tables and figures with brief discussion. Website links to MedPAC publications and other websites are included on a Web links page at the end of each section. The Data Book provides information on national health care and Medicare spending as well as Medicare beneficiary demographics, dual-eligible beneficiaries, quality of care in the Medicare program, and Medicare beneficiary and other payer liability. It also examines provider settings such as hospitals and post-acute careand presents data on Medicare spending, beneficiaries access to care in the setting (measured by the number of beneficiaries using the service, number of providers, volume of services, length of stay, or through direct surveys) and the sectors Medicare profit margins, if applicable. In addition, it covers the Medicare Advantage program and prescription drug coverage for Medicare beneficiaries, including Part D. Several charts in this Data Book use data from the Medicare Current Beneficiary Survey (MCBS). We use the MCBS to compare beneficiary groups with different characteristics. The MCBS is a survey, so expenditure amounts that we show may not match actual Medicare expenditure amounts. Changes in aggregate spending among the fee-for-service sectors presented in this Data Book reflect changes in Medicare enrollment between the traditional fee-for-service program and Medicare Advantage. Increased enrollment in Medicare Advantage may be a significant factor in instances in which Medicare spending in a given sector has leveled off or even declined. In these instances, fee-for-service spending per capita may present a more complete picture of spending changes. We produce a limited number of printed copies of this report. It is, however, available through the MedPAC website: www.medpac.gov.
iii
Table of contents
Introduction .............................................................................................................................. iii Sections
1 National health care and Medicare spending .............................................................. 1
1-1 1-2 1-3 1-4 1-5 1-6 1-7 1-8 1-9 1-10 1-11 1-12 1-13 1-14
Aggregate Medicare spending among FFS beneficiaries, by sector, 20002009 ................................... 3 Per capita Medicare spending among FFS beneficiaries, by sector, 20002009 .................................... 4 Medicare made up over one-fifth of spending on personal health care in 2009...................................... 5 Medicares share of total spending varies by type of service, 2009 ........................................................ 6 Health care spending has grown more rapidly than GDP, with public financing making up nearly half of all funding......................................................................................................... 7 Trustees project Medicare spending to increase as a share of GDP ........................................................ 8 Changes in spending per enrollee, Medicare and private health insurance ............................................. 9 Trustees and CBO project Medicare spending to grow at an annual average rate of between 5.5 percent and 6 percent over the next 10 years .................................................................... 10 Medicare spending is concentrated in certain services and has shifted over time ................................ 11 FFS program spending is highly concentrated in a small group of beneficiaries, 2007 ...................... 12 Medicare HI trust fund is projected to be insolvent in 2024 under actuaries intermediate assumptions ...................................................................................................................... 13 Medicare faces serious challenges with long-term financing ............................................................... 14 Average monthly SMI premiums and cost sharing are projected to grow faster than the average monthly Social Security benefit ......................................................................................... 15 Medicare HI and SMI program payments and cost sharing per beneficiary in 2009........................... 16 Web links ................................................................................................................................................. 17
Medicare beneficiary demographics ........................................................................... 19
2-1 2-2 2-3 2-4 2-5 2-6
Aged beneficiaries account for the greatest share of the Medicare population and program spending, 2007 .................................................................................................................. 21 Medicare enrollment and spending by age group, 2007 ....................................................................... 22 Beneficiaries who report being in poor health account for a disproportionate share of Medicare spending, 2007 ................................................................................................................... 23 Enrollment in the Medicare program is projected to grow rapidly in the next 20 years ...................... 24 Characteristics of the Medicare population, 2007 ................................................................................. 25 Characteristics of the Medicare population, by rural and urban residence, 2007 ................................. 26 Web links ................................................................................................................................................. 27
Dual-eligible beneficiaries ............................................................................................ 29
3-1 3-2
Dual-eligible beneficiaries account for a disproportionate share of Medicare spending, 2007 ........... 31 Dual-eligible beneficiaries are more likely than non-dual eligibles to be disabled, 2007 ................... 32
3-3 3-4 3-5 3-6
Dual-eligible beneficiaries are more likely than non-dual eligibles to report poorer health status, 2007....................................................................................................................... 33 Demographic differences between dual-eligible beneficiaries and non-dual eligibles, 2007 .............. 34 Differences in spending and service use rate between dual-eligible beneficiaries and non-dual eligibles, 2007 .................................................................................................................. 35 Both Medicare and total spending are concentrated among dual-eligible beneficiaries, 2007 ............ 36 Web links ...................................................................................................................................... 37
Quality of care in the Medicare program................................................................... 39
4-1 4-2 4-3 4-4 4-5 4-6 4-7
Most in-hospital and 30-day postdischarge mortality rates improved from 2006 to 2009 .................. 41 Hospital inpatient patient safety indicators improved or were stable from 2006 to 2009 .................... 42 Most ambulatory care quality indicators improved or were stable from 2007 to 2009 ....................... 43 Risk-adjusted SNF quality measures show mixed results since 2000 .................................................. 44 Share of home health patients with positive outcomes has grown, but increases have leveled off ..... 45 Dialysis quality of care: Some measures show progress, others need improvement ........................... 46 Medicare Advantage quality measures were generally stable between 2009 and 2010 ...................... 47 Web links ................................................................................................................................................. 49
Medicare beneficiary and other payer financial liability ......................................... 51
5-1 5-2 5-3 5-4 5-5 5-6
Sources of supplemental coverage among noninstitutionalized Medicare beneficiaries, 2007 ........... 53 Sources of supplemental coverage among noninstitutionalized Medicare beneficiaries, by beneficiaries characteristics, 2007 ........................................................................................................ 54 Total spending on health care services for noninstitutionalized FFS Medicare beneficiaries, by source of payment, 2007 ................................................................................................................... 55 Per capita total spending on health care services among noninstitutionalized FFS beneficiaries, by source of payment, 2007 ............................................................................................ 56 Variation in and composition of total spending among noninstitutionalized FFS beneficiaries, by type of supplemental coverage, 2007 ............................................................................................... 57 Out-of-pocket spending for premiums and health services per beneficiary, by insurance and health status, 2007...................................................................................................... 58 Web links ...................................................................................................................................... 59
Acute inpatient services ............................................................................................... 61 Shortterm hospitals
6-1 6-2 6-3 6-4 6-5 6-6
Annual changes in number of acute care hospitals participating in the Medicare program, 20002009 .............................................................................................................. 63 Percent change in hospital employment, by occupation, 20072009 ................................................... 64 Growth in Medicares FFS payments for hospital inpatient and outpatient services, 19992009 ...... 65 Proportion of Medicare acute care hospital inpatient discharges by hospital group, 2009 .................. 66 Major diagnostic categories with highest volume, fiscal year 2009 ..................................................... 67 Cumulative change in total admissions and total outpatient visits, 19992009 ................................... 68
vi
6-7 6-8 6-9 6-10 6-11 6-12 6-13 6-14 6-15 6-16 6-17 6-18 6-19 6-20 6-21 6-22 6-23 6-24
Cumulative change in Medicare outpatient services and inpatient discharges per FFS beneficiary, 20042009 .............................................................................................................................................. 69 Trends in Medicare inpatient and non-Medicare inpatient length of stay, 19992009 ........................ 70 Source of inpatient hospital admissions, 20002009 ............................................................................ 71 Share of Medicare Part A beneficiaries with at least one hospitalization, 20002009 ........................ 72 Hospital occupancy rates, 19992009 ................................................................................................... 73 Medicare inpatient payments, by source and hospital group, 2009 ...................................................... 74 Medicare acute IPPS margin, 19942009 ............................................................................................. 75 Medicare acute IPPS margin, by urban and rural location, 19942009 ............................................... 76 Overall Medicare margin, 19972009 ................................................................................................... 77 Overall Medicare margin, by urban and rural location, 19972009 ..................................................... 78 Hospital total all-payer margin, 19942009 .......................................................................................... 79 Hospital total all-payer margin, by urban and rural location, 19942009 ............................................ 80 Hospital total all-payer margin, by teaching status, 19942009 ........................................................... 81 Medicare margins by teaching and disproportionate share status, 2009 .............................................. 82 Financial pressure leads to lower costs .................................................................................................. 83 Change in Medicare hospital inpatient costs per discharge and private payer payment-to-cost ratio, 19872009 ......................................................................................................... 84 Markup of charges over costs for Medicare services, 19982009........................................................ 85 Number of CAHs, 19992011 ............................................................................................................... 86
Specialty psychiatric facilities
6-25 6-26 6-27 6-28 6-29
Medicare payments to inpatient psychiatric facilities, 20012010 ....................................................... 87 Number of inpatient psychiatric facility cases has fallen under the PPS, 20022009 ........................ 88 Inpatient psychiatric facilities, 20032009 ............................................................................................ 89 One diagnosis accounted for almost three-quarters of IPF cases in 2009 ............................................ 90 IPF discharges by beneficiary characteristics, 2009 .............................................................................. 91 Web links ................................................................................................................................................. 92
Ambulatory care .......................................................................................................... 93 Physicians
7-1 7-2 7-3 7-4 7-5 7-6 7-7 7-8 7-9 7-10
Medicare spending per FFS beneficiary on physician fee-schedule services, 20002010 .................. 95 Volume growth has raised physician spending more than input prices and payment updates, 20002009................................................................................................................. 96 Most beneficiaries report that they can always or usually get timely care, 2010 ................................. 97 Medicare beneficiaries report better ability to get timely appointments with physicians, compared with privately insured individuals, 20072010 .................................................................... 98 Medicare and privately insured patients who are looking for a new physician report more difficulty finding one in primary care, 20072010 ...................................................................... 99 Access to physician care is better for Medicare beneficiaries compared with privately insured individuals, but minorities in both groups report problems more frequently, 2010 ........................... 100 Differences in access to new physicians are most apparent among minority Medicare and privately insured patients who are looking for a new specialist, 2010 ........................................ 101 Continued growth in volume of physician services per beneficiary, 20002009 .............................. 102 Shifts in the volume of physician services, by type of service, 20042009 ....................................... 103 Changes in physicians professional liability insurance premiums, 20032010 ................................ 104
vii
Hospital outpatient services
7-11 7-12 7-13 7-14 7-15 7-16 7-17 7-18
Spending on all hospital outpatient services, 20002010 ................................................................... 105 Most hospitals provide outpatient services .......................................................................................... 106 Payments and volume of services under the Medicare hospital outpatient PPS, by type of service, 2009..................................................................................................................................... 107 Hospital outpatient services with the highest Medicare expenditures, 2009 ...................................... 108 Medicare coinsurance rates, by type of hospital outpatient service, 2009 .......................................... 109 Effects of hold-harmless and SCH transfer payments on hospitals outpatient revenue, 20072009 ............................................................................................................................. 110 Medicare hospital outpatient, inpatient, and overall Medicare margins, 20032009......................... 111 Number of observation hours has increased, 20062009 ................................................................... 112
Ambulatory surgical centers
7-19
Number of Medicare-certified ASCs increased by 41 percent, 20032010 ....................................... 113

Imaging services
7-20 7-21
Medicare spending for imaging services under the physician fee schedule, by type of service, 2004 and 2009 .................................................................................................................... 114 Radiologists received nearly half of physician fee-schedule payments for imaging services, 2009 ...................................................................................................................... 115 Web links .............................................................................................................................................. 116
Post-acute care ........................................................................................................... 119
8-1 8-2
Number of most post-acute care providers grew or remained stable in 2010 .................................... 121 Medicares spending on home health care and skilled nursing facilities fueled growth in FFS post-acute care expenditures .................................................................................................... 122
Skilled nursing facilities
8-3 8-4 8-5 8-6 8-7
Since 2005, the share of Medicare stays and payments going to freestanding SNFs and for-profit SNFs has increased........................................................................................................ 123 Small declines in SNF days and admissions between 2008 and 2009 ............................................... 124 Case mix in freestanding SNFs shifted toward rehabilitation plus extensive services RUGs and away from other broad RUG categories ............................................................................ 125 Freestanding SNF Medicare margins have exceeded 10 percent for seven years............................. 126 Freestanding SNFs with relatively low costs and high quality maintained high Medicare margins......................................................................................................................... 127
Home health agencies
8-8 8-9 8-10 8-11
Spending for home health care, 19942010 ........................................................................................ 128 Provision of home health care changed after the prospective payment system started...................... 129 Trends in provision of home health care ............................................................................................. 130 Margins for freestanding home health agencies .................................................................................. 131
Inpatient rehabilitation facilities
8-12 8-13 8-14 8-15
Most common types of inpatient rehabilitation facility cases, 2010 ................................................... 132 Volume of IRF FFS patients remained stable in 2009, after declining from 2004 to 2007 ............... 133 Overall IRFs payments per case have risen faster than costs, post-PPS ........................................... 134 Inpatient rehabilitation facilities Medicare margin by type, 20012009 ........................................... 135
viii
Long-term care hospitals
8-16 8-17 8-18 8-19 8-20
Top MSLTCDRGs made up more than half of LTCH discharges in 2009 ................................... 136 LTCH spending per FFS beneficiary has increased under PPS .......................................................... 137 LTCHs per case payment rose more quickly than costs in 2009....................................................... 138 LTCHs Medicare margins by type of facility .................................................................................... 139 LTCHs in the top quartile of Medicare margins in 2009 had much lower costs................................ 140 Web links .............................................................................................................................................. 141
Medicare Advantage.................................................................................................. 143
9-1 9-2 9-3 9-4 9-5 9-6 9-7 9-8 9-9
MA plans available to virtually all Medicare beneficiaries ............................................................ 145 Access to zero-premium plans with MA drug coverage, 20062011............................................. 146 Enrollment in MA plans, 19942011 .............................................................................................. 147 Changes in enrollment vary among major plan types ..................................................................... 148 MA and cost plan enrollment by state and type of plan, 2011 ........................................................ 149 MA plan benchmarks, bids, and Medicare program payments relative to FFS spending, 2011 ... 150 Enrollment in employer group MA plans, 20062011 ................................................................... 151 Number of special needs plans continues to decline from 2008 peak ............................................ 152 Number of SNPs decreased while SNP enrollment rose from 2010 to 2011 ................................. 153 Web links .............................................................................................................................................. 154
10
Prescription drugs ...................................................................................................... 155
10-1 10-2 10-3 10-4 10-5 10-6 10-7 10-8 10-9 10-10 10-11 10-12 10-13 10-14 10-15 10-16 10-17
Medicare spending for Part B drugs administered in physicians offices or furnished by suppliers .......................................................................................................................... 157 Top 10 Part B drugs administered in physicians offices or furnished by suppliers, by share of expenditures, 2009............................................................................................................. 158 In 2010, about 90 percent of Medicare beneficiaries were enrolled in Part D plans or had other sources of creditable drug coverage .................................................................................... 159 Parameters of the defined standard benefit increase over time ........................................................... 160 Characteristics of Medicare PDPs ....................................................................................................... 161 Characteristics of MAPDs ................................................................................................................. 162 Average Part D premiums .................................................................................................................... 163 Number of PDPs qualifying as premium-free to LIS enrollees increased in 2011, even as overall number of PDPs declined .................................................................................................... 164 In 2011, most Part D enrollees are in plans that charge higher copayments for nonpreferred brand-name drugs ........................................................................................................... 165 In 2011, use of utilization management tools continues to increase for both PDPs and MAPDs ........................................................................................................................................ 166 Characteristics of Part D enrollees, 2009............................................................................................. 167 Part D enrollment trends, 20062009 .................................................................................................. 168 Part D enrollment by region, 2009....................................................................................................... 169 The majority of Part D spending is incurred by fewer than half of all Part D enrollees, 2009 .......... 170 Characteristics of Part D enrollees, by spending levels, 2009 ............................................................ 171 Part D spending and utilization per enrollee, 2009.............................................................................. 172 Part D risk scores vary across regions, by plan type and by LIS status, 2009 .................................... 173 ix
10-18 10-19 10-20 10-21 10-22 10-23
Part D spending varies across regions even after controlling for prices and health status, 2009 ....... 175 Top 15 therapeutic classes of drugs under Part D, by spending and volume, 2009 .......................... 176 Generic dispensing rate for the top 15 therapeutic classes, by plan type, 2009.................................. 177 Generic dispensing rate for the top 15 therapeutic classes, by LIS status, 2009 ................................ 178 Pharmacies participating in Part D, 2009 ............................................................................................ 179 Prescriptions dispensed, by pharmacy characteristics and urbanicity, 2009 ...................................... 180 Web links .............................................................................................................................................. 182
11
Other services ............................................................................................................. 183 Dialysis
11-1 11-2 11-3 11-4 11-5 11-6 11-7
Number of dialysis facilities is growing and share of for-profit and freestanding dialysis providers is increasing ............................................................................................................ 185 Medicare spending for outpatient dialysis services furnished by freestanding and hospital-based dialysis facilities, 2004 and 2009................................................................................. 186 Dialysis facilities capacity increased between 2000 and 2010 .......................................................... 187 Characteristics of dialysis patients, by type of facility, 2009 .............................................................. 188 The ESRD population is growing, and most ESRD patients undergo dialysis .................................. 189 Diabetics, the elderly, Asian Americans, and Hispanics are among the fastest growing segments of the ESRD population ....................................................................................................... 190 Aggregate margins vary by type of freestanding dialysis facility, 2009............................................. 191
Hospice
11-8 11-9 11-10 11-11 11-12 11-13 11-14 11-15 11-16 11-17 11-18
Medicare hospice use and spending grew substantially from 2000 to 2009 ...................................... 192 Hospice use increased across beneficiary groups from 2000 to 2009 ................................................ 193 Number of Medicare-participating hospices has increased, largely driven by for-profit hospices.... 194 Hospice cases and length of stay, by diagnosis, 2008 ........................................................................ 195 Long hospice stays are getting longer, while short stays remain virtually unchanged, 2000 and 2009 ...................................................................................................................................... 196 Hospice average length of stay among decedents, by beneficiary and hospice characteristics, 2008 ............................................................................................................................. 197 Hospice aggregate Medicare margins, 20022008 ............................................................................. 198 Medicare margins are higher among hospices with more long stays, 2008 ....................................... 199 Hospices that exceeded Medicares annual payment cap, selected years........................................... 200 Length-of-stay and live discharge rates for above- and below-cap hospices, 2008 ........................... 201 Hospice cap is unrelated to use of hospice services across states, 2008 ............................................. 202
Clinical laboratory
11-19
Medicare spending for clinical laboratory services, fiscal years 20002010 ..................................... 203 Web links .............................................................................................................................................. 204
SECTION
National health care and Medicare spending
Chart 1-1.
140 Medicare spending (dollars in billions) 120
Aggregate Medica spen A e are nding am mong FFS S beneficiar ries, by sector, 2 s 2000200 09
Hospita inpatient al 100 80 60 40 20 0 2000 2001 200 02 2003 2004 2 2005 2006 6 2007 2008 20 009 Physici an Post-ac cute care Hospita outpatient al Inpatien psychiatric hospital nt ASC
Note: FF (fee-for-servic ASC (ambulatory surgical ce FS ce), enter). Dollars are Medicare spen e nding only and do not include o be eneficiary cost sh haring. The grow in spending slowed between 2 wth 2006 and 2008 d to large incre due eases in the num mber of Medicare Advanta enrollees, wh age hose spending is not included in t these aggregate totals. e e eport of the Board of Trustees of the Medicare T ds f Trust Funds. CMS, Office of the Actuary and the 2011 annual re
Source:
Medicare spendin among fe ng ee-for-servic (FFS) ben ce neficiaries gr rew strongly in most sec y ctors from 2000 throug 2004. Spe gh ending grow slowed sllightly from 2 wth 2005 to 2007 but reboun 7 nded in som sectors from 2008 to 2009. The slowing in a me f o aggregate sp pending from 2005 to 20 is m 007 partia attributab to a decl ally ble line in the nu umber of FF beneficiar FS ries.
A Data Book: Health care spe H ending and the Medicare prog gram, June 20113
Chart 1-2.
4,00 00 Medicare spending (dollars per capita) 3,50 00 3,00 00 2,50 00 2,00 00 1,50 00 1,00 00 50 00 0
Per capita Medica spend a are ding among FFS S ries, by sector, 2 s 2000200 09 beneficiar
Hospital inpatien nt Phy ysician Pos st-acute care Hospital outpatie ent Inp patient psychia atric hospital AS SC
2000
2001
20 002
2003
2004
2005
200 06
2007
2008
20 009
Note:
FF (fee-for-servic ASC (ambulatory surgical ce FS ce), enter). Dollars are Medicare spen e nding only and do not include o be eneficiary cost sh haring. e e eport of the Board of Trustees of the Medicare T ds f Trust Funds. CMS, Office of the Actuary and the 2011 annual re
Source:
Medicare spendin per bene ng eficiary in fee e-for-service Medicare in ncreased ste eadily in mos st secto from 2000 through 20 ors 009, with some sectors growing fast from 200 to 2009. ter 06
4Nation health care and Medicare spending nal a s
Chart 1-3.
Medicare made up over on M p ne-fifth o spend of ding on personal health ca in 20 are 009
Other health insura ance progr rams 4% % Out of pocket o 14% Total = $2.09 trillio on
Medic care 23% %
Medicaid 17% Priv vate health in nsurance 34%
Other third-party payers s 8%
Note:
Out-of-pocket spending includes cost sharing for both privately and publicly insured individuals. Per c d d rsonal health car re pending includes spending for clin s nical and profess sional services re eceived by patie nts. It excludes a administrative co osts sp an profits. Premiu nd ums are included with each program (e.g., Medic d care, private insu urance) rather tha in the out-of-p an pocket ca ategory. Other he ealth insurance programs include the Children's H p e Health Insurance Program, Depa e artment of Defens and se, De epartment of Vet terans' Affairs. Other third-party payers include w O p worksite health ca other private revenues, India are, e an He ealth Service, wo orkers' compensation, general as ssistance, matern and child hea nal alth, vocational re ehabilitation, other federal programs, Substance Abus and Mental He se ealth Services A Administration, ot her state and loc programs, and cal sc chool health. e nal , CMS, Office of the Actuary, Nation Health Expenditure Accounts, 2011.
Source:
Of the $2.09 trillio spent on personal he e on ealth care in the United S States in 200 Medicare 09, e accou unted for 23 percent, or $502 billion (as noted a above, this a amount includes direct patient care spen nding and ex xcludes certa administ ain trative and b business cos sts). Medicar is re argest single purchaser of health car in the Uniited States. Thirty-four p e o re percent of the la spending was financed throu private health insura ugh h ance payers and 14 perc cent was from m consu umer out-of-pocket spen nding. Medicare and private health insurance sp pending incllude premium contributio from m ons enrollees.
Chart 1-4.
100% % 90% % 80% % Share of spending 70% % 60% % 50% % 40% % 30% %
Medicare share of total s M s spending varies by type of se ervice, 2009 2

21% 2 53% 70% % 36% 3 47% 66% 69%
18% 8% %
33% 44% 4 20% 13% 21% Durable medical equipment Other 9% 22%
20% % 29% 10% % 0% % Hospita al 21% %
rsing home Physicia and Home health Nur an clinic cal services Medic care Medicaid and all S SCHIP
Prescriptio on drugs
Note:
CHIP (State Childrens Health Ins surance Program Personal hea spending inclludes spending f clinical and m). alth for SC pr rofessional servic received by patients. It excludes administrativ costs and pro ces p ve ofits. Totals may n sum to 100 p not percent du to rounding. O ue Other includes private health ins p surance, out-of-p pocket spending, and other privat and public spe te ending. e nal , CMS, Office of the Actuary, Nation Health Expenditure Accounts, 2011.
Source:
The level and dis stribution of spending dif between Medicare a other payers, largely s ffer n and y because Medicar covers an older, sicke population and does n cover se re n er n not ervices such as long-term care. In 2009, Medicar accounted for 29 perc re d cent of spend ding on hosp pital care, 21 percent of 1 physi ician and clin nical service 44 percent of home h es, health servic ces, 20 percent of nursin ng home care, 21 pe e ercent of dur rable medica equipmen and 22 pe al nt, ercent of pre escription dru ugs.
Chart 1-5.
Health care spend H ding has grown m more rap pidly than GDP, with public financing making up nea G h f arly half of al funding ll
Total health s T spending All p private spendiing Med dicare spendin ng Projected Ac ctual
25% All public spending A 20%
Health spending as a percent of GDP
15%
10%
5%
0% 1966
1971
1976
1981
1986
1991
1 996
2001
2006
2011 2
2016
Note:
estic product). To health spending is the sum of all private and p otal f public spending. Medicare spend ding is GDP (gross dome ne f on component of all public spending. e nal , CMS, Office of the Actuary, Nation Health Expenditure Accounts, 2011.
Source:
Total health spen nding consum an incre mes easing propo ortion of nat tional resour rces, accoun nting for a double-digit share of gro domestic product (G t oss GDP) annuallly since 198 82. As a share of GD total hea spending has increa sed from ab DP, alth g bout 6 percen in 1965 to o nt t GDP in 2019 Health 9. about 18 percent in 2009. It is projected to reach 20 percent of G spendings share of GDP was stable thro e oughout muc of the 199 due to s ch 90s slower spend ding growt associate with great use of ma th ed ter anaged care techniques and higher enrollment in e s mana aged plans as well as a strong economy. a Medicare spendin has also grown as a share of the economy fr ng e rom less tha 1 percent an when it was start in 1965 to about 3.6 percent toda Projectio suggest that Medica n ted t ay. ons are spending will make up 4 perc cent of GDP by 2019. In 2009, all public spending made up abo 49 perce of total health care spending and c m out ent d privat spending made up 51 percent. By 2019, thos percentag are proje te 1 y se ges ected to be 5 51 perce and 49 percent, resp ent p pectively.
Chart 1-6.
8% 7% 6%
Trustees project Medicare spending to inc M e crease as a hare of GDP G sh

Part D Part B Part A 5.8% 5.2 %
5 5.9%
6.1%
6.2%
6.3%
Share of GDP (percent)
5% 4.0% 4% 3% 2.3% 2 1.9% 2% 1% 0% 1970 198 80 1990 2000 2 2010 2020 30 203 2040 2 2050 2060 2070 80 208 0.7% 1.3% 3.6%
Note: Source:
estic product). These projections are based on the trustees interm a e mediate set of ass sumptions. GDP (gross dome 011 rt o e t 20 annual repor of the Boards of Trustees of the Medicare Trust Funds.
Over time, Medica spending has accounted for an inc are g creasing sha of gross d are domestic product P). ent i d ver t 2080. (GDP From less than 1 perce in 1970, it is projected to reach ov 6 percent of GDP in 2 Nominal Medicare spending grew on avera 9.2 perce per year over the per e age ent riod from 198 to 80 2010, considerabl faster than nominal gro , ly n owth in the ec conomy, which averaged 5.7 percent per d year over the sam time frame Future Medicare spend o me e. ding is projec cted to contin growing f nue faster than GDP, averag G ging 5.5 percent per year between 201 and 2080 compared w an annua 10 0 with al avera growth ra of 4.6 per age ate rcent for the economy as a whole. In o other words, Medicare spend ding is projec cted to contin rising as a share of G nue GDP but at a slower pace e. Medic cares share of GDP is pr rojected to re each 6.3 perc cent in 2080. This amoun is significan nt ntly smaller than the projection of Medicares share of GDP before enac p M s P ctment of the Patient e ection and Aff fordable Care Act of 2010 (PPACA). U e 0 Under prior la in 2009 t Trustees aw, the Prote estim mated that Me edicares sha of GDP would reach 1 1.2 percent by 2080. This difference is are w largel due to the permanent productivity adjustments f most prov ly p a for viders enacte in PPACA ed A. Begin nning in 2010 the aging of the baby-b 0, o boom genera tion, an expe ected increas in life se expec ctancy, and the Medicare drug benefit are likely to increase the proportion of economic t e t o e c resou urces devoted to Medicare growing fr d e, rom 3.6 perce of GDP in 2010 to 5.8 percent of G ent n 8 GDP by 20 040. Additiona factors suc as innova al ch ation in medic technolog and the wi cal gy idespread us of se insura ance (which shields individuals from facing the ful l price of serv f rvices) will als contribute to so e increa ases in health care spend ding.
Chart 1-7.
30%
Changes in spend C ding per enrollee Medica and e, are private he ealth insurance
Average ann nual percent ch hange by perio od
25% Per enrollee change (percent)

1970-2009 1970-1993 1993-1997 1997-1999 1999-2002 2002-2009
Medicare
9.0 11.0 7.3 -0.3 6.4 7.5
PH HI
10.0 12.9 3.7 6.2 9.4 5.9
20%
15%
10%
5%
0%
-5% 1970
Note:
19 975
198 80
1985
1990 0
1995
2000
2005
PH (private health insurance). In most years in this period Medicar and PHI do no cover the same services. Medi HI h m s re ot icare ex xpenditures inclu both fee-for-s ude service and priva plans. ate e nal , CMS, Office of the Actuary, Nation Health Expenditure Accounts, 2011.
Source:
Altho ough rates of growth in per capita sp f p pending for M Medicare and private ins d surance often differ from year to year, over the long ter they have been quite similar. How r o rm e e wever, this comp parison is se ensitive to the end points of time one uses for ca e s e alculating av verage growt th rates. Also, private insurers and Medicar do not buy the same m of servic a re y mix ces, and Medicare covers an older population that tends to be more costly. In addition the data d n, t e do not allow analysis of the exte to which these spend s ent ding trends w were affected by change in es the generosity of covered benefits and, in turn, chan ges in enrollees out-off n -pocket spending. Differ rences appe to be more pronounc since 19 ear ced 985, when Medicare beg introduci gan ing the prospective payment sys p stem for hosp pital inpatien services. S nt Some analys believe t sts that, e 80s, Medica has had greater succ are g cess at conta aining cost g growth than since the mid-198 privat payers by using its larger purchas te y sing power. Others main ntain that, since the 197 70s, benefits offered by private ins b surers have expanded a cost-sha and aring require ements declined. These factors ma the comparison prob ake blematic, as Medicares benefits cha anged little o over the same period.
Chart 1-8.
Trustees and CBO project Medica spend O t are ding to e f n grow at an annual average rate of between 5.5 percent and 6 per rcent ove the ne 10 years er ext
Trustees - hig T gh Actua al Project ted
1200
1000
Trustees - inte T ermediate CBO C Trustees - low T w
Dollars (in billions)
800
600
400
200
0 1980
Note:
1984
1988
1992
199 96
2000
2004
20 008
2012
2016
CBO (Congression Budget Office All data are nominal, gross pr nal e). rogram outlays (m mandatory plus a administrative xpenses) by cale endar year. ex 011 rt o e t 20 annual repor of the Boards of Trustees of the Medicare Trust Funds. CBO M arch 2011 baseline.
Source:
Medicare spendin has grow nearly 13ng wn -fold, from $ billion in 1980 to $50 billion in 2 $37 09 2009 (see Chart 1-3; th hese data include benef payments and adminis fit strative expe enses). Medicare spendin increased significantly after 2006 with the int ng d 6 troduction of Part D, f Medicares volun ntary outpatie prescript ent tion drug ben nefit. The Congression Budget Office project that mand C nal O ts datory spend ding for Med dicare will gro at ow an av verage annu rate of 5.5 percent be ual 5 etween 2011 and 2020. The Medica trustees 1 are interm mediate projections for 2011 to 2020 assume 5. 9 percent av 2 0 verage annu growth. ual Forec casts of future Medicare spending are inherently uncertain, and differen e a y nces can ste em from different ass sumptions about the eco onomy (whic affect prov ch vider payme annual ent updates) and abo growth in the volume and intens ity of service delivered to Medicare out n e es e beneficiaries, am mong other fa actors.
10Natio health care and Medicare spending onal e e
Chart 1-9.
Medicare spendin is con M ng ncentrate in cer ed rtain se ervices and has shifted o a over time e
Total spe ending 2010 = $514 billio on
Pres scription drugs provided s unde Part D er 12% SNF 5% Inp patient spital hos 2 27%
Tota spending 2000 = $227 billion al 2 b

SNF 5%
Other 10% Oth her hospital 4% DME 2%
Inpatie ent hospita al 39%
r Other 8% Other al hospita 5% Home health 4% Hospice 3%
Physician fee schedule 18% ealth Home he Hospice 4% 1%
DM ME 2% % Phys sician fee sc chedule 12%
Managed care 18%
Managed care 22%
Note:
SN (skilled nursin facility), DME (durable medica equipment). M edicares outpat NF ng al tient drug benefit began in 2006, and t thus the distributio of spending fo 2009 differs sig on or gnificantly from e earlier years. Spe ending amounts are gross outlay ys, eneficiary premiu ums but do not in nclude spending by beneficiaries (or meaning that they include spending financed by be pending on their behalf) for cost-s sharing requirem ments of Medicare e-covered servic ces. Values are re eported on a fisc cal sp ye incurred bas and do not inc ear, sis clude spending on program admin o nistration. Othe r includes carrie lab, other carri er ier, intermediary lab, and other interme a ediary. Totals ma not sum to 10 percent due to rounding. ay 00 o
012 B ffice of the Actua 2011. ary, Source: 20 Presidents Budget; CMS, Of
The distribution of Medicare spending am d o mong service has chan es nged substan ntially over time. In 2010, Medicar spent abo $514 billio for benef expenses. Inpatient hospital servi re out on fit ices were by far the la argest spend ding categor (27 percen followed by manage care (22 ry nt), ed perce ent), services reimbursed under the physician fe schedule (12 percent outpatient ee t), t presc cription drugs provided under Part D (12 percen and other fee-for-serv u nt), r vice settings (8 s perce ent). Altho ough inpatien hospital se nt ervices still made up the largest spe m e ending categ gory, spendin ng for those services was a sma s aller share of total Medic care spendin in 2010 th it was in ng han n 2000, falling from 39 percent to 27 perce Spendin g on benefic m t ent. ciaries enrolled in manag ged care plans has gr rown from 18 percent to 22 percent over the same period. C o Current Med dicare mana aged care en nrollment is higher than it was a dec cade ago.
Chart 1-10. FFS progr ram spending is highly c concentr rated in a mall eneficiari ies, 2007 7 sm group of be
100% % 90% % 80% % 70% % 60% % Percent 50% % 40% % 30% %
Least costly half c Second quartile d 8 81% 17% Most costly 1%
Nex 4% xt
Nex 5% xt 14%
Nex 15% xt 24%
26%
20% % 10% % 0% % Percent of beneficiaries Percen of program spending nt m 14%

5% %
Note:
FS ce). eneficiaries with any group health enrollment durin the year. Spe a h ng ending data reflec ct FF (fee-for-servic Excludes be re evised 2007 Medicare Current Be eneficiary Survey Cost and Use fiile from CMS. y rrent Beneficiary Survey, Cost an Use files. nd MedPAC analysis of Medicare Cur
Source:
Medicare fee-for-service (FFS) spending is concentr g rated among a small num g mber of beneficiaries. In 2007, the co 2 ostliest 5 per rcent of bene eficiaries acc counted for 38 percent o of annual Medicare FFS spending and the costliest qua artile accoun nted for 81 p percent. By contr rast, the leas costly half of beneficia st f aries accoun nted for only 5 percent of FFS spend f ding. Costly beneficiaries tend to in nclude those who have multiple chro e onic conditio ons, those using inpatient hospital services, th l hose who are dually elig ible for Medicare and M e Medicaid, and d those who are in the last yea of life. e ar
Chart 1-11. Medicare HI trust fund is p M projected to be insolvent t in 2024 un n nder actu uaries in ntermediate assu umptions
Yea costs ar excee income ed 2008 2 2008 2 2008 2 Year H trust HI fund assets exhausted s 2016 2024 Neve er*
Estimate High Intermedia ate Low

Note:
ance). Income includes taxes (pa ayroll and Social Security benefits taxes, railroad retirement tax s HI (Hospital Insura ansfer), income from the fraud an abuse program and interest fr f nd m, rom trust fund as ssets. tra * Under the low-co assumption, trust fund assets would start to in U ost t ncrease in 2014 a continue to i and increase through hout the projection period. 011 rt o e t Office of the Actuary. 20 annual repor of the Boards of Trustees of the Medicare Trust Funds; CMS, O
Source:
The Medicare pro M ogram is fina anced throug two trust funds: one f Hospital Insurance (H gh for HI), which covers ser h rvices provid by hospitals and oth er providers such as ski ded s illed nursing g facilit ties, and one for Supplementary Medical Insuran (SMI) se e nce ervices, such as physician visits and Medica ares new pre escription dr benefit. Dedicated p rug payroll taxes on current worke largely fi fund. The HI trust fund c ers inance HI sp pending and are held in t HI trust f the can be ex xhausted if spending exc s ceeds payro tax revenu and fund reserves. G oll ues d General reven nues finance roughly 75 percent of SMI services and benef e S s, ficiary premiums finance e about 25 percent (General re t. evenues are federal tax dollars that are not ded e x dicated to a partic cular use but are made up of income and other t u e taxes on ind dividuals and corporation d ns.) The SMI trust fun is finance with general revenues and benefiiciary premiu S nd ed s ums. Some analy ysts believe that the leve of premiu t els ums and gen neral revenues required to finance burden on M projected spendin for SMI services wou impose a significant b ng s uld Medicare d i e beneficiaries and on growth in the U.S. economy. e xceeded its income in 20 008. In 2011 , Medicare t trustees report that unde er HIs expenses ex the in ntermediate assumptions the HI trus fund will be exhausted in 2024. Un s st e d nder high-co ost assum mptions, the HI trust fun could be exhausted a early as 2016. Under low-cost e nd e as assum mptions, it would remain able to pay full benefits indefinitely w n y s y.
Chart 1-12. Medicare faces se M erious ch hallenges with lo ong-term m financing

7% Total expenditures 6% Actual Projected P HI def ficit 5% General re evenue transf fers Percent of GDP 4% State transfers and drug fee 3% Premiums 2% Tax on ben nefits es Payroll taxe
1%
0% 1966
Note:
1976
1986
199 96
2006
2016 2
2026
2036
204 46
2056
2066
2076 6
estic product), HI (Hospital Insurance). These projjections are base on the trustee intermediate s of ed es set GDP (gross dome ssumptions. Tax on benefits refer to a portion of income taxes th higher income individuals pay on Social Secur rs hat e y rity as be enefits that is des signated for Med dicare. State transfers (often calle the Part D cla ed awback) refer to payments called for o wi ithin the Medicar Prescription Drug, Improvemen and Moderniz re D nt, zation Act of 200 from the states to Medicare for 03 s r as ssuming primary responsibility for prescription dru spending. The drug fee refers to the fee impos in the Patien ug e sed nt Pr rotection and Aff fordable Care Ac of 2010 on man ct nufacturers and iimporters of bran nd-name prescription drugs. These fees are deposited in the Part B ac d ccount. 011 rt o e t 20 annual repor of the Boards of Trustees of the Medicare Trust Funds.
Source:
Unde an interme er ediate set of assumption trustees p f ns, project that Medicare sp pending will g grow rapidly, from about 3.5 perce of gross domestic pro ent d oduct (GDP) today to 5.8 percent by ) y 2040 and to abou 6.3 percen by 2080. ut nt pared with th projection before the Patient Pro he ns e otection and Affordable Care Act of d f Comp 2010 (PPACA), Medicares expenditures are projecte to be a significantly s M e s ed smaller shar of re the economy6. percent of GDP in 208 compare d with 11.2 percent under prior law. This .3 f 80 projection is large due to th provisions in PPACA that put in p ely he s place perman nent adjustm ments for pr roductivity fo most providers. The actuaries also project tha PPACA w increase or a o at will reven nues to the Medicare pro M ogram due to an expans o sion of the H Hospital Insurance payro tax oll and other revenu provisions o ue s.
Chart 1-13. Average monthly SMI prem A m miums a and cost sharing ar projec re cted to grow fast than t aver g ter the rage monthly Social Se m S ecurity b benefit
$3,0 000 Monthly amounts per person in 2009 dollars Actual $2,5 500 Projected P
Avera Social Secu age urity benefit Avera SMI premiu plus cost sh age um haring Avera SMI benefit age t
$2,0 000
$1,5 500
$1,0 000
$5 500
$0 1970
Note:
198 80
1990
2000
2010
2020
20 030
2040
2050
2060 0
2070
20 080
SM (Supplementary Medical Insurance Average SMI be MI y e). enefit and average SMI premium plus cost-sharing valu are for a benefi e s ues iciary en nrolled in Part B and (after 2006) Part D. Beneficiary spe t ending on outpatien prescription drug before 2006 is n included. nt gs not 20 annual report of the Boards of Tru 011 o ustees of the Medic care Trust Funds.
Source:
Between 1970 and 20 009, the averag monthly Soc Security ben ge cial nefit (adjusted f inflation) inc for creased by an a annual averag rate of 1.7 pe ge ercent. Over the same period, average Supp , plementary Med dical Insurance (SMI) premium ms plus co sharing grew by an annual average of 5.3 percent, and t value of the total SMI bene grew by an ost w l 3 the e efit annual average of 6.5 percent. Betw 5 ween 2003 and 2009, Part B p premium increas offset 54 pe ses ercent of the do ollar se urity benefit. increas in the average Social Secu come. Growth over time in Medicare premiums and cost sharing will con h M s ntinue to outpac growth in So ce ocial Security inc Medica trustees pro are oject that betwe 2009 and 2040 the averag Social Security benefit will grow by 1 perc een 2 ge cent annually (after adjusting for inflation) compared wit about 2.5 pe ), th ercent annual growth in averag SMI premium ge ms ost wth v MI ell miums and cost plus co sharing. However, the grow rate of the value of the SM benefit as we as SMI prem sharing is lower than projected before enactment of the Patient P g o Protection and A Affordable Care Act of 2010 e (PPAC SMI premiu CA). ums and cost sharing are projected to grow i n inflation-adjusted terms by 2 percent ann s 2.5 nually betwee 2009 and 20 compared with 2.8 percen under prior la This change is a result of t PPACA en 040 w nt aw. e the provisi ions affecting SMIthe perma S anent productiv adjustments for some Part B providers an the changes in vity s t nd s payme ents to Medicar Advantage plans. re Most Medicare benef M ficiaries pay the Part B premium by having it withheld from their monthly S eir t Social Security benefit The December 2011 cost-of t. f-living adjustment for Social S Security benefit is projected to be 0.9 percen ts o nt. Under current hold-ha armless policies Medicare Pa B premiums cannot increas by a larger dollar amount th the s, art se han cost-of f-living increase in a beneficiary's Social Security benefit. So e ome beneficiariies may have th Part B prem heir mium increas limited as a result of the ho se old-harmless pro ovision if their S Social Security benefit is relati ively small. Twenty y-five percent of Medicare ben o neficiaries are not protected un n harmless provis sion. They inclu ude: nder the hold-h new be eneficiaries in Medicare who did not pay a pr M d remium in 2010 high-income beneficiaries w pay the inco 0, who omerelated Part B premiu and Medica beneficiaries who are also eligible for Med d um, are s dicaid. (For the last group, Me e edicaid pays fo their Part B premiums.) or p
Chart 1-14. Medicare HI and SMI prog M S gram pay yments a and cost sh haring per benef p ficiary in 2009 n
Average pro ogram payme ent (in dollars) d HI SMI
Note:
A Average cost-s sharing amou unt (in do ollars) $4 428 $1,1 188
$4,861 $ $4,644 $
ance), SMI (Supp plementary Medi ical Insurance). A Average program payments and cost-sharing am m mounts HI (Hospital Insura re vice Medicare on and do not inc nly clude Part D. Me edicare program payments repres sent unadjusted ar for fee-for-serv am mounts paid for covered services incurred during a calendar year under Medicare fee-for-service o c s e only and exclude e pa ayments for managed care servic ces. Program pay yments differ from benefit payme m ents, which reflec estimates of in ct nterim an retroactive adjustments made to institutional providers as well as payments for managed care. nd r dicaid Statistical Supplement 201 CMS Office o Information Se 10, of ervices. Medicare and Med
Source:
In calendar year 2009, the Medicare prog M gram made $4,861 in Hospital Insur rance (HI) progr ram paymen and $4,64 in Supple nts 44 ementary Me edical Insura ance (SMI) p program paym ments on ave erage per be eneficiary. In the same year beneficiarie owed an average of $ e r, es $1,616 in Medicare cost sharing for HI t r and SMI. S Most Medicare beneficiaries have supple emental cove erage throug former em gh mployers, medig policies, Medicaid, or other sources that fill in much of Medicares c gap o cost-sharing g requirements.
Web li inks. Nat tional he ealth care and Me e edicare s spending g

The Trustees Re T eport provide informatio on the fin es on nancial opera ations and actuarial status of the Medicare pro M ogram. //www.cms.g gov/ReportsT TrustFunds/ http:/
The National Hea Expendi N alth iture Accoun develope by the Off nts ed fice of the Actuary at CM MS provid information about spending for health care in the United States. de h n //www.cms.g gov/NationalHealthExpendData/ http:/
The Medicare an Medicaid Statistical Supplement d M nd developed b CMS prov by vides statistic cal inform mation about Medicare, Medicaid, and other CM programs MS s. .gov/MedicareMedicaidS StatSupp/ https://www.cms.
rovide inform mation about Medicare b t beneficiaries, providers, utilization, a and CMS statistics pr spending. //www.cms.g gov/DataCom mpendium/ http:/
MedP PACs March 2011 Repo to the Co h ort ongress prov vides an ove erview of Medicare and U U.S. health care spending in Chap 1, Conte for Medic pter ext care Payme Policy. ent http:/ //medpac.gov/chapters/M Mar11_Ch01 1.pdf
SECTION
Medicare beneficiary demographics
Chart 2-1.
Aged ben A neficiarie account for the greatest es e sh hare of the Medic t care pop pulation and prog gram sp pending, 2007
Perce of spend ent ding
Aged 8 82.0% Disabled 16.3% SRD ES 1.7 7%
Percent of beneficiar o ries

Age ed 84.0% Disabled 15.6% ESRD 0.3%
Note:
SRD (end-stage renal disease). ESRD refers to beneficiaries und age 65 with E E b der ESRD. The disab bled category refe to ers ES be eneficiaries unde age 65 without ESRD. The age category refer to beneficiarie s age 65 or olde Results include feeer t ed rs er. for-service, Medica Advantage, community dwelling, and institutio are c onalized benefic ciaries. Totals ma not sum to 100 ay 0 pe ercent due to rou unding. ciary Survey, Cos and Use file, 2 st 2007. MedPAC analysis of the Medicare Current Benefic
Source:
In 2007, beneficia aries age 65 or older composed 84 percent of th beneficia populatio 5 he ary on and accounted fo 82 percen of Medicar spending. Beneficiarie under age 65 accoun a or nt re . es nted for the remaining population and spendin g ng. In 2007, average Medicare spending per beneficiary was $9,695 e s r y 5. On a per capita basis, a disp b proportionate share of M edicare expenditures is devoted to e Medicare benefic ciaries who are eligible due to end-s a d stage renal d disease (ESR RD). On avera age, these beneficiaries incur spend ding that is m more than fiv times grea than ve ater beneficiaries in other categor o ries. In 2007 $51,901 w spent pe beneficiary enrolled du to 7, was er y ue ESRD versus $9,417 per ben D neficiary enr rolled due to age (including those wi and witho o ith out ESRD and $10, D), ,053 per (no on-ESRD) be eneficiary en nrolled due to (non-ESRD) disability. o Within the aged category, pe capita spe c er ending for tho with ESRD was $54 ose 4,997 versus s $9,15 for those without ESR 50 RD. (The Medicare Current Bene eficiary Surve may unde ey erstate the E ESRD popula ation and its s assoc ciated spend ding.)
Chart 2-2.
Medicare enrollme and s M ent spending by age group, e 20 007

85+ 1 17.2% Under 65 17.4% Under 65 16.1%

85+ 12.3%
75-84 28.8% 75-84 4 32.1% % 65-74 42.8% Average per capita = $9,695 e
Note: esults include fee e-for-service, Me edicare Advantag community dw ge, welling, and inst titutionalized ben neficiaries. Totals may s Re no sum to 100 pe ot ercent due to roun nding. ciary Survey, Cos and Use file, 2 st 2007. MedPAC analysis of the Medicare Current Benefic
74 65-7 32.7 7%
Source:
For th aged pop he pulation (65 or older), pe capita exp o er penditures in ncrease with age. Per ca apita expenditures wer $7,411 for beneficiaries ages 65 t 74, $10,7 for those 75 to 84, and re to 790 e $13,1 for those 85 or older 173 e r. Per capita expen c nditures for Medicare ben M neficiaries u under age 65 enrolled du to end-sta 5 ue age renal disease or disability we $11,141. ere
22
Medi icare beneficiar demographics ry
Chart 2-3.
Beneficiaries who report b B o being in poor he ealth ac ccount for a disp f proportio onate sh hare of Medicare spendin 2007 M ng,
Exce ellent or v very go ood hea alth 22. .5% Po oor hea alth 19. .0%
Poor P health 9.5% 9

Excellent or very good health 39.9%
Good or th fair healt 50.6%
Go or ood fair he ealth 58 8.5%
Average per capita = $9,695
Note:
esults include fee e-for-service, Me edicare Advantag community dw ge, welling, and inst titutionalized ben neficiaries. Totals may s Re no sum to 100 pe ot ercent due to roun nding. ciary Survey, Cos and Use file, 2 st 2007. MedPAC analysis of the Medicare Current Benefic
Source:
In 2007, most beneficiaries re eported exce ellent to fair health. Few than 10 p wer percent repo orted poor health. Medicare spendin is strongl associated with self-re ng ly d eported health status. In 2007, per n capita expenditur were $5, a res ,447 for thos who repo rted excellent or very go health, se ood $11,2 for those who report good or fair health, a $19,332 for those w reported 205 e ted and 2 who d poor health.
Chart 2-4.
140 0
Enrollmen in the Medicar progra is pro nt re am ojected t to grow rapidly in the next 20 years
Historic Projected
120 0 Beneficiaries (in millions)
100 0
80 0
60 0
40 0
20 0
0 1970 19 980 1990 2000 2010 2020 2 2030 2040 2050 206 60 2070 2 2080
Note: Source:
nrollment numbe are based on Part A enrollment only. Beneficia ers aries enrolled on in Part B are n included. nly not En e CMS, Office of the Actuary, 2011.
The total number of people enrolled in th Medicare program willl double bet t r e he tween 2000 and 2030, from about 40 million to 80 million beneficiarie t es. The rate of increa in Medic r ase care enrollm ment will acce elerate until 2030 as mo members of ore s the baby-boom generation be g ecome eligib and will s ble slow around 2030 after t entire ba the abym n boom generation has become eligible.
24
Chart 2-5.
Character C ristics of the Med f dicare po opulation, 2007

Percent of the Medic care popula ation* Percent of the Medicare population*
Character ristic
Characte eristic
Total (44, ,982,416) Sex Male Female e Race/ethnicity White, non-Hispanic c African American, non-Hispanic Hispanic Other Age <65 6574 7584 85+ Health status Excelle or very good ent Good or fair o Poor Residenc ce Urban Rural
Note:
100 0%
45 5 55 5
Living arrangemen g nt Instit tution Alon ne Spou use Othe er ation Educa No h high school diiploma High school diploma only h Som college or m me more Incom status me Belo poverty ow 100 125% of pov verty 125 200% of pov verty 200 400% of pov verty Over 400% of pov r verty emental insu urance status Supple Med icare only Man aged care Emp ployer Med igap Med igap/employe er Med icaid Othe er
6% 29 47 18
78 8 9 8 5
26 31 43
16 6 43 3 29 9 12 2
14 9 19 33 25
40 0 51 10 0
76 6 24 4
10 20 33 17 5 14 1
eneficiaries living in metropolitan statistical areas (MSAs). Rural in g ndicates benefic ciaries living outside Urban indicates be overty was define as income of $10,590 for peop living alone a as $13,540 fo married couples. ed ple and or MSAs. In 2007, po otals may not sum to 100 percent due to rounding Some beneficiiaries may have more than one ty of suppleme g. ype ental To insurance. Based on a repre esentative sample of the Medicare population. e e *B ciary Survey, Cos and Use file, 2 st 2007. MedPAC analysis of the Medicare Current Benefic
Source:
Close to one-qua e arter of bene eficiaries live in rural area e as. Twen nty-nine perc cent of the Medicare pop M pulation lives alone. s Twen nty-six perce of benefic ent ciaries have no high sch hool diploma a. Most Medicare beneficiaries have some source of su upplemental insurance.
Chart 2-6. t
Character C ristics of the Med f dicare po opulation, by rur ral an urban residen nd n nce, 2007 7
Percent of urban f Medicare po pulation Percent o rural of Medicare po opulation
ristic Character Sex Male Fema ale Race/ethnicity White non-Hispanic e, Africa American, non-Hispanic an c Hispa anic Other r Age <65 6574 4 7584 4 85+ Health status Excellent or very good Good or fair Poor Income status s Below poverty w 1001 125% of pove erty 1252 200% of pove erty 2004 400% of pove erty Over 400% of pove erty
Note:
44% 56
46 6% 54 4
76 10 9 5
87 7 6 3 4
15 43 29 13
19 9 42 2 28 8 11 1
41 50 9
36 6 51 1 12 2
13 8 18 33 27
15 5 9 22 2 34 4 19 9
eneficiaries living in metropolitan statistical areas (MSAs). Rural in g ndicates benefic ciaries living outside Urban indicates be overty was define as income of $10,590 for peop living alone a as $13,540 fo married couples. ed ple and or MSAs. In 2007, po esults include fee e-for-service, Me edicare Advantag community dw ge, welling, and inst titutionalized ben neficiaries. Totals may s Re no sum to 100 pe ot ercent due to roun nding. ciary Survey, Cos and Use file, 2 st 2007. MedPAC analysis of the Medicare Current Benefic
Source:
Rural Medicare beneficiaries are more lik b s kely to be W White (87 per rcent vs. 76 percent), to repor being in po health (1 percent vs 9 percent and to hav incomes below 125 rt oor 12 s. t), ve perce of povert (24 percen vs. 21 per ent ty nt rcent) compa ared with ur rban beneficiaries.
26
Web li inks. Medicare beneficiar demographics ry s

CMS Data Comp pendium con ntains historic, current, a projected data on Me and d edicare enrollment. http:/ //www.cms.g gov/DataCom mpendium/ The CMS website provides in C e nformation on Medicare enrollment by state. o http:/ //www.cms.g gov/Medicare eEnRpts The CMS website provides in C e nformation about the Me a edicare Curr rent Benefici iary Survey, a resou urce on the demographic characteris d c stics of Med icare beneficiaries. //www.cms.g gov/mcbs http:/
SECTION
Dual-eligible beneficiaries
Chart 3-1.
Dual-eligible bene D eficiaries accoun for a s nt dispropor rtionate share of Medicar spend s f re ding, 200 07
P Percent of fe ee-for-servic spending ce
Perce of fee-fo ent or-service be eneficiaries

Dual eligible e 18%
Du ual eligi ible 31%
Non-dual N eligible e 82%

Note:
Non-du ual eligibl e 69%
eficiaries are desi ignated as such if the months the qualify for Med ey dicaid exceed the months they qualify Dual-eligible bene ding data reflect revised 2007 Me edicare Current B Beneficiary Surve Cost and Use file ey e for supplemental insurance. Spend fro CMS. om M vey, Cost and Us file, 2007. se MedPAC analysis of the revised Medicare Current Beneficiary Surv
Source:
Dual-eligible beneficiaries are those who qualify for b e o both Medica and Medicaid. Medic are caid is a jo federal and state pro oint a ogram desig gned to help low-income persons ob e btain needed d health care. Dual-eligible beneficiaries ac ccount for a disproportio nate share o Medicare expenditure d of es: As 18 percent of the Medicar fee-for-se 8 re ervice popula ation, they re epresent 31 percent of aggre egate Medic care fee-for-s service spen nding. On av verage, dual-eligible ben neficiaries in ncur 2.1 time as much a es annual fee-f for-service Medicare spendin as non-dual-eligible beneficiaries $16,512 is spent per d ng b s: s dual-eligible beneficiary, and $7,823 is sp $ pent per non-dual-eligible beneficiary e y. In 2007, average total spendingwhich includes Me e edicare, Med dicaid, supplemental insurance, and out-of-pocket spending across all pay t yersfor du ual-eligible beneficiaries was about $28,500 pe beneficiar twice the amount for other Medic er ry, care benefici iaries.
ealth care spen nding and the M Medicare progr ram, June 2011 1 A Data Book: He
31
Chart 3-2.
Dual-eligible bene D eficiaries are mo likely than s ore non-dual eligibles to be disabled, 2007 s
Non-dual-e eligible bene eficiaries
85+ 12% Under 65 (disabled) 12%
Dual-eligib beneficia ble aries

85+ 14% Under 65 5 (disabled) 41%
75-84 20%
75-84 4 30%
65-74 46 6% 65-74 4 25% %

Note: eneficiaries who are under age 65 qualify for Med 6 dicare because th are disabled Once disabled beneficiaries rea hey d. ach Be ag 65, they are counted as aged. Dual-eligible be ge c eneficiaries are d esignated as suc if the months they qualify for ch Medicaid exceed the months they qualify for supple t emental insuranc ce. care Current Ben neficiary Survey, Cost and Use fi le, 2007. MedPAC analysis of revised Medic
Source:
-eligible beneficiaries are more likely than non-d e y dual-eligible beneficiarie to be unde es er Dualage 65 and disab 6 bled. Forty-o percent of dual-eligib beneficia one o ble aries are und age 65 a der and disab bled, compar with 12 percent of th non-dualred p he -eligible popu ulation.
32
Dual-eligible benefi iciaries
Chart 3-3. t
Dual-eligible bene D eficiaries are mo likely than nons ore dual eligib bles to re eport po oorer hea alth statu 2007 us,
Non-dual-e eligible beneficiaries
P Poor he ealth 8 8%
Dual-eligib beneficia ble aries

Exce ellent or very v go ood hea alth 18 8% Poor health 19%
Excelle ent or ver ry good d health h 44% %
Good or fa health air 63%

Note:
Good or fair h health 48%
eficiaries are desi ignated as such if the months the qualify for Med ey dicaid exceed the months they qualify Dual-eligible bene for supplemental insurance. M vey, Cost and Us file, 2007. se MedPAC analysis of the revised Medicare Current Beneficiary Surv
Source:
Dual-eligible beneficiaries are more likely than non-d e y dual-eligible beneficiarie to report es poore health sta er atus. Most re eport good or fair status, but 19 perc cent of the du ual-eligible population report being in poor health (c ts compared w 8 percen of the non-dual-eligible with nt e population). Dual-eligible beneficiaries are more likely to have co e y ognitive impa airment and mental disorders. They also have hig a gher rates of diabetes, p pulmonary disease, stroke, and Alzhe eimers disea than do non-dual-eligible benefiiciaries. ase
33
Chart 3-4.
Demograp D phic diffe erences between dual-el n ligible beneficiar ries and non-dua eligible 2007 al es, 7
Percent of dua alaries eligible beneficia
37% 63 58 18 14 10 46 24 30 70 30 20 27 15 30 53 24 19 48 21 22 6 1 93 3 1 0 0 3
ristic Character
Sex Male Female Race/ethn nicity White, non-Hispanic n African American, non A n-Hispanic Hispanic c Other ns Limitation in ADLs No ADLs Ls 12 ADL 36 ADL Ls Residence Urban Rural rangement Living arr Institutio on Alone Spouse n, s, Children nonrelatives others Education n No high school diplom ma High sch hool diploma only o Some co ollege or more e Income st tatus Below poverty 100125 of poverty 5% 125200 of poverty 0% 200400 of poverty 0% Over 400% of poverty y Suppleme ental insurance status Medicar or Medicare re e/Medicaid only Medicar managed ca re are Employe er Medigap p Medigap p/employer Other*
Note:
Percent of non-dualf eligible be eneficiaries

46% 54 82 8 7 4 72 19 9 77 22 2 26 46 13 22 32 46 8 6 19 37 29 11 24 38 20 6 1
AD (activity of dail living). Dual-elig DL ly gible beneficiaries are designated a such if the mon s as nths they qualify f Medicaid exce the for eed months they qualify for other supplem y mental insurance. Urban indicates beneficiaries livin in metropolitan statistical areas . ng (M MSAs). Rural indic cates beneficiaries living outside MSAs. In 2007, pov s verty was defined as income of $10 d 0,590 for people living alo and $13,540 for married coupl Totals may no sum to 100 per one les. ot rcent due to round ding and exclusion of an other category. *In ncludes public pro ograms such as th Department of Veterans Affairs and state-sponso he f ored drug plans. o are iciary Survey, Cos and Use file, 20 st 007. MedPAC analysis of revised Medica Current Benefi
Source:
Dual-eligible beneficiaries qu ualify for Med dicaid due to low income Forty-eig percent live o es: ght below the poverty level, and 91 percent live below 20 percent o poverty. C w y 00 of Compared with non-d dual-eligible beneficiarie dual-eligible beneficia es, aries are mo likely to b female; to be ore be o Africa American or Hispanic to lack a high school d an n c; h diploma; to h have greater limitations in r activities of daily living; to res side in a rura area; and to live in an institution (20 percent v 2 al vs. perce ent), alone, or with perso other tha a spouse o ons an e.
34
Chart 3-5.
Difference in spe D es ending a and servi use r ice rate between dual-elig d gible ben neficiarie and no es on-dual el ligibles, 2007
Dual-eligib ble beneficiaries Non-dual-eligible beneficia aries
Service ayment for all beneficiarie es Average Medicare pa Total Med dicare payments Inpatient hospital h Physician* Outpatien hospital nt Home hea alth Skilled nu ursing facility** Hospice Prescribed medication* *** Percent of beneficiaries using service o Percent using any type of service e Inpatient hospital h Physician* Outpatien hospital nt Home hea alth Skilled nu ursing facility** Hospice
Note:
$16,512 2 5,369 9 2,884 4 1,647 7 752 2 1,160 0 403 3 4,262 2
$7,823 2,751 2,294 886 379 484 153 852
95.0 0% 29.0 0 90.0 0 74.3 3 12.3 3 9.4 4 4.1 1
87.0% % 18.4 84.0 62.2 8.0 4.4 1.8
Includes only fee-f for-service Medic care beneficiaries. Dual-eligible b beneficiaries are designated as s such if the month they hs ualify for Medicai exceed the mo id onths they qualify for supplement insurance. Sp y tal pending totals de erived from the qu Medicare Current Beneficiary Surv (MCBS) do not necessarily m vey n match official esti mates from CMS Office of the A S, Actuary. otal ms en nding data reflect t To payments may not equal the sum of line item as some mino r items have bee omitted. Spen re evised 2007 Medicare Current Be eneficiary Survey Cost and Use fiile from CMS. y *In ncludes a variety of medical serv y vices, equipment, and supplies. **Individual short-te facility (usua skilled nursing facility) stays fo r the Medicare C erm ally g Current Beneficiar Survey populat ry tion. ***CMS changed th methodology for collecting pres he f scription drug dat in the MCBS in 2007. Before 20 ta n 007, all prescripti ion rug sed on e er, 07, ollecting prescrip ption dr data were bas on informatio collected in the survey; howeve starting in 200 CMS began co dr data for the MCBS from Medic rug M care AdvantagePrescription Drug plans and presc g cription drug plan ns. M vey, Cost and Us file, 2007. se MedPAC analysis of the revised Medicare Current Beneficiary Surv
Source:
Avera per capi Medicare spending fo dual-eligib beneficia age ita e or ble aries is more than twice that e for no on-dual-eligible beneficia aries$16,5 compare with $7,8 512 ed 823. For each type of service, ave e erage Medica per capiita spending is higher fo dual-eligible are or beneficiaries than for non-dual-eligible be n eneficiaries. Highe average per capita sp er p pending for dual-eligible beneficiarie is a functio of a highe d es on er servic use rate and greater intensity of use than the non-dualce a eir -eligible counterparts. -eligible beneficiaries are more likely to use eac type of Me e y ch edicare-cove ered service than e Dualnon-d dual-eligible beneficiarie es.
35
Chart 3-6.
100% 90% 80% 70%
Both Med B dicare and total s spending are con g ncentrate ed am mong du ual-eligib benef ble ficiaries, 2007 ,
5% 32% 15% 25 5%
30% Percent 60% 36 6% 50% 40% 30% 20% 10% 9% 0%

Medicare spending for duale eligible beneficiaries
Note:
33%
26%
50%
26 6%
10 0%
Share of dual-e ligible S es beneficiarie T Total spending for dual-eligible g benef ficiaries
otal cludes Medicare, Medicaid, suppl lemental insuran nce, and out-of-p ocket spending. Dual-eligible To spending inc be eneficiaries are designated as such if the months they qualify for M d Medicaid exceed the months the qualify for d ey su upplemental insu urance. Totals ma not sum to 10 percent due to rounding. Spen ay 00 o nding data reflect revised 2007 t Medicare Current Beneficiary Surv Cost and Use file from CMS. vey e M vey, Cost and Us files, 2007. se MedPAC analysis of the revised Medicare Current Beneficiary Surv
Source:
Annu Medicare spending is concentrate among a small numb of dual-e ual e s ed ber eligible beneficiaries. The costliest 20 percent of dual eligible account f 65 percent of Medica e f es for are t ng eligible benef ficiaries. In c contrast, the e spending and 61 percent of total spendin on dual-e least costly 50 pe ercent of dua al-eligible be eneficiaries a account for o only 9 perce of Medica ent are spending and 10 percent of total spendin on dual-e t ng eligible benef ficiaries. On av verage, total spending fo dual-eligib beneficia or ble aries is twice that for non e n-dual-eligib ble beneficiaries$2 28,518 comp pared with $14,204.
36
Web li inks. Dua al-eligibl benefi le iciaries

Chap 5 of the MedPAC Ju 2011 Re pter une eport to the C Congress pr rovides inform mation on dualeligib beneficiaries. ble http:/ //medpac.gov/chapters/J Jun11_Ch05 5.pdf Chap 5 of the MedPAC Ju 2010 Re pter une eport to the C Congress pr rovides further informatio on on dual-eligible bene eficiaries. http:/ //medpac.gov/chapters/J Jun10_Ch05 5.pdf The Kaiser Famil Foundatio provides information o dual-eligiible beneficiaries. K ly on i on http:/ //www.kff.org g/medicaid/d duals.cfm Furth informatio on dual eligibles is av her on e vailable from the CMS M m MedicareMedicaid Coord dination Offi ice. http:/ //www.cms.g gov/medicare e-medicaid-c coordination n/01_overvie ew.asp?
37
SECTION
Quality of care in the Medicare program
Chart 4-1.
Most in-hospital and 30-day postd M a discharge mortal lity ra ates improved fro 2006 to 2009 om 6
Risk-adju usted rate per 100 eligible 0 discharg ges, 2006 Risk-adjus sted rate per 100 e eligible discharge 2009 es, Directional change in rate, 200620 009
Condition or procedure e In-hospital mortality Esopha ageal resection Pancrea resection atic Abdominal aortic ane eurysm repair r Acute myocardial infa m arction Conges stive heart failure Stroke Hip frac cture Pneumo onia 30-day po ostdischarge mortality e Esopha ageal resection Pancrea resection atic Abdominal aortic ane eurysm repair r Acute myocardial infa m arction Conges stive heart failure Stroke Hip frac cture Pneumo onia
Note:
8.29 8 6.18 6 5.17 5 9.36 9 4.24 4 11 1.19 3.50 3 4.72 4
6.14 4 4.36 5.27 7.43 3.27 8.94 4 2.89 3.69
No differ rence No differ rence No differ rence Better Better Better Better Better
10 0.66 7.74 7 6.53 6 15 5.75 10 0.62 23 3.31 9.50 9 10 0.32
7.98 6.05 7.09 13.08 8.76 19.77 8.04 4 8.35
No differ rence No differ rence No differ rence Better Better Better Better Better
Ra ates are calculat based on the discharges eligi ted e ible to be counte in each measu Rates do not include deaths in ed ure. no oninpatient pros spective paymen system hospita or Medicare A nt als Advantage plans . Better indicate that the riskes ad djusted rate decr reased by a statis stically significan amount from 2 nt 2006 to 2009 usin a p 0.01 crit ng terion. No differe ence indicates that the change in the rat was not statist c te tically significant from 2006 to 20 using a p 0 t 009 0.01 criterion. re ysis and Review data using Agen for Healthcare Research and w ncy d MedPAC analysis of CMS Medicar Provider Analy Q s with s tality rate calcula ations). Quality Inpatient Quality Indicators Version 4.1b (w modifications for 30-day mort
Source:
Trend in risk-adj ds justed in-hospital mortality rates are used to ass e sess change in the qua es ality of care provided to Medicare beneficiarie during inp e es patient stays for certain medical s conditions and su urgical proce edures. The 30-day post tdischarge m mortality rate reflect the es e qualit ty-of-care tra ansitions for beneficiarie in the critiical period during and af a hospita r es fter al disch harge. From 2006 to 200 in-hospit and 30-da postdisch m 09, tal ay harge mortality rates imp proved by a statis stically signif ficant amoun for all five medical con nt nditions mea asured: acut myocardia te al infarc ction, conges stive heart fa ailure, stroke hip fractur and pneu e, re, umonia. Both types of mo ortality rates for the three inpatient su e urgical proce edures measured esophageal resection, pancre eatic resecti ion, and repa of abdom air minal aortic a aneurysmw were stable from 2006 to 2009; the was no statistically s e ere s significant ch hange in tho rates from ose m 2006 to 2009.
A Data Book: He ealth care spen nding and the M Medicare progr ram, June 2011 1
41
Chart 4-2.
Hospital inpatient patient safety in H t ndicators improv s ved or were st table fro 2006 t 2009 om to
Risk-ad djusted rate per 10 eligible 00 discha arges, 2006 10.44 1 0.10 1.94 0.93 0.29 0.34 Risk-adjus sted rate eligible per 100 e discharges 2009 s, 9.85 5 0.07 7 1.88 8 0.50 0 0.28 8 0.23 3 ange Directional cha in rate, 9 20062009 No differenc ce Better ce No differenc Better ce No differenc Better
Patient safety indicato s or Death am mong surgica inpatients with al w treatable serious com e mplications Iatrogenic pneumotho orax Postoperative respiratory failure D Postoperative PE or DVT Postoperative wound dehiscence Accident puncture or laceration tal o
Note:
PE (pulmonary em E mbolism), DVT (d deep vein thromb bosis). Better in ndicates that the risk-adjusted rate decreased by a statistically signific cant amount from 2006 to 2009 using a p 0.01 c m u criterion. No diff ference indicate that the change in es the rate from 2006 to 2009 was no statistically sign 6 ot nificant using a p 0.01 criterion n. MedPAC analysis of CMS Medicar Provider Analy re ysis and Review data using Agen for Healthcare Research and w ncy d Quality Patient Sa afety Indicators Version 4.1b. V
Source:
The observed rat for these patient safe indicator provide an indication o the freque o tes e ety rs n of ency of inju uries to patie ents from the medical care or comp eir c plications fro clinical p om procedures that often can be avoided with ap ppropriate me edical care. The rates a calculated using softw are ware developed by the Agency for Healthcare Research a Quality ( e r and (AHRQ) and Medicare d inpatient hospital discharge data. The so l d oftware is pe eriodically rev vised by AH HRQ, so rates for a give year and trends over time that ar calculated with differe versions of the softw en r re d ent ware are not directly co omparable. With an updated version of th AHRQ so he oftware (com mpared with the 2010 da book), the ata e ween 2006 and 2009 for three of the six indicato analyzed: a e ors observed rate improved betw genic pneum mothorax, po ostoperative pulmonary e embolism (a blood clot in one or mo a n ore iatrog arteries of the lun or deep vein thrombo ng) v osis (a blood clot in a de vein, us d eep sually the leg g), and accidental pu a uncture or la aceration. Th rates for t other thr indicator were stable; he the ree rs that is there was no statistica significa change in those rates from 2006 to 2009. s, s ally ant n s Medicare began requiring all inpatient pr rospective pa ayment syst tem (IPPS) h hospitals to indica whether a condition was presen on admiss ate nt sion (POA) for inpatient discharges on t or aft October 1, 2007, with the goal of more accur ter 1 h f rately identif fying conditio that actu ons ually are acquired duri a hospita stay. The increasingly consistent use of POA indicator co a ing al y odes by IP PPS hospitals should ena s able more re eliable analy yses of patient safety ind dicator rates and trends in the future.
42
lity he ogram Qual of care in th Medicare pro
Chart 4-3.
Most amb M bulatory care qua ality indicators im mproved or d were stab from 2007 to 2 w ble 2 2009
Number of indicators Improved 19 2 2 2 5 1 0 6 0 1 Stable 16 2 2 4 3 0 1 1 0 3 rsened Wor 3 0 0 1 0 1 0 0 1 0 Total l 38 4 4 7 8 2 1 7 1 4
s Indicators All Anemia CAD Cancer CHF COPD Depressio on Diabetes Hypertens sion Stroke
Note: Source:
CA (coronary art AD tery disease), CH (congestive heart failure), CO HF OPD (chronic obs structive pulmona disease). ary Elderly with data from the Medica 5 percent Sta are andard MedPAC analysis of Medicare Ambulatory Care Indicators for the E nalytic Files. An
The Medicare Am M mbulatory Car Indicators for the Elder track the p re rly provision of n necessary ca are and rates of poten ntially avoida able hospitaliz zations for be eneficiaries a 65 or old with selec age der cted cal s. medic conditions Of 38 indicators, 19 improved and 16 did not change by a statistica significant amount. Th 8 1 n y ally his findin indicates that for most measures, ra ng ates of benef ficiaries with selected con nditions rece eiving clinica indicated services an averting po ally d nd otentially avo oidable hospitalizations w were the sam or me better in 2009 com r mpared with 2007. Additio 2 onally, for dia abetes and c congestive he failure eart patien reduction in potentia avoidable hospitalizat nts, ns ally e tions occurre concurren with ed ntly impro ovements in process-of-ca measures for those c p are conditions. Our analysis found declines in three of the indicators. T percenta of benefic a n The age ciaries diagn nosed with iron-deficienc anemia for whom a follow-up colon cy noscopy shou be performed (to chec for uld ck ossibility of colon cancer) has remaine below 30 percent sinc we started examining t c ) ed ce d this the po indica in 2002 ator 2003. There also were small but statiistically significant decline from 2007 to e es 7 2009 in rates of po otentially pre eventable hos spitalizations for beneficia s aries diagnos with chro sed onic uctive pulmo onary disease and those diagnosed w ith hypertens e d sion. obstru Three of the six measures of potentially av e m p voidable hosp pitalizations a emergen departme and ncy ent visits improved, one remained stable, and two worsene (discussed above). The improved ed d sures were th percentage of beneficia he aries with dia abetes who w were admitte to a hospit for ed tal meas seriou short-term diabetes-re us m elated complications (such as hypergly h ycemia), the percentage of benef ficiaries with diabetes adm mitted for lon ng-term diabe etes-related complication (such as lo ns ower extrem amputat mity tion), and the percentage of beneficia e e aries with con ngestive hear failure who had rt o hospitalizations re elated to that disease. Ra ates were sta able between 2007 and 20 for the 009 perce entage of ben neficiaries dia agnosed with unstable an h ngina who ha multiple emergency ad depar rtment visits during the ye ear.
43
Chart 4-4.
Risk-adjusted SNF quality measur show mixed R y res w re esults since 2000 0
Percentage e point change e, 20002008 8
Measure Percent discharged to community within 100 days of SNF admission 0 F Percent re ehospitalized for any of five conditions within 100 days of SNF admission
Note:
2000
2004
2006
2008
% 33.3%
34.4%
35.3%
36.0%
2.7%
13.7
13.8
13.8
13.9
0.2
NF ng ases in rates of discharge to comm munity indicate im mproved quality. T five condition The ns SN (skilled nursin facility). Increa include congestive heart failure, res e spiratory infection urinary tract infe n, ection, sepsis, an electrolyte imb nd balance. Increase in es ehospitalization fo the five conditio indicate wors or ons sening quality. Ra ates are calculate for all facilities with 25 or more stays. ed re s. MedPAC analysis of freestanding SNF cost reports
Source:
The 2008 risk-adj 2 justed rate at which Med a dicare-covere skilled nu ed ursing facility (SNF) patie ents were discharged to the comm munity was 36 percent. The rate impr 6 roved since 2 2000, indicat ting impro oved quality. The 2008 risk-ad 2 djusted rate at which Med a dicare-cover SNF pat red tients were r rehospitalize for ed poten ntially avoida able conditio was 13.9 percent, al most the sa ons 9 ame as in 2000 and indica ating almost no change in quality. t Acros facilities, the risk-adju ss usted measu ures varied c considerably (not shown Facilities with y n). the highest rates of discharge to the com e mmunity (the top 10th pe ercentile) were three time es more likely to discharge Med e dicare patien to the com nts mmunity com mpared with facilities wit the th rehospitaliza lowes rates (the lowest 10th percentile). Risk-adjust rates of r st ted ation varied less but st more than twofold. till n
44
Chart 4-5.
Share of home he h ealth pati ients wit positiv th ve s own, but increases have leveled off t outcomes has gro
2004 2005 2006 20 007 2008 2009 2 2010
Functional/pain meas sures (higher is better) Improvements in: Walk king Getting out of bed d Bath hing Managing oral me edications Patient have less pain ts p ure Adverse event measu (lower is better) Any ho ospital admiss sion
Source:
36% % 50 59 37 59
37% 51 61 39 61
39% 52 62 40 62
4 41% 5 53 6 63 4 41 6 63
44% % 53 64 43 64
45% 54 64 43 64
47% 54 65 43 64
28
28
28
28 8
29
29
29
H MedPAC analysis of CMS Home Health Compare data.
Medicare publish risk-adjusted home health qualit measures that track changes in th hes h ty he functional abilities and rates of adverse events for pa receive hom health car e atients who r me re. Since 2004, the functional measuressu as impro e f uch ovements in walking and bathing, an n d nd pain controlhav shown sm but stea improvem ve mall ady ment, althou the trend has leveled off ugh d d in rec cent years. (For these measures, inc m creasing val ues indicate improveme e ent.) The adverse event ratesinc a cluding hosp pitalizations and emerge ency room usehave m mostly rema ained unchan nged over th period. his
45
Chart 4-6.
Outcome measure
Dialysis quality of care: Some measures s D q f show progress, others need imp , n proveme ent
2003 94% 48 15 6 33 N/A 45 21 7 15 4.8 21.4 2.0 13.7 2007 94% 49 14 6 47 89 48 18 7 17 4.4 19.3 1.9 12.9 20 008 95% 57 9 6 50 88 52 14 9 17 4.2 18.6 1.9 12.8 2 2009 95% 62 7 6 53 89 57 12 10 N N/A N N/A N N/A N N/A N N/A
Percent of in-center he o emodialysis pa atients: Receiving adequate dialysis e Anemia measures a Mean hemoglobin 1012 g/dL n Mean hemoglobin 13 g/dL* n Mean hemoglobin < 10 g/dL* n Dialyze with an AV fistula ed V Percent of peritoneal dialysis patien o d nts: Receiving adequate dialysis e Anemia measures a Mean hemoglobin 1012 g/dL n Mean hemoglobin 13 g/dL* n Mean hemoglobin < 10 g/dL* n Percent of prevalent dialysis patient o ts wait-listed for a kidney Renal tran nsplant rate per 100 dialys p sis patient years Annual mortality rate per 100 patien years* nt Total adm missions per patient year* p Hospital days per patie year d ent
Note:
g/ (grams per de /dL eciliter of blood), AV (arterioveno , ous), N/A (not av vailable). Data on dialysis adequa n acy, use of fistula and as, an nemia management represent pe ercent of patients meeting CMSs clinical performa s s ance measures. United States R Renal Da System adjus data by age, gender, race, an primary diagn osis of end-stage renal disease. ata sts nd e *L Lower values sug ggest higher quality. ompiled by MedP PAC from the Ela Project Repor Fistula First, a the United St ab rt, and tates Renal Data System. a Co
Source:
The quality of dialy care has improved fo some meas q ysis s or sures. All hem modialysis pa atients require e vascu access ular the site on th patients body where b he b blood is remov and returned during ved dialys Between 2003 and 20 sis. 009, use of ar rteriovenous f fistulas, cons sidered the be type of est vascu access, increased from 33 percent to 53 percen of hemodia ular t nt alysis patient Between 2 ts. 2003 and 2008, overall adjusted mor 2 rtality rates decreased but remained high among dialysis patien t nts. The quality of dialy care has remained st q ysis s teady for som measures. Between 20 and 2009 the me 003 9, propo ortion of hemo odialysis patients receivin adequate d ng dialysis rema ained high. Ov verall rates o of hospitalization rem mained steady at about tw admissions per dialysis patient per y wo s s year. r mprovements in dialysis q s quality are sti needed. W looked at ill We Other measures suggest that im acces to kidney transplantatio because it is widely bellieved that it iis the best tre ss on eatment optio for on individ duals with en nd-stage rena disease. Th proportion of dialysis p al he n patients accep pted on the k kidney transp plant waiting list remains low. The fallo in the rate of kidney tra l off ansplantation is partly due to a decre ease in live or rgan donation during this period. ns s
46
Chart 4-7.
Measures s
Medicare Advanta quality meas M age sures we ere generally stable between 2009 and 2010 b d
HM averages MO 200 09 2010
67 .9 59 .8 86 .3 92 .7 20 .7 70 .4 27 .7 53 .0 88 .5 58 .5 86 .3 60 .8 87 .8 48 .6 29 .5 66 .7 46 .9 35 .3 57 .8 66 .0 77 .4 66 .4 64 .4 83 .2 89 .5 73 .8 84 .0 84 .2 69.1 62.1* 89.1* 93.7* 20.7 72.3 28.4 54.7 88.4 59.7 87.3 63.5* 88.5 49.9 28.1 67.4 46.9 35.4 58.2 66.6 76.9 64.3* 65.1 83.8 89.3 73.8 83.9 83.3*
l ges Local PPO averag 200 09 2010

65.7 62.5 88.7 95.1 17.2 75.2 26.4
a a a a a a a a
HEDIS administrative measures e Breast ca ancer screenin ng Glaucoma testing a Monitoring of patients taking long-ter medications rm s o are t ar At least one primary ca doctor visit in the last yea Osteopor rosis managem ment Rheumatoid arthritis ma anagement c p sorder Tests to confirm chronic obstructive pulmonary dis HEDIS hybrid measur res al ening Colorecta cancer scree Cholester screening for patients wit heart disease rol f th Controllin blood press ng sure Cholester screening for patients wit diabetes rol f th Eye exam to check for damage from diabetes m Kidney fu unction testing for patients with diabetes w Diabetics with choleste under cont erol trol g etter) Diabetics not controlling blood sugar (lower rate be s Measures from HOSb Osteopor rosis testing Monitoring physical act tivity Improving bladder cont g trol Reducing the risk of falling g Other measures based on HOS d g ng ealth Improving or maintainin physical he Improving or maintainin mental health g ng Measures from CAHP PS u Annual flu vaccine Pneumon vaccine nia Ease of getting needed care and see g d eing specialists s Doctors who communic w cate well Getting appointments and care quick a kly ating of health care quality Overall ra Overall ra ating of plan
Note:
66.1 1 64.2 2 89.7 7 95.6 6 18.1 1 76.9 9 28.7 7

a a a a a a a a
72.5 47.0 36.3 54.8 66.3 78.4 67.2 66.9 83.8 89.5 74.8 84.7 83.0
73.8 8 48.1 1 37.9*, 54.4 4 67.3 3 77.7 7 65.3 3 67.0 0 84.8 8* 89.4 4 74.1 1 84.6 6 81.8 8*
PP (preferred pr PO rovider organization), HEDIS (He ealthcare Effectiv veness Data and Information Set a registered d t, tra ademark of the National Committ for Quality As N tee ssurance), HOS (Health Outcom es Survey), CAH (Consumer HPS r As ssessment of He ealthcare Provide and Systems, a registered tra ers ademark of the A Agency for Health hcare Research a and Quality). Medicare Advantage plan types not includ in the data a regional PPO private fee-for e n ded are Os, r-service plans, ontinuing care retirement community plans, and employer-direct p e plans. Cost-reimb bursed HMO plan results are incl luded. co as HEDIS administra ative measures are calculated by using administr a y rative data such a claims, encou unter data, pharm macy da and certain electronic records; hybrid measur involve samp ata, e res pling medical rec cords to determin a rate. ne *Statistically signif S ficant difference in performance on this measure for plan type com o mpared with prec ceding year (p < 0.05). Statistically signif S ficant difference in performance in 2010 between HMO and PPO results (p < 0.05 5).
(Chart con ntinued next page) p
47
Chart 4-7.
a
Medicare Advanta quality meas M age sures we ere generally stable between 2009 and 2010 (c b d continue ed)
PPO results not reported for hybr measures for 2009 because p lans were not alllowed to use me P r rid edical record review to de etermine rates. Because 2010 is the first year in which PPOs are using medical re B w ecord review, loc PPO rates ma not cal ay be entirely comparable to HMO rat (statistical sig e tes gnificance of diffe erences between HMOs and PPO therefore not n Os t de etermined). For the colorectal can ncer screening measure, CMS sp m pecifically exclud PPO results in determining st des tar thresholds for plan because of the specification of the measure, w ns e f which includes a nine-year look-back period to con nfirm hether a person has received a colonoscopy. c wh
b
nclude scores fo plans not repor Results shown fo HEDIS measu R or ures taken from HOS (the four m easures listed) in H or rting ot ther HEDIS data in 2010. Result will therefore differ from those shown in other M a ts d MedPAC reportin of these score ng es. Source: Med dPAC analysis of CMS HEDIS pu ublic use files for HEDIS measure and star ratin data for mea r es, ngs asures based on HOS an for CAHPS measures. nd
CMS compiles qu uality data fr rom several sources to c calculate a star rating ( (ranging from m one to five stars) for Medicar Advantage (MA) plans Beginning in 2012, pla ratings under t re e s. g an the CMS star sys C stem will determine whic MA plans are eligible for quality b ch bonuses. The ese data provide a ba aseline for determining the effect of having certa measure tied to bon t ain es nus paym ments. The performance on such me easures can also be com mpared with plan perfo ormance on measures th are not in m hat ncluded in th star rating system. he g he al nt e ngs, HMO plan For th 28 clinica and patien experience measures included in the star ratin perfo ormance was generally stable betwe 2009 and 2010, with 4 measures showing s s een d h s statis stically signif ficant improv vement and 2 declining. Among loca preferred p al provider organ nization (PPO) plans, tw measures showed im provement in this time p wo s period, and o one declin ned. As of 2010, PPO plans are re f eporting resu for hybriid measures using medi ults s ical record review which the were not allowed to do before 20 10. For the h w, ey a hybrid meas sures, local cal PPOs are reporting poorer re s esults than HMOs, but th result ma be because the medic H his ay recor rd-based rep porting is new for PPOs. For the non w nhybrid measures includ in the sta ded ar rating system, loc PPO results are better than HMO results for four measu g cal O r ures and wor rse for tw measures wo s.
48
Web li inks. Quality of care in th Medic c he care prog gram

pters 3, 4, an 6 through 9 of the Me nd h edPAC Marc 2011 Rep to the Co ch port ongress include Chap inform mation on the quality of care provide by inpatie hospitals physicians and other c ed ent s, s ambu ulatory care providers, outpatient dia o alysis facilitie skilled nu es, ursing facilities, home he ealth agencies, and inp patient rehabilitation fac cilities. http:/ //www.medpac.gov/chap pters/Mar11_ _Ch03.pdf http:/ //www.medpac.gov/chap pters/Mar11_ _Ch04.pdf http:/ //www.medpac.gov/chap pters/Mar11_ _Ch06.pdf http:/ //www.medpac.gov/chap pters/Mar11_ _Ch07.pdf http:/ //www.medpac.gov/chap pters/Mar11_ _Ch08.pdf http:/ //www.medpac.gov/chap pters/Mar11_ _Ch09.pdf pter e M he formation on the n Chap 12 of the MedPAC March 2011 Report to th Congress includes inf qualit of care in Medicare Advantage plans. ty http:/ //www.medpac.gov/chap pters/Mar11_ _Ch12.pdf Chap 13 of the MedPAC March 2011 Report to th Congress includes inf pter e M he formation on n perfo ormance met trics for Med dicare Part D plans (pres scription drug plans and Medicare Adva antagePrescription Drug plans). g http:/ //www.medpac.gov/chap pters/Mar11_ _Ch13.pdf Chap 6 of the MedPAC Ma pter arch 2010 Report to the Congress includes a se of R e et recom mmendations on comparing the qua ality of care b between Medicare fee-fo or-service an nd Medicare Advant tage and am mong Medica Advantag plans. are ge http:/ //www.medpac.gov/chap pters/Mar10_ _Ch06.pdf pter une eport to the C Congress dis scusses poli options t icy to Chap 4 of the MedPAC Ju 2007 Re impro the quality of home health servic ove ces, and Ch apter 8 of th same report provides he inform mation on the quality of care provide by skilled nursing fac c ed cilities. http:/ //www.medpac.gov/chap pters/Jun07_ _Ch04.pdf http:/ //www.medpac.gov/chap pters/Jun07_ _Ch08.pdf on pter une eport to the C Congress dis scusses car coordinatio re Chap 2 of the MedPAC Ju 2006 Re for Medicare ben neficiaries an its implica nd ations for qu ality of care. http:/ reports/Jun0 //www.medpac.gov/publications/congressional_r 06_Ch02.pdf Chap 4 of the MedPAC Ma pter arch 2005 Report to the Congress o R e outlines strat tegies to impro care thro ove ough pay-for r-performanc incentive s and inform ce mation technology. http:/ //www.medpac.gov/publications/congressional_r reports/Mar0 05_Ch04.pd df
49
The CMS website provides in C e nformation on several of the Medica quality an value-bas o f are nd sed purch hasing initiat tives. http:/ //www.cms.g gov/QualityIn nitiativesGen nInfo/
es mparative information on selected quality measu n ures for hospital, Medicare provide public com d cilities on its consumer w website. nursing facility, home health agency, and dialysis fac Hosp pital Compar http://www re: w.hospitalco ompare.hhs. gov/hospitall-search.asp px Nursi Home Compare: http ing p://www.med dicare.gov/N NHCompare/ /Home.asp Home Health Compare: http: e ://www.medicare.gov/Ho omeHealthC Compare/sea arch.aspx Dialysis Facility Compare: http://www.me C edicare.gov/ /Dialysis/Hom me.asp
CMS makes avai ilable downlo oadable data abases of th quality me he easures and other d inform mation underlying the four provider comparison databases c c cited above. http:/ //www.medic care.gov/Dow wnload/Dow wnloadDB.as sp
Medicare Advant tage plan qu uality measures are avai lable through a Medicar consumer re r webs (the Med site dicare Plan Finder) that makes planF m -to-plan com mparisons within a specif fied geographic area, including co omparisons with Medica fee-for-se are ervice result on certain ts n meas sures. http:/ //www.medic care.gov/MP PPF/home.as sp
CMS makes avai ilable a downloadable da atabase of t Medicare Advantage plan quality the e e y meas sures underlying the Medicare Plan Finder and t star ratin of plans. the ngs http:/ //www.medic care.gov/Dow wnload/Dow wnloadDB.as (select PlansQuality Data from the sp m drop-down menu u)
Curre and past editions of the National Committee for Quality A ent t t Assurance ( (NCQA) public cation The State of Health Care Qua S ality are ava ailable from t NCQA w the website. http:/ //www.ncqa.org/tabid/83 36/Default.as spx
50
SECTION
Medicare beneficiary and other payer financial liability
Chart 5-1.
Sources of supple o emental coverag among ge g utionalized Medic care ben neficiarie 2007 es, noninstitu
No su upplemental co overage 8.2% Medigap 2 24.6%
Medicare re managed car 22.9%
Other public sector O 0.8%
Medicaid 12.3% Employe er sponsore ed 31.2% %

Note: Be eneficiaries are assigned to the supplemental cov a s verage category that applied for t most time in 2007. They coul have the ld ha coverage in other categories throughout 2007. Other public se ad . ector includes fe ederal and state programs not inc cluded in other categories Analysis includ only beneficiaries not living in institutions suc as nursing hom s. des n ch mes. It excludes eneficiaries who were not in both Part A and Part B throughout the enrollment in 2007 or who had Medicare as a eir be se econd payer. rrent Beneficiary Survey, Cost an Use file, 2007 nd 7. MedPAC analysis of Medicare Cur
Source:
Most beneficiaries living in the community have covera that supp s e age plements or r replaces the care benefit package. About 92 perce of benefic p ent ciaries have s supplementa coverage o al or Medic partic cipate in Med dicare manag care. ged e-sector supp plemental cov verage such as medigap (about 25 About 56 percent have private ent) oyer-sponsore retiree coverage (abou 31 percent). ed ut perce or emplo About 13 percent have publicerage, prima -sector supplemental cove arily Medicaid d. Twen nty-three perc cent participa in Medica managed care. This c ate are d care includes Medicare s Advantage, cost, and health ca prepaym are ment plans. Th hese types o arrangeme of ents generally y ce nd replac Medicare coverage an often add to it. The proportion of beneficiaries who have managed car enrollment on this diag p s m re t gram (about 2 23 perce is smalle than the pr ent) er roportion liste in Section 9 (24 percen because this chart re ed nt), eflects 2007 data and Se ection 9 reflec 2011 data Managed c cts a. care enrollment grew sub bstantially in the vening years. . interv
53
Chart 5-2.
Sources of supple o emental coverag among ge g utionalized Medic care ben neficiarie by es, noninstitu beneficiar ries cha aracterist tics, 200 07
Number of f beneficiaries (thousands) Employer rsponsore ed insurance e
31% % 19 35 32 33 34 33 9 13 24 41 46 33 18 28 32 30 33 30 35 30 24
Medigap insurance e
25% 5 25 27 27 32 33 13 21 26 26 31 28 5 27 23 31 22 26 28 23 17
Medicaid
12% 39 7 9 8 7 9 46 27 10 1 0 8 39 21 11 17 11 14 6 15 26
Medicare managed care

23% 17 23 25 26 22 23 21 27 26 24 19 24 17 13 27 9 23 23 24 22 20
Other public sector

1% 1 1 1 1 1 1 1 1 2 1 0 1 1 0 1 1 1 1 1 1 1
dicare Med only

8 8% 19 9 6 5 5 5 10 11 13 7 4 6 19 11 7 12 11 6 6 9 13
ciaries All benefic Age 6 Under 65 6569 7074 7579 8084 85+ Income status p Below poverty 100% to 125% of pove o erty 125% to 200% of pove o erty 200% to 400% of pove o erty Over 40 00% of poverty Eligibility status Aged Disabled d ESRD e Residence Urban Rural Sex Male Female atus Health sta Excellen nt/very good Good/fa air Poor
Note:
38,364 5,635 8,751 7,803 6,615 5,224 4,336 6,117 3,502 7,829 11,462 9,379 32,546 5,476 291 29,286 9,052 17,080 21,285 15,852 19,107 3,178
ES SRD (end-stage renal disease). Beneficiaries are assigned to the supplemental co B e e overage where they spent the most tim in 2007. They could have had coverage in oth categories thr me y d her roughout 2007. M Medicare manag care includes ged s Medicare Advanta age, cost, and he ealth care prepay yment plans. Oth public sector includes federa and state programs her r al ot her n w e d arried no included in oth categories. In 2007, poverty was defined as $ 9,944 for people living alone and $12,550 for ma co ouples. Urban indicates benefic ciaries living in metropolitan statis stical areas (MSA Rural indicates beneficiarie living As). es ou utside MSAs. Analysis includes beneficiaries living in the commun b nity. Number of b beneficiaries diffe among boldfa ers ace ca ategories becaus we exclude be se eneficiaries with missing values. m re ficiary Survey, C ost and Use file. MedPAC analysis of 2007 Medicar Current Benef
Source:
Benef ficiaries most likely to have employer-spo onsored supp plemental coverage are tho who are above ose age 64, are higher income (abov 200 percen of poverty), are eligible due to age or e ve nt end-stage ren nal diseas (ESRD), and report bett than good health. se ter Medig is most co gap ommon among those who are age 80 or older, are mid a ddle or high in ncome (above 125 e percent of poverty), are eligible due to age or ESRD, are ru dwelling, a female, an report exce d ural are nd ellent or ver good health ry h. Medic caid coverage is most comm among th e mon hose who are under age 65 are low inco 5, ome (below 125 percent of poverty), are eligible due to disability, and report poor health. d t o ( verage only) is most comm among be mon eneficiaries wh ho Lack of supplemental coverage (Medicare cov are un nder age 65, have income below 200 percent of pove rty, are eligiblle due to disability, are rura h b al dwelling, are male, and report po health. oor
54
Medi icare beneficiar and other pa ry ayer financial li iability
Chart 5-3.
Total spending on health care ser n rvices for utionalized FFS M Medicare benefic e ciaries, noninstitu by source of paym y e ment, 200 07
Per P capita total spending = $13,001 Pu ublic supplements 6% 6
Priva ate supplem ments 17% %
Medicare 64%
Beneficiarie es' direct spend ding 14%

Note: FS ce). plements include employer-spons sored plans and individually purc chased coverage. FF (fee-for-servic Private supp Pu ublic supplement include Medica Department of Veterans Affa ts aid, airs, and other pu ublic coverage. D Direct spending is on Medicare cost sha aring and noncov vered services bu not supplemen premiums. A ut ntal Analysis includes only FFS benefi iciaries ot tions such as nursing homes. Nu umbers may not s sum to 100 perce due to round ding. no living in institut ent rrent Beneficiary Survey, Cost an Use file, 2007 nd 7. MedPAC analysis of Medicare Cur
Source:
Amon fee-for-service (FFS) beneficiaries living in the community, the total cost of health ca ng b t are servic (defined as beneficiaries direct sp ces pending as w as expen well nditures by M Medicare, other public c-sector sour rces, and all private-secto sources on all health care goods an services) or n nd avera ages $13,001 Medicare is the largest source of pa 1. s ayment; it pa 64 percen of the heal ays nt lth care costs for FFS beneficiarie living in th community an average of $8,299 p beneficia c S es he y, e per ary. The le evel of Medic care spendin in this chart differs from the level in Chart 2-1 be ng m n ecause this c chart excludes beneficia aries in Medi icare Advantage and thos living in in se nstitutions, while Chart 2-1 dicare beneficiaries. represents all Med te f tal primarily e employer-spo onsored retire coverage and ee Privat sources of supplement coverage medig gappaid 17 percent of beneficiaries costs, an av 7 b s verage of $2 2,182 per ben neficiary. Beneficiaries paid 14 percent of their health care costs out of pocke an averag of $1,798 per d o et, ge benef ficiary. Public sources of supplementa coverage c al primarily M edicaidpaiid 6 percent o beneficiaries of health care costs, an average of $721 per beneficiary. h
55
Chart 5-4.
Per capita total sp a pending on healt care s th services mong no oninstitu utionalize FFS b ed beneficia aries, by am so ource of paymen 2007 f nt,
Me edicare Su upplemental p payers Ou of pocket ut
70,0 000 60,0 000 50,0 000 40,0 000 30,0 000 20,970 20,0 000 9,472 10,0 000 33 36 0 75-90 < 10 1 10-25 > 90 0 25-50 50-75 Groups of beneficiaries ranked by t b s total spendin (percentile ranges) ng 1,844 1 4,389 60,77 74
Dollars
Note:
FS ce). ficiaries not living in institutions s g such as nursing h homes. Out-of-po ocket FF (fee-for-servic Analysis includes FFS benef sp pending is on Me edicare cost shar ring and noncove ered services. rrent Beneficiary Survey, Cost an Use file, 2007 nd 7. MedPAC analysis of Medicare Cur
Source:
Total spending on health car services varies drama re v atically amon fee-for-se ng ervice (FFS) beneficiaries livin in the com ng mmunity. Per capita spe nding for the 10 percent of beneficia e t aries with the highest total spendin averages $60,774. Pe capita spe t t ng er ending for th 10 percen of he nt beneficiaries with the lowest total spending averages $336. h s Amon FFS bene ng eficiaries living in the community, M edicare pays a larger pe ercentage as s age total spending inc s creases, and beneficiaries out-of-po d ocket spending is a sma aller percenta as tot spending increases. For example Medicare pays 64 per tal g e, rcent of total spending fo all or beneficiaries but pays 75 per rcent of total spending fo the 10 percent of ben l or neficiaries wi ith the highest total spending. Beneficiaries out-of-pock spending covers 14 p s ket g percent of to otal spending for all beneficiaries but only 9 percent of to spending for the 10 p b s p otal g percent of beneficiaries with the highest total spend h t ding.
56
Chart 5-5.
Variation in and composit V c tion of to spen otal nding am mong no oninstitu utionalize FFS b ed beneficia aries, by type of supplemental c y f coverage 2007 e,
20,000 0 18,000 0 16,000 0 14,000 0

2,180 959 1,669 14 2,164 470 393 3,266 1,728 2,961 15,200 9,817 2,060 1,035 7,989 6,088 25 8,227 7 523 1,925 5 8 1,328 6
Dollars
12,000 0 10,000 0 8,000 0 6,000 0 4,000 0 2,000 0 0
1,856
7,493
Employe er sponsore ed Me edicare

Note:
Medi igap
Me edigap & em mployer
Medicaid
ntal No supplemen coverage Out of p pocket
Other pu ublic sector
Pr rivate suppleme ental
Publ ic supplementa al
FS ce). s o ntal tegory that applie for the most time in ed FF (fee-for-servic Beneficiaries are assigned to the supplemen coverage cat 20 007. They could have had covera in other categories throughou 2007. Other p age ut public sector inc cludes federal and state pr rograms not inclu uded in the other categories. Priv r vate supplement includes emp tal ployer-sponsored plans and indiv d vidually pu urchased coverage. Public supplemental include Medicaid, Dep es partment of Vete erans Affairs, and other public d co overage. Analysis includes only FFS beneficiaries not living in inst s F s titutions such as nursing homes. It excludes be eneficiaries who were not in both Part A and Part B throughout the enrollment in 2007 or had Me edicare as a seco ond eir pa ayer. Out-of-pock spending is on Medicare cost sharing and non ket o t ncovered service but not supple es emental premium ms. rrent Beneficiary Survey, Cost an Use file, 2007 nd 7. MedPAC analysis of Medicare Cur
Source:
The level of total spending (d defined as be eneficiaries out-of-pock spending as well as ket g expenditures by Medicare, ot M ther public-s sector source and all p es, private-secto sources on all or n health care goods and servic ces) among fee-for-serviice beneficia f aries living in the commu n unity varies by the type of supplem s e mental cover rage they ha ave. Total sp pending is much lower fo or those beneficiarie with no supplemental coverage t han for thos beneficiar e es se ries who hav ve supplemental cov verage. Beneficiaries with Medicaid coverage have the high hest level of total spending, 94 per rcent higher than those with no supp w plemental co overage. Medicare is the la argest sourc of paymen for benefi ciaries in ea supplem ce nt ach mental insura ance categ gory, but the second larg gest source of payment differs. Amo those with employer ong rspons sored, medigap, mediga plus employer, and M ap Medicaid, sup pplemental c coverage cover ragepublic and private combined the seco largest s c e is ond source of pa ayment. Howe ever, among those with other public and Medica g are-only cove erage, bene eficiaries out t-ofpocke spending is the secon largest so et nd ource of pay yment.
57
Chart 5-6.
Out-of-po O ocket spe ending fo premiums and health or d se ervices per bene p eficiary, b insura by ance and health d st tatus, 20 007
7,000
6,000
5,000
3,053 2,825 1,992 2,006
Dollars
4,000
2,514 1,677 2,705
3,000
2,394 67 1,66 2,886 3,136 3,070 672 1,6 3,473
2,000
1,000
1,085 1,08 82
2 1,957 2,041 1,069 864 12 20 123 156 1,052 1,1
-+
-+
-+
Me edigap
-+
Medigap & employer
-+
Medicaid
-+
Other
Medicare only ESI e Premiu ums paid by beneficiaries b
Ben neficiaries who r report they are iin fair or poor he ealth
Out-of f-pocket spending by beneficiaries + Beneficiaries who report they are in good, very g good, or excellen health nt
Note: Source: SI onsored supplem mental insurance) ). ES (employer-spo rrent Beneficiary Survey, Cost an Use file, 2007 nd 7. MedPAC analysis of Medicare Cur
This diagram illustrat out-of-pock spending on services and premiums by b tes ket n beneficiaries s supplemental insurance and health status. For ex h xample, benefic ciaries who hav only traditio nal Medicare c ve coverage (Medicare a o spending on pr remiums and $2,705 only) and report fair or poor health had an average of $1,085 in out-of-pocket s on ser rvices. Those who have Medic w care-only cove erage and repo rt good, very g good, or excelle health had a ent an averag of $1,082 in out-of-pocket spending on premiums and $ ge $1,667 on serv vices. Insura ance that supple ements Medica does not sh are hield beneficiar ries from all ou ut-of-pocket cos Beneficiarie sts. es who re eport being in fair or poor hea spend more out of pocket for health serv f alth e t vices than thos reporting good, se edicare. very good, or excelle health regar ent rdless of the ty of coverage they have to supplement Me ype e te rage, beneficiaries who have employer-spon nsored insuran (ESI) or me nce edigap Despit having supplemental cover have out-of-pocket spending that is comparable to or more than those who hav only coverage under tradit o s o ve tional Medicare (Medicare only). This result likely reflect the fact that beneficiaries w have ESI o medigap hav ts who or ve r a eferences for h health care. higher incomes and are likely to have stronger pre What beneficiaries actually pay out of pocket varie by type of s upplemental co b t es overage. For th hose with medi igap, out-of-pocket spending generally re eflects the prem miums and cost of services n covered by Medicare. ts not y Benefi iciaries with ES usually pay less out of pock for Medicar noncovered services than those with med SI ket re digap but ma pay more in Medicare deductibles and co sharing. ay ost
58
Web li inks.
Medicare benefici M iary and other pa ayer financial liability l
Chap 1 of the MedPAC Ma pter arch 2011 Report to the Congress p R e provides more informatio on on Medicare program spending. m . www.medpac.gov v/chapters/M Mar11_ch01.pdf
Chap 1 of the MedPAC Ma pter arch 2010 Report to the Congress p R e provides more informatio on on Medicare program spending. m . www.medpac.gov v/chapters/M Mar10_ch01.pdf
Chap 1 of the MedPAC Ma pter arch 2009 Report to the Congress p R e provides more informatio on on Medicare program spending. m . http:/ //www.medpac.gov/chap pters/Mar09_ _ch01.pdf
Chap 3 of the MedPAC Ju 2011 Re pter une eport to the C Congress dis scusses ben neficiaries supplemental cov verage, cost sharing, an health car use as we as progra spending t nd re ell am g. http:/ //medpac.gov/chapters/J Jun11_ch03.pdf
Chap 2 of the MedPAC Ju 2010 Re pter une eport to the C Congress dis scusses the effect supplemental cov verage has on beneficia o aries cost sh haring, their health care use, and progr ram spendin ng. www.medpac.gov v/chapters/J Jun10_ch02.pdf
Appe endix B of the MedPAC June 2004 Report to the Congress a Chapter 1 of the e J R e and r MedP PAC June 20 Report to the Congr 002 t ress provide more inform e mation on Medicare beneficiary and other payer financial liab o f bility. www.medpac.gov v/publication ns/congressional_report ts/June04_A AppB.pdf www.medpac.gov v/publication ns/congressional_report ts/Jun2_Ch1 1.pdf
59
SECTION
Acute inpatient services

Short-term hospitals Specialty psychiatric facilities
Chart 6-1.
90 80 70 Number of hospitals 60 50 40 30 20 10 0 2000 44 69
Annual ch A hanges in numbe of acu care h er ute hospitals s participat ting in th Medicare prog he gram, 200 002009
85 Opene ed 73 63 49 63 65 57 48 46 34 3 32 56 62 6 Closed d
28
27 19
31 1 17
2001 2
2002 2
2003
2004 20 005 Calendar ye ear
2006
2007
2 2008
2009 9
Note: Source:
. sures exclude ho ospitals convertin to long-term c ng care hospitals an d critical access hospitals. Closu ures Openings and clos a include voluntary and involuntary terminations. MedPAC analysis of the Provider of Service file fro CMS. o om
The number of ho n ospital open nings exceed the num ded mber of closures for the s seventh conse ecutive year In 2009, 31 acute care hospitals b r. 1 e began partici ipating in the Medicare e progr ram and 17 terminated. t Overa the numb of acute care hospita increase from 2008 to 2009. In 2009, 4,846 all, ber als ed 8 n 6 acute care hospit e tals (includin critical ac ng ccess hospita participa als) ated in Medi icare.
63
Chart 6-2.
Percent change in hospita emplo c n al oyment, b by on, 2009 occupatio 2007

Total U.S. T em mployment (M 2007) May Total U U.S. employ yment (May 2 2009) ,240 5,174, 30, ,490 55, ,180 ,870 182, 57, ,230 95, ,250 ,230 102, ,820 127, ,000 1,492, 13, ,970 646, ,110 ,580 759, ,390 158, Percent chan in nge total employ yment (200720 009) 4.1% % 11.1 10.2 8.8 8.6 8.4 8.1 6.5 5.9 5.5 1.9 1.6 5.2
All hospita occupations al Diagnostic sonographe c er Computer and math sc r cience Managem ment Pharmacist Business and finance Social wo ork Radiology technician y Registere nurse ed Nuclear medical technician m Support Office or administrative a e LPN or LV VN
Note: Source:
4,973,020 4 27,450 50,060 168,070 52,720 87,870 94,550 120,050 1,409,220 13,240 633,920 747,960 166,930
LP (licensed practical nurse), LVN (licensed voca PN ational nurse). MedPAC analysis of Bureau of Lab Statistics, Oc bor ccupational Emp ployment Statistic data set as of December 2010 cs 0.
ges d nue we In general, chang reported here contin trends w observed last year. m t 9, mployment i ncreased 4.1 percent. B the end of this By From May 2007 to May 2009 hospital em period the hospital industry employed mo than 5 m e ore million individ duals. The number of di n iagnostic sonographers employed b the hospit industry in by tal ncreased mo ore rapidly than any other occupa o ation from 2007 to 2009 at 11.1 per 9, rcent. Growt was also th e or ging-related occupations such as ra s, adiology technicians (6.5 5 above average fo other imag perce ent). The number of co n omputer and math scien staff at h d nce hospitals incr dly y reased rapid from May 2007 to May 2009, at 10.2 pe ercent. Grow of this oc wth ccupation may be relate to the surg in ed ge intere in installing electronic health reco systems in hospitals est c ord s s. Licen nsed practica nurses (LP al PNs) and lic censed vocat tional nurses (LVNs) we among th s ere he few occupations to experienc a decline in the numb of individ o ce ber duals employ by hospitals yed from 2007 to 200 declining by 5.2 perc 09, cent (8,540 L LPNs and LV VNs). During the same time g period, the numb of registe ber ered nurses employed by hospitals increased 5.9 percent e y (82,7 registere nurses), suggesting a shift toward nurses with a higher le h 780 ed s d evel of trainin ng.
64
e vices Acute inpatient serv
Chart 6-3.
200 180 160 Billions of dollars 140 120 100 80 60 40 20 0 1999 95 18
Growth in Medica G n ares FFS paymen for hospital S nts in npatient and outp patient s services, 199920 009
Outpatie ent Inpatient 29 2 29 31 33 3 36
21 18
21
23 2
26
96 9
105
114
19 11
126
133
34 13
135
139
142
20 000
2001
2002
20 003 2004 2005 Calendar y year
20 006
2007
2008
20 009
Note:
FF (fee-for-servic Analysis includes inpatient services covered by the acute inp FS ce). patient prospectiv payment syste ve em (P PPS); psychiatric, rehabilitation, lo ong-term care, cancer, and childr rens hospitals a nd units; outpatie services covered ent by the outpatient PPS; and other outpatient service Payments inc y P o es. clude program ou utlays and benef ficiary cost sharin The ng. gr rowth in spending was slowed in 2006 by large increases in the nu g umber of Medica Advantage en are nrollees, who are not e included in these aggregate totals. a . CMS, Office of the Actuary. e
Source:
Aggre egate Medic care fee-for-s service (FFS inpatient s S) spending wa $142 billio and as on outpa atient spending was $36 billion in 20 6 009. From 20 to 2009, inpatient sp 008 pending increased about 2 percent, while outpatie spending increased about 10 pe w ent g ercent. A free in inpatient payment rates in the Balanced B eze e Budget Act o 1997 redu of uced inpatient spending growth from 1999 to 2000. Spe t ending increa ased substa antially betwe 2001 an een nd 2004 but reverted to relatively slow grow from 2005 to 2007 be d wth 5 ecause a lar number o rge of beneficiaries swit tched from traditional FF Medicare to the Medicare Advan FS e ntage progra am. More rapid paym e ment growth resumed in 2008 for inpa r 2 atient and outpatient services. Outpa atient spend ding has incr reased as a share of tota hospital-b al based spend ding in the last 10 years In 1999, outpatient spending acco s. ounted for al most 16 per rcent of all hospital spending; in 2009 outpatient spending grew to more than 20 pe 9, t g e ercent of tota hospital al spending. Outpa atient spend ding per FFS beneficiary was about $1,133 in 20 S y 009, up from approximately m $590 in 1999, a 93 percent in 9 ncrease.
65
Chart 6-4.
Proportio of Med on dicare ac cute care hospita inpatie e al ent es spital gr roup, 200 09 discharge by hos
Hospitals Medicare d discharges Nu umber (thou usands) 10,781 10,373 8,896 4,877 4,020 1,477 386 602 216 47 226 7,442 1,637 1,294 1,572 3,732 5,070 408 total Share of t 100. .0% 96. .2 82. .5 45. .2 37. .3 13. .7 3. .6 5. .6 2. .0 0. .4 2. .1 69. .0 15. .2 12. .0 14. .6 34. .6 47. .0 3. .8 ber Numb 4,6 660 3,3 370 2,4 402 1,3 310 1,0 092 968 9 124 1 394 3 195 1 102 1 153 1 1,9 969 824 8 577 5 269 2 762 7 2,3 339 1,2 290 Sh hare of total 100.0% 72.3 51.6 28.1 23.4 20.8 2.7 8.5 4.2 2.2 3.3 42.3 17.7 12.4 5.8 16.4 50.2 27.7
g Hospital group All PPS hospitals and CAHs s PPS hosp pitals Urban Large urban Other urban Rural (exc cluding CAHs s) Rural re eferral Sole community Medicar dependent re t Other ru <50 beds ural s Other ru >50 beds ural s Voluntary Proprietar ry Governme ent Major teac ching Other teac ching Nonteaching CAHs
Note:
PP (prospective payment system CAH (critical access hospital). Analysis include all hospitals c PS m), a . es covered by Medic cares inpatient PPS alon with CAHs. Maryland hospitals are excluded. L ng s Large urban area have populatio of more than 1 as ons n ching hospitals ar defined by a ratio of interns an residents to be of at least 0. re nd eds .25. Other teachi ing million. Major teac ospitals have a ra below 0.25. Data are limited to providers with complete cost r atio h reports in the CM database. Se MS ee ho Chart 6-24 for mor information ab re bout CAHs. Numbers may not su m to totals due t rounding. Sam to mple of hospitals limited plete hospital cos reports in 2009 st 9. to those with comp MedPAC analysis of PPS impact files and Medicar cost report dat from CMS. re ta
Source:
In 2009, 3,370 ho ospitals prov vided 10.4 million discha m arges under Medicares acute inpatie ent prosp pective paym ment system (IPPS) and 1,290 critica access ho al ospitals (CAHs) provided d more than 0.4 mi e illion dischar rges. The nu umber of PP discharge declined f PS es from 2008 prima arily due to a shift in serv vices from th inpatient to the outpa he atient setting g. Appro oximately 15 percent of all hospitals are covered by three special paym 5 s d ment provisio ons (rural referral cen l nters, sole co ommunity ho ospitals (SC CHs), and sm rural Medicaremall dependent hospitals (MDHs) intended to help rural f )) o facilities that are not CA AHs; these facilit ties account for more tha 11 percen of all disc an nt charges. The number of these hospit e tals increased approx ximately 1 pe ercent from 2008 to 200 09. Abou 88 percent of rural hos ut t spitals were CAHs, SCH MDHs, or rural referr centers in Hs, ral n 2009. Collectively these four types of ho y, r ospitals prov vide 86 perce of all rura discharge ent al es.
66
Chart 6-5.
Major diag M gnostic categories with h c highest v volume, fis scal yea 2009 ar
Sha of all are disc charges 25% 14 12 11 8 7 5 4 Share of medical discharges 23% 19 4 11 9 8 6 5 Share of e surgical discha arges 27 7% 3 34 4 10 0 5 4 2 2
MDC number 5 4 8 6 1 11 18 10
MDC name e Circulatory system y Respirator system ry Musculosk keletal system m and conne ective tissue Digestive system Nervous system s Kidney and urinary trac ct Infectious and parasitic diseases c Endocrine nutritional, and e, a metabolic diseases and d disorders Hepatobiliary system and pancr reas Skin, subc cutaneous tissue, and breast d Total
7 9
3 3 92
2 3 91
4 2 93 3
Note: Source:
MDC (major diagn nostic category). Numbers may no sum to totals d to rounding. ot due MedPAC analysis of MedPAR data from CMS. a
cal 09, c accounted fo 92 percent of all or t In fisc year 200 10 major diagnostic categories a disch harges at hos spitals paid under the ac cute inpatien prospectiv payment system. nt ve Circu ulatory system cases acc counted for about one-q a quarter of me edical cases and almost 30 s t perce of surgical cases. ent Resp piratory syste cases ac em ccounted for nearly 20 p ercent of me edical discha arges. Musc culoskeletal system case accounted for 34 perc es d cent of surgiical discharg ges.
67
Chart 6-6.
35
Cumulativ chang in tota admissions an total C ve ge al nd outpatient visits, 199920 009

To admission otal ns To outpatient visits otal t 26.0
30
9.6 29
25 1.0 21 Percent 20 15.4 15 12.3 8.7 5.3 5 0.0 0 1999 20 000 2001 2002 20 003 2004 2005 Fiscal yea ar 20 006 2007 2008 20 009 2.3 6.5 4.5 3.7 13 9.3 9.2 10.5 9.8 9 18.0 21.8
10
7.5
8.4
8.9
Note: Source:
Cumulative change is the total per rcent increase fro 1999 through 2009. Data are admissions (all payers) to and om h ou utpatient visits at about 5,000 com t mmunity hospital ls. Am merican Hospital Association, AH Hospital Statistics. HA
Hosp pital outpatient service us grew muc more rap se ch pidly from 19 to 2009 t 999 than inpatien nt servic use. Tota hospital ou ce al utpatient visi increased about 30 p its d percent from 1999 to 200 09, while total admissions grew nearly 10 pe e n ercent. e m atient visits and nearly 3 million admissions to community a 36 There were 641 million outpa hospitals in 2009 9. c p nge o sits ed ge The cumulative percent chan in total outpatient vis increase by nearly 4 percentag points from 2008 to 2009, or nearly 18 million visits. s m The cumulative percent chan in inpatie admissio decreased by 0.7 pe c p nge ent ons ercentage po oint from 2008 to 200 or more than 230,000 admission s. It was the largest sing 09, t 0 e gle-year decre ease in the la 10 years Inpatient admission de ast s. a eclined only slightly from 2006 to 20 m 007.
68
Chart 6-7.
Cumulativ chang in Med C ve ge dicare outpatient service es an inpatient disc nd charges per FFS benefici iary, 20 0042009
Ou utpatient services per FF beneficiary FS y Inp patient discha arges per FF beneficiary FS y 14.8 23.2 18.2
25 20 15 Percent 10 5 0.0 0 -5 -10 2004 5 2005 20 006 2007 2008 4.1 0.3 0.2 -1.1
8.5
-2.0
-4.2
2009
Calendar ye ear
Note: Source: FF (fee-for-servic Data are for short-term gene and surgical hospitals, includ FS ce). eral ding critical acces and childrens ss s ho ospitals. MedPAC analysis of MedPAR and hospital outpatient claims data f d from CMS.
From 2004 to 200 the number of Medic m 09, care inpatien discharge per fee-for nt es r-service (FF FS) beneficiary declin 4.2 perc ned cent. From 2004 to 2006 inpatient v 6, volume per b beneficiary w was relativ vely flat, but beginning in 2007, the volume of d t discharges began to dec cline. From 2004 to 200 the number of outpa m 09, atient service per FFS b es beneficiary in ncreased mo ore than 23 percent. Toge ether these tw trends su wo uggest a shif in services from the in ft s npatient to th outpatient he t settin ng.
69
Chart 6-8.
6 5.41
Trends in Medicar inpatie and non-Med re ent dicare npatient length of stay, 19 o 09 in 999200
5.31 5.23 5.20 5.1 13 5.06 5.00 .93 4. 4.91 4.89
5 3.97 3.96 6 3.95 3.95 96 3.9 3.91 3.91
4.78 4 3.96 3
4 Inpatient days
3. .90
3.91
3.95
Medicare beneficiaries re es Non-Medicar beneficiarie
0 1999 2000 2001 2002 200 03 2004 Fiscal yea ar

Note: Source: Le ength of stay is calculated from discharges and patient days for m c more than 3,000 h hospitals covered by the acute in d npatient pr rospective payme system. Excludes critical access hospitals. ent MedPAC analysis of Medicare cos report data from CMS. st m
2005
20 006
2007
2008
2 2009
Length of stay for Medicare inpatients wa nearly 1 d longer th for nonas day han -Medicare inpatients in 2009 9. Length of stay for Medicare inpatients fell nearly 12 p percent, from 5.41 days in 1999 to 4 m 4.78 days in 2009, dro opping at an average an nnual rate of 1.2 percent from 1999 t 2009. t to Length of stay for all non-Me edicare inpat tients remain nearly unchanged a 3.96 days ned at betwe 1999 an 2009. een nd
70
Chart 6-9. Sou urce of in npatient hospital admissi ions, 200 002009
100 0 90 0 Share of admissions (percent) 80 0 70 0 60 0 50 0 40 0 30 0 20 0 10 0 0 2000 2 200 01 2002 2003 2004 2 2005 200 06 2007 2008 2009 50.1 5 57.5 39.8 3 30.2 4.8 5.3 6.0 6.3
Fiscal ye ear Emergen room ncy

Note: Source:
Physician re eferral
Ot ther
Tran nsfer from oth hospital her
O Other includes clinic referral, hea maintenance organization, tra alth e ansfer from skille nursing facility transfer from o ed y, other pr rovider, transfer from within the same hospital, co f ourt/legal, and no information. o MedPAC analysis of MedPAR data from CMS. a
Hospitals report that most Medicare beneficiaries they ad dmit as inpatie ents are admi itted through cy ysician. In 200 nearly 58 percent of 09, hospital emergenc rooms or directly from a referring phy nts hrough a hospitalized patien were admitted through the emergency room and 30 percent th cian. Note tha not all eme at ergency room admissions a emergenc situations. are cy physic The share of Medicare beneficia s aries admitted to the hosp through th emergenc room increa d pital he cy ased from approximately 50 percent to 58 percent from 2000 to 2009, nearly a 15 percen increase. a y t o y nt The share of Medicare beneficia s aries admitted to the hosp through a referring phy d pital ysician declin ned from approximately 40 percent to 30 percent from 2000 to 2009, a 24 percent decre a y t o ease. g ely hare of all adm missions, the share of Med dicare Despite accounting for a relative smaller sh ficiaries admit tted as transf fers from othe acute care hospitals incr er reased from 4 percent to 6 4.8 o benef perce a 25 perce increase. ent, ent ary missions throu the emerg ugh gency room increased from approxima m ately On a per beneficia basis, adm p 2 2009, an 11.4 percent incre ease. eficiaries in 2 184 per 1,000 beneficiaries in 2000 to 205 per 1,000 bene In con ntrast, admiss sions from dir rect physician referral declined from 147 per 1,000 b n 7 beneficiaries in 2000 to 108 per 1,000 beneficia aries in 2009, a 26.5 perce decline. In addition, adm ent n missions resu ulting m ospital increas from appr sed roximately 18 per 1,000 be 8 eneficiaries in n from a transfer from another ho 2000 to 21 per 1,000 beneficiar in 2009, a 20.3 percen increase. ries nt
71
Chart 6-10. Share of Medicare Part A beneficiaries wit at leas M e th st on, 2009 one hospitalizatio 2000
25.0 0 24.5 5 24.0 0 23.5 5 23.0 0 Percent 22.5 5 22.0 0 21.5 5 21.0 0 20.5 5 20.0 0 2000 2001 200 02 2003 2004 2 2005 Fiscal ye ear 2006 6 2007 2008 200 09 23.4 23.4 23 3.4 23.1 23.4 2 23.6
23.5 23.0 22.7 22.1
Note: Source:
An nalysis excludes Medicare Advan ntage claims and claims for non d inpatient prospe ective payment sy ystem hospitals, such as critical access hospitals and hospitals located in Maryland. s h n MedPAC analysis of MedPAR data from CMS. a
The share of Med s dicare benef ficiaries with Part A cove h erage who h at least o inpatien had one nt hospitalization in a given yea declined by 1.5 percen ar b ntage points from 2005 to 2009. In s 2009, approximately 22 percent of Medic npatient stay care benefic ciaries had at least one in y cover under Pa A. red art Since 2005, the decline in the share of Medicare Par A beneficiaries using i e d e M rt inpatient hos spital care may be in part attributab to the rap shift of s ble pid surgical case from the inpatient sett es ting to the outpatient setting. In th inpatient setting, the number of s e he s surgical case per es beneficiary declin more rapidly than medical cases from 2005 to 2009, at 9.3 percent and ned m s 5 3.8 percent, resp pectively.
72
Chart 6-11. Hospital occupancy rates 19992 H o s, 2009

80 70 Occupancy rate (percent) 60 50 49 40 30 20 10 0 1999 200 00 2001 2002 200 03 2004 2005 Fiscal yea r 200 06 2007 2008 200 09 U Urban PPS R Rural PPS A hospitals All 0 50 64 61 65 5 65 62 51 67 8 68 68 65 52 69 66 53 69 9 68 65 69 66 8 68 5 65
61 1
63 51
4 64 2 52
5 65 2 52
51
50
49 9
Note:
PP (prospective payment system Hospital occup PS m). pancy rate is me easured as total iinpatient days as a percent of tot s tal av vailable bed days in the hospital over the reporting period. Bed da available are based on beds that are set up a s o ays e and staffed for inpatien service (i.e., th units are open and operating), but the beds ma not be staffed for a full patient load nt he n ay d t g tals group designations for the e entire 19992009 period are base on their status at the 9 ed s in each unit on a given day. Hospit nd en of 2009. MedPAC analysis of data from the American Hospital Association A e Annual Survey o Hospitals. of
Source:
In the aggregate, hospitals occupancy ra e , o ates have be relatively stable at a een around 65 perce or 66 per ent rcent each year from 2004 to 2009. In 2009, occ y cupancy rate were 65 es perce Earlier in the decade hospital occupancy ra ent. n e, o ates hovered around the low 60s. d e Occu upancy rates are higher in urban than in rural ho s ospitals; in 20 009, occupa ancy rates st tood at 68 percent for urban hospitals and 49 percent for rural hospita a 19 per als, rcentage poi int rence. differ upancy rates may unders s state overall facility occu upancy levells because t they do not Occu includ outpatien observatio cases, wh de nt on hich are often placed in b n beds counte as inpatie ed ent bed space. s
73
Chart 6-12. Medicare inpatien payme M nt ents, by s source a and hosp pital group, 2009
Percent of total paym ments Hospital group g All hospitals Urban Rural Large urban Other urb ban Rural ref ferral Sole com mmunity Medicare dependent e Other rur <50 beds ral Other rur >50 beds ral Voluntary y Proprieta ary Governm ment Major tea aching Other tea aching Nonteaching
Note:
Base 81.1% 80.5 85.7 78.8 82.8 89.1 81.9 85.2 91.5 90.6 81.6 84.3 74.6 66.3 83.0 87.4
IME 5.0% 5.5 0.7 6.6 3.9 1.1 0.9 0.0 0.2 0.4 5.3 1.3 7.0 16.1 3.7 0.0
DSH 9.4% 9.8 5.4 10.3 9.2 7.9 2.5 7.8 7.3 7.0 8.5 11.1 12.5 12.2 9.3 7.9
Outlier 3.6% 3.9 1.2 4.2 3.5 2.0 0.6 1.1 1.1 2.0 3.6 2.9 4.3 5.3 3.4 2.8
Ad dditional rural hospital* 1.0% 0.3 7.0 0.1 0.7 0.0 14.2 5.9 0.0 0.0 1.0 0.5 1.6 0.1 0.6 1.9
Tota al payme ents (millions) $110,019 98,622 11,396 57,018 41,604 3,173 5,039 1,420 262 1,501 80,072 15,418 14,528 24,756 40,191 45,072
IM (indirect medi ME ical education), DSH (disproportionate share). An D nalysis includes a hospitals cove all ered by Medicare es ac cute inpatient pro ospective payme system (PPS) Includes both o ent ). operating and ca apital payments b excludes dire but ect gr raduate medical education payme ents. Simulated payments reflect 2009 payment r p t rules applied to a actual number of cases f in 2009. Excludes critical access hospitals and their special payme h ents. Sole commu unity hospital and Medicare-depe d endent ospital categories include facilities paid at either the special nonfe s ederal rate or the federal rate. Ro e ows may not sum to m ho 10 percent due to rounding. 00 o *P Payments receive by sole comm ed munity and Medic care-dependent h hospitals beyond what would hav been received under d ve d PP A few sole community hospit PS. tals are located in urban areas. MedPAC analysis of claims and im mpact file data fro CMS. om
Source:
Medica inpatient pay are yments in 2009 to hospitals cove t ered by the acut inpatient pros te spective paymen system totaled more nt d than $1 billion. Abou $99 billion (90 percent) was paid to hospitals located in urban areas and $11.4 billion went to rural 110 ut 0 p n o hospita This figure does not reflect more than $2.7 billion in paymen to critical acc als. d m b nts cess hospitals (C CAHs) for inpatient care. al hich ucation, disprop ortionate share, and outlier pay , yments as well as Specia paymentswh include indirect medical edu additional payments to rural hospitals through the sole community hos o e spital (SCH) and Medicare-depe d endent hospital (MDH) a ments. This prop portion is higher for urban (19.5 percent) than fo rural r or programsaccount for 19 percent of all inpatient paym als n ments does not include wage in ndex adjustment or CAHs cost-based ts hospita (14.3 percent). This definition of special paym payme ents. CH ategories above include hospitals paid at either t hospital-spe the ecific rate or the federal rate. Am mong The SC and MDH ca the sub bgroup of SCHs and MDHs paid at the hospitald -specific rate, the share of paym e ments described as additional rural hospita payments was higher, 20.7 pe al s ercent for SCHs and 11.4 perce nt for MDHs. Ad dditional rural ho ospital payments s increas in 2009 as a result of the rebasing of cost-b sed based payment r rates to a more c current year. Outlier payments acco r ounted for 3.6 pe ercent of total inp patient payment in 2009. The legislative mandate for the level of ts outlier payments uses a different calcu ulation, displayin outlier payme ng ents as a ratio of outlier payments to base paym f ments utlier payments. Measured in this way, CMSs outlier share ratio was 5.3 percen in fiscal year 2 o o 2009, close to th he plus ou nt annual goal of 5.1 perc l cent.
74
Chart 6-13. Medicare acute in M npatient P PPS mar rgin, 199 942009
20 14.7 18.0 15.9 1 13.7 12 2.0 Margin (percent) 10 9.0 10.4 6 6.6 5 3.6 2.4
15
0 -0.3 -0.5 -2.2 -5 -3.7 -4.7 -2.4
-10
1994 1995 1996 1997 1998 1999 20 1 000 2001 200 2003 2004 2005 2006 2007 2008 2 02 4 2009
Fiscal ye ar
Note: PP (prospective payment system A margin is ca PS m). alculated as reve enue minus costs divided by reve s, enue. Data are b based on Medicare-allow n wable costs and exclude critical access hospitals. Medicare acute inpatient margin includes service e n es co overed by the acute care inpatien PPS. nt MedPAC analysis of Medicare cos report data (Au st ugust 2010) from CMS. m
Source:
Medicares acute inpatient margin reflect payments and costs f services c e m ts s for covered by Medicares inpati ient hospital prospective payment sy e ystem. The iinpatient ma argin may be e influe enced by how hospitals allocate overhead costs across serv w a vice lines. Only by comb bining data for all major services ca we estima Medicare costs witho the poten r an ate e out ntial influenc of ce how overhead co o osts are alloc cated (see Chart 6-15). C The Medicare inp M patient marg reached a record high of 18.0 pe gin h ercent in 199 After 97. imple ementation of the Balanc Budget Act of 1997, however, in o ced A npatient mar rgins decline ed over the next 10 years as cos rose fast than the 3 percent av sts ter verage annu increase in ual Medicare payments. In 2009, the margin was 2.4 p ercent, up m n more than 2 percentage points from 2008. s Medicare inpatien margins vary widely. In 2009, one nt v e-quarter of hospitals ha Medicare ad inpatient margins that were 7.9 percent or higher, an another quarter had in s 7 o nd npatient margins that were 17.9 percent or lo w p ower. This ra ange amount to a 26 pe ts ercentage po differenc in oint ce perfo ormance betw ween the top and bottom quartiles in 2009. Fort p m n ty-two perce of hospita ent als had positive inpa p atient Medica margins in 2009. are
75
Chart 6-14. Medicare acute in M npatient P PPS mar rgin, by u urban an nd ru loca ural ation, 199 942009
25 20 5.3 15 15 Margin (percent) 10 5 0 -0.3 -5 -10 1994 1995 19 996 1997 199 1999 200 2001 2002 2003 2004 2005 2006 2007 2008 2 98 00 2 4 2009 Fiscal yea ar
Note: PP (prospective payment system A margin is ca PS m). alculated as reve enue minus costs divided by reve s, enue. Data are b based on Medicare-allow n wable costs and exclude critical access hospitals. Medicare acute inpatient margin includes service e n es co overed by the acute care inpatien PPS. nt MedPAC analysis of Medicare cos report data (Au st ugust 2010) from CMS. m
18.8 16 6.8 14.6 13.0 11.1 9.7 9 4.0 4 4.4 11.3 8.3 6.0 1 4.1 3.9 1.6 0.6 2.6 0.5 -0.4 0.2 -1.6 -0.5 -2.8 -2.2 -3.8 7.2
Urb ban Rural
9.5
-3.7 -4.9
-2.2 -2.4
Source:
Urban hospitals historically had much hig h h gher Medica inpatient margins tha rural are an hospitals, but this difference narrowed ea n s arlier in this decade and today urban hospital d margins are lowe than those for rural ho er e ospitals. The gap between urban and rural hospita inpatien t margins gr g n als rew between 1994 and 2 n 2000. One factor in this divergence in this perio is that urb hospitals had greate success in f s e od ban er n contr rolling cost growth, at lea partly in response to pressures f g ast from manage care. Fro ed om 2001 to 2004, the difference narrowed an from 200 to 2008 ru hospitals inpatient e nd 04 ural s margins were slig ghtly higher than those for urban ho spitals. In 20 f 009, the diffe erence betw ween the margins of ru and urba hospitals narrowed fu m ural an urther, to 2. percent an 2.4 perc .2 nd cent, respe ectively. The narrowing between the two grou of hospit e b ese ups tals from 200 to 2004 is the 01 s result of payment policies tar t t rgeted at rais sing rural ho ospital paym ments and gro owth in the numb of critical access hos ber spitals, which removed m many rural h hospitals with low margin h ns from the prospec ctive paymen system. nt
76
Chart 6-15. Overall Medicare margin, 199720 O 009

15 11.9 10 Margin (percent) 8.5 6.3 5 2.2 0 -1.2 -5 -3.0 -3.0 0 -4.6 -6 6.0 -10 1997 1998 8 1999 20 000 2001 2002 2003 2004 2 Fiscal ye ear 200 05 2006 20 007 2008 2009 -7.1 -5.2 5.3 5.2
Note:
A margin is calcula ated as revenue minus costs, div vided by revenue Data are based on Medicare-al e. d llowable costs an nd ex xclude critical acc cess hospitals. Overall Medicare margins cover t costs and pay O the yments of acute inpatient, outpat tient, inpatient psychiatr and rehabilitat ric tion unit, skilled nursing facility, a home health services as well as graduate me n and edical ducation and bad debts. Data on overall Medicare margins before 1997 are unava d e e ailable. ed MedPAC analysis of Medicare cos report data (Au st ugust 2010) from CMS. m
Source:
The overall Medicare margin incorporate payments and costs f acute inp o es s for patient, outpa atient, skilled nursing, ho d ome health care, and inp c patient psychiatric and r rehabilitative e servic as well as direct gra ces a aduate medic educatio and bad d cal on debts. The overall margin is availa able only sin 1997, bu it follows a trend simila to that for the inpatien margin. nce ut ar r nt The overall Medicare margin in 1997 was 11.9 perce In fiscal year 2009, it was o s ent. 5.2 percent. In 2009, one-qua arter of hospitals had ove erall Medica margins o 4.2 percent or higher, and are of , anoth quarter had margins of 17.3 pe her h ercent or low Between 2000 and 2 wer. n 2008, the differ rence in perf formance be etween the to and botto quartile w op om widened from 17 percentage m points to 22 percentage points but narrow to 21 pe s wed ercentage po oints in 2009 About 36 9. perce of hospitals had posi ent itive overall Medicare m argins in 2009.
77
Chart 6-16. Overall Medicare margin, by urban and rural O n lo ocation, 19972009
15 12.6 9.4 7.3 Margin (percent) 5 6.2 3 6.3 6.0 2.8 2 1.7 -1.4 -5 -0.4 2 -2.2 2.3 -2 -3.9 -0.9 -3.0 -3.3 -2.8 -3.1 -4.5 -4.7 -6.0 -10 1997 1998 1999 200 00 2001 20 002 2003 2004 Fiscal yea ar 2005 2006 07 200 2008 2009 -5.3 -4.9 -6.3 -5.2 -7.2 Urb ban Rur ral
10
Note:
A margin is calcula ated as revenue minus costs, div vided by revenue Data are based on Medicare-al e. d llowable costs an nd ex xclude critical acc cess hospitals. Overall Medicare margins cover t costs and pay O the yments of acute hospital inpatien nt, ou utpatient, inpatient psychiatric and rehabilitation unit, skilled nursin facility, and h ome health services as well as d u ng direct gr raduate medical education and ba debts. Data on overall Medica margins befo 1997 are una ad o are ore available. MedPAC analysis of Medicare cos report data (Au st ugust 2010) from CMS. m
Source:
As with inpatient margins, ov verall Medica margins historically w are were higher for urban hospitals than for rural hospit r tals, but sinc 2005 ove ce erall Medicar margins fo rural hosp re or pitals have gradually be egun to sligh exceed those for urb hospitals. htly t ban The difference in overall Med d dicare margins between urban and r rural hospita grew betw als ween 1997 and 2000 but has since narrowed. In 1997, the overall mar b e e rgin for urban hospitals was mpared with 6.2 percent for rural ho spitals. In 20 t 009, the ove erall Medicar re 12.6 percent, com margin for urban hospitals wa 5.2 perc as cent, compa red with 4.9 percent fo rural hospitals. or Policy changes made in the Medicare Pr y m M rescription D Drug, Improv vement, and Modernizati ion Act of 2003 targe o eted to rural hospitals he elped to impr rove the rela ative financia position of al f rural hospitals. Further legisla ation to assi rural hosp ist pitals was im mplemented after 2008.
78
Chart 6-17. Hospital total all-p H t payer ma argin, 19 9942009 9

10 9 8 7 Margin (percent) 6 5 4 3 2 1 0 1994 1995 1996 1997 19 1 998 1999 2000 2001 200 2003 2004 2005 2006 2007 2008 2009 02 4 6 Fiscal yea ar
Note: A margin is calcula ated as revenue minus costs, divid by revenue. T m ded Total margin inclu udes all patient c care services fund by ded all payers, plus non npatient revenue. Analysis excludes critical access hospitals. s *T significant dro in total margin includes investm The op n ment losses stem mming from the de ecline of the U.S. stock market in 2 2008. MedPAC analysis of Medicare cos report data (Au st ugust 2010) from CMS. m
6.4 5.8 4.6 5.9 5.4 4.8 4 3.6 3. .9 4.3 3.7 3.7 7 4.3 4.8
6.0
4.3
1.8*
Source:
The total hospital margin for all payers t Medicare, M Medicaid, oth governm her ment, and pri ivate payersreflects the relations ship of all ho ospital reven nues to all ho ospital costs including s, inpatient, outpatie post-acute, and non ent, npatient serv vices. The to margin a otal also includes s nonpatient revenue such as investment revenues. Th 2008 dec r he cline of the U U.S. stock market resulted in significant investment losses for h t hospitals, wh hich resulted in a d corre esponding de ecline in tota margin. Ot al ther types of margins we track, Med f e dicare inpatie ent margin and overa Medicare margin, are operating m all e margins that do not inclu investme ude ent reven nue. The total hospital margin pea t aked in 1997 at 6.4 perc 7 cent, before d declining to less than 4 perce in the 19992002 pe ent eriod. From 2002 to 2007 total marg 2 7, gins increase to the hig ed ghest level in a decade In 2008, th total marg declined to 1.8 perce its lowes level since the e. he gin ent, st e inpatient prospec ctive paymen system wa implemen nt as nted. In 2009 total marg increased 9, gin d again to 4.3 perc n cent. In 2009, 68 perce of hospit ent tals had positive total ma argins. Howe ever, the tot margin va tal aried much less than th Medicare inpatient or overall Med h he e r dicare margin. In 2009, one-quarter of r prosp pective paym ment system hospitals ha total mar ad rgins that we 8.0 perce or higher ere ent r, while another one e e-quarter ha margins th were 1 .7 percent o lower, a sp ad hat or pread of roug ghly 10 pe ercentage po oints compared with a 26 percentag point spre for Medic ge ead care inpatien nt margins and a 21 percentage point sprea for overa ll Medicare m 1 e ad margins.
79
Chart 6-18. Hospital total all-p H t payer ma argin, by urban a y and rural l lo ocation, 19942009
10 9 8 7 Margin (percent) 6 5 4 3 2 1 0 996 1997 1998 1999 200 2001 2002 2003 2004 2005 2006 2007 2008 2009 00 4 2 1994 1995 19 Fiscal yea ar
Note: A margin is calcula ated as revenue minus costs, div vided by revenue Total margin in e. ncludes all patien care services f nt funded y s enue such as inve estment revenue Analysis exclu es. udes critical acce hospitals. ess by all payers, plus nonpatient reve *S Significant drop in total margin inc n cludes investmen losses resultin from the U.S. stock market dec nt ng cline of 2008. MedPAC analysis of Medicare cos report data (Au st ugust 2010) from CMS. m
Rur ral 7.9 6.8 5.5 5 5.7 4.5 4 5.8 5 7.2 7 5.7 5.1 1 5.1 4.5 .7 4. 3.4 3.7 7 3.6 9 3.9 3.6 6 4.3 4.2 4.7 4.2 2.5* 3.8 5.1 5.3 5.9 6.0 5.9 Urb ban
5. .6 6.2
4.3
1.8*
Source:
In 2009, urban ho ospitals had higher total (all payer) m margins than rural hospitals. Total n margins were 4.3 percent for urban hosp r 3 r pitals and 3.8 percent for rural hospitals. Historic 8 cally, rural hospitals ha usually had higher to margins in aggregat than urban hospitals. The ave h otal s te fact that urban ho ospitals had higher total margins tha rural hosp an pitals in 2009 may be assoc ciated with urban hospitals relatively larger inve u estment port tfolios and th improved he perfo ormance of th U.S. stoc market tha year. he ck at In 2008, both rura and urban hospitals experienced their lowest level of tota (all payer) al n e t al margins in the las 15 years. Hospitals to margin iincludes all patient care services fun st otal nded by all payers, plu nonpatient revenue su as inves l us uch stment reven nues. The 20 decline of 008 the U.S. stock ma U arket resulte in significa investme losses fo hospitals, which resulted ed ant ent or in a correspondin decline in total margin Other typ of margins we track Medicare c ng n ns. pes k, inpatient margin and overall Medicare ma argin, are op perating mar rgins that do not include o e inves stment reven nue.
80
Chart 6-19. Hospital total all-p H t payer ma argin, by teachin status y ng s, 19 9942009
10 No onteaching Ot ther teaching Major teaching 6.7 6.1 5.3 5 4.6 5.0 4.0 3.4 2 1.6 0 -0.4* -2 1994 1995 1996 1997 19 998 1999 2000 2001 200 2003 2004 2005 2006 2007 2008 2009 02 4 6 Fiscal yea ar
Note: Major teaching hospitals are define by a ratio of in ed nterns and reside ents to beds of 0 0.25 or greater, w while other teaching ho ospitals have a ra of greater than 0 and less tha 0.25. A margiin is calculated a revenue minus costs, divided b atio an as s by re evenue. Total ma argin includes all patient care serv vices funded by a payers, plus n all nonpatient reven nue. Analysis exc cludes cr ritical access hos spitals. *S Significant drop in total margin inc n cludes investmen losses resultin from the U.S. stock market dec nt ng cline of 2008. MedPAC analysis of Medicare cos report data (Au st ugust 2010) from CMS. m
6.8 5.4 6.1
7.0 6.7
7.0 6.9 5.2 5.2
Margin (percent)
.6 4. 4. .2 .4 2.
4.9
8 4.8
5.1 4.9
5.0 4.6
5.3 4.6
6.0 5.2 2.9*
4.9 4.9
4.8 3.4
5.2 5 4.1 3.4 3 4.2 4.2 2
3.6 2.5 1.3 4 1.4 3.0 2.3* 2.4
Source:
The pattern of tot margins by teaching status is the opposite of the pattern for the p tal b e f n Medicare inpatien and overa Medicare margins. Th total marg nt all he gins for majo teaching or hospitals have co onsistently been lower th those fo other teaching and nonteaching b han or hospitals. In 2009 the total margin for major teachin g hospitals s 9, m stood at 2.4 percent comp pared with ot ther teaching hospitals and nonteac g a ching hospita at 4.9 pe als ercent each. In 2007, major te eaching hosp pitals total (a payer) ma all argins reach their highest level in hed n more than two de e ecades and increased fo the fifth co or onsecutive y year. However, in 2008, this trend was interrupted by a steep decline in their inve estment reve enues. The decline of the U.S. stock market in 2008 resulted in significa investme losses fo d k 2 d ant ent or hospitals, which resulted in a decline in hospitals tot margins. Other types of margins we r h tal s track, Medicare in npatient mar rgin and ove erall Medicar margin, a operating margins an do re are g nd not in nclude investment reven nue.
81
Chart 6-20. Medicare margins by teac M s ching and dispro d oportiona ate sh hare stat tus, 2009 9
Sha of are hos spitals 10 00% 9 21 2 69 6 26 2 5 53 5 16 1 Share of f Medicare e inpatient s payments 100% 25 34 42 52 6 31 10 M Medicare in npatient m margin 2.4% 6.7 3.0 7.1 2.2 9.1 3.7 18.1 Overall Medicar re margin n 5.2% % 0.2 5.3 7.8 2.4 10.3 5.5 15.3
Hospital group g All hospita als Major teac ching Other teac ching Nonteaching Both IME and DSH IME only DSH only Neither IM nor DSH ME
Note: Source:
IM (indirect medi ME ical education), DSH (disproportionate share). D MedPAC analysis of 2009 Medicar cost report data from CMS. re
Major teaching hospitals hav the highes Medicare inpatient and overall Me ve st edicare marg gins. Their better finan r ncial perform mance is largely due to th additiona payments they receive he al e from the indirect medical edu ucation (IME and dispro E) oportionate s share (DSH) adjustment ) ts. Hosp pitals that rec ceive neither IME nor DS payment have the llowest Medicare margin In SH ts ns. 2009, the Medica inpatient margins of these hospit are tals were ne early 25 perc centage poin nts below those of major teachin hospitals and overall Medicare margins were more than 1 w m ng a 15 perce entage point lower. ts
82
Chart 6-21. Financial pressur leads t lower costs re to

Level of financial pres ssure, 20042 2008 High pressure h (non n-Medicare margin 1%) Number of hospitals o Financial characteristics, 2009 l Non-Medi icare margin (private Medicaid, uninsured) e, u Standardized cost per discharge re onal median) (as a shar of the natio Median of for profit and nonprofit a Nonprofit hospital For-prof hospital fit Annual gr rowth in cost per p discharge 20062009 e, Overall 20 Medicare margin 009 e Patient characteristic (medians) cs Total hosp pital discharges in 2009 Medicare share of inpa atient days Medicaid share of inpa atient days Medicare case mix index
Note:
Me edium pressure 3 390
Low pres ssure (non-Medicare margin > 5%) 1,747 7
756
3.8% 92 92 92 4.3% 4.7%
2.7% 96 96 92 4.2% 1.1%
10.7 7% 104 4 105 5 99 9 4.6 6% 10.2 2%
5,113 5 43% 12 1.33
8,1 183 42% 11 1.45
7,292 2 43 3% 10 0 1.45 5
St tandardized cost are adjusted fo hospital case mix, wage index, outliers, transfe cases, interest expense, and th ts or m , er t he ef ffect of teaching and low-income Medicare patients on hospital co a osts. The sample includes all hos e spitals that had co omplete cost repo on file with CMS by August 2010. orts C 2 MedPAC analysis of Medicare cos report and claim files from CM st ms MS.
Source:
Highe financial pressure ten to lead to lower cost growth and lower costs per dischar er p nds o s rge. Hosp pitals with low volume, lower case mix, and hig wer gher Medica charges a more like to aid are ely be un nder financia pressure. al
83
Chart 6-22. Change in Medica hosp C n are pital inpatient cos per sts discharge and private pay paym e yer ment-to-c cost ratio o, 19 9872009
12 Percent change in cost per discharge 10 8 6 4 2 0
0.6 6 1.20 1.24 1.18 3.0 1 1.17 1.15 9.2 9 9.4 1.31 2 1.32 1.30 6.6 6.9 1.24 2.6 5.0 5.1 1.22 4.2 3.0 1.29 1.34
1.40 1.35 1.30 1.25 1.20 1.15 1.10 1.05 987 19 1989 1991 1993 1995 199 97 1999 Fis scal year 2 2001 2003 2005 2007 7 2009 Payment-to-cost ratio
-2 -4
-1.4
Change in Medicare acute inpatien costs per diischarge i a nt

Note:
Payment-to-cost ratio
Da are for comm ata munity hospitals and cover all hos a spital services. Im mputed values w were used for mis ssing data (about onet third of observations). Data for 200 062009 exclude Medicare and M e Medicaid manage care patients from the private ed ayment-to-cost ra atio. The private payment-to-cost ratio includes se t elf-pay patients. If we excluded s self-pay patients, the , pa pa ayment-to-cost ra for 2009 wou be higher, at approximately 1 .41. atio uld MedPAC analysis of Medicare Cos Report files fro CMS and CM st om MSs rules for the acute inpatient prospective paym e ment sy ystem and American Hospital Ass sociation Annual Survey of Hosp itals.
Source:
The pa attern of growth in Medicare costs per disch h c harge makes it clear that hosp pitals have resp ponded strongl to ly the inc centives posed by the rise and fall of financial pressure fro private paye over three d om ers distinct periods s between 1987 and 2007. During the first period 19871992, private payers payments ros much faster than the cost of treating their g d, s se r patients (seen in the chart as a stee increase in the payment-to ep o-cost ratio). Th result suggests an almost his t ssure from priv vate payers. Me edicare costs p discharge r per rose 8.3 percen per year duri nt ing complete lack of pres ge ar crease in Mediicares market basket index. these years, more than 3 percentag points a yea above the inc As HM MOs and other private insurers exerted more pressure duri ng the second period, 1993 s e 1999, the priva ate payer payment-to-co ratio droppe substantially The rate of co growth plum ost ed y. ost mmeted to an a average of only 0.8 y nt t age ow e he ket. percen per year, which was more than 2 percenta points belo the average increase in th market bask As pre essure from priv vate payers wa aned after 1999 the private p 9, payer payment-to-cost ratio ro sharply, an ose nd hospital cost growth exceeded grow in the mark basket by 2 percentage po wth ket oints a year. In 20052007, th n he growth in private pay profit margins slowed, and in 2007, cost growth more c h yer d closely matches the market ba s asket. In 200 the private payer payment 09, p t-to-cost ratio in ncreased as co growth was lower than pay ost yment rate increases. The slow cost growth in 2009 may refle financial pre ect essure stemmiing from 2008 investment por rtfolio s c 7.) losses and economic uncertainty. (See Chart 6-17
84
Chart 6-23. Markup of charge over c M f es costs for Medicar servic re ces, 19 9982009
250 207 200 157 150 Percent 104 114 125 9 139 167 176 181 85 18 193
100
98
50
0 1998
Note: Source:
19 999
2000
2001
2002
2004 2003 2 Fiscal y year
2005
2006
20 007
2008
2009
An nalysis includes all community ho ospitals. Am merican Hospital Association Ann nual Survey of Hospitals. H
The markup of ch m harges over costs rose from about 9 percent in 1998 to 20 percent in f 98 n 07 n 2009. Charges now exceed costs by more than a fac of 3. c ctor e ts harges, rapid growth in c d charges may have little i y impact on Since few patient pay full ch hospital financial performanc However, this growth may significantly affect uninsured ce. h t patients, who ma pay full ch ay harges. More rapid grow in charge (relative to growth in e wth es o costs may reflec hospitals attempts to maximize re s) ct a evenue from private payers (who oft ten struct ture their pa ayments as a discount of charges). The unusua large incr ff ally reases in charg in 2002 and 2003 may have resulted from s ges some hospita manipula als ating Medica are outlie payments. Toward the end of fisca year 2003 Medicare revised its o er e al 3, outlier policy in hrough an at ttempt to cur hospitals opportunity to increase their outlier payments th rb exces ssive increases in charg ges. The markup of ch m harges over costs is gen nerally highe for urban h er hospitals (22 percent in 24 n 2009) than for rural hospitals (168 percent in 2009). s
85
Chart 6-24. Number of CAHs, 199920 o 011

1,400 1,200 5 1,055 1,000 Number of CAHs 875 800 600 400 200 41 0 000 2001 2002 2003 2004 2005 2006 200 2 5 07 2008 20 009 2010 2011 1999 20 Calendar year r
Note: Source: CA (critical access hospital). AH Th Medicare Rur Hospital Flexibility Program an CMS. he ral nd
1,324 83 1,280 1,28 1,291 1,302 1,306 1
722 563
341 139
The number of cr n ritical access hospitals (CAHs) grew rapidly from 1999 to 20 but has s w m 006 since leveled off at approximately 1,300 facilities. e C gislative cha anges that m made convers sion The increase in CAHs is in part due to a series of leg AH asier and exp panded the services tha qualify for cost-based reimbursem s at ment. to CA status ea Curre ently, CAHs are paid the Medicare costs plus 1 percent for inpatient se eir r ervices, outpa atient service (including laboratory and therapy services), a post-acu services in es g y and ute swing beds. g Befor 2006, a hospital could convert to CAH status if it was (1) 35 miles by primary roa or re d y ad 15 miles by secondary road from the nea f arest hospita or (2) the state waived the distance al, d e provider. Sta arting in 200 states co 06, ould requirement by declaring the hospital a necessary p no longer waive the distance requiremen While mo st existing C t e nt. CAHs fail the distance te e est, they are grandfat a thered into the program. Among sm all rural hospitals that ha not . ave conve erted, most would not meet the dista w m ance require ement. There efore, we ex xpect the num mber of CA to remain fairly cons AHs stant.
86
Chart 6-25. Medicare paymen to inp M nts patient ps sychiatr faciliti ric ies, 20 0012010
5.0 4.5 4.0 Dollars (in billions) 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2001 2002 200 03 2004 2 2006 2005 Fiscal ye ear 2007 7 2008 2009 2010 3.3 3.5 3.5 5 3.8 4.0 4.1 4.1 4 4.2
4.0
4.0
Source:
CMS, Office of the Actuary. e
The inpatient psy ychiatric facility prospect tive paymen system sta nt arted Januar 1, 2005. ry Medicare program spending for beneficia m aries care in inpatient psychiatric fa n acilities grew an w estim mated 2.7 percent per ye between 2001 and 20 ear 010. Inpat tient psychia atric care furn nished in scatter beds in acute care hospitals and paid under n e the acute care inpatient prospective paym ment system is not inclu m uded in this c chart.
87
Chart 6-26. Number of inpatie psych o ent hiatric fa acility ca ases has fa allen und the PPS, 2002 der P 22009
A TEFRA 2002 Cases 1 Cases per 1,000 FFS beneficiarie es p Spending per FFS beneficiary y er Payment pe case er Payment pe day tay Length of st (in days)
Note:
PPS 2004 2006 47 74,417 13.1 $104.7 $ $7,989 $ $677 13.0 2 2008 44 2,759 12.5 $ 109.5 $ 8,742 $728 13.1 2009 431 1,276 12.3 $1 111.3 $9 9,080 $ $763 13.1
Average nual ann cha ange 2002 2004 2 2.0% 0 0.2 3 3.4 3 3.6 4 4.9 1 1.2
Ave erage ann nual cha ange 20042009 2 2.3% 1 1.5 2 2.8 4 4.4 4 4.0 0 0.6
464,780 13.3 $90.6 $6,822 $570 13.0
483,271 4 13.2 $96.8 $7,328 $627 12.7
PS m), E Act e-for-service (FFS S). PP (prospective payment system TEFRA (Tax Equity and Fisca l Responsibility A of 1982), fee Numbers of cases and patients ref s flect Medicare FF utilization of s FS services furnishe in inpatient ps ed sychiatric facilities s. catter bed cases and spending are excluded, as are cases and sp s a pending for bene eficiaries enrolled in Medicare d Sc Ad dvantage plans. MedPAC analysis of MedPAR data from CMS. a
Source:
Since a prospect e tive payment system for inpatient ps t sychiatric fac cilities (IPFs) was ) imple emented in January 2005 the number of cases in IPFs has fallen, on av J 5, verage, abou ut 2.3 percent per year. Control y lling for the number of b eneficiaries enrolled in f n fee-for-service Medicare, IPF ca ases fell 1.5 percent per year betwee 2004 and 2009. en d
88
Chart 6-27. In npatient psychiat facili tric ities, 200 032009

TEFRA Type of IP PF All Urban Rural Freestand ding Hospital-b based units Nonprofit For profit Governme ent
Note: Source:
PPS S 2005 1,623 1,283 340 366 1,257 910 344 369 2006 1,590 1,267 323 396 1,194 878 343 369 2007 4 1,584 1,262 2 322 2 412 2 1,172 2 849 9 359 9 376 6 2008 1,564 1,251 313 420 1,144 831 352 381 2 2009 1,536 1,210 326 426 1,110 802 368 366
2003 1,703 1,298 405 353 1,350 974 349 380
200 04 1,657 1,277 378 352 1,305 949 327 381
Ave erage Ann nual annual cha ange cha ange 2003 2004 2004 2009 2 2.7% 1 1.6 6 6.7 0 0.3 3 3.3 2 2.6 6 6.3 0 0.3 1 1.5% 1 1.1 2 2.9 3 3.9 3 3.2 3 3.3 2 2.4 0 0.8
PF chiatric facility), TEFRA (Tax Equ and Fiscal Re T uity esponsibility Act of 1982), PPS (prospective paym t ment IP (inpatient psyc sy ystem). Numbers are facilities tha submitted valid Medicare cost r s at d ven reports in the giv fiscal year. MedPAC analysis of Medicare cos report files from CMS. st m
Between 2003 an 2004, the number of freestanding inpatient p nd e g psychiatric fa acilities (IPFs s) rema ained fairly st teady. Begin nning in 2005, when the IPF prospec ctive payme system (P ent PPS) began to be implemented, the number of freestandin IPFs grew an average of 3.9 perc f ng w e cent per year. By com mparison, the number of distinct-part psychiatric units in acut care hosp e t te pitals fell by 3.3 percen between 2003 and 2004, a decline that contin y nt 2 e nued after the PPS was imple emented. Mu of the de uch ecline in psy ychiatric units occurred a s among nonprofit and rura al facilit ties. The drop in the number of ps d n sychiatric units likely has several cau s hiatric units m may uses. Psych not be as profitab as they once were, particularly w ble o p when compa ared with other acute car re hospital services. Other facto such as the availabiility of psych ors, hiatrists to pr rovide on- ca all servic in hospital emergency departme ces ents, may al so affect acu care hos ute spitals decis sions to clo their psy ose ychiatric units s.
89
Chart 6-28. One diagn O nosis accounted for almo three d ost e-quarter rs of IPF cas in 20 f ses 009
MSDRG 885 057 884 897 881 882 895 056 880 886 883 894 896 876 887 081 080 Diagnoses s Psychosis Degenerat tive nervous system disord s ders without M MCC Organic disturbances & mental retar rdation Alcohol/dru abuse or dependency, no rehabilitat ug d tion, without M MCC Depressive neurosis e Neurosis except depres e ssive Alcohol/dru abuse or dependency with rehabilita ug d w ation, without MCC Degenerat tive nervous system disord s ders with MCC C Acute adju ustment reaction & psychos social dysfun ction Behavioral and develop pmental disord ders Disorders of personality & impulse co y ontrol Alcohol/dru useleft AMA ug A Alcohol/dru abuse or dependency without rehab ug d w bilitation, with MCC OR proced dure with principal diagnos of mental i llness sis Other men disorders ntal Nontrauma stupor & coma without MCC atic c t Nontrauma stupor & coma with MC atic c CC Nonpsychi iatric MSDR RGs Total
Note:
Percentage 73. .1% 7. .5 5. .8 4. .2 3. .3 1. .1 0. .9 0. .8 0. .7 0. .5 0. .5 0. .2 0. .2 0. .1 0. .1 0. .1 0. .0 0. .9 100. .0
IP (inpatient psyc PF chiatric facility), MSDRG (Medic M care severitydia agnosis related g group), MCC (ma comorbidity o ajor or co omplication), AMA (against medic advice), OR (operating room) . A cal ( MedPAC analysis of MedPAR data from CMS. a
Source:
Medicare patients in inpatien psychiatric facilities (IP nt c PFs) are gen nerally assig gned to 1 of 17 psych hiatric Medic care severity ydiagnosis related grou ups. In 2009, the most fr requently occur rring IPF dia agnosisacc counting for 73 percent of IPF disch hargeswas psychoses. The s next most commo discharge accounting for almost 8 percent o IPF cases, was on e, t of rvous system disorders. m degenerative ner
90
Chart 6-29. IP discharges by benefic PF y ciary cha aracteris stics, 200 09

Character ristic Current eligibility status s* Aged Disabled ESRD only o Age (year rs) <45 4564 6579 80+ Race White African American Hispanic Other
Note: IP (inpatient psyc PF chiatric facility), ESRD (end-stage renal disease). E e . *S Some aged bene eficiaries are also disabled. o MedPAC analysis of MedPAR data from CMS. a
Share of to IPF discha otal arges
34.9% 65.0 0.1
28.3 36.4 21.1 14.6
77.1 17.3 2.7 2.9
Source:
Most Medicare beneficiaries treated in in npatient psyc chiatric facili ities (IPFs) q qualify for Medicare becaus of a disab se bility. As a re esult, IPF pa tients tend t be younge and poore to er er than the typical fe ee-for-servic beneficiar ce ry. Diagn nosis pattern differed by age and ra ns b ace. Among the top Med g dicare sever ritydiagnosis relate groups in 2009, dege ed enerative ner rvous system disorders, such as dementia, were m e much more comm in older patients, wh psychos were mo common in younger h mon r hile ses ore patients. A ma ajority of ben neficiaries ad dmitted to IP are duallly eligible for Medicare a Medicaid. In PFs and 2009, 59 percent of Medicare beneficiaries with at le t e east one IPF discharge w F were dually eligib for at leas one month of the year ble st h r.
91
Web li inks. Acu inpat ute tient serv vices

Short-term hospital ls Chap 3 of the MedPAC Ma pter arch 2011 Report to the Congress p R e provides add ditional detai iled inform mation on ho ospital margins. http:/ //medpac.gov/chapters/M Mar11_Ch03 3.pdf MedP PAC provide basic information about the acute inpatient pr es e rospective payment syst tem in its Payment Ba asics series. . http:/ //www.medpac.gov/docu uments/MedPAC_Payme ent_Basics_ _10_hospital l.pdf formation on the hospita market ba sket. n al CMS provides inf http:/ //www.cms.g gov/Medicare eProgramRa atesStats/do ownloads/inf fo.pdf CMS published th proposed acute inpati he ient prospec ctive paymen system rule in the May 4, nt y 2010, Federal Re egister. http:// /www.cms.gov/AcuteInpatientPPS/IP PPS2011/list t.asp#TopOf fPage Inpatient psychiatri facilities ic Chap 6 of the MedPAC Ju 2010 Re pter une eport to the C Congress pr rovides inform mation on inpatient psychiatric facilities. http:/ //medpac.gov/chapters/J Jun10_Ch06 6.pdf MedP PAC provide basic information about the inpati ent psychiat facility pr es tric rospective paym ment system in its Payme Basics series. ent http:/ //www.medpac.gov/docu uments/MedPAC_Payme ent_Basics_ _10_psych.p pdf CMS provides inf formation on the inpatient psychiatriic facility pro n ospective pa ayment syste em. http:/ //www.cms.g gov/Inpatient tPsychFacilP PPS/
CMS describes updates to th inpatient psychiatric f u he p facility prosp pective paym ment system for ate ginning July 1, 2011, in the January 27, 2011, Fe ederal Regis ster. the ra year beg http:/ //edocket.acc cess.gpo.go ov/2011/pdf/2 2011-1507.p pdf
92
SECTION
Ambulatory care
Physicians Hospital outpatient services Ambulatory surgical centers Imaging services
Chart 7-1.
2,200 2,000 Spending per beneficiary (dollars) 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0
Me edicare spending per FFS benefi s g iciary on physician n fee e-schedu servi ule ices, 200 002010
Aged d Disa abled
2000 0
Note:
20 002
2004
2006
2008
2010
FF (fee-for-servic Dollars are Medicare spending only and do n include benef FS ce). M not ficiary coinsurance. The category y d disabled exclude beneficiaries who qualify for Medicare because they have endes w e -stage renal disease. All beneficia aries ag 65 or over are included in the aged category. ge e 011annual report of the Boards of Trustees of the Medicare trust funds. ts t 20
Source:
Physicians and other health professional perform a broad range of services listed on th o ls e s he Medicare physician fee schedule, includi office vis ing sits, surgical procedures and a varie of s, ety diagn nostic and th herapeutic se ervices furnished in all h health care s settings. In a addition to physi icians, these services may be provid by other health prof e m ded r fessionals (e e.g., nurse pract titioners, chir ropractors, and physical therapists). a l . Fee-f for-service (FFS) spending per bene eficiary for p hysician fee e-schedule services has increased annually. During th decade between 200 and 2010, Medicare s he b 00 , spending per r FFS beneficiary on these ser o rvices grew 64 percent. 6 Grow in spendi on physician fee-sch wth ing hedule servic is one of several con ces f ntributions to o Part B premium increases ov this time period. ver c ding for disab bled beneficiaries (unde r age 65) is lower than p capita per Per capita spend spending for aged beneficiar ries. In 2010, for exampl e, per capita spending f disabled a for beneficiaries was $1,729 com s mpared with $2,056 for a aged benefic ciaries. Spen nding data fo 2011 are not available or n e.
A Data Book: He ealth care spen nding and the M Medicare progr ram, June 2011
95
Chart 7-2.
70 60 Cumulative percent change 50 40 30 20 10 0 2000 -10
Volume growth ha raised physic V as d cian spen nding mo ore th input prices and pay han yment up pdates, 2 2000200 09
Spen nding per benef ficiary MEI Upda ates
20 001
2002
2003
2004
200 05
2006
2007
2008
200 09
Note: Source:
MEI (Medicare Economic Index). 010 rt o e bal hrough second q quarter 20 annual repor of the Boards of Trustees of the Medicare trust funds, IHS Glob Insight data th of 2010, and data from the Office of the Actuary. f o
Durin the 10-year period en ng nding in 2009 Medicare spending fo physician servicesper 9, or beneficiaryincr reased by 61 percent. 1 ng cian services grew much more rapid over this period than both s h dly Medicare spendin on physic e nd care Econom Index (MEI). Physicia fee sched mic an dule the payment rate updates an the Medic paym ment updates totaled 7 percent, and the MEI incr s reased 20 percent. Grow in the vol wth lume of serv vices provide contribute significan more to t rapid ed ed ntly the increase in Medic care spendin than paym ng ment rate up pdates. Both factorsup h pdates and me combine to increase physician reve enues. volum growth
96
Ambulatory care
Chart 7-3.
Most bene M eficiaries report that they can alw s y ways or us sually ge timely care, 20 et y 010
Overall
87 7 9 90
Beneficiary characteristic
Aged (65 yea or older) A ars Disabled (under 65)

84 84
8 88 92
Routine Urg gent
White African American n Hispanic 0 20 40 60

81 84 79 84
89 8 91
80
100
Percent of responden ts who repor rted that they f "a always" or "u usually" got care as soon as they wa anted
Note: In the survey, rout tine care refers to appointments in doctors offices or clinics that a not for care n o s are needed right awa ay. s onapplicable respondents (e.g., t those Urgent care refers to care needed right away for an illness, injury , or condition. No ho r s e wh did not seek routine or urgent care in the last six months) were excluded. ment of Healthca Providers and Systems ) for f are d fee-for-service MedPAC analysis of CAHPS (Consumer Assessm Medicare, 2010.

Source:
Overa 87 perce of Medica beneficia all, ent are aries who re eported makiing an appointment for routin care at a doctors office or clinic said that the always or usually got care as soon as ne s ey they wanted. For beneficiarie who repor w r es rted needing urgent care in a clinic, emergency g e room, or doctors office, 90 percent repor s p rted that the always or usually got care as soon as ey they wanted. w pared with beneficiaries age 65 or older, those u b o under age 6 and eligible for Medica 65 are Comp on the basis of di isability were less likely to report tha they alway or usually got routine or e at ys y e urgen care as so as they wanted. nt oon w Smaller percenta ages of Africa American and Hispan beneficia an n nic aries reporte that they ed alway or usually got care as soon as the wanted, c ys y s ey compared w White be with eneficiaries.
97
Chart 7-4.
Medicare beneficia M aries rep port bette ability to get er timely app pointmen with p nts physicians, comp pared with privately insured individua 2007 i als, 2010
Me edicare (age 65 or older) 6 Private insuranc (age 5064) ce 2007 7 2008 2009 20 010
Survey qu uestion
2007
2008
2009 2
2010 0
Unwanted delay in ge d etting an app pointment: Am mong those w needed a appointme How ofte did who an ent, en you have to wait longer than you wa anted to get a doctors app pointment? For routine care Never Somet times Usually Always s For illne or injury ess y Never Somet times Usually Always s
Note:
75%* 18* 3 3
76%* 17* 3* 2
77%* 17* 2* 2
%* 75% 17* * 3* * 2
67% %* 24* * 4 3
69%* 24* 5* 2
71%* 22* 3* 3
72%* 21* 4* 3
82* 13* 3 2
84* 12* 1 1*
85* 11* 2 1
83% %* 13* * 2 1* *
76* * 17* * 3 3
79* 16* 2 2*
79* 17* 2 2
80%* 15* 2 2*
cent due to round ding. Missing res sponses (Dont K Know or Refuse ed) are not pres sented. Numbers may not sum to 100 perc zes up d ed) n d Overall sample siz for each grou (Medicare and privately insure were 2,000 in years 2006 and 2007, 3,000 in 2008, nd s 0. f estions varied. an 4,000 in years 2009 and 2010 Sample sizes for individual que * Indicates a statis I stically significant difference betw t ween the Medicar and privately iinsured samples in the given yea at a re ar 95 percent confide 5 ence level. . ed rveys, conducted in 2007, 2008, 2009, and 2010. d MedPAC-sponsore telephone sur
Source:
Most Medicare beneficiaries have one or more docto appointme r or ents in a given year. There efore, one access indica we exam ator mine is their ability to sch hedule timel appointme ly ents. ciaries repor better acce to physic rt ess cians for app pointments c compared w with Medicare benefic tely insured individuals age 50 to 64 For examp in 2010, 75 percent of Medicare a 4. ple, , e privat beneficiaries and 72 percent of privately insured indiividuals repo d orted never having to w wait longe than they wanted to get an appoin er ntment for ro outine care. Medicare benefic ciaries also report more timely appoiintments for injury and il r r llness compared with their privatel insured co t ly ounterparts. As ex xpected, app pointment sc cheduling for illness and injury is bet than for routine care r tter e appointments for both Medicare beneficiaries and pr r rivately insur individua red als.
98
Ambulatory care
Chart 7-5.
Medicare and priv M vately ins sured pa atients w who are lo ooking fo a new physicia repor more d or an rt difficulty finding on in prim ne mary car 2007 re, 2010
Me edicare (age 65 or older) 6 Private insuranc (age 5064) ce 2007 7 2008 2009 20 010 2007 2008 2009 2 2010 0
Survey qu uestion
Looking for a new ph f hysician: In the past 12 months, have y tried to get a new prim t m you mary care doc ctor? Yes No 9% 91 6% 93 6% 93 7% % 93 10% % 90 7% 93 8% 92 7% 93
Getting a new physic cian: Among those who trie to get an a t ed appointment w a new ph with hysician, How w much of a problem was it finding a primary care doctor/specia s p d alist who woulld treat you? W it Was Primary care physic y cian No pro oblem Small problem Big pro oblem Specialist No pro oblem Small problem oblem Big pro
Note:
70* 12 17
71 10 18
78 10 12*
* 79* 8 12
82* * 7 10
72 13 13
71 8 21*
69* 12 19
85 6 9
88 7 4
88 7 5
87* * 6* * 5
79 11 10
83 9 7
84 9 7
82* 11* 6
Numbers may not sum to 100 perc cent due to round ding. Missing res sponses (Dont K Know or Refuse ed) are not pres sented. zes up d ed) n d Overall sample siz for each grou (Medicare and privately insure were 2,000 in years 2006 and 2007, 3,000 in 2008, nd s 0. f estions varied. an 4,000 in years 2009 and 2010 Sample sizes for individual que * Indicates a statis I stically significant difference betw t ween the Medicar and privately iinsured samples in the given yea at a re ar 95 percent confide 5 ence level. . ed rveys, conducted in 2007, 2008, 2009, and 2010. d MedPAC-sponsore telephone sur
Source:
In 2010, only 7 pe ercent of Med dicare beneficiaries and 7 percent of p privately insu ured individua als rted looking fo a new prim or mary care ph hysician. This finding sugg s gests that mo people ar ost re repor either satisfied wit their curre physician or did not ha a need to look for one r th ent ave o e. Of the 7 percent of Medicare beneficiaries who were lo e o b ooking for a n new primary c care physicia in an 2010, 20 percent reported problems finding one12 pe , g ercent report ting their problem as big plus 8 percent rep porting their problem as s p small. Althou this num ugh mber amounts to less than 2 s n perce of the tota Medicare population re ent al p eporting prob lems, the Co ommission is concerned a about the co ontinuing tren of greater access prob nd r blems for prim mary care. e o nsured individ duals who we looking fo a new prim ere or mary care Of the 7 percent of privately in physician in 2010, 31 percent reported pro oblems finding one19 percent report g ting their pro oblem ig ercent report ting their problem as sma The diffe erence in the percentage e as bi plus 12 pe all. exper riencing a bi problem finding a prim ig f mary care phy ysician betwe the Medicare and een privat tely insured groups was statistically si g s ignificant in 2 2009.
ries and priva ately insured individuals w were more lik kely to report t For 2010, Medicare beneficiar ems accessing primary care physician compared with specia ns d alists. proble
99
Chart 7-6.
Access to physici care is better for Med A o ian r dicare beneficiar ries com mpared w with priva ately insu ured in ndividuals, but minorities in both groups report m s h problems more fre equently 2010 y,
Me edicare (age 65 or older) 6 Pr rivate insuran (age 506 nce 64) A All Wh hite Mino ority
Survey qu uestion
All
White e
Minority y
Unwanted delay in ge d etting an app pointment: Am mong those w needed a appointme How ofte did who an ent, en you have to wait longer than you wa anted to get a doctors app pointment? For routine care Never Somet times Usually Always s For illne or injury ess y Never Somet times Usually Always s
Note:
%* 75% 17* 3* 2
76%* * 17* 3 2
74%* 17* 3* 3
2%* 72 21* 4 4* 3
73 3%* 20 0* 4 2
66% %* 23* * 6* * 4
83% %* 13* 2 1*
84%* * 12 2 1*
80%* 14* 2 2
80 0%* 15 5* 2 2 2*
81 1%* 14 4 2 2 2*
74% %* 20* * 2 3
cent due to round ding. Missing res sponses (Dont K Know or Refuse ed) are not pres sented. Numbers may not sum to 100 perc zes up d ed) n d Overall sample siz for each grou (Medicare and privately insure were 2,000 in years 2006 and 2007, 3,000 in 2008, nd s 0. f estions varied. an 4,000 in years 2009 and 2010 Sample sizes for individual que * Indicates a statis I stically significant difference betw t ween the Medicar and privately iinsured samples in the given yea at a re ar 95 percent confide 5 ence level. Indicates a statis stically significan difference by ra within the sa nt ace ame insurance co overage category in the given year at a y 5 ence level. 95 percent confide ed rveys, conducted in 2010. d MedPAC-sponsore telephone sur
Source:
In 2010, Medicar beneficiar re ries reported better acce to physic ess cians for app pointments comp pared with pr rivately insured individua age 50 to 64. als o Access varied by race, with minorities mo likely tha Whites to report acce problems in y m ore an o ess both insurance ca ategories. For example, in 2010, 84 percent of W 4 White Medic care beneficiaries repo orted never having to wait longer t r w than they wa anted to get an appointm ment for an illness or in n njury compa ared with 80 percent of m minority bene eficiaries. Altho ough minorities experienced more ac ccess proble ems, minoritiies with Med dicare were less likely to experience problems compared with minoritiies with private insuranc y s ce.
100
mbulatory care Am
Chart 7-7.
Difference in acc D es cess to n new phys sicians a most are t ap pparent among minority Medicar and pr m re rivately in nsured patients who are looking for a new p w w sp pecialist 2010 t,
Medicare (age 65 or older) 6 Pr rivate insuran (age 506 nce 64) A All Wh hite Mino ority
Survey qu uestion
All
White e
Minority y
Looking for a new ph f hysician: In the past 12 months, have y tried to ge a new prim t m you et mary care doc ctor? Yes No 7% % 93 7% 93 7% 92 7 7% 93 3 7 7% 93 3 6% % 94
cian: Among those who trie to get an a t ed appointment w a new ph with hysician, How w Getting a new physic much of a problem was it finding a primary care doctor/specia s p d alist who woulld treat you? W it Was Primary care physic y cian No pro oblem Small problem Big pro oblem Specialist No pro oblem Small problem Big pro oblem
Note:
79* 8 12
80* 7 12
76 9 14
9* 69 12 2 19 9
69 9* 11 19 9
67 15 18
87* 6* 5
89* 5* 5
78 11 9
82 2* 11* 6
83 3* 11* 5 5
73 14 13
cent due to round ding. Missing res sponses (Dont K Know or Refuse ed) are not pres sented. Numbers may not sum to 100 perc zes up d ed) n d Overall sample siz for each grou (Medicare and privately insure were 2,000 in years 2006 and 2007, 3,000 in 2008, nd s 0. f estions varied. an 4,000 in years 2009 and 2010 Sample sizes for individual que * Indicates a statis I stically significant difference betw t ween the Medicar and privately iinsured samples in the given yea at a re ar 95 percent confide 5 ence level. Indicates a statis stically significan difference by ra within the sa nt ace ame insurance co overage category in the given year at a y 5 ence level. 95 percent confide ed rveys, conducted in 2010. d MedPAC-sponsore telephone sur
Source:
Amon the small percentage of Medicare beneficiariies and priva ng e e ately insured individuals d lookin for a spec ng cialist, minorities were more likely th Whites t report pro m han to oblems findin ng one. For example in 2010, 89 percent of White Med icare beneficiaries reported no e, 8 f problem finding a specialist, compared with 78 perc w cent of minor beneficia rity aries. Altho ough minorities experienced more ac ccess proble ems, minoritiies with Med dicare were less likely to experience problems compared with minoritiies with private insuranc y s ce.
A Data Book: Hea care spend D alth ding and the M Medicare progra June 2011 am,
101
Chart 7-8.
100 90 Cumulative percent change 80 70 60 50 40 30 20 10 0 2000
Note:
Continued growth in volume of ph C d h hysician services s per benef ficiary, 20 000200 09

Imaging Tests Other procedure es Ev valuation & ma anagement Ma procedure ajor es All services
2001 2
2002 2
2003
2004
2 005
2006 6
2007
2008
20 009
Vo olume is units of service multiplie by relative value units from the physician fee s ed e schedule. Volume for all years is e measured on a co ommon scale, wit relative value units for 2009. th u or f ficiaries. MedPAC analysis of claims data fo 100 percent of Medicare benef
Source:
The volume of ph v hysician serv vices per beneficiary has continued to grow from year to year, s m with some services growing much more than others. s m t m 09, me cian services grew by 47 percent. By specific s 7.0 From 2000 to 200 the volum of physic types of services, imaging, te s ests, and ot ther procedu ures (proced dures other than major proce edures) each grew at a rate of 65 pe h r ercent or mo The com ore. mparable gro owth rates fo or major procedures and evalua s ation and ma anagement s services wer only 34 percent and 3 re 32 perce respectiv ent, vely. Volum growth has slowed in recent yea but rema ins positive. From 2008 to 2009, me h n ars servic in the te ces ests category grew the most: They in y m ncreased 7.4 percent. O 4 Other procedures was next, at 5.5 percent, follo n p owed by maj procedur (5.3 perc jor res cent), imagin (2.0 perce ng ent), and evaluation an managem e nd ment (1.7 pe ercent). Volum growth in me ncreases Me edicare spen nding, squee ezing other p priorities in th federal he budget and requi iring taxpaye and bene ers eficiaries to contribute m more to the M Medicare progr ram. Overall volume incr reases trans slate directly to growth in both Part B spending a y n and premiums. They are also larg gely respons sible for the negative updates requir by the red susta ainable grow rate formula. Rapid volume grow may be a sign that so wth v wth ome services in s the physician fee schedule are mispriced e d.
102
mbulatory care Am
Chart 7-9.
100 90 80 Percent of total volume 70 60 50 40 30 20 10 0
Shifts in the volum of ph t me hysician services by type of s, e ervice, 2004200 2 09 se

6.8 4.8 20.8 6.9 5.1 2 21.8
9.1 14.2
8.8 1 15.2
44.3
4 42.2
2004
Evaluation and management E Imaging Major procedur M res
2 2009
Other pro ocedures Te ests Other
Note:
olume is units of service multiplie by relative value units from the physician fee s ed e schedule. Volume for both years i e is Vo measured on a co ommon scale, wit relative value units for 2009. th u MedPAC analysis of claims data for 100 percent of Medicare bene M s f o eficiaries.
Source:
Amon broad cat ng tegories of services, eva s aluation and manageme (E&M) se ent ervices includ ding office visits and visits to hospita inpatients al account fo the larges share of or st volum In 2009, E&M was 42.2 percent of the total, followed by other proce me. 4 y edures (21.8 8 perce ent), imaging (15.2 perce g ent), major procedures ( p (8.8 percent), and tests (5.1 percent t). Services in other categories r such as ch hiropractic accounted f the rema for aining 6.9 perce ent. With higher grow rates for some servic and lowe growth rat for others, the distrib wth s ces er tes bution of volume across the service categories has shifted. For instance, as a prop s e portion of tota al volum E&M ser me, rvices fell be etween 2003 and 2008 f 3 from 44.3 pe ercent to 42.2 percent. B By contr rast, imaging share of total volume for those ye gs t e ears rose fro 14.2 perc om cent to 15.2 perce ent.
103
Chart 7-10. Changes in physicians pr C rofessional liability in nsurance premiums, 2003 e 32010
25
20
15
Percent
10
-5
-10 03 200
Note: Source:
2004
2005 5
2006
2007
2008
2009
2010
ars f cent change. Ba represent a four-quarter moving average perc e a P bility Physician P Premium Survey. CMS, Office of the Actuary. Data are from CMSs Professional Liab
Profe essional liabi insuranc (PLI) acco ility ce ounts for 4.3 percent of total payments under th 3 he physi ician fee sch hedule. PLI premiums ge p enerally follo a cyclicall pattern, alternating ow betwe periods of low prem een miumschar racterized by high invest y tment returns for insurer rs and vigorous com v mpetitionand high prem miumscha aracterized b declining investment by return and mark exit. ns ket After rapid increa ases in PLI premiums be p etween 2002 and 2004, premium gro 2 owth slowed in d 2005 and 2006, becoming ne b egative in 20 007.
104
mbulatory care Am
Chart 7-11. Spending on all hospital o g outpatien servic nt ces, 0002010 0 20

45 40 35 Dollars (in billions) 30 25 20 15 10 5 0 2000
Note:
Benefi iciary cost sha aring Progra payments am 8 8.6 8.2 8.5 8.3 8 8.1 8 8.7 13.3 15.3 17 7.7 20.4 21.6 3.0 23 8.2 7.9 24.7 27.6 9.9 29 8.0 8 8.1 8.0
9.3
2.8 12
20 001
2002
2003
20 004
2005
2006
20 007
2008
2009
20 010*
Sp pending amounts are for services covered by the Medicare outpa s s atient prospective payment system and those paid on e m d se eparate fee schedules (e.g., ambulance services and durable med dical equipment) or those paid on a cost basis (e.g., ) n or rgan acquisition and flu vaccines) They do not include payments for clinical labora a ). atory services. *E Estimate. e CMS, Office of the Actuary.
Source:
Overa spending by Medicar and benef all g re ficiaries on h hospital outp patient servic (excluding ces clinical laboratory services) from calenda year 2000 to 2010 inc y ar 0 creased by 11.5 percent, reach hing $38.6 billion. The Office of the Actuary proj ects continu growth in total spend O A ued n ding, avera aging 8.2 percent per ye from 2007 to 2012. ear A pro ospective payment syste (PPS) for hospital ou em r utpatient serv vices was im mplemented in Augu 2000. Services paid under the ou ust u utpatient PPS represent most of the hospital S outpa atient spending illustrate in this cha about 92 percent. ed art, 2 In 200 the first full year of the outpatient PPS, spendiing under the PPS was $ 01, e e $19.2 billion, includ ding $11.4 billion by the program and $7.7 billion in beneficiary cost sharing. Spending p y under the outpatie PPS repr ent resented 92 percent of th $20.9 billio in spendin on hospita p he on ng al outpa atient service in 2001. By 2010, spen es y nding under t outpatien PPS is exp the nt pected to rise to e $35.3 billion ($27. billion prog 3 .4 gram spendin $7.9 billio beneficiar copaymen ng; on ry nts), which is 92 perce of the $38 billion in spending on outpatient se ent 8.6 s ervices in 20 010. The outp patient PPS accou unted for abo 6 percent of total Med out t dicare spending by the pr rogram in 2010. Bene eficiary cost sharing unde the outpa s er atient PPS is generally higher than fo other sect s or tors, about 23 percent in 2009. Ch 7-15 pro t hart ovides more detail on co oinsurance.
105
Chart 7-12. Most hosp M pitals pr rovide ou utpatient service t es

Perc cent offering Year 2002 2004 2006 2008 2009 2010
Note:
Hospita als 4,210 0 3,882 2 3,651 1 3,607 7 3,557 7 3,518 8
Outpatient services 94% 94 94 94 94 95
O Outpatient surgery 84% 86 86 87 89 90
Emer rgency serv vices 93 3% 92 2 91 1 91 1 89 9 89 9
nged by short-term hospitals. Exc cludes long-term Christian Scien m, nce, psychiatric, Includes services provided or arran ehabilitation, child drens, critical ac ccess, and alcoho ol/drug hospitals . re r s Medicare Provider of Services files from CMS.
Source:
The number of ho n ospitals that furnish serv t vices under Medicares o outpatient prospective y paym ment system (PPS) declined from 20 through 2 001 2006, largely due to gro owth in the numb of hospit ber tals convertin to critical access hos ng spital status, which allow payment o a ws on cost basis. Since 2006, the number of ou b e n utpatient PP S hospitals has been more stable. In addition, the perc cent of hospitals providin outpatien services re ng nt emained stable; the perc cent offering outpatien surgery ha steadily in nt as ncreased; an the perce offering e nd ent emergency servic has dec ces creased sligh htly. Almo all hospita in 2010 provide outp ost als p patient servic (95 perc ces cent). The va majority ast provid outpatie surgery (90 percent) and emerge des ent ( ency service (89 percent). es
106
mbulatory care Am
Chart 7-13. Payments and vol t s lume of s services under th Medic he care o nt by of e, hospital outpatien PPS, b type o service 2009
Payme ents
Separately paid drugs/blood products 11% Evaluation & management t 14%
Volume
Tests 4%
s-through Pass drugs d 1% Separately pa aid drugs/blood products 38%
Tests 11%
Pass-through drugs 1%
Proced dures 19% %
Imagin ng 19% % Procedures 52% Evaluation & n manageme ent 16%
Imaging 14%
Note:
PS m). lude both progra spending and beneficiary cost sharing but do n am d t not PP (prospective payment system Payments incl include hold-harmless payments to rural hospitals. Services are gro o ouped into evalu uation and manag gement, procedu ures, maging, and tests according to th Berenson-Egg s, he gers Type of Serv vice classificatio n developed by C CMS. Pass-throu ugh im dr rugs and separat tely paid drugs and blood produc are classified by their paymen status indicator Percentages m not cts nt r. may su to 100 percen due to roundin um nt ng. dard analytic file of outpatient claiims for 2009. o MedPAC analysis of the five stand
Source:
Hosp pitals provide many different types of services in their outpat e f n tient departm ments, includ ding emer rgency and clinic visits, imaging and other diagn c nostic service laboratory tests, and es, d ambu ulatory surge ery. p d e. mple, procedu ures The payments for services are distributed differently than volume For exam accou for 52 pe unt ercent of pay yments but only 19 perc o cent of volum me. Proce edures (e.g., endoscopie surgeries skin and m es, s, musculoskelletal procedu ures) accoun for nt the greatest shar of paymen for servic (52 perc re nts ces cent), followe by imagin services ( ed ng (19 ent) aluation and managemen services ( percent). nt (14 perce and eva In 2009, separate paid drug and blood products a ely gs d accounted fo 11 percent of payment or t ts.
107
Chart 7-14. Hospital outpatien servic with the high H o nt ces hest Medicare expendi M itures, 20 009
APC Title Total All emergency visits All clinic visits v Diagnostic cardiac cath c heterization CT and CTA with contr C rast composit te* Cataract procedures with IOL insert p w t Level I pla film excep teeth ain pt Lower gas strointestinal endoscopy Insertion of cardioverte o er-defibrillator r Level II ex xtended assessment & ma anagement co omposite Insertion/r replacement/repair of card dioverter-defib brillator leads IMRT trea atment deliver ry Computed tomography without cont d y trast Transcath heter placeme of intracor ent ronary drug-e eluting stents Coronary or noncorona angioplasty and percut ary taneous valvu uloplasty Level II ca ardiac imaging Level I up pper gastrointe estinal proced dures CT and CTA without co C ontrast compo osite* Transcath heter placeme of intravas ent scular shunts* * Level II ec chocardiogram without con m ntrast except transesophag geal Level II laparoscopy MRI and magnetic reso m onance angio ography witho contrast m out material Level III nerve injection n ns Rituximab cancer treat b tment MRI and magnetic reso m onance angio ography without contrast follo owed by contr rast Level II ra adiation therapy Average APC A
Note:
Share of e payme ents 47 7% 6 4 3 3 3 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1
Volume (thous sands)
Pay yment r rate
10,9 988 18,6 679 4 450 1,5 528 5 540 15,5 581 1,1 146 28 8 808 19 1,2 205 2,4 463 68 1 180 5 584 9 922 1,0 011 73 8 896 1 131 9 994 8 841 6,0 060 5 598 2,0 077 3 344
$ $180 72 2 2,594 635 1 1,605 45 594 21 1,140 675 28 8,251 411 194 7 7,669 3 3,195 774 572 416 6 6,094 431 3 3,060 348 474 525 539 152 143
PC cation), CT (com mputed tomograp hy), CTA (compu uted tomography angiography), IOL y AP (ambulatory payment classific (in ntraocular lens), IMRT (intensity-modulated radiat tion therapy), MR (magnetic res onance imaging). The payment r RI rates for All emergency visits and All clinic visits are weighted average of payment ra y c w es ates from five AP PCs. *D not appear on the list for 2008 Did n 8. alytic files of outp patient claims for calendar year 2 r 2009. MedPAC analysis of 5 percent ana
Source:
Altho ough the outp patient prosp pective paym ment system covers thou m usands of se ervices, expenditures are concentrate in a handful of catego ed ories that ha high volu ave ume, high paym ment rates, or both.
108
mbulatory care Am
Chart 7-15. Medicare coinsura M ance rates, by ty of ho ype ospital outpatient service 2009 e,
35 30 25 Coinsurance rate 20 15 10 5 0
Evaluation and E d management Imaging Procedures T Tests Pa ass-through drugs S Separately paid drugs/blood products
28 22 23
26 23 20 20
Ty of servic ype ce
Note: ervices were gro ouped into catego ories of evaluatio and managem on ment, imaging, pr rocedures, and te ests according to the o Se Be erenson-Eggers Type of Service classification de eveloped by CMS Pass-through d S. drugs and separ rately paid drugs and blood products are classified by their payment status indicators. e MedPAC analysis of the 5 percent standard analytic files of outpati ent claims for 20 009.
Source:
Histo orically, bene eficiary coins surance payments for ho ospital outpa atient service were bas es sed on ho ospital charg ges, while Medicare payments were based on hospital costs As hospita s. al charg grew fas than cos coinsura ges ster sts, ance represe ented a large share of to payment e otal ts over time. In adopting the outpatient pro ospective pa ayment syste the Con em, ngress froze the dollar amou unts for coinsurance. Co onsequently, beneficiarie share of total payments will decli es ine over time. The coinsurance rate is different for each service. So c h ome service such as im es, maging, hav ve relativ vely high rat of coinsu tes urance28 percent. Oth services, such as ev her valuation and d mana agement ser rvices, have coinsurance rates of 22 percent. e 2 In 2009, the aver rage coinsur rance rate was about 23 percent. w 3
109
Chart 7-16. Effects of hold-ha f armless a and SCH transfe payme H er ents tals outp patient re evenue, 200720 009 on hospit
2007
Share of payments p from ho harmless old and SCH transfer
2 008
Share of payments from hold harmles ss and SCH trans sfer
2009
Share of e payme ents from m hold harm mless and SCH tr ransfer
Hospital gr roup
Number of ho ospitals
Number of hospitals
Number r of s hospitals
All hospita als Urban Rural SCH Hs Rural <10 beds 00 Other rura al Major teac ching Other teac ching Nonteaching
Note: Source:
3,292 2,349 409 381 153 272 762 2,258
0.2% 0.4 5.8 2.9 0.4 0.3 0.1 0.6
3,197 2,276 397 373 151 265 745 2,187
0.2% 0.4 5.9 3.1 0.4 0.3 0.1 0.6
3,143 3 2,241 1 389 9 363 3 150 0 260 0 742 2 2,141 1
0.3 3% 0.4 4 7.1 1 3.1 1 0.4 4 0.3 3 0.2 2 0.8 8
SC (sole commu CH unity hospital). st om MedPAC analysis of Medicare Cos Report files fro CMS.
Medic care implemented the ho ospital outpa atient prospe ective payme system (P ent PPS) in 2000 0. Previously, Medic care paid for hospital out r tpatient serviices on the b basis of hosp pital costs. Reco ognizing that some hospit tals might re eceive lower payments under the out tpatient PPS than ansitional co under the earlier system, the Congress es stablished tra orridor payments. The corrid dors were de esigned to make up part of the differe ence betwee payments that hospita en als would have receiv under th old payme system a those un d ved he ent and nder the new outpatient P w PPS. Trans sitional corrid payment expired for most hospiitals at the end of 2003. However, so dor ts r ome rural hospitals continue to rec ceive a speci category of transitiona corridor pa ial al ayments call led Q ospitals rece eive the grea of the pa ater ayments they would have y e hold harmless. Qualifying ho receiv from the previous sy ved e ystem or the actual outpa atient PPS p payments. Hosp pitals that qua alified for hold-harmless payments in 2004 and 2 n 2005 include sole ed comm munity hospit tals (SCHs) located in ru areas an other sma rural hospitals (100 or ural nd all fewer beds). After 2005, small rural hospitals continue to be eligiible for holdr ed -harmless paym ments but SC no longe qualified. However, in 2 CHs er H 2006, CMS implemented a policy (th d he SCH transfer) th increased outpatient payments to rural SCHs by 7.1 perc H hat d o s cent above th he stand dard rates. This policy is budget neut by reduciing payment to all other hospitals by 0.4 tral ts r perce Finally, the Congress reestablish hold-har mless payments for SCH that have 100 ent. t s hed Hs e or few beds. wer Hold-harmless pa ayments and the SCH tra d ansfer repres sented 0.2 p percent of tot outpatient tal t PPS payments fo all hospitals in 2007. However, the percentage of total outp or H e e patient paym ments from these policie was 5.8 percent for ru SCHs an 2.9 percen for small r es ural nd nt rural hospitals. Data from 2008 and 2009 ind a dicate transfe and hold-h er harmless pay yments to ru SCHs we ural ere 5.9 percent of the outpatient revenue in 2008 and 7.1 percent in 2009. Small rural hospit eir t tals contin nued to bene from hold efit d-harmless payments in 2008 and 20 p 009. These p payments we ere 3.1 percent of the total outpa eir atient payme ents in both y years.
110
mbulatory care Am
Chart 7-17. Medicare hospital outpatie M l ent, inpa atient, an overa nd all Medicare margins 20032 M s, 2009
10 0 Inpatient margin 5 Overalll Medicare margin 2.4 -0.3 Margin (percent) 0 -1.2 -5 5 -3.0 -3.0 -4.6 -6.0 -10 0 -11.4 -15 5 -10.7 -9.1 -11.0 -11.5 -10.8 -12.7 -7.1 -5.2 -0.5 -2.2 -3.7 -4.7 -2.4 Outpat tient margin
-20 0 2003 2004 2005 2006 2007 2008 2009
Note:
ated as revenue minus costs, div vided by revenue Data are based on Medicare-al e. d llowable costs. A margin is calcula nalysis excludes critical access hospitals. Overall Medicare margiins cover the cos and payment of hospital inpa h l sts ts atient, An ou utpatient, psychia atric and rehabilitation (not paid under the prospe u ective payment s ystem) services, hospital-based skilled , nu ursing facilities and home health services, and gra aduate medical e education. st m MedPAC analysis of Medicare cos report data from CMS.
Source:
Hosp pital outpatient margins vary. In 2009 while the a v 9, aggregate m margin was 10.8 percen nt, 25 pe ercent of hos spitals had margins of 2 m 22.3 percen or lower, a 25 perce had marg nt and ent gins of 1.6 percent or higher. Ou o utpatient mar rgins also diiffered widely across hos y spital catego ories. Given hospital ac n ccounting pr ractices, mar rgins for hos spital outpatiient services must be s consi idered in the context of Medicare pa e M ayments and hospital co d osts for the fu range of ull servic provided to Medicar beneficiar ces d re ries. Hospita allocate o als overhead to all services, so we ge enerally con nsider costs and paymen overall. a nts The improved ma argin in 2009 may be du to relative low cost g 9 ue ely growth and e expansion o of hold-harmless pa ayments to sole commun hospitals (SCHs). A s nity s After increasing from 200 to 03 2004 and 2005, the outpatien margin de t nt eclined in 20 006, reflecting a change in Medicare es reimb bursement fo Part B dru and an end to hold-h or ugs e harmless pa ayments to S SCHs (which h were reestablishe in 2009). The margin declined ag ed gain in 2007 and 2008, w which may b be partly due to lowe hold-harm y er mless payme ents for hosp pitals that stiill qualify for them.
111
Chart 7-18. Number of observ o vation ho ours has increas s sed, 20 0062009
40 36 35 Observation hours (millions) 31 30 25 20 15 10 5 0 2006 6 2007 2008 2009 23 27
Source:
MedPAC analysis of outpatient pro ospective payme system claims that CMS uses to set payment rates, 2006200 ent s s 09.
Hosp pitals use observation ca to determ are mine whethe r a patient s should be ho ospitalized fo or inpatient care or sent home. Medicare began providing se eparate paym ments to hos spitals for so ome observa ation service on es April 1, 2002. Pre eviously, the observation services w e n were package into the p ed payments for the r emer rgency room or clinic vis that occu with obser m sits ur rvation care. . The number of ob n bservation hours (both packaged an separately paid) has increased h p nd subst tantially from about 23 million in 200 to 36 milliion in 2009. Before 2006 it was difficult m m 06 6, to count the total number of observation hours becau hospitals were not r o use required to recor on claims the number of hours for packaged o rd r r observation hours.
112
mbulatory care Am
Chart 7-19. Number of Medica o are-certif fied ASC increa Cs ased by 41 percen 2003 1 nt, 2010
2003 p ons Medicare payments (billio of dollars) Number of centers New centers enters Exiting ce nt mber Net percen growth in num of centers from previous year f y Percent of all centers that are: t For profit Nonprofit t Urban Rural
Note:
2004 2 $2.5 4,067 4 368 80
2005 $2.7 7 4,362 2 354 4 59 9
2006 $2.8 4,608 331 85
2007 $2.9 4,879 4 344 73
2008 $3.1 5,095 5 281 5 65
2009 $3.2 5,217 213 91
2010 $3.4 5 5,316 152 53
$2.2 3,779 366 66
7.6%
7.6%
7.3 3%
5.6%
5.9%
4.4 4%
2.4%
1.9%
95 5 87 13
96 4 87 13
96 6 4 87 7 13 3
96 4 88 12
96 4 88 12
96 6 4 88 8 12 2
96 3 88 12
97 3 88 12
SC s ents include prog gram spending a beneficiary cost sharing for A and ASC AS (ambulatory surgical center). Medicare payme facility services. Payments for 2010 are preliminary and subject to c y change. Totals m not sum to 1 percent due may 100 to rounding. ervices files from CMS, 2010. Pay yment data are f from CMS, Office of the Actuary. e MedPAC analysis of provider of se
Source:
Ambu ulatory surgi ical centers (ASCs) are entities that furnish only outpatient s y surgical serv vices not re equiring an overnight sta To receiv payments from Medic o ay. ve s care, ASCs must meet Medicares condi itions of cove erage, which specify min h nimum facility standards s. In 2008, Medicar began using a new pa re ayment syste for ASC services tha is based o em at on the hospital outpa atient prospe ective payment system. ASC rates a less than hospital are n outpa atient rates. In contrast to the old AS system, w t SC which had only nine procedure grou ups, the new system has several hundred pro h ocedure grou ups. Total Medicare payments for ASC servic increase d by 6.5 per r ces rcent per yea on average, ar, from 2003 throug 2010. Pay gh yments per fee-for-servi ce beneficia grew by 6 percent per f ary 6.6 year during this period. Betw p ween 2009 an 2010, tota payments rose by 5.6 percent and nd al s 6 paym ments per beneficiary gre by 4.2 pe ew ercent. The number of Medicare-cer n M rtified ASCs grew at an a average ann nual rate of 5 percent f 5.0 from 2003 through 201 Each yea from 2003 through 20 10. ar 3 010, an aver rage of 301 n new Medica arecertified facilities entered the market, while an avera ge of 72 closed or merg with othe e ged er facilit ties.
113
Chart 7-20. Medicare spendin for imaging se M ng ervices u under the e physician fee schedule, b type of service 2004 a n by e, and 20 009
2004 ($11.4 billion)
Imaging procedures 5% Echocardio graphy 13% PET P 3% 3 CT 16% 1 Imaging procedures 6% Echoca ardio grap phy % 12%
2009 ($ $11.6 billion) )

PET 4% CT 20%
Nuclear medicine 14%
Standa ard 20% %
Nucle ear medic cine % 12%
S Standard 19%
Other O echography (ultr rasound) 11%
MRI % 18%
Other e echography ultrasound) (u 13%
MR RI 15 5%
Note:
T mography), MRI (magnetic resona ( ance imaging), P PET (positron em mission tomograp phy). Standard im maging CT (computed tom includes chest, mu usculoskeletal, and breast X-rays Imaging proced s. dures include ste ereoscopic X-ray guidance for de y elivery f py, or n, ventional radiolo procedures. M ogy Medicare payme ents of radiation therap fluoroguide fo spinal injection and other interv include program spending and ben neficiary cost sha aring for physicia fee-schedule iimaging services Payments inclu an s. ude arrier-priced code but exclude ra es adiopharmaceuticals. Totals may not sum to 100 percent due to r y rounding. ca p er mmary file from C CMS, 2004 and 2 2009. MedPAC analysis of 100 percent physician/supplie procedure sum
Source:
Abou one-third of Medicare spending for imaging un ut o nder the phy ysician fee sc chedule in 2 2009 was for computed tomograph and magn f d hy netic resona ance imaging (MRI) studies. g Between 2000 an 2009, phy nd ysician fee-s schedule spe ending for im maging servi ices grew by 5.9 y perce per year per fee-for-s ent service (FFS beneficiar S) ry. g rom $13.2 billion in 2006 to $11.4 biillion in 2007 largely as a 6 7, Imaging spending declined fr result of a provisi in the De t ion eficit Reduct tion Act of 20 that cap 005 pped physician fee-sche edule rates for the tech hnical compo onent of imag ging service at the leve of hospital outpatient es el rates. However, the number and complex of imagiing studies g t xity grew by 3.8 percent per FFS beneficiary from 2006 to 2007. Imaging spending resumed it growth in 2008, increa g ts asing by 3.8 percent per FFS 8 r beneficiary to $11.7 billion. Although spe A ending declin slightly f ned from 2008 to 2009 (from o m $11.7 billion to $1 7 11.6 billion), the number and comple r exity of imag ging services grew by 2. s .0 perce per FFS beneficiary. The slight decline in sp ent d pending was largely due to changes in pract tice expense relative value units for imaging serv e rvices and th adoption o a new he of comp prehensive code for echo c ocardiography.
114
mbulatory care Am
Chart 7-21. Radiologi R ists rece eived nea arly half of physician feesc chedule paymen for im nts maging se ervices, 2009
General surgery G y Ort thopedic surge ery 2% 3% Intern medicine nal 7% IDTF 7% Radiology 46% Othe er 11% % Family/genera al practice 2%
Cardiolo ogy 22%
Note:
DTF nt ing eneficiary cost sharing ID (independen diagnostic testi facility). Medicare payments iinclude program spending and be for physician fee-s schedule imaging services. Paym g ments include car rrier-priced codes but exclude rad s diopharmaceutic cals. To fee-schedule imaging spendi was $11.6 billion in 2009. IDT are independ otal e ing TFs dent of a hospita and physicians office al s an provide only outpatient diagno nd o ostic services. Th other category includes urolog ophthalmolog gastroenterolo he y gy, gy, ogy, an nesthesiology, an other specialties. nd p er mmary file from C CMS, 2009. MedPAC analysis of 100 percent physician/supplie procedure sum
Source:
Imaging services paid under Medicares physician fe schedule involve two parts: the s ee techn nical compon nent, which covers the cost of the eq c c quipment, su upplies, and nonphysicia d an staff, and the pro ofessional co omponent, which covers the physicia w ans work in interpreting the y g both the technical and th professio he onal study and writing a report. A provider who performs b comp ponent of a study bills Medicare for a global serv s vice. Altho ough radiolog gists receive over three ed e-quarters of total physic f cian fee-schedule payments for pr rofessional component services in 2009, they ac c s 2 ccounted for much smal shares o r ller of spending for glob services (34 percent) and technic compone services (14 percent bal ) cal ent t). Between 2004 an 2009, the share of tot imaging p nd e tal payments fo independe diagnostic or ent testin facilities, family/gener practice, cardiology, and internal medicine declined. The ng f ral e ut share of imaging payments fo radiology stayed abou the same, and the share for other e or provid ders (such as general surgery and orthopedic s a o surgery) incre eased.
115
Web li inks. Am mbulatory care y

Physicia ans
For more informat m tion on Medic cares payme system fo physician services, see MedPACs ent or e Paym ment Basics series. s /medpac.gov/ /documents/M MedPAC_Pay yment_Basics s_10_Physiciian.pdf http://
Chap 4 of the MedPAC Mar 2011 Rep to the Co pter M rch port ongress and Appendix A of the June 2011 Report to the Congress provide addit p tional informa ation on phys sician service es. /www.medpa ac.gov/chapte ers/Mar11_C Ch04.pdf http:// http:// /www.medpa ac.gov/chapte ers/Jun11_A AppA.pdf
MedP PACs congre essionally ma andated repo Assessing Alternative to the Sustainable ort, g es Grow Rate (SGR System, examines the SGR and an wth R) e e nalyzes alter rnative mech hanisms for contro olling physici expenditu ian ures under Medicare. M /www.medpa ac.gov/docum ments/Mar07_ _SGR_mand dated_report t.pdf http://
stimony by th chairman and executiv director of MedPAC dis he a ve f scusses Congressional tes paym ment for physi ician services in the Medicare program This includes: s m. ments to selec cted fee-for-s service providers (May 15 2007) 5, Paym http:// /www.medpa ac.gov/docum ments/051507 7_WandM_T Testimony_M MedPAC_FFS S.pdf ons ve s s 007) Optio to improv Medicares payments to physicians (May 10, 20 http:// /www.medpa ac.gov/docum ments/051007 7_Testimony y_MedPAC_p ayment.pdf physician_pa ssing alterna atives to the sustainable growth rate s ystem (Marc 6, 2007) s g ch Asses http:// /www.medpa ac.gov/docum ments/030607 7_W_M_test timony_SGR R.pdf ssing alterna atives to the sustainable growth rate s ystem (Marc 6, 2007) s g ch Asses http:// /www.medpa ac.gov/docum ments/030607 7_E_C_testi mony_SGR.pdf ssing alterna atives to the sustainable growth rate s ystem (Marc 1, 2007) s g ch Asses http:// /www.medpa ac.gov/docum ments/030107 7_Finance_t testimony_SG GR.pdf PAC recomm mendations on imaging se n ervices (July 1 2006) 18, MedP http:// /medpac.gov v/documents/ /071806_Tes stimony_imag ging.pdf care paymen to physicians (July 25, 2006) nt 2 Medic http:// /medpac.gov v/documents/ /072506_Tes stimony_phys sician.pdf
The 2011 Annual Report of the Boards of Trustees of t he Hospital I 2 e T Insurance an Suppleme nd entary Medic Insurance Trust Funds provides de cal e etails on hist torical and pr rojected spen nding on physician services s. /www.cms.go ov/ReportsTr rustFunds/do ownloads/tr20 011.pdf http://
116
mbulatory care Am
The Government Accountabi G t ility Office issued a repo in August 2009 about access to ort t t physi ician service within Medicare. es http:/ //www.gao.gov/new.item ms/d09559.pd df
C tudying Hea System Change also conducts r alth C o research on patient acce ess The Center for St to health care. http:/ //www.hscha ange.org
Hospital outpatient services l

For more informat m tion on Medic cares payme system fo hospital ou ent or utpatient serv vices, see MedP PACs Payme Basics se ent eries. /www.medpa ac.gov/docum ments/MedPA AC_Payment t_Basics_10_ _opd.pdf http:// pter M rch port ongress prov vides informa ation on the Chap 3 of the MedPAC Mar 2011 Rep to the Co status of hospital outpatient de s epartments in ncluding sup ply, volume, profitability, and cost gro owth. /www.medpa ac.gov/chapte ers/Mar11_C Ch03.pdf http:// on arch 2006 Re eport to the C Congress pro ovides inform mation on the Sectio 2A of the MedPAC Ma current status of hold-harmless payments and other sp h a pecial payments for rural h hospitals. /www.medpa ac.gov/public cations/congr ressional_rep ports/Mar06_ _Ch02a.pdf http:// pter e Congress pro ovides additional informa ation Chap 3A of the MedPAC March 2004 Report to the C on ho ospital outpat tient services including outlier and tra s, o ansitional cor rridor payments. /www.medpa ac.gov/public cations/congr ressional_rep ports/Mar04_ _Ch3A.pdf http:// More information on new technology and pass-through payments c be found in Chapter 4 of p h can M ch port ongress. the MedPAC Marc 2003 Rep to the Co http:// /www.medpa ac.gov/public cations/congr ressional_rep ports/Mar03_ _Ch4.pdf
Ambulat tory surgica centers al

For more informat m tion on Medic cares payme system fo ambulatory surgical ce ent or ry enters, see MedP PACs Payme Basics se ent eries. /medpac.gov v/documents/ /MedPAC_Pa ayment_Bas sics_10_ASC C.pdf http:// Chap 5 of the MedPAC Mar 2011 Rep to the Co pter M rch port ongress prov vides additional informatio on on am mbulatory sur rgical centers s. /medpac.gov v/chapters/Ma ar11_Ch05.p pdf http://
117
SECTION
Post-acute care
Skilled nursing facilities Home health agencies Inpatient rehabilitation facilities Long-term care hospitals
Chart 8-1.
Number of most post-acute care p o p providers grew o s or re emained stable in 2010 n

A Average annual percent rcent change Per 2002 cha ange 2010 2009 92010
2002 lth Home heal agencies Inpatient ion rehabilitati facilities Long-term care hospitals
2003
2004
2005
2006 2
2007
2008
09 200
2010
7,057
7,342
7,80 04
8,314
8,955 8
9,404 10,036 10,9 961 11,488
6.5%
4 4.8%
1,181
1,207
21 1,22
1,235
1,225 1
1,202
1,202
1,1 196
1,179
0.0
1.4
297
334
36 66
392
398
406
424
4 435
437
4.9
0.5
Skilled nurs sing facilities 14,794 14,879

Note: Source:
14,93 15,001 15 39 5,008 15,037 15,031 15,0 068 15,070
0.2
0.0
he g oes s Th skilled nursing facility count do not include swing beds. rtification and Survey Provider En nhanced Reporti ng on CMSs Survey and Certific cations MedPAC analysis of data from cer roviding Data Qu uickly system for 20022010 (hom health agenc me cies and skilled n ursing facilities) and CMS Provid of der Pr Se ervice data (inpa atient rehabilitatio facilities and lo on ong-term care ho ospitals).
n ome health agencies ha increased substantiallly since 2002. a as The number of ho The number of in n npatient reha abilitation fac cilities (rehab bilitation hos spitals and r rehabilitation n units) declined slightly in 2010. ) In spite of a mora atorium on new long-term care hosp n m pitals beginning in Octob 2007, the ber e numb of these facilities has continued to grow. ber s The total number of skilled nursing facilit t r ties has rem ained about the same fo four years but t or s, the mix of facilitie continues to shift from hospital-ba m es s m ased to frees standing fac cilities. Hosp pitalbased facilities make up 6 pe m ercent of all facilities, dow from alm f wn most 11 perc cent in 2001.
A Data Book: Health care spendi and the Me D ding edicare program June 2011 m,
121
Chart 8-2.
Medicare spend M s ding on h home hea alth care and e sk killed nu ursing fac cilities fu ueled gro owth in FFS post-acut care ex te xpenditu ures
All post-acute car p re
70 Skilled nursing fa acilities Hom health age me encies 50 Dollars (in billions) Inpa atient rehabilit tation hosp pitals Long g-term care hospitals h 37.5 32.6 3 30 26.6 22.2 20 12.1 9.6 10 4.5 4 2.0 2 2001
Note: Source:
60
55.1 52.1 48.4 42.1 43 3.5
7.2 57
40 34.3 3
24.4 16.9
25.8 18.3
6.4 26 9.3 19
14.8 1 8.0 5.7 2.5 2002 2
0 15.0 10.1 6.2 3.0 2003 3
16.7 10.8 6.4 3.6 2004
18.6 12.6 6.5 4.4 2005
9.6 19 15.4 13 3.0 6 6.3 4 4.6 20 006 6.1 4.7 2007 6.0 4.8 2008
6.1 4.9 2009
6.4 5.1 20 010
FS ce). bers are program spending only a do not includ beneficiary co m and de opayments. FF (fee-for-servic These numb e CMS, Office of the Actuary.
Increases in fee-f for-service (FFS) spending on post( -acute care h have slowed in part due to d e expanded enrollm ment in managed care, whose spend w ding is not in ncluded in th chart. his Desp the slowe growth, spending on all post-acut care still g pite er a te grew close to 4 percent o betwe 2009 an 2010, fue een nd eled by increases in hom health car and skille nursing fa me re ed acility expenditures. FFS spending on inpatient re s n ehabilitation hospitals de eclined betw ween 2005 an 2008, nd reflec cting policies intended to ensure tha patients wh do not ne this intensity of serv s o at ho eed vices are tr reated in less intensive settings. How s wever, spen nding on inpa atient rehabi ilitation hosp pitals increased in 2009 and contin 9 nued to incre ease in 2010 0.
122
st-acute care Pos
Chart 8-3.
Since 200 the sh 05, hare of M Medicare stays and e s anding S SNFs and for-pro d ofit payments going to freesta SNFs has increas s sed
Facilitie es Medicare-c covered stays s 2009 100% 94 6 70 30 68 26 5 2005 100% 87 13 79 21 66 30 4 2009 100% % 92 8 81 19 69 26 4 Med dicare payme ents 2005 5 100 0% 93 3 7 81 9 19 72 2 25 5 3 2 2009 1 100% 96 5 83 17 74 22 3 2005 2 100% 92 8 67 33 68 28 5
Type of SNF All SNFs ding Freestand Hospital based b Urban Rural For profit Nonprofit ent Governme
Note:
SN (skilled nursin facility). Totals may not sum to 100 percent du to rounding or missing informa NF ng o ue r ation about facilit ty ch haracteristics. MedPAC analysis of the Provider of Services and Medicare Provide Analysis and Review files 200 o M er 052009.
Source:
Frees standing skil lled nursing facilities (SN NFs) made u 94 percen of facilities in 2009. up nt Frees standing SNFs treated 92 percent of stays (up 5 percentage points from 2005) and 9 e m accou unted for 96 percent of Medicare pa M ayments. Between 2005 an 2009, fornd -profit SNFs share of M s Medicare-cov vered stays increased 3 perce entage point and payments increas 2 percen ts sed ntage points. Urban SNFs sha of facilitie Medicare are es, e-covered st tays, and pa ayments increased betwe een 2005 and 2009.
123
Chart 8-4.
Small dec clines in SNF day and admissions betwe ys een 008 20 and 2009
2007 2 2008 2009 9 Chan nge 2008 2009
Volume per 1,000 fee-f for-service en nrollees Covere admissions ed s Covere days ed Covere days per ad ed dmission
Note: Source:
72 1,921 26.7 2
73 1,977 27.0
72 2 1,963 3 27.3 3
1 1.6% 0 0.7 0 0.9
SN (skilled nursin facility). Data include 50 states and the Distric of Columbia. NF ng ct alendar year data from CMS, Off fice of Research, Development a nd Information. , Ca
Between 2008 an 2009, cov nd vered days declined, ref d flecting fewe hospital ad er dmissions. A prior hospital stay is required for Medicar coverage . y d re Cove ered admissions declined faster than covered da d n ays, resulting in a small increase in g cover days per admission. red r . Meas sures are rep ported on a per fee-for-s service enro llee basis be ecause the c counts of da ays and admissions do not includ the utiliza a d de ation of bene eficiaries enr rolled in Med dicare Adva antage (MA) plans. Beca ause MA enr rollment cont tinued to inc crease, chan nges in utilization could reflect a sm d maller pool of users rathe than chan o er nges in service use by th beneficiaries he captu ured by the data. d
124
st-acute care Pos
Chart 8-5.
Case mix in freest C tanding SNFs sh hifted tow ward re ehabilitation plus extensive servi s ices RUG and Gs aw from other broad RU categ way m b UG gories
100% 90% Share of Medicare days 80% 70% 60% 50% 40% 30% 20% 10% 0% 200 03 2005 2007 2009 Rehabilitation only Rehabilitation plus e extensive serv vices Extensi services ive Special care l Clinically complex
Note: NF ng ation group). The clinically comple category inclu e ex udes patients wh are ho SN (skilled nursin facility), RUG (resource utiliza co omatose; have burns, septicemia pneumonia, int a, ternal bleeding, o dehydration; o receive dialysis or chemotherapy. or or s Th special care category includes patients with multiple sclerosis or cerebral palsy those who rece he c s m y, eive respiratory se ervices seven da per week, or those who are ap ays t phasic or tube fe The extensive services catego includes patients ed. e ory wh have received intravenous me ho d edications or suc ctioning in the pa 14 days, have required a vent ast e tilator or respirato or ory tra acheostomy care or have receive intravenous fe e, ed eeding within the past 7 days. Da are for freest e ays tanding SNFs wi ith va cost reports. alid s. MedPAC analysis of freestanding SNF cost reports
Source:
In 2009, rehabilitation resour utilization groups (RU rce n UGs) accoun nted for 92 p percent of al ll Medicare days in freestandin skilled nursing facilitie (SNFs). T nine rehabilitation pl n ng es The lus exten nsive service RUGs, the highest pa es e ayment case e-mix groups made up 3 percent o s, 39 of RUG days (comp pared with 36 percent in 2008). With the rehab 6 hin bilitation cas se-mix group ps, ding SNFs co ontinued to shift toward the highest therapy groups (not sho s own). days in freestand e wth habilitation days may be explained by a shift in the site of care y e e Some of the grow in total reh from inpatient rehabilitation fac cilities to SNFs. It also co ould reflect th payment incentives to he furnis the service necessary to get patie sh es y ents classified into higher paying rehabilitation RUGs. d Between 2003 an 2009, the share of cli nd e inically comp plex and spe ecial care da declined ays from 14 percent to 6 percent. Patients wh previouslly would hav been clas t ho ve ssified into th hese case-mix groups may have re eceived eno ough therapy (75 minute a week) to qualify them for y es o m a rehabilitation gr roup.
125
Chart 8-6.
Freestand ding SNF Medica margins have exceed F are e ded nt ven rs 10 percen for sev year
20 003 10 0.9% 10 0.3 13 3.9 13 3.4 1.3 N/ /A 2004 13 3.8% 13 3.2 16 6.2 16 6.2 3.6 3 N/A N 20 005 13 3.1% 12 2.6 15 5.2 15 5.2 4.6 4 N/A N 20 006 13 3.3% 13 3.1 14 4.3 15 5.8 3 3.5 N N/A 2 2007 14 4.7% 14 4.6 15 5.5 17 7.3 4 4.2 N N/A 2 2008 16.6% 16.3 18.0 19.1 7.1 N/A 2 2009 1 18.1% 1 18.0 1 18.7 2 20.3 9.5 N/A
Type of SNF All Urban Rural For profit Nonprofit Governme ent*
Note:
NF ng ( SN (skilled nursin facility), N/A (not applicable). *G Government-own providers ope ned erate in a differen context from o nt other providers, s their margins are not necessarily so co omparable. s. MedPAC analysis of freestanding SNF cost reports
Source:
Altho ough aggrega Medicare margins fo freestandiing skilled nu ate e or ursing facilities (SNFs) h have varied over the past 7 years, they have exceeded 10 percent ev d e 0 very year since 2001 (ea arly years not shown) s ). Aggre egate Medic care margins increased from 2008 to 2009 due t costs per day growing s f o to g more slowly than payments per day. The growth in p e n p e payments ref flected the in ncreased sh hare of days classified into the hig d ghest paying resource ut tilization gro oups. Exam mining the distribution of 2009 margins, one-half of freestand f ding SNFs h margins of had 18.7 percent or more. One-quarter had Medicare ma m M argins at or b below 8.8 pe ercent and o onequart had marg ter gins of 26.7 percent or higher. h
126
st-acute care Pos
Chart 8-7.
Freestand ding SNF with re Fs relatively low cos and y sts tained high Medicare ma argins high quality maint
SNFs with rela S atively low costs and good d quality (9 p percent)
Character ristic ance in 2008 Performa Relative community discharge ra e* y ate Relative rehospitaliz e* zation rate Relative cost per da e* ay Median length of stay y Medicar margin re ance in 2009 Performa Relative cost per da e* ay Median length of stay y Medicar margin re Total margin Medicai share of fac id cility days
Note:
O Other SNFs
1.2 9 4 0.84 0.9 0 35 day ys 21.8% %
1.0 1.0 1.0 41 days 17.4%
0.89 0 35 day ys 21.8% % 5.3% % 58% %
1.0 40 days 18.3% 3.9% 62%
SN (skilled nursin facility). SNFs with relatively lo costs and go od quality were t NF ng s ow those in the lowe third of the est distribution of cost per day, in the top third for one quality measure, and not in the b t t , bottom third for th other quality he er ndardized for diffe erences in case mix (using the n ursing component relative weights) and measure. Costs pe day were stan ages. Quality me easures were rates of risk-adjuste community di scharge and reh ed hospitalization for five conditions r wa (c congestive heart failure, respiratory infection, urina tract infection sepsis, and ele ary n, ectrolyte imbalan nce) within 100 d days of ho ospital discharge Increases in ra e. ates of discharge to the communit indicate impro ty oved quality; incre eases in re ehospitalization ra ates for the five conditions indica worsening qu ality. Quality measures were calc c ate culated for all fac cilities wi more than 25 stays. ith *M Measures are rela ative to the natio onal average. e ures for 200520 and Medicare cost report dat for 20052009 008 ta 9. MedPAC analysis of quality measu
Source:
Frees standing skil lled nursing facilities (SN NFs) can hav relatively low costs a provide g ve y and good qualit of care wh maintain ty hile ning high ma argins. ed atively efficie SNFs had community discharge rates ent d y In 2008, compare with other SNFs, rela w cent higher and rehospit a talization rat that were 16 percent lower. tes e t that were 29 perc In 2009, relatively efficient SN had cos per day t y NFs sts that were 11 percent low and shor wer rter lengths of stay co ompared wit other SNF Relatively efficient SNFs had Me th Fs. y edicare marg gins in 2009 of 21.8 percent comp pared with a median ma argin for othe SNFs of 18.3 percent. er . Relat tively efficien SNFs wer more likely to be locat in a rura area and m nt re ted al more likely to be o nonprofit than oth SNFs. her
127
Chart 8-8.
25
Spending for hom healt care, 1 S g me th 1994201 10
20 17.3 Dollars (in billions) 15.9 15 12.5 10
19.3 18.0 16.9 15.4 3.9 13 10.8 12 13.0 2.6 9.2 2 8.0 9.6 10.1 18.3
9.0
0 1994 1995 1996 1997 19 1999 2000 2001 2002 2003 2004 20 2006 200 2008 2009 2010 1 998 0 005 07
Source: e CMS, Office of the Actuary, 2011.
Medicare home health care spending gre at an ave h s ew erage annua rate of 20 percent from al m 1992 to 1997. Du uring that pe eriod, the pay yment syste m was cost based. Eligi ibility had be een loose ened just bef fore this period, and enforcing the p rograms sta andards bec came more difficu Providers delivering billing for fra ult. audulent or u uncovered s services also were a o signif ficant factor in the increa in expen ase nditures. Spen nding began to fall after 1997, concu 1 urrent with th introductio of the inte he on erim payment syste (IPS) bas on costs with limits, tighter eligib em sed s bility, and inc creased scru utiny from th he Office of Inspecto General. e or In Oc ctober 2000, the prospec ctive payment system (P PPS) replace the IPS. A the same ed At time, eligibility for the benefit broadened slightly. Enf r forcement of the Medica programs f are integrity standard continues at the regio ds s onal home he ealth intermediaries and state surve d ey and certification agencies. c a Home health care has risen rapidly unde PPS. Spen e e r er nding has ris by abou 10 percent a sen ut t year between 2001 and 2009 9.
128
st-acute care Pos
Chart 8-9.
Provision of home health care cha n e anged af fter the ment syst tem start ted prospective paym
Pe ercent change e 1997 2001 74 2009 130 199720 001 72% % 2001 2009 7 76%
Number of visits (in millions) o Visit type (percent of to otal) Home health aide h Skilled nursing Therap py Medica social servic al ces Visits per home health patient
258
48% 41 10 1 73
25% 50 24 1 33
16% 55 28 1 39 55 2 20
Note: Source:
he b Th prospective payment system began in October 2000. ome health Standard Analytic File; Health Care Financing Review Medicare and Medicaid Statist F w, tical Supplement 2002. t, Ho
The types and am t mount of hom health ca services that benefic me are ciaries receiv have ve chang ged. In 1997 home health aide serv 7 vices were th most frequently provid visit type, he ded and beneficiaries who used home health care receiv an avera of 73 vis b s h h ved age sits. CMS began to ph hase in the interim paym ment system in October 1997 to stem the rise in m spending for hom health services and im me mplemented a prospective payment system (PP d t PS) in 2000 (see Cha 8-8). By 2001, total vi art 2 isits dropped by 72 perc d cent, and ave erage visits per user had dropped to 33. The increase in visits per us between 2001 and 2 d ser 2009 reflects s home health users getting more episodes. The mix o services c e of changed as w well, with sk killed nursing and thera visits no accountin for over 8 percent of all services Since PPS apy ow ng 80 f s. S d, er a s rapidly (see Chart 8-10). was implemented the numbe of users and episodes has risen r
129
Chart 8-10. Trends in provisio of hom healt care on me th

20 002 2005 2009 Average a annual percent ch hange 200220 009
Number of users (in millions) o Percent of beneficiaries who o used hom health me Episodes (in millions) Episodes per home he ealth patient Visits per home health patient Average payment per episode p e
Source:
2.5 2
3.0
3.3
3.9% %
7.2% 7 4.1 4 1.6 1 31 $2,329
8.1% 5.2 1.8 32 $ $2,470
9.4% 6.6 2.0 39 $2,879
3.8 6.9 4.5 3.7 3.1
alth MedPAC analysis of the home hea Standard Analytic File.
Unde the prospe er ective payme system, in effect sinc 2000, the number of users and th ent ce e he numb of episod have rise significan ber des en ntly. In 2009 , more than 3 million beneficiaries u used the home health benefit. The number of ho n ome health episodes inc e creased rapiidly from 200 to 2009. The number of 02 r beneficiaries usin home hea has also increased s ng alth o since 2002 b at a lowe rate than the but er growt in episode th es. The number of vi n isits per hom health pa me atient increas from 31 in 2002 to 3 in 2009. T sed 39 This increase is prima arily due to an increase in the numbe of home h a er health episod per patie des ent.
130
st-acute care Pos
Chart 8-11. Margins for freest M f tanding h home he ealth age encies
2008 2009 Percent of agencie es 2009
All Geograph hy Urban Rural Type of co ontrol For pro ofit Nonpro ofit Volume quintile First Second d Third Fourth Fifth
Source:
17.0%
17.7%
100%
17.3 16.0
17.9 16.6
83 17
18.6 12.3
18.7 14.4
84 11
9.0 9.3 13.3 16.0 18.9
8.9 8.7 12.6 16.5 20.1
20 20 20 20 20
MedPAC analysis of 20082009 Cost Report files. C
In 2009, about 78 percent of agencies ha positive m 8 ad margins (not shown in ch t hart). These e estim mated margin indicate th Medicare payment are above the costs of providing ns hat es ts e servic to Medic ces care benefic ciaries for bo rural and urban home health age oth e encies (HHA As). These margins are for freesta anding HHA which com As, mposed abo 85 percent of all HHA in out As 2009. HHAs are also based in hospitals and other fa i a acilities. HHAs that served mostly urb patients in 2009 had a weighted average ma s d ban d argin of 17.9 9 perce those that served mostly rural patients had a weighted a ent; average margin of 16.6 perce The 200 margin is consistent with the histo ent. 09 w orically high margins the home healt e th indus has expe stry erienced und the prospective paym der ment system The weigh m. hted average e margin from 2001 to 2008 wa 17.5 perc 1 as cent, indicati ng that mos agencies h st have been paid well in excess of their costs under prospe u ective paym ent. For-p profit agencie in 2009 had a weight average margin of 18 percent, and nonpro es h ted 8.7 ofit agencies had a weighted ave w erage margin of 14.4 pe rcent. n Agen ncies that serve more pa atients have higher marg gins. The age encies in the lowest volu e ume quintile in 2009 have a weigh h hted average margin of 8 percent, while those in the highe e 8.9 e est quintile have a weighted average margin of 20.1 per w n rcent.
131
Chart 8-12. Most com M mmon typ of inpatient r pes rehabilita ation fa acility ca ases, 201 10
Type of ca ase Stroke Hip fracture Major join replacemen nt nt Debility Neurological Brain injury Other orth hopedic Cardiac conditions Spinal cor injury rd Other
Note:
S Share of case es 20.5% 14.4 11.2 9.9 9.7 7.3 6.5 5.0 4.3 11.3
Other includes con nditions such as amputations, ma multiple trau ajor uma, and pain sy yndrome. Numbe may not sum to 100 ers pe ercent due to rou unding. habilitation Facilit tyPatient Asses ssment Instrumen data from CMS (January throu nt S ugh MedPAC analysis of Inpatient Reh une Ju of 2010).
Source:
In 2010, the most frequent di iagnosis for Medicare pa atients in inp patient rehab bilitation faci ilities (IRFs was stroke representing close to 21 percent o cases, up from 2004, when stroke s) e, of p e repre esented fewe than 17 pe er ercent of cas ses. cement case represented just over 11 percent of IRF admissions in 20 es 010, Major joint replac down from 24 percent of cases in 2004, when major joint replace n w ement was t most the comm IRF Medicare case type. mon
132
st-acute care Pos
Chart 8-13. Volume of IRF FFS patients remai V o S ined stab in 2009, ble af fter declining fro 2004 to 2007 om
Average annual percent Per rcent ange cha ange cha 2004 2008 2008 2009
2004
2007
2008
200 09
Number of IRF cases tients per 10,00 00 Unique pat FFS benef ficiaries p Payment per case s Medicare spending (in billions) Average le ength of stay (in days)
Note: Source:
455,000 113.2
364,000 93.2
0 356,000 91.5 5
361,00 00 92 2.9
6 6.0% 5 5.2
1.5% 1.5
$13,275
$16,143
$16,649 9
$16,56 68
5 5.8
-0.5
$6.43
$6.08
$5.96 6
$6.0 07
1 1.9
1.8
12.7
13.2
13.3 3
13 3.1
1 1.2
1.5
IR (inpatient reha RF abilitation facility) FFS (fee-for-se ), ervice). Numbers of cases reflect Medicare FFS u s t utilization only. a tal nding for IRF se rvices from CMS Office of the Ac S ctuary. MedPAC analysis of MedPAR data from CMS. Tot Medicare spen
Inpat tient rehabilit tation facility (IRF) volum is measu y me ured by the n number of IR cases and the RF numb of unique patients pe 10,000 be ber e er eneficiaries, which contro for chang in fee-fo ols ges orservic (FFS) enrollment. ce v 004 nforcement o the compliiance thresh of hold (60 perc cent IRF volume declined after 20 when en rule) was renewe ed. Medicare FFS sp pending on IRFs declined between 2 2004 and 20 as more IRFs complied 008 with the 60 perce rule and more Medic t ent care benefici aries enrolle in Medica Advantag ed are ge plans s. In 2009, volume remained re elatively stab with the number of c ble, cases increasing from 20 008 by 1.5 percent. The increase in the numb of cases was due to an increase in both the T e ber s e numb of unique beneficiaries receiving IRF care an an increa in the nu ber e g nd ase umber of beneficiaries with more than one IRF sta in a year. h ay IRF Medicare pay M yments per case and av verage lengt of stay have increased since 2004 th d 4, consi istent with in ncreasing av verage case mix of IRF p patients. How wever, the a average FFS S paym ment per case declined by half a perc b cent betwee 2008 and 2009 becau payment in en use ts 2009 were held at 2007 levels. a
133
Chart 8-14. Overall IR O RFs paym ments pe case h er have rise faster en r th costs, post-P han PPS
50 TEFRA T 40 Cumulative percent change PP PS Paym ment per case e Cost per case
30
20
10
-10 1999
Note:
20 000
2001
2002
2003
2004
2005
2 2006
2007 7
2008
2009
IR (inpatient reha RF abilitation facility) PPS (prospect ), tive payment sys stem), TEFRA (T Equity and Fi Tax iscal Responsibility Act of 1982). Data are from consistent two-year cohort of IRFs. Costs are not adjusted for changes in case mix. f e ts d ata MedPAC analysis of cost report da from CMS.
Source:
a ts i t es plementation of n Medicare costs and payment per case increased at similar rate before imp p stem (PPS) in 2002 as in npatient reha abilitation fac cilities (IRFs s) the prospective payment sys receiv cost-bas reimbursement under the Tax E ved sed Equity and F Fiscal Respo onsibility Act of 1982. Since implementation of the PPS, overall Medicare p e payments pe case have increased er e faster than costs, even when costs per case grew ra n c apidly betwee 2004 and 2006 as a en d t ment of the compliance threshold. c t result of enforcem These trends in Medicare pe case paym M er ments and co osts are refle ected in IRFs Medicare margins, shown in Chart 8-15 i 5.
134
st-acute care Pos
Chart 8-15. In npatient rehabilit tation fac cilities M Medicare margin by e ty ype, 2001 12009
TEFRA A 2001 All IRFs Hospital ba ased Freestanding Urban Rural Nonprofit For profit
Note:
PPS 2002 10.9% 6.1 18.5 11.3 5.9 6.5 18.7 2003 2 17.7% 14.7 22.9 2 18.2 12.5 14.5 23.9 2 2 2005 1 13.3% 9.3 2 20.7 1 13.5 1 12.0 1 10.2 1 19.8 2 2007 11.9% 8.1 18.5 12.0 10.2 9.6 16.9 20 008 9 9.6% 4 4.4 18 8.2 9 9.8 7 7.9 5 5.6 17 7.0 200 09 8. .4% 0. .5 20. .1 8. .5 6. .6 2. .3 19. .1
% 1.5% 1.5 1.5 1.5 1.1 1.6 1.2
EFRA (Tax Equit and Fiscal Res ty sponsibility Act of 1982), PPS (pr o rospective paym ment system), IRF (inpatient F TE re ehabilitation facility). ata MedPAC analysis of cost report da from CMS.
Source:
The aggregate Medicare margin increase rapidly du a M ed uring the firs two years of the inpati st ient rehab bilitation faci (IRF) pro ility ospective pa ayment syste (PPS). A em Aggregate m margins rose from just under 2 perc u cent in 2001 to almost 18 percent in 2003. 8 From 2003 to 200 margins declined bu remained h m 09, ut ecline was la argely due to o high. This de reduc ctions in pati ient volume over this tim period tha resulted in fewer patie me at n ents among whom to distribut fixed costs. The 2007 to 2009 ma m te 7 argin decrease was main a result o a nly of zero update to th base rates for half of 2008 and fo r all of 2009 that resulte in Medicare he s 2 9 ed paym ment rates re emaining at 2007 levels. 2 Frees standing and for-profit IR had sub d RFs bstantially hig gher aggreg gate Medicar margins than re hospital-based an nonprofit IRFs, contin nd nuing a trend that began with implem d n mentation of the f P IRF PPS in 2002.
135
Chart 8-16.
MSLTC DRG 207 189 871 177 592 949 208 190 193 593 539 573 559 862 291 166 178 682 314 919
Top MS T LTCDR RGs made up mo than h of ore half LTCH dis L scharges in 2009 s 9
Discharges s 15,378 9,438 6,857 4,690 3,913 3,576 2,729 2,687 2,613 2,103 2,102 1,984 1,971 1,953 1,860 1,810 1,797 1,783 1,748 1,747 72,739 131,446 Percentage .7% 11. 7. .2 5. .2 3. .6 3. .0 2. .7 2. .1 2. .0 2. .0 1. .6 1. .6 1. .5 1. .5 1. .5 1. .4 1. .4 1. .4 1. .4 1. .3 1. .3 55. .3 100. .0
Description
Respiratory sy R ystem diagnos with ventila support 9 hours sis ator 96+ Pulmonary ede ema & respira atory failure Septicemia or severe sepsis without ventilator suppor s rt 96 hours with MCC 6+ h Respiratory inf R fections & inflammations with MCC w Skin ulcers wit MCC th Aftercare with CC/MCC A Respiratory sy R ystem diagnos with ventila support < hours sis ator <96 Chronic obstru C uctive pulmonary disease with MCC w Simple pneumonia & pleuris with MCC sy Skin ulcers wit CC th Osteomyelitis with MCC O w Skin graft and/ debrideme for skin ulc or celluliti s with MCC /or ent cer Aftercare, mus A sculoskeletal system & con s nnective tissu e with MCC Postoperative & post-traumatic infections with MCC s Heart failure & shock with MCC H M Other respirato system OR procedures with MCC O ory s Respiratory inf R fections & inflammations with CC w Renal failure with MCC R w Other circulato system dia O ory agnosis with MCC M Complications of treatment with MCC C Top 20 MSLT TCDRGs Total
Note:
MSLTCDRG (M Medicare severity ylong-term care diagnosis relate group), LTCH (long-term care hospital), MCC (major ed H e omplication or co omorbidity), CC (c complication or comorbidity), OR (operating room MSLTCDR c R m). RGs are the case-mix co sy ystem for these fa acilities. Columns may not sum due to rounding. d MedPAC analysis of MedPAR data from CMS. a
Source:
Case in long-ter care hosp es rm pitals (LTCH are conc entrated in a relatively s Hs) small numbe of er Medicare severity ylong-term carediagnosis related groups (MS SLTCDRG In 2009, the Gs). DRGs acco ounted for mo than half of all cases ore f s. top 20 MSLTC The most frequen diagnosis in LTCHs in 2009 was r m nt n respiratory d diagnosis with ventilator r support for more than 96 hou Eight of the top 20 d urs. diagnoses, re epresenting 31 percent of all s, piratory cond ditions. cases were resp
136
st-acute care Pos
Chart 8-17. LT TCH spe ending per FFS b beneficia has in ary ncreased d under PPS S
Averag annual cha ge ange 2003 Cases Cases per 10,000 FFS bene eficiaries Spending per FFS bene eficiary Payment per case 110,396 30.8 2005 134,003 36.4 2007 200 08 2009 9 131,446 6 37.4 4 2003 2005 10.2% 8.8 2005 2008 0.8% 0.6 2 2008 2009 0.4% 0.9
129 9,202 130,8 869 36.3 37 7.0
$75.2
$122.2
$126.5
$130 0.4
$139.3 3
27.5
2.2
6.8
$24,758 28.8
$33,658 $ 28.2
$34 4,769 $35,2 200 26.9 26 6.7
$37,465 5 26.4 4
16.6 1.0
1.5 1.8
6.4 1.1
Length of stay (in days s)

Note:
TCH (long-term care hospital), FF (fee-for-servic PPS (prospe c FS ce), ective payment s system). Growth in per FFS cases and LT sp pending was slow in 2006 and 2007 by large in wed ncreases in the n number of Medica Advantage e are enrollees, whose longterm care hospital use and spendin are not includ in these totalls. ng ded a MedPAC analysis of MedPAR data from CMS.
Source:
Between 2008 an 2009, Me nd edicare spen nding per fee e-for-service beneficiary rose 6.8 e perce much more than the rate of grow in the nu ent, e wth umber of cas ses.
137
Chart 8-18. LT TCHs pe case payment rose mo quickly than er p t ore co osts in 2009 2
50 TE EFRA 40 Cumulative percent change PP PS Payment per case r Cost per cas se
30
20
10
-10 1999
Note:
200 00
2001
2002
200 03
2004
2005
20 006
2007
2008
20 009
TCH (long-term care hospital), TE c EFRA (Tax Equit and Fiscal Res ty sponsibility Act o 1982), PPS (pr of rospective paym ment LT sy ystem). Data are from consistent two-year cohorts of LTCHs. s st m MedPAC analysis of Medicare cos report data from CMS.
Source:
Paym ment per cas increased rapidly after the prospe se ective payme system w ent was imple emented, clim mbing an av verage 16.6 percent per year betwee 2003 and 2005. Cost per p en d t case also increas rapidly during this period, albeit at a somew sed d what slower p pace. Between 2005 an 2008, gro nd owth in cost per case ou tpaced that for payment as regula ts, atory chang to Medic ges cares paym ment policies for long-term care hosp m pitals slowed growth in d paym ment per case to an aver rage of 1.5 percent per y p year. After the Congres delayed implementat ss tion of some of CMSs re ecent regula ations, payments per case climbed 6.4 percent between 20 and 200 Cost per case, howe d t 008 09. r ever, rose les ss than 2 percent.
138
st-acute care Pos
Chart 8-19. LT TCHs Medicare margins by type of facili M s e ity

Share of discharges d Type of LT TCH (2009) TEFRA 2002 2003 2 2004 4 2005 PPS 2006 200 07 2008 2009
All Urban Rural Freestand ding Hospital within hospital w Nonprofit For profit
Note:
100% 96 4 70 31 16 83
0.1% 0.1 0.5 0.1 0.5 0.1 0.1
5.2% 5 5.2 5 4.5 4 5.6 5 4.2 4 1.9 1 6.3 6
9.0% % 9.2 2.6 8.4 10.6 6.9 10.0
11.9% 11.9 10.1 11.3 13.1 9.0 13.1
9.7% 9.9 4.9 9.3 10.8 6.6 10.9
4.8% 5.0 0.7 4.3 5.8 1.3 5.9
3.5% 3.8 2.8 3.1 4.4 2.4 5.1
5.7% 6.0 3.7 4.9 7.6 0.2 7.3
TCH (long-term care hospital), TE c EFRA (Tax Equit and Fiscal Res ty sponsibility Act o 1982), PPS (pr of rospective paym ment LT sy ystem). Columns may not sum to 100 percent due to rounding or m s e missing data. Go overnment-owne providers oper ed rate in a different context from other provi iders, so their ma argins are not re ported here. ata MedPAC analysis of cost report da from CMS.
Source:
After implementa ation of the prospective payment sys p p stem, long-te care hos erm spitals (LTC CHs) Medicare margins increased rapidly, from 5.2 percen in 2003 to 11.9 percen in 2005. m nt o nt Margins then fell as growth in payments per case lev n veled off. In 2009, howe ever, LTCH margins began to increase again, reaching 5.7 perce o ent. Finan ncial perform mance in 200 varied across LTCHs The aggregate Medica margin fo 09 s. are or for-pr rofit LTCHs (which acco ounted for 83 percent of all Medicare discharges from LTCH 3 e s Hs) was 7.3 percent, compared with 0.2 per 7 w rcent for non nprofit facilities (which accounted for 16 perce of all Medicare LTCH discharges Rural LTC ent H s). CHs aggreg gate margin was 3.7 perce compare with 6.0 percent for th urban co ent, ed p heir ounterparts. Rural providers accoun for . nt about 4 percent of all LTCHs caring for a smaller vo o s, olume of patiients on ave erage, which may result in poorer economies of scale. t e
139
Chart 8-20. LT TCHs in the top quartile of Medic care mar rgins in 20 had much lo 009 ower costs
ristics Character Mean tota discharges (all payers) al Medicare patient share e Average length of stay (in days) Mean per discharge: r Standar rdized costs Medicar payment re High-co outlier pay ost yments Share of: Cases that are SSOs t s Medicar cases from primary-refe re m erring ACH LTCHs that are for-p profit
Note:
High-ma argin LTCH s 33 53 6 66% 2 26 $26,12 23 $38,63 35 $1,45 55 2 27% 3 39 9 92
Lo ow-margin LTCHs 410 64% 27 $37,647 $37,094 $3,887 35% 38 70
LT TCH (long-term care hospital), SS (short-stay outlier), ACH (acu care hospital) Includes only e c SO ute ). established LTCH Hs those that filed val cost reports in both 2008 and 2009. High-marg LTCHs were in the top 25 percent of the distr lid n gin ribution f ercent of the distr ribution of Medic care margins. of Medicare margins. Low-margin LTCHs were in the bottom 25 pe St tandardized cost have been adjusted for differen ts nces in case mix and area wages Average prima referring ACH x s. ary H re eferral share indic cates the mean share of patients who are referred to LTCHs from each LTCHs pr s d m rimary referring A ACH. eports and MedPA data from CM AR MS. MedPAC analysis of LTCH cost re
Source:
A qua arter of all lo ong-term car hospitals (LTCHs) had margins in excess of 1 re ( d n 15.7 percent t, while another qua e arter had ma argins below 3.9 perce w ent. Lowe per discha er arge costs, ra ather than higher payme ents, drove t differenc in financ the ces cial perfo ormance betw ween LTCHs with the lowest and hig s ghest Medic care margins Low-margin s. LTCH had stand Hs dardized cos per disch sts harge that we almost 5 percent h ere 50 higher than h highmargin LTCHs ($ $37,647 vs. $26,123). $ High-cost outlier payments per discharge for low-ma p e argin LTCHs were more than double e those of high-margin LTCHs ($3,887 vs. $1,455). At the same tim short-stay outliers m e me, made up a larger share of low-marg LTCHs cases. Lowe gin c -margin LTC CHs thus cared for disproportionate shares of pa atients who are high-cos outliers an patients w have sh a st nd who horter stays Both types of patients can have a negative eff e s. s fect on LTCH margins. LTCHs lose Hs mone on high-cost outlier ca ey ases since, by definition they gener n, rate costs th exceed hat paym ments. Payments for sho ort-stay outlie cannot b more than 100 percen of the costs of ers be n nt the case. f ts omies of scale may there efore Low-margin LTCHs service fewer patient overall. P oorer econo t n sts. affect low-margin LTCHs cos Low-margin LTCHs were far less likely to be for prof than were their high-m o fit margin count terparts.
140
st-acute care Pos
Web li inks. Pos st-acute care

Skilled nursing facilities n Chap 7 of MedPACs March 2011 Repo to the Con pter h ort ngress provid informatio about the des on supply, quality, se ervice use, an Medicare margins for skilled nursin facilities. C nd ng Chapter 7 of MedP PACs June 2008 Report to the Congr 2 ress provides information about altern s native design for ns Medic cares prospe ective payme system th would mo accurately pay provide for their ent hat ore y ers skilled nursing fac d cility services Medicare payment basiics: Skilled n s. p nursing facility payment y system provides a description of how Medicare pays fo skilled nurs or sing facility c care. /www.medpa ac.gov/chapte ers/Mar11_C Ch07.pdf http:// /www.medpa ac.gov/chapte ers/Jun08_C Ch07.pdf http:// /www.medpa ac.gov/docum ments/MedPA AC_Payment t_Basics_10_ _SNF.pdf http:// o ormation on s skilled nursin facilities, in ng ncluding the The official Medicare website provides info paym ment system and other rela a ated issues. /www.cms.go ov/SNFPPS/ / http:// ealth service es Home he Chap 8 of MedPACs March 2011 Repo to the Con pter h ort ngress, Chap 2E of Me pter edPACs Mar rch 2009 Report to the Congress, Chapter 4 of MedPACs June 2007 R f Report to the Congress, a and pter t gress provide information on home health e Chap 5 of MedPACs June 2006 Report to the Cong servic ces. Medicar payment basics: Home health care services pay re b e yment system provides a m descr ription of how Medicare pays for home health care w p e e. //www.medpa ac.gov/chapt ters/Mar11_C Ch08.pdf http:/ //www.medpa ac.gov/chapt ters/Mar09_C Ch02e.pdf http:/ //www.medpa ac.gov/chapt ters/Jun07_C Ch04.pdf http:/ //www.medpa ac.gov/public cations/congressional_re ports/Jun06_ _Ch05.pdf http:/ //www.medpa ac.gov/docum ments/MedPA AC_Paymen nt_Basics_10 0_HHA.pdf http:/ o ormation on t quality of home health care and the f h The official Medicare website provides info additional informa ation on new policies, stat tistics, and re esearch as w as inform well mation on hom me health spending and use of se h a ervices. /www.cms.go ov/HomeHea althPPS/ http://
141
Inpatient rehabilitation facilities t s Chap 9 of MedPACs March 2011 Repo to the Con pter h ort ngress provid informatio on inpatie des on ent rehab bilitation facilities. Medica payment basics: Reha are b abilitation fac cilities (inpatie payment ent) system provides a description of how Medicare pays fo inpatient re or ehabilitation f facility servic ces. /www.medpa ac.gov/chapte ers/Mar11_C Ch09.pdf http:// /www.medpa ac.gov/docum ments/MedPA AC_Payment t_Basics_10_ _IRF.pdf http:// CMS provides info ormation on the inpatient rehabilitation facility pros t n spective payment system m. /www.cms.go ov/InpatientR RehabFacPP PS/ http://
Long-ter care hosp rm pitals pter dPACs Marc 2011 Rep to the Co ch port ongress proviides informat tion on long-term Chap 10 of Med care hospitals. Me h edicare paym ment basics: Long-term ca hospital s L are services pay yment system m provid a descrip des ption of how Medicare pa for long-te care hos ays erm spital service es. /www.medpa ac.gov/chapte ers/Mar11_C Ch10.pdf http:// /www.medpa ac.gov/docum ments/MedPA AC_Payment t_Basics_10_ _LTCH.pdf http:// CMS also provide information on long-ter care hosp es rm pitals, includi ng the long-t term care hospital prosp pective paym ment system. //www.cms.gov/LongTerm mCareHospitalPPS/ http:/
142
st-acute care Pos
SECTION
Medicare Advantage
Chart 9-1.
MA plans availabl to virtu M le ually all Medicar re beneficiar ries

CC CPs HMO or local PPO Reg gional PP PO Any CCP Any MA plan Average plan e offerings per coun nty
PFFS
2005 2006 2007 2008 2009 2010 2011

Note:
67% 80 82 85 88 91 92
N/A N 87 87 87 91 86 86
67% 98 99 99 99 99 99
45% 80 100 100 100 100 63
84% 100 100 100 100 100 100
5 12 2 20 0 35 5 34 4 21 1 12 2
MA (Medicare Adv vantage), CCP (c coordinated care plan), HMO (he e ealth maintenanc organization), PPO (preferred ce rovider organizat tion), PFFS (priva fee-for-servic N/A (not app ate ce), plicable). These d data do not include plans that have pr re estricted enrollme or are not pai based on the MA plan bidding process (specia needs plans, co ent id M al ost-based plans, em mployer-only plans, and certain demonstration pla d ans). ata MedPAC analysis of plan finder da from CMS.
Source:
There are four typ of plans, three of whic are coordiinated care p e pes ch plans (CCPs.) Local CCP Ps includ local prefe de erred provide organizatio (PPOs) a HMOs, w er ons and which have co omprehensiv ve provid networks and limit or discourage use of out-ofder s u f-network pro oviders. Loca CCPs may al choos which indi se ividual counties to serve. Regional CC (regiona plans are re CPs al equired by st tatute to be PPOs) cove entire state er e-based regio and have networks th may be lo ons e hat ooser than th he ocal PPOs. Regional PPO were ava R Os ailable beginn ning in 2006. Private fee-f forones required of lo ce ans, which previously we not CCPs are now (as of 2011) re p ere s, equired to have servic (PFFS) pla netwo orks in areas with two or more CCPs. In areas whe there are not two or m s e more CCPs, ere PFFS plans are not required to have netwo S o orks and enro ollees are fre to use any Medicare ee y provid der. Local CCPs are available to 92 percent of Medicare be a 2 eneficiaries in 2011up f n from 67 perce in ent 2005. Regional PP . POs are available to 86 percent of be p eneficiaries. T availabili of Medica The ity are Advantage (MA) PFFS plans has declined from 100 pe P h ercent of beneficiaries in 2 2010 to 63 ent ciaries in 2011. The declin is due to n ne new provider network req r quirements in n perce of benefic most of the countr For the pa six years, virtually 100 percent of Medicare be ry. ast 0 eneficiaries ha ave M ailable, up fro 84 percen in 2005. om nt had MA plans ava The number of pla from which beneficiar n ans ries may cho oose in 2011 is about the same as in 2 2006. In 2011, beneficia aries can cho oose from an average of 1 plans ope 12 erating in their counties. T This ber nued to decr rease since 2009, reflectin CMSs 20 effort to r 2 ng 010 reduce the numb has contin numb of duplica ber ative plans an plans with small enrolllment and the 2011 netwo requirem nd h e ork ments for PF FFS plans.
D ding edicare program June 2011 m, A Data Book: Health care spendi and the Me
145
Chart 9-2.
100 2006 90 80 Percent of beneficiaries
Access to zero-pr A o remium p plans wit MA dr th rug co overage, 20062011 ,

94 2007 200 08 2009 2010 201 1 86 73 68 55 73 7 88 90 85 5
70 70 60 60 50 40 30 20 48 66
72
52
34 29 2 19 15 11 28 30 25 2 26 6 29 25 25 29
37 32
10 0 HMO
Note:
PPO P
PFFS
onal PPO Regio
Any MA plan n
vantage), HMO (health maintenance organization PPO (preferre provider organ n), ed nization), PFFS ( (private MA (Medicare Adv fee-for-service). f MedPAC analysis of bid and plan finder data from CMS.
Source:
Acros all plan ty ss ypes, the ava ailability of z zero-premiu m plansp plans with no premium o paym ments other than the Med t dicare Part B premium increased in 2011. Mor beneficiar re ries can obtain a Med o dicare Advan ntagePresc cription Drug (MAPD) p g plan, an MA plan that remium for e includ Part D drug coverag for which the enrollee pays no pr des d ge, h e either the drug cover rage or the coverage of Medicare Pa A and Pa B service In 2011, 9 percent o c art art es. 90 of Medicare benefic ciaries have access to at least one M t MAPD plan with no pre n emium (beyo ond the Medicare Par B premium for the combined cove M rt m) erage (and n premium for any nonno Medicare-covered benefits in ncluded in th benefit pa he ackage), com mpared with 85 percent in 2010. Seve enty-three pe ercent of ben neficiaries ha zero-pre ave emium MAP HMOs available, while PD MAP preferred provider or PD d rganizations (PPOs) with s hout premiums are muc less widely ch availa able. Howev zero-pre ver, emium region PPOs ar more avaiilable than th have be in nal re hey een the past. Private fee-for-service plans off fering zero p premiums an Part D dru coverage are nd ug e availa able to 29 pe ercent of beneficiaries in 2011. n ost M ollees continu paying th Medicare Part B pre ue heir e emium, but some In mo cases, MA plan enro MAP plans use rebate dol PD llars to reduc or elimina their enr ce ate rollees Part B premium obliga ation.
146
Med dicare Advanta age
Chart 9-3.
14
Enrollmen in MA plans, 1994201 nt 11
12 10.5 Beneficiaries (in millions) 10 8.1 8 6.4 6.3 6.1 6 4.1 4 2.3 2 3.1 5.2 5.5 5 4.9 4.9 6 4.6 4.7 6.9 .4 9.
11.7 11.0
0 996 8 03 2006 2007 2008 2009 2010 2011 0 1994 1995 19 1997 1998 1999 2000 2001 2002 200 2004 2005 2
Note: Source:
MA (Medicare Adv vantage). ed r thly summary rep ports, CMS. Medicare manage care contract reports and mont
Medicare enrollm ment in privat health pla paid on a at-risk ca te ans an apitated basi is at an allis time high at 11.7 million enro ollees (25 pe ercent of all M Medicare be eneficiaries). Enrollment rose . rapidly throughou the 1990s peaking at 6.4 million e hen ut s, t enrollees in 1999, and th declined to d a low of 4.6 millio enrollees in 2003. Me w on edicare Adva antage enrolllment has in ncreased stead since 2003. dily
147
Chart 9-4.
Changes in enroll C lment va amon major plan typ ary ng r pes

Total enrollees housands) (in th February F 2008 6,830 257 2,057 February 2009 7,625 377 2,353 Februa ary 2010 0 8,534 4 760 0 1,657 7 Febr ruary 20 011 9,9 993 1,1 132 5 588 P Percentage ch hange 20102011 17% 49 65
Plan type Local CCP Ps Regional PPOs PFFS

Note:
CC (coordinated care plan), PPO (preferred provider organization PFFS (private fee-for-service) Local CCPs inc CP O n), e ). clude he ealth maintenanc organizations and local PPOs. ce . m y CMS health plan monthly summary reports.
Source:
Enrol llment in local coordinate care plan (CCPs) gr ed ns rew slower t than enrollm ment in region nal prefe erred provide organizatio (PPOs) over the pa st year, whille enrollmen in private f er ons nt feefor-se ervice (PFFS plans dec S) clined. Comb bined enrollm ment in the three types o plans grew by of w 7 per rcent from Fe ebruary 2010 to February 2011. While still the dom e minant form of enrollment, local CCP enrollmen grew 17 pe nt ercent over t the P past year, and en y nrollment in regional PPOs grew by 49 percent f from a lower base. It is l r likely that much of the enrollment growth in loc CCPs an regional P m g cal nd PPOs came f from the 65 perce decline in PFFS enro ent n ollment in the same time period. e
148
Chart 9-5.
State Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland etts Massachuse Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada shire New Hamps New Jersey o New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Puerto Rico Rhode Island South Carolina ta South Dakot Tennessee Texas Utah Vermont Virginia Washington Washington, DC West Virginia Wisconsin Wyoming U.S. total
Note: Source:
MA and cost plan enrollm M ment by s state and type of d plan, 2011 1
Medicare eligibles M s (in thousands) 844 66 872 532 4,744 622 568 149 3,339 1,237 207 229 1,842 1,007 517 433 761 686 265 786 1,061 1,654 786 497 1,003 170 279 354 219 1,329 313 2,991 1,489 109 1,899 602 618 2,277 660 183 774 137 1,056 3,001 283 112 1,144 969 78 380 911 80 47,123 Distribution (in percent) of e enrollees by plan type n HMO 13% 0 35 5 34 26 15 2 24 5 14 10 5 1 5 3 3 21 7 3 15 10 15 4 14 0 5 27 0 12 18 23 10 0 14 10 22 24 60 27 2 0 20 14 16 0 2 19 2 1 14 0 17 Local PPO 7% 0 2 2 0 3 2 1 1 8 9 14 2 7 5 5 4 1 6 1 2 12 4 2 4 7 2 2 1 1 7 6 3 1 8 3 19 12 8 1 5 3 4 2 13 1 4 5 1 6 8 1 5 Regional PPO 1% 0 1 2 2 0 2 0 7 4 13 0 1 7 1 1 8 1 0 0 1 1 2 2 1 1 1 2 0 0 0 1 1 0 10 0 0 0 0 6 5 1 1 2 0 2 1 0 0 10 3 0 2 PFFS 0% 0 1 5 0 2 0 0 0 5 0 5 0 2 1 2 1 2 1 0 0 1 0 2 3 7 3 1 5 0 1 1 4 3 1 2 0 1 0 0 4 3 1 1 5 2 5 1 0 2 2 3 1 Cost 0% 0 0 0 0 4 0 0 0 0 7 1 0 0 2 1 1 0 0 3 0 0 23 0 0 0 1 0 0 0 0 0 0 4 1 0 0 0 0 0 0 2 0 1 1 0 1 0 7 3 3 1 1 To otal 2 % 21 1 4 40 1 15 3 37 3 34 1 19 4 3 32 2 22 4 43 2 29 9 1 17 1 13 1 11 1 17 2 24 1 13 8 1 18 2 23 4 44 1 10 2 22 1 15 1 12 3 31 6 1 13 2 26 3 31 1 18 9 3 34 1 15 4 42 3 38 6 69 3 35 1 16 9 2 25 2 20 3 35 5 1 14 2 26 1 10 2 23 3 30 6 2 26
MA (Medicare Adva A antage), HMO (he ealth maintenance organization), PP (preferred pro e PO ovider organization PFFS (private fee-forn), se ervice). Cost plans are not MA plans; they submit cos reports to CMS rather than bids. Totals may not sum due to roundin s st S ng. CM enrollment and population data 20102011. MS a,
Medica private plans attract more bene are a eficiaries in some areas than in oth e hers. At the state level, private pla attract only 1 e ans percent of beneficiaries in Alaska. The hi t ighest penetrations of Medicare p rivate plans are in Puerto Rico, M Minnesota, Hawaii and i, Oregon with 69 percent 44 percent, 43 percent, and 42 percent of benefi ciaries, respectiv n, t, p vely, enrolled in p plans. The popularity of different types of plans varies as well. Fo example, som states have alm or me most their entire p plan enrollment in n PFFS) plans, while other states ha little or none of their enrollmen in PFFS plans. ave nt private fee-for-service (P
149
Chart 9-6.
MA plan benchma M b arks, bids, and M Medicare program m payments relative to FFS spendin 2011 s e ng,
All Plan ns HMO Os 113% % 97 109 Loca PPOs al 1 16% 09 10 1 14 Regional PP POs 110% % 104 110 PFF FS 116% 110 114
Benchmarks/FFS Bids/FFS Payments s/FFS

Note:
113% 100 110
MA (Medicare Adv vantage), FFS (fe ee-for-service), HMO (health maiintenance organ ization), PPO (pr H referred provider r rganization), PFF (private fee-fo FS or-service). or ember 2010. MedPAC analysis of plan bid data from CMS, Nove
Source:
Since 2006, plan bids have pa e artially determ mined the Me edicare paym ments they re eceive. Plans bid to offe Part A and Part B cove er d erage to Med dicare benefic ciaries (Part D coverage is handled separ rately). The bid includes plan administrative cost a profit. CM bases the Medicare b p and MS e paym ment for a priv vate plan on the relationship between its bid and it applicable benchmark. ts The benchmark is an administ b s tratively dete ermined biddiing target. Le egislation in 1 1997 establis shed bench hmarks in ea county, which include a floora minimum am ach w ed mount below which no cou unty bench hmarks could go. By desi d ign, the floor rate exceed ed fee-for-se ervice (FFS) spending in many count ties. Benchm marks are upd dated yearly by the nation growth in FFS spending. nal If a pl lans bid is above the ben nchmark, the the plan re en eceives the b benchmark as payment fro s om Medic care and enr rollees have to pay an add t ditional prem mium that equ uals the difference. If a pl lans bid is below the be enchmark, th plan receives its bid, p he plus a rebate defined by law as 75 e, y ent een s must then retu urn perce of the difference betwe the plans bid and its benchmark. The plan m the re ebate to its enrollees in th form of supplemental b he benefits, lowe cost sharin or lower er ng, premiums. We estimate that MA benchma arks average 113 percen of FFS spe e nt ending when weighted by MA lment. The ra varies by plan type, because diffe atio y b erent types of plans tend to draw enroll f enroll lment from different types of areas. s Plans enrollments -weighted bid average 100 percent o FFS spend ds of ding. We esti imate that HM MOs bid an average of 97 percent of FFS spend n o ding, while biids from othe plan types average at l er least 104 percent of FF spending. These numb p FS bers suggest that HMOs can provide the same t servic for less than FFS, wh other plan types tend to charge more. ces hile n We project that 20 MA paym 011 ments will be 110 percent of FFS spen t nding. It is lik kely this num mber will de ecline signific cantly over th next few years as ben he y nchmarks are gradually re e educed relativ to ve FFS levels to mee requiremen under the Patient Pro l et nts e otection and A Affordable Ca Act of 20 are 010. r nding varies b the type o Medicare A by of Advantage pl lan. The ratio of payments relative to FFS spen HMOs and regional preferred provider orga anization (PP payment are estima PO) ts ated to be 10 09 ent p FS, ayments to pr rivate fee-for r-service and local perce and 110 percent of FF respectively, while pa PPOs will average 114 percen s e nt.
150
Chart 9-7.
2.5
Enrollmen in emp nt ployer gr roup MA plans, 2 A 2006201 11

PFFS CCP
2.0 Enrollment (in millions)
1.5
1.0
0.5
0.0 May-06
Note: Source:
Nov-0 07
Fe eb-08
Feb-09
Feb-10
Feb-1 11
vantage), PFFS (private fee-for-s ( service), CCP (co oordinated care p plan). MA (Medicare Adv CMS enrollment data.
While most Medicare Advant e tage (MA) plans are ava ailable to any Medicare b y beneficiary residing in a give area, som MA plans are availablle only to ret en me tirees whose Medicare e cover rage is supp plemented by their forme employer or union. Th y er hese plans a called are emplo oyer group plans. Such plans are us p sually offere through in ed nsurers and are markete to ed group formed by employers or unions ra ps y s ather than to individual b o beneficiaries s. In the last five ye e ears, enrollm ment in emplo oyer group p plans has mo than dou ore ubled, while overa MA enrollment grew by about 65 percent. As of February 2011, abou 2.1 million all b y ut n enrollees were in employer group plans, or about 18 percent of a MA enrollees. n g 8 all Unde a requirem er ment in the Medicare Imp M provements for Patients and Provide Act of 20 s ers 008, emplo oyer group plans were required to have network and after 2010 could no longer be p r h ks e privat fee-for-se te ervice (PFFS plans. S) Our analysis of MA bid data shows that employer gro plans on average have bids tha are a M s e oup n at highe relative to FFS spending than indi er ividual plans meaning t s, that group pl lans appear less efficie than indi ent ividual market MA plans Employer g s. group plans bid an aver rage of 108 perce of FFS, compared with 99 percent of FFS fo individual p ent c or plans (not sh hown in cha art above e).
151
Chart 9-8.
900 0 800 0 Number of special needs plans 700 0 600 0 500 0 400 0 300 0 200 0
Number of specia needs plans co o al ontinues to decline s fr rom 2008 peak 8

769 698
5 562 476 55 45
276
125 100 0 11 0 2004 2005 2006 2007 2008 2 2009 20 010 2011
Source:
CMS special need plans fact shee and data summary, February 1 2006, and CM special need plans ds et 14, MS ds omprehensive reports, March 21, 2007, April 2008 April 2009, Ap 2010, and Ap 2011. 8, pril pril co
The Congress created specia needs pla (SNPs) a a new Me C al ans as edicare Adva antage (MA) plan ) type in the Medic care Prescrip ption Drug, Improvemen and Mode nt, ernization Ac of 2003 to ct o provid a commo framewor for the existing plans s de on rk serving spec needs beneficiaries and cial to expand beneficiaries acce to and ch ess hoice among MA plans. g In 2011, there are 455 SNPs As is the case with all MA plans, th number m e s. his marks a stea ady decre ease from 20 as CMS has made efforts to red 008 S e duce the num mber of dupl licative plans s and plans with sm enrollme p mall ent. SNPs were origin s nally authoriz for five years. SNP authority wa extended, subject to n zed y as new are requirements, by the Medicare, Medicaid and SCHI P Extension Act of 2007 the Medica y d, n 7, Impro ovements for Patients an Providers Act of 2008 and the P nd s 8, Patient Protection and Afford dable Care Act of 2010. Absent congressional a A action, SNP authority will expire at th he end of 2014. o
152
Chart 9-9.
Number of SNPs decrease while SNP enrollment o d ed t ro from 2010 to 2011 ose m o
SNP enrollment (in thousands) 1,400 1,200 1,000 800 600 400 200 0 April 201 0 April 2011 969 1,069 214 98 1 170 80
600 500 Number of SNPs 400 300 200 100 0 April 2010 April 2011 A 335 153 74 92 65
298
Chronic or disabling condition d Institutional l Dual eligible e
C Chronic or dis sabling condit tion I Institutional D Dual eligible
Note: Source:
NP ds SN (special need plan). ds hensive reports, April 2010 and 2 2011. CMS special need plans compreh
Altho ough the num mber of spec needs plans (SNPs) decreased by 19 perce from April cial ent 2010 to April 2011, the numb of SNP enrollees inc ber e creased by 3 percent. NPs cent) are for dual-eligible beneficiaries, while 20 percent are for e 0 e In 2011, most SN (66 perc h nditions, and 14 percent are for ben d t neficiaries wh reside in ho beneficiaries with chronic con institu utions (or reside in the community but have a si milar level o need). c b of Enrol llment in SNPs has grow from 0.8 million in Ma wn arch 2007 (n shown) to 1.3 million in not o n April 2011. The availability of SNPs has changed slig a ghtly and va aries by type of special n e needs popula ation serve In 2011, 76 percent of beneficiar ed. o ries reside in areas wher SNPs ser dual-elig n re rve gible beneficiaries (dow from 79 percent in 2010), 47 per wn rcent live wh here SNPs s serve utionalized beneficiaries (down from 49 percent and 46 pe b s m t), ercent live where SNPs institu nt). serve beneficiarie with chronic condition (down fro 63 percen e es ns om
153
Web li inks. Medicare Advantag A ge

Chap 12 of Me Congress pr pter edPACs Ma arch 2011 Re eport to the C rovides infor rmation on Medicare Advant tage plans. http:/ //www.medpac.gov/chap pters/Mar11_ _Ch12.pdf More information on the Med e n dicare Advan ntage progra payment system can be found in am n n MedP PACs Medic care Paymen Basics se nt eries. http:/ //www.medpac.gov/docu uments/MedPAC_Payme ent_Basics_ _10_MA.pdf CMS provides inf formation on Medicare Advantage a other Me n A and edicare man naged care p plans. http:/ //www.cms.g gov/HealthPl lansGenInfo o/ The official Medic o care website provides in e nformation o n plans avaiilable in specific areas a and the benefits they offer. http:/ //www.medic care.gov/
154
SECTION
Prescription drugs
Chart 10-1. Medicare spendin for Pa B drug admin M ng art gs nistered in physician office or furn ns es nished b suppliers by
15.0 0 Medicare spending (dollars in billions) Me edicare spend ding 12.0 0 10.3 9.0 0 6.4 6.0 0 4.1 3.0 0 2.8 3.2 3 5.1 8.5 10.9 .1 10. 10.6 11.0 10.7 11.1
0.0 0 1997 19 998 1999 2000 2001 2002 2003 2004 200 2 3 05 2006 20 007 2008 2 2009
Note: Da include Part Bcovered drugs administered in physicians offic or furnished by suppliers (e.g certain oral dr ata s n ces g., rugs an drugs used with durable medic equipment). Data do not inclu Part Bcove red drugs furnish in hospital nd cal D ude hed ou utpatient departm ments or dialysis facilities. MedPAC analysis of Medicare claims data.
Source:
Spen nding for Par B drugs ad rt dministered in physician s offices or furnished by suppliers y totale about $11 billion in 2009, up 3.5 percent fro the 2008 level. ed 1.1 5 om 8 Medicare spendin on Part B drugs incre ng eased at an average rate of 25 perc e cent per year r from 1997 to 200 In 2005, the Medicare payment r 03. t e rate changed from one b d based on the e avera wholesa price to 106 percent of the avera ge sales pric With the move to the age ale o ce. e new payment sys p stem, spending declined 8 percent in 2005. Sinc then spen d n ce nding has increased modes stly, growing at an avera rate of 2 .3 percent p year sinc 2005. age per ce In addition to the new payme system, another facto contributing to the mo ent a or odest growth in h Part B spending is reduced use of darbepoetin alfa a epoetin alfa. Annual Part B u and l spending on thes products declined by nearly $1 biillion betwee 2006 and 2009 due in part se d en n to changes in CM coverage policy and Food and D MS e Drug Adminis stration labeling. This total does no include dr t ot rugs provide through o utpatient de ed epartments o hospitals o to of or patients with end d-stage renal disease in dialysis facillities. MedPA estimate that paym AC es ments for se eparately bill drugs pr led rovided in ho ospital outpa atient departments equaled about $3 3.5 billion in 2009. We estimate that freestan n W t nding and ho ospital-based dialysis facilities billed d d Medicare an additional $3.0 billion for dru in 2009. ugs .
157
Chart 10-2. Top 10 Pa B drugs administered in phys art d sicians ffices or furnishe by su r ed uppliers, by share of e of ex xpenditu ures, 200 09
Drug nam me Rituximab b Ranibizum mab Bevacizum mab Infliximab Pegfilgras stim Darbepoe alfa etin Epoetin alfa Oxaliplatin n Docetaxel Tacrolimu us
Note: Source:
Clinical indications l Lympho oma, leukemi ia, rheuma atoid arthritis Age-rel lated macula degeneratio ar on Cancer age-related r, macula degeneratio ar on Rheum matoid arthritis s, Crohns disease s Cancer r Anemia a Anemia a Cancer r Cancer r Preven organ nt transpla rejection ant
Com mpetition Sole source e
Percent of f spending 7.8%
Rank in k 2008 1
Sole source e Sole source e Sole source e Sole source e Sole source e Mult isource biolo ogic Sole source e Sole source* e Mult isource
7.7 7.0 5.8 4.7 4.2 3.3 3.0 2.6 2.6
2 3 4 5 6 7 8 10 0 Not on list
Da do not includ Part B drugs fu ata de urnished in hosp pital outpatient de epartments or dia alysis facilities. *D Docetaxel was so source in 200 but generic ve ole 09, ersions have sinc become availlable. ce MS al MedPAC analysis of Medicare claims data from CM and informatiion on drug and biologic approva information from the ood dministration web bsite (www.fda.gov). Fo and Drug Ad
Medicare covers more than 600 outpatie drugs und Part B, b spending is very 6 ent der but g conce entrated. Th top 10 dru account for about 49 percent of all Part B dr spending he ugs 9 rug g. The seven highest expenditu products are biologic s ure cs. Treat tment for can ncer domina ates the list (7 of the top 10 drugs tre cancer o the side ef ( eat or ffects assoc ciated with chemotherap because most cance drugs mus be administered by c py) er st physi icians, a req quirement for coverage of most Part B drugs. r o These rankings reflect Part B drugs adm r ministered in physicians offices or furnished by suppliers.
158
escription drugs s Pre
Chart 10-3. In 2010, about 90 percent of Medic n a care ben neficiarie es were enro w olled in Part D pla or had other sources of P ans r s cr reditable drug co e overage
No creditable coverage 10% ces Other sourc of creditable cov verage* 4% Primary coverage y throug FEHB, gh TRICAR VA, or RE, active worker with w Medicare as secondary payer p 13% 1
Non-LI enrollees in IS PDPs 21% LIS e enrollees in PDP Ps 17%
P PDPs 3 38%
Prim mary coverage through employers that t eceive RDS re 14% LIS enroll lees in MAPDs P 4% 4
Non-LIS enr rollees in MA-PD Ds 17% %
MA-PDs 21% M
Note: LIS (low-income subsidy), PDP (pr rescription drug plan), MAPD (M p Medicare Advanta agePrescription Drug [plan]), RDS n etiree drug subsi idy), FEHB (Fede Employees Health Benefits p eral H program), VA (D epartment of Veterans Affairs). (re TR RICARE is the he ealth program fo military retirees and their depen or s ndents. *C Creditable covera means drug benefits whose value is equal to or greater than t age v that of the basic Part D benefit. nt egrated Reposito February 16 , 2010; Office of Personnel Mana ory, agement; Depart tment CMS Managemen Information Inte f rtment of Veteran Affairs; CMS Coordination of B ns C Benefits Databas CMS Credita se; able Coverage of Defense; Depar Da atabase.
Source:
As of February 2010, CMS estimated that 34 million of the 46 million M F C t o Medicare benefiiciaries (73 perc cent) were either r signed up for Part D pl lans or had pres scription drug coverage through employer-spons sored plans und Medicares re der etiree ubsidy (RDS). (If an employer agrees to provide primary drug c e coverage to its re etirees with an a average benefit v value drug su that is equal to or grea in value than that of Part D (called creditable coverage), Me ater n ( e edicare provides the employer w a s with e h uals drug costs that fall within a specified range of spending.) e tax-free subsidy for 28 percent of each eligible individu About 10 million benef ficiaries (nearly 22 percent) rece Part Ds low 2 eive w-income subsidy (LIS). Of these individuals, 6.4 e 4 million are dually eligib to receive Me ble edicare and all Medicaid benefit offered in their state. Another 3.5 million quali M ts r ified for extr help either be ra ecause they rece benefits thro eive ough the Medica Savings Pro are ogram or Supplemental Security y Income Program or be e ecause they applied directly to th Social Security Administration. Among all LIS beneficiaries, about he S 8 millio (17 percent of all Medicare be on f eneficiaries) are enrolled in stan nd-alone prescrip ption drug plans (PDPs) and 2 m s million (4 perc cent) are in Medicare Advantage ePrescription Drug plans (MA D PDs). Other enrollees in stan e nd-alone PDPs numbered 9.7 million, or 21 perc n m cent of all Medic care beneficiarie Another 7.9 m es. million enrolle (17 percent) are in MAPDs or other private Medicare healt plans. Individu ees th uals whose emp ployers receive Medica ares RDS numb bered 6.4 million, or 14 percent. Those groups o beneficiaries d of directly affect Me edicare program m spending. Other Medicare beneficiaries have cre M editable drug cov verage, but that coverage does not affect Medic care program drug coverage t spending. For example 6.2 million ben e, neficiaries (13 percent) receive d through the Fede Employees eral am, he o airs, or current em mployers becau the individua is still use al Health Benefits progra TRICARE, th Department of Veterans Affa S have other sourc of creditable coverage. ces e an active worker. CMS estimates that another 1.6 million individuals h An esti imated 4.7 millio beneficiaries (10 percent) hav no creditable drug coverage. on ve e .
159
Chart 10-4. Paramete of the defined standar benef increa ers e d rd fit ase ver ov time
2006 2 Deductible e Initial cove erage limit Annual ou ut-of-pocket th hreshold Total cove ered drug spe ending at annual out-of-p pocket thresho old Maximum amount of co sharing in the m ost n coverag gap ge Minimum cost sharing above the an nnual out-of-p pocket thresho old Copay for generic/p y preferred mul ltisource drug g Copay for other pre y escription drugs
Note:
2 2008 $2 275.00 2,5 510.00 4,0 050.00 5,7 726.25 3,2 216.25
2 2009 $2 295.00 2,7 700.00 4,3 350.00 6,1 153.75 3,4 453.75
2010 $3 310.00 2,8 830.00 4,5 550.00 6,4 440.00 3,6 610.00
2 2011 $31 10.00 2,84 40.00 4,55 50.00 6,44 47.50 3,60 07.50
$25 50.00 2,2 250.00 3,6 600.00 5,100.00 2,8 850.00
2.00 5.00
2.25 5.60
2.40 6.00
2.50 6.30
2.50 6.30
Under Part Ds defined standard benefit, the enrollee pays the dedu uctible and then 25 percent of co overed drug spen nding 75 b ug ches the initial co overage limit (ICL). Before 2011, (7 percent paid by the plan) until total covered dru spending reac en nrollees exceedin the ICL were responsible for paying 100 perce of covered dr spending up to the annual ou ng p ent rug ut-ofpo ocket threshold. Beginning in 201 enrollees face reduced cost s 11, e sharing for the co overage gap. The amount for 201 e 11 ($ $6,447.50) is for an individual with no other source of supplemen coverage filin only brand-name drugs during the a h es ntal ng g co overage gap. Cos sharing paid by most sources of supplemental coverage does n count toward this threshold. T st b not d The en nrollee pays nom minal cost sharing above the limit. g . e CMS, Office of the Actuary.
Source:
The Medicare Prescription Drug, Improve M ement, and Modernization Act of 20 specified a 003 d defined standard benefit structure. In 201 it has a $ 11, $310 deduct tible, 25 perc cent coinsur rance on co overed drugs until the en s nrollee reach $2,840 i n total cover drug spe hes red ending, and then a cov verage gap until annual out-of-pocke spending reaches the annual thre u o et e eshold. Before 2011, enrollees were responsible for pay w ying the full d discounted p price of cove ered drugs fi illed during the covera gap. Bec age cause of cha anges made by the Patient Protectio and e on 50 Afford dable Care Act of 2010, beginning in 2011, enro A n ollees face r reduced cost sharing of 5 t perce for brand ent d-name and 97 percent for generic d f drugs filled in the covera gap. n age Enrol llees with drug spending above $4,5 would pa the great of $2.50 t $6.30 per g 550 ay ter to r presc cription or 5 percent coin nsurance. The parameters of this define standard benefit struc p o ed e cture increase over time at the same rate as the annua increase in average to drug exp a al otal penses of Medicare ben neficiaries. mits, sponsor ring organiza ations may o offer Part D p plans that ha the sam ave me Within certain lim arial value as the defined standard benefit but a different be s d b enefit structure. For exam mple, actua a plan may use ti iered copaym ments rather than 25 pe ercent coinsu urance. Or a plan may h have no de eductible but use cost-sh t haring requir rements tha t are equiva alent to a rate higher than 25 e perce Both def ent. fined standa benefit plans and pla that are actuarially e ard ans equivalent to the o defined standard benefit are known as b basic benefit ts. e ng tion offers on plan with basic benefits within a prescription drug ne h Once a sponsorin organizat plan region, it ma also offer a plan with enhanced b ay benefitsbasic and supp plemental cover rage combin ned.
160
Chart 10-5. Character C ristics of Medica PDPs f are s

2010 Plans Number Total 1,576 rganization Type of or National* 1,268 Other 308 enefit Type of be Defined standard 172 Actuarially equivalent** * 609 ed Enhance 795 Type of de eductible Zero 629 Reduced d 374 Defined standard 573 Drugs cov vered in the ga ap Some ge enerics but no bran nd-name drugs 273 Some ge enerics and som me 35 brand-n name drugs 1,268 None
Note:
2011 1 ollees as of Enro Feb bruary 2010 Plans Number r 1,109 851 258 133 474 502 464 197 448 Percent 100% 77 23 12 43 45 42 18 40 as Enrollees a of February 20 011 Number (in millions) Pe ercent 17.0 13.9 3.0 1.3 12.6 3.0 7.3 2.1 7.6 1 100% 82 18 8 74 18 43 13 45
Number t Percent (in millions) Percent 100% 80 20 11 39 50 40 24 36 16.6 14.0 2.7 1.6 11.4 3.7 6.5 2.1 8.1 100% 84 16 9 68 22 39 12 49
17 2 80
1.0 <0.1 15.7
6 0 94
259 106 744
23 10 67
2.2 0.3 14.4
13 2 85
PD (prescription drug plan). The PDPs and enroll DP lment described here exclude em mployer-only plan and plans offe ns ered in U.S. territories. Ex xcluded plans have 1.6 million en nrollees in 2011 a had 1.1 millio in 2010. Sums may not add to totals and on o ue du to rounding. *R Reflects total num mbers of plans fo organizations with at least 1 PD in each of the 34 PDP regions or w DP e s. **Includes actuarially equivalent standard and ba s asic alternative benefits. $310 in both 2010 and 2011. $ ape, premium, an enrollment dat nd ta. MedPAC analysis of CMS landsca
Source:
Part D drew about 30 percent fewe stand-alone prescription d 3 er e drug plans (PD DPs) into the fie for 2011 th in eld han 2010. Plan sponsors are offering 1,109 PDPs in 2011 compare with 1,576 in 2010. The r s 1 red reduction in pla an offerin is primarily the result of regulations and guidance iss ued by CMS to differentiate more clearly ngs y d o betwe basic and enhanced benefit plans. een e In 2011, 77 percent of all PDPs ar offered by sp re ponsoring orga anizations that have at least 1 PDP in each of t 4 . d onal sponsors account for 82 percent of al PDP enrollm s 2 ll ment. the 34 PDP regions. Plans offered by those natio Spons sors are offerin a slightly sm ng maller proportio of PDPs wit enhanced b on th benefits (basic plus suppleme ental covera age) for 2011 and a slightly larger proportio of benefits w actuarially equivalent be a on with y enefitshavin the ng same average value as the define standard benefit but with a e ed alternative ben nefit designs. M Most enrollees (74 nt) arially equivale plans. ent percen are in actua A larger proportion of PDPs includ some benef in the coverage gap for 2 o de fits 2011 than in 20 010. Nearly a t third of all plans with som gap coverag offer generi and brandp me ge ics -name drugs, c compared with about 1 in 10 in h 0 2010. ees ns o overage gap. In 2011, 85 percent of PDP enrolle are in plan that offer no additional benefits in the co ver, o s ction and Affor rdable Care Ac of 2010, ct Howev because of the changes made by the Patient Protec beginn ning in 2011, beneficiaries no longer face 100 percent co b o 1 oinsurance in t coverage g (see Chart 10the gap t 4). In addition, many PDP enrollee receive Part Ds low-incom subsidy, wh a y es t me hich effectively eliminates the y covera gap. age
161
Chart 10-6. Character C ristics of MAPD f Ds

2010 Plans Number
Totals Type of org ganization Local HM MO Local PP PO PFFS l Regional PPO Type of benefit Defined standard s Actuarially equivalent* ed Enhance Type of deductible Zero Reduced d Defined standard** s Drugs cove ered in the gap p Some ge enerics but no brand-n name drugs Some ge enerics and som me brand-n name drugs None
Note:
2011 nrollees as of En Fe ebruary 2010 Pla ans Number

1,566 936 445 146 39 51 121 1,394 1,358 123 85
of Enrollees as o February 2011 Number (in millions) n

8.6 5.7 1.7 0.5 0.7 0.1 0.6 7.9 7.8 0.5 0.2
Pe ercent
10 00% 57 5 25 17 2 4 6 90 90 4 6
Number (in millions) Percent t

7.0 4.7 0.9 0.9 4 0.4 0.1 0.3 6.6 6.6 0.2 0.2 100% 68 13 13 6 1 5 94 94 3 2
Percent
100% 60 28 9 2 3 8 89 87 8 5
Pe ercent
1 100% 66 20 5 8 1 7 92 91 6 3
1,834 1,038 452 304 40 78 105 1,651 1,657 66 111
532 408 894
29 22 49
2.3 1.7 2.9
33 25 42
457 350 759
29 22 48
3.0 1.6 3.9
36 19 46
e escription Drug [p plan]), HMO (hea maintenance organization), P alth e PPO (preferred MAPD (Medicare AdvantagePre rovider organizat tion), PFFS (priva fee-for-servic The MAPD s and enrollmen t described here exclude employ ate ce). e yer-only pr plans, plans offere in U.S. territor ed ries, 1876 cost pl lans, special nee plans, demon eds nstrations, and P B-only plans Sums Part s. tals due to rounding. may not add to tot Benefits labeled actuarially equiva a alent to Part Ds standard benefit include what CM calls actuari t MS ially equivalent *B standard and bas alternative benefits. sic b 10 **$310 in both 201 and 2011. ape, premium, an enrollment dat nd ta. MedPAC analysis of CMS landsca
Source:
There are 15 percen fewer Medic e nt care Advantag gePrescriptio Drug plans (MAPDs) in 2011 than in 2 on 2010. Spons sors are offerin 1,566 MA ng PDs compare with 1,834 t year before The largest decrease was for ed the e. t private fee-for-service plans, mak e king up 9 perce of all (unw ent weighted) offer rings in 2011 c compared with 17 h percent in 2010 (see Chart 9-1). Although the number of loca HMOs also declined betw A n al ween 2010 and d n nt PD. ber ans y 2011, HMOs remain the dominan kind of MAP The numb of drug pla offered by both local and nal p ined stable be etween 2010 a 2011. and region preferred provider organizations remai A larger share of MA APDs than stand-alone pre escription drug plans (PDPs offer enhanc benefits g s) ced (comp pare Chart 10- with Chart 10-5). In 2011, 45 percent of all PDPs had enhanced be -6 1 , f d enefits compared with 89 percent of MAPDs. In 20 M 011, enhanced MAPDs attr d racted 92 perc cent of total M MAPD enrollm ment. Most MAPD plans have no deductible: 87 perc M cent of MAPD offerings in 20 and 90 pe D 011 ercent in 2010. MA . PDs with no deductible attracted about 91 perce of total MA w a ent PD enrollmen in 2011. nt MAP are more likely than PDPs to provide some addition benefits in the coverage gap, although PDs l nal h mostly for generics. In 2011, 51 percent of MA y p PDs included some gap co d overage29 p percent with so ome gener but no brand-name drug coverage and 22 percent w some gen rics g d with nerics and som brand-nam me me drug coverage. Tho plans acco c ose ount for 54 per rcent of MAP enrollment. PD
162
Chart 10-7. Average Part D pr A P remiums s

Average monthly 010 20 premium 2010 weighted by w 2011 enrollment 2010 enrollment (in millions) enrollment (in millions) n PDPs Basic co overage Enhance ed covera age Any cove erage MAPDs s, including SNPs* g Basic co overage Enhance ed covera age Any cove erage All plans s Basic co overage Enhance ed covera age Any cove erage
Note:
Average mo onthly 2011 prem mium weighted by 2011 enrollme nt $33 63 38
Doll lar chan nge $0.6 13.1 1.2
Perce entage change in weighted rage aver prem mium % 2 2 26 3
13.0 3.7 16.6
$34 50 37
13.9 3.0 17.0
1.0 7.0 8.0
26 13 14
1.1 7.6 8.7
27 12 14
1.6 1.0 0.7
6 8 5
14.0 10.7 24.7
33 25 30
15.0 10.6 25.6
33 26 30
0.5 0.9 0.2
1 4 1
DP PD (Medicare AdvantagePresc A cription Drug [pla an]), SNPs (special needs plans). The . PD (prescription drug plan), MA PD and enrollm DPs ment described he exclude employer-only plans and plans offere in U.S. territor ere ed ries. The MAPD and Ds en nrollment describ here exclude employer-only plans, plans offe red in U.S. territo bed e p ories, 1876 cost plans, demonstr rations, an Part B-only plans. nd *R Reflects the portio of Medicare Advantage plans total monthly pr on A remium attributa ble to Part D ben nefits for plans th hat of Part D covera ffer age. MAPD pre emiums reflect re ebate dollars (75 percent of the diifference betwee a plans payment en be enchmark and its bid for providing Part A and Par B services) tha were used to o s g rt at offset Part D prem mium costs. Low wer av verage premiums for enhanced MAPD plans reflect a different m of sponsoring organizations a counties of s M mix g and op peration than MA APDs with basic coverage. c ape, plan report, and enrollment d data. MedPAC analysis of CMS landsca
Source:
verage, Part D enrollees pay $30 pe month in 2 t s er 2011, with p premiums inc creasing by less On av than $1 compare with 2010. ed The average pres a scription dru plan (PDP enrollee p ug P) pays $38 per month, com r mpared with $37 in 2010a 3 percent increas se. Medicare Advant tagePrescr ription Drug plans (MAP p PDs) can low the part of their mon wer nthly premium attributa able to Part D using reba dollars percent of the differ ate 75 rence betwee en the plans payme benchma and its bi for providiing Part A and Part B se ent ark id ervices. MA PDs may also enhanc their Part D benefit wi rebate do a ce ith ollars. Many MAPDs us rebate do se ollars in the ways, re ese esulting in mo enhance offerings and lower a ore ed average prem miums comp pared with PDPs. P The portion of Me p edicare Adva antage prem miums attribu utable to pre escription dru benefits ug rema ained flat (de ecrease of le than $1) in 2011, with the averag MAPD e ess h ge enrollee paying $14 per month. p
163
Chart 10-8. Number of PDPs qualifyin as pre o q ng emium-fr to LIS ree S en nrollees increase in 201 even as overa numb ed 11, all ber of PDPs declined f d
Numbe of PDPs er on PDP regio 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 State(s) ) ME, NH H CT, MA RI, VT A, NY NJ E, DC, DE MD PA, WV V VA NC SC GA FL AL, TN MI OH IN, KY WI IL MO AR MS LA TX OK KS IA, MN, MT, ND, NE, SD WY D, NM CO AZ NV A OR, WA ID, UT CA HI AK Total 2010 43 48 50 47 45 55 44 47 47 45 49 46 46 46 44 48 46 45 49 45 45 50 46 46 46 47 48 46 46 44 48 47 41 41 1,576 2011 2 30 34 33 33 33 38 32 33 34 32 32 34 35 34 32 32 35 32 34 32 32 33 33 33 33 32 31 30 31 32 35 33 28 29 1,109 Differe ence 1 13 1 14 1 17 1 14 1 12 1 17 1 12 1 14 1 13 1 13 1 17 1 12 1 11 1 12 1 12 1 16 1 11 1 13 1 15 1 13 1 13 1 17 1 13 1 13 1 13 1 15 1 17 1 16 1 15 1 12 1 13 1 14 1 13 1 12 46 67 Nu umber of PDPs t that have zero premium for LIS enrollees S 20 010 4 13 11 6 11 11 11 8 13 8 5 9 9 5 9 10 10 13 15 10 13 11 10 9 8 8 6 8 5 9 9 7 7 6 3 307 2011 7 12 11 6 12 12 10 11 15 14 4 11 12 8 14 10 10 5 17 14 10 12 10 12 10 8 7 9 4 8 11 5 6 5 332 Difference 3 1 0 0 1 1 1 3 2 6 1 2 3 3 5 0 0 8 2 4 3 1 0 3 2 0 1 1 1 1 2 2 1 1 25
Note: Source:
DP ( PD (prescription drug plan), LIS (low-income subsidy). n dscape file and LIS enrollment da provided by C L ata CMS. MedPAC based on 2011 PDP land
The nu umber of stand-alone prescription drug plans (PDPs) decline by 30 perce around the c s ed ent country, from 1,576 in 2010 to 1,109 in 2011 The median number of plan offered in eac region is 33 compared with 46 in 2010. t 1. ns ch h Hawaii had the fewes stand-alone PDPs with 28; the Pennsylvan st P t niaWest Virgin region had the most with 38 nia 8. In 2011, enrollees wh receive Part Ds low-income subsidy (LIS) have more opt ho e tions for PDPs in which they p no pay premiu In 2011, 33 PDPs qualifie to be premiu um. 32 ed um-free to thos enrollees, co se ompared with 30 in 2010. 07 Each region has at le r east four PDPs available to LIS enrollees at n premium. S no
164
Chart 10-9. In 2011, most Part D enrol n m t llees are in plans that e s ch harge higher cop payment for nonpreferr ts red brand-nam drugs me s
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 22 2% 006 20 18 8% 11% 4% 19% 2007 17% 10% 1% 9% 3% 8% 1 2011 2% 20 006 4% 24 1% 8% 1% 9% 1% 8% 1% 8% 1% 7% 2007 2008 2009 M MA-PD enrollees 2010 1 2011 59 9% 69% 79% 87% 81% 80% % 73 3% 87% 85% 83% 80% % 77% <1% 1% 1% <1% 3% <1% 6% 11% % 2% 1% 3% 5% % 2% 1% 6% 2 10% 1% 14% %
2008 2009 2010 PDP enrolle ees
Other tier structure Two ge eneric and two b brand-name tiers Generic, preferred bran and nonprefe nd, erred brand-nam tiers me Generic and brand-nam tiers me 25% coinsurance Note: DP PD (Medicare AdvantagePresc A cription Drug [pla an]). Calculations are weighted by s y PD (prescription drug plan), MA en nrollment. All calc culations exclude employer-only groups and plan offered in U.S . territories. In ad e ns ddition, MAPDs s ex xclude demonstra ation programs, special needs plans, and 1876 c cost plans. Sums may not add to totals due to rou unding. ed N wn ysis of formularie es MedPAC-sponsore analysis by NORC/Georgetow University/Soc and Scientifiic Systems analy cial ubmitted to CMS. su
Source:
ent ription drug plan (PDP) e p enrollees are in plans th distinguis e hat sh In 2011, 80 perce of prescr een ed ugs; another 11 percent are in plans t s betwe preferre and nonpreferred brand-name dru with two generic and two brand-name tie In 2006, only 59 per t ers. rcent of PDP enrollees w P were in pla with such distinctions. Over 90 percent of M edicare Adv ans h p vantagePre escription Dr rug (MA PD) plan en nrollees are in such plan in 2010, u from 73 percent in 2006. ns up For enrollees in PDPs that di e P istinguish be etween prefe erred and no onpreferred b brand-name e drugs the median copay in 2011 is $42 for a preferre brand an $78 for a nonpreferred s, 2 f ed nd nrollees, in 2 brand The media copay for generic dru is $7. Fo MAPD en d. an r ugs or 2011, the media copay is $40 for a pr an referred bran $80 for a nonpreferre brand, an $6 for a nd, ed nd generic drug. Most plans, exce those tha use the de ept at efined standa benefits 25 percent coinsurance for ard s e all drugs, also us a specialty tier for drugs that have a negotiate price of $ se y e ed $600 per month or mo In 2011, median cos sharing fo a specialty tier drug is 30 percent among PDP ore. st or y s Ps and 33 percent among MAP 3 a PDs. Enrolle may not appeal cost sharing for drugs in ees t speci ialty tiers.
165
Chart 10-10. In 2011, use of uti n u ilization management too ols co ontinues to incre s ease for both PD DPs and M MAPDs s
PDPs
35% 2007 30% 25% 20% 15% 10% 5% 0% Prior Ste ep authorization thera apy Quantity limits Any utilization management 2008 8 2009 201 10 2011 30% 25% 20% 15% 10% 5% 0% Pr Step rior author rization therapy Quantity limits Any u utilization ma anagement 35% 2007 2008 2009 2010 2011
MA A-PDs
Note:
PD (prescription drug plan), MA DP PD (Medicare AdvantagePresc A cription Drug [pla an]). Calculations are weighted by s y en nrollment. All calc culations exclude employer-only groups and plan offered in U.S . territories. In ad e ns ddition, MAPDs s ex xclude demonstra ation programs, special needs plans, and 1876 c cost plans. Value s reflect the perc cent of listed che emical en ntities that are su ubject to utilizatio management, weighted by pla enrollment. Pr authorization means that the on an rior en nrollee must get preapproval from the plan before coverage. Step therapy refers to a requirement that the enrollee try m e p e o sp pecified drugs firs before moving to other drugs. Quantity limits m st g mean that plans liimit the number o doses of a dru of ug av vailable to the en nrollee in a given time period. ed N wn cial ysis of formularie es MedPAC-sponsore analysis by NORC/Georgetow University/Soc and Scientifiic Systems analy ubmitted to CMS. su
Source:
The number of dr n rugs listed on a plans fo o ormulary doe not neces es ssarily repre esent benefic ciary acces to medica ss ations. Plans processes for nonform s s mulary excep ptions, prior authorization (prea approval from plan befor coverage) quantity lim (plans li m re ), mits imit the num mber of doses of a s partic cular drug co overed in a given time pe g eriod), and s step therapy requiremen (enrollee y nts es must try specified drugs befo moving to other drug can affec access to certain drugs. d ore o gs) ct For example, unlisted drugs may be cove e ered through the nonfor h rmulary exce eptions proce ess, which may be rel h latively easy for some pl y lans and mo burdenso ore ome for othe Alternati ers. ively, on-fo ormulary drug may not be covered in cases in w gs b i which a plan does not ap n pprove a prio or autho orization request. Also, a formularys size can be deceptively large if it in s e ncludes drug gs that are no longe used in co a er ommon pract tice. In 2011, the aver rage enrollee in a stande -alone presc cription drug plan faces s some form o of utiliza ation manag gement for 32 percent of drugs listed on a plans formulary, compared w 2 f d s with 28 pe ercent for the average Medicare Adv e M vantagePre escription Dr plan enr rug rollee. The m most by comm utilizatio managem mon on ment tool is quantity limit followed b prior auth q ts, horization, and then step therapy y.
166
Chart 10-11. Character C ristics of Part D e f enrollees 2009 s,

All Medicare Beneficiarie (in millions) es* Percent of all Medicare o Gender Male Female Race/ethnicity White, no on-Hispanic African American, A non-His spanic Hispanic Asian Other Age (years s) <65 6569 7074 7579 80+ y** Urbanicity Metropolitan Micropoli itan Rural 48.8 100% 45% 55 78 10 8 3 2 21 24 18 15 22 79 12 8 Plan type Part D 28.7 59% 41% 59 74 11 10 3 2 23 22 18 15 22 79 12 9 1.101 100% PDP 18.7 7 38 8% 40% % 60 0 76 6 11 8 3 2 27 7 20 0 17 7 14 4 23 3 74 4 15 5 11 1.123 3 102% % MAPD D 10.0 21% % 43% 57 72 10 14 3 1 16 26 20 16 21 89 7 4 1.060 96% S Subsidy status LIS 10.9 9 22% 39% 61 6 5 59 20 14 5 2 42 4 14 13 11 20 77 7 13 10 01 1.20 109 9% Non-L LIS 17.8 8 37 7% 42 2% 58 8 84 4 6 7 2 1 12 2 26 6 21 7 17 24 4 80 0 11 1 8 1.041 95% %
Average ris score sk 1.049 Percent re elative to all Part D

Note:
DP PD (Medicare AdvantagePresc A cription Drug [pla an]), LIS (low-inco ome subsidy). To otals PD (prescription drug plan), MA may not sum to 10 percent due to rounding. 00 o Figures for Medic care and Part D include all benefi iciaries with at le east one month o enrollment in th respective pro of he ogram. *F A beneficiary is cla assified as LIS if that individual re eceived Part Ds LIS at some poiint during the yea For individual who ar. ls witch plan types during the year, classification into plan types is ba d o er sw ased on a greate number of months of enrollment. **Urbanicity based on the Office of Management and Budgets core d f e-based statistica area. A metrop al politan area cont tains a ore f e area contains an urban core of at least 10,000 (bu less t ut co urban area of 50,000 or more population, and a micropolitan a than 50,000) popu ulation. Fewer tha 1 percent of Medicare benefic an M ciaries were exclu uded due to an u unidentifiable cor reased statistical area designation. ba Part D risk score are calculated by CMS using th prescription d P es he drug hierarchical condition catego model develo ory oped be efore 2006. Risk scores shown he are not adjus ere sted for LIS or in stitutionalized st tatus (multipliers) ). rt r MedPAC analysis of Medicare Par D denominator and enrollment files from CMS.
Source:
In 200 28.7 million Medicare bene 09, eficiaries (59 percent) enrolle in Part D at s ed some point in t year. Most of the them (18.7 million) were in stand-al ( w lone prescriptio drug plans ( on (PDPs), with 10 million in Med 0 dicare Advanta age Prescr ription Drug pla (MAPDs). About 11 million enrollees re ans . eceived Part Ds low-income subsidy (LIS). Compared with the overall Medicar population, Part D enrollee s are more like to be female and non-White. o re P ely e e eneficiaries und age 65 and more likely to be Hispanic der d MAPD enrollees are less likely to be disabled be compa ared with PDP enrollees; LIS enrollees are more likely to b female, nonm be -White, and dis sabled beneficiaries under age 65 compa ared with non-L enrollees. LIS nt y rollees were sim milar to the ove erall Medicare population with 79 h Patterns of enrollmen by urbanicity for Part D enr nt opolitan areas, and the remaining 9 percent in rural areas. percen in metropolitan areas, 12 percent in micro The av verage risk sco for PDP enr ore rollees is highe (1.123) than the average fo all Part D enrollees (1.101) er or ), while the average ris score for MA t sk APD enrollees is lower (1.06 ). s
167
Chart 10-12. Part D enrollment trends, 200620 t 009

200 06 Part D en nrollment, in millions* m Total t By plan type PDP MAPD D dy By subsid status LIS Non-LIS ethnicity By race/e White, non-Hispanic n African American, non-Hispanic Hispan nic Other By age (y years) <65 6569 70-79 80+ ent Enrollme growth, in percent Total By plan type t PDP MAPD D By subsid status dy LIS Non-LIS By race/e ethnicity White, non-Hispanic African American, non-Hispanic n Hispan nic Other By age (y years) <65 6569 7079 80+
Note:
2007 26.1 18.3 7.8 10.4 15.7 19.4 2.9 2.5 1.3 6.1 5.4 8.7 6.0 7% 4 14 2 10 13 13 14 49 8 8 5 7
2008 27.5 18.6 8.9 10.7 16.9 20.5 3.1 2.7 1.3 6.4 5.9 9.0 6.3 5% 2 14 2 8 5 5 6 6 6 8 4 4
2009 28.7 18.7 10.0 10.9 17.8 21.4 3.2 2.8 1.3 6.6 6.3 9.3 6.4 4% <1 12 2 6 4 4 6 <1 4 7 4 3
24. .5 17. .7 6. .8 10. .2 14. .3 17. .2 2. .6 2. .2 2. .5 5. .6 5. .0 8. .3 5. .6
PD (prescription drug plan), MA DP PD (Medicare AdvantagePresc A cription Drug [pla an]), LIS (low-inco ome subsidy). *F Figures include all beneficiaries with at least one month of enrollm a w m ment. A beneficiary is classified as LIS if that indiv s vidual re eceived Part Ds LIS at some poin during the year. If a beneficiary was enrolled in both a PDP and an MAPD plan nt y n d n du uring the year, th individual was classified into the type of plan w a greater nu mber of months of enrollment. hat s with Numbers may not sum to totals du to rounding. ue rt r MedPAC analysis of Medicare Par D denominator and enrollment files from CMS.
Source:
Betwe 2006 and 2009, Medicare AdvantagePrescription Dru plan enrollm een 2 e ug ment grew by m more than 10 pe ercent per ye compared with growth rat of less than 5 percent per year for presc ear, w tes n cription drug pla ans. During the e same period, the num mber of enrolle receiving th low-income subsidy (LIS) r ees he remained relatively flat, while the er e b i cent in 2008, an 6 percent in 2009. nd n numbe of non-LIS enrollees grew by 10 percent in 2007, 8 perc
168
Chart 10-13. Part D enrollment by regio 2009 t on,

Percent of P Medica enrollment are PDP region 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 State(s) ME, NH CT, MA, RI, VT NY NJ DE, DC, MD PA, WV VA NC SC GA FL AL, TN MI OH IN, KY WI IL MO AR MS LA TX OK KS IA, MN, MT, NE, ND, SD, WY NM CO AZ NV OR, WA ID, UT CA HI AK Mean Minimum Maximum Note: Source: Part D 55% 58 59 53 45 63 52 59 54 60 60 62 54 54 56 54 55 62 61 65 62 57 60 61 66 62 59 61 56 57 57 69 66 39 59 39 69 RDS 13% 18 19 22 19 13 11 16 16 11 13 12 25 25 18 15 19 12 9 6 13 15 8 7 9 8 13 12 13 11 11 10 4 25 14 4 25 PDP P 8 88% 6 69 5 57 8 81 8 85 5 53 8 80 7 75 7 79 7 79 5 54 6 67 6 63 6 65 8 83 6 66 8 87 7 71 8 83 9 90 6 67 7 71 8 80 8 85 7 74 6 63 4 49 4 43 4 47 6 60 5 59 5 52 4 48 9 97 6 65 4 43 9 97 Perce nt of Part D enro ollment Plan type Subsidy status MA PD 1 2% 3 31 4 43 19 15 4 47 2 20 2 25 2 21 2 21 4 46 3 33 3 37 3 35 17 3 34 13 2 29 17 10 3 33 2 29 2 20 15 2 26 3 37 5 51 5 57 5 53 4 40 4 41 4 48 5 52 3 3 35 3 5 57 LIS 49% 42 46 35 41 33 38 43 45 44 34 47 34 36 41 33 38 35 45 54 49 45 38 29 27 39 29 31 28 31 28 39 29 61 38 27 61 Non n-LIS 5 51% 5 58 5 54 6 65 5 59 6 67 6 62 5 57 5 55 5 56 6 66 5 53 6 66 6 64 5 59 6 67 6 62 6 65 5 55 4 46 5 51 5 55 6 62 7 71 7 73 6 61 7 71 6 69 7 72 6 69 7 72 6 61 7 71 3 39 6 62 3 39 7 73
PD (prescription drug plan), RDS (retiree drug su DP S ubsidy), MAPD ( (Medicare Advan ntagePrescriptio Drug [plan]), L on LIS (lo ow-income subsidy). Definition of regions based on PDP regions u f o used in Part D. MedPAC analysis of Part D enrollm ment data from CMS. C
Among Part D region in 2009, bet g ns, tween 39 perce and 69 perc ent cent of all Med dicare beneficia aries enrolled in Part n D. Ben neficiaries were more likely to enroll in Part D in regions w e o where a low take e-up rate for th retiree drug he subsid (RDS) was observed. For example, in Re dy o e egion 32 (Califo ornia) and Region 33 (Hawaii), the shares of Medicare beneficiarie enrolled in Part D were 69 percent and 6 percent, resp es P 66 pectively. In the two region 10 ese ns, nt neficiaries enrolled in employe er-sponsored p plans that received the RDS. percen or fewer ben A wide variation was seen in the sh e hares of Part D enrollees who enrolled in pre o escription drug plans (PDPs) and g Medicare Advantage ePrescription Drug (MAPD) plans across P D ) PDP regions. T pattern of M The MAPD enrollm ment e plans. is generally consistent with enrollment in Medicare Advantage p The sh hare of Part D enrollees recei e iving the low-in ncome subsidy (LIS) ranged f from 27 percent in Region 25 (Iowa, Minnesota, Mo ontana, North Dakota, Nebraska, South Dak D kota, and Wyoming) to 61 pe ercent in Region 34 n ka). e ees r enrollment. In t two (Alask In 26 of the 34 PDP regions, LIS enrolle account for 30 percent to 50 percent of e regions (Region 20 (Mississippi) an Region 34 (A nd Alaska)), LIS e enrollees accou for more tha half of Part D unt an enrollm ment.
169
Chart 10-14. The majority of Pa D spe art ending is incurre by few s ed wer han ollees, 20 009 th half of all Part D enro
100% % 90% % 80% % 70% %
16%
4%
5%
27% 21%
60% % Percent 50% % 40% % 30% % 20% % 10% % 0% % Percen of beneficia nt aries
Note: Source:
74% 48%
31%
Annual spending on n prescr ription drugs $10 0,000 $6,15 53.75-$9,999 $2,70 00-$6,153.74 $295-$2,699
1%
22%
25%
$0-$2 295
Percent of sp pending
Numbers may not sum to 100 perc cent due to round ding. rt MedPAC analysis of Medicare Par D prescription drug event data from CMS.
Medicare Part D spending is concentrate among a subset of be ed eneficiaries. In 2009, 30 perce of Part D enrollees had annual spending of $ ent h s $2,700 or more, at which point enrollees were responsible for 100 per e rcent of the cost of the d c drug until the spending reached eir $6,15 53.75 under the defined standard be enefit. These beneficiarie accounte for 74 per e es ed rcent of tot Part D spending. tal The costliest 9 pe c ercent of beneficiaries, those with dr spending above the catastrophic t rug threshold under the defined standard ben t s nefit, accoun nted for 43 p percent of to Part D otal spending. Rough three-qua hly arters of beneficiaries wiith the highe spending receive Par Ds est rt low-in ncome subsidy (see Cha 10-15). Spending on prescription drugs is les concentra art S n ss ated than Medicare Pa A and Pa B spendin In 2009, the costliest 5 percent o beneficiar art art ng. of ries unted for 38 percent of annual Medicare fee-for a r-service (FF spending and the FS) g accou costli iest quartile accounted for 81 percen of Medica FFS spen f nt are nding
170
Chart 10-15. Character C ristics of Part D e f enrollees by spe s, ending le evels, 2009
<$ $2,700 Sex Male Female Race/ethn nicity White, non-Hispanic n African American, non-Hispanic A Hispanic c Other rs) Age (year <65 6569 7074 7580 80+ LIS status s* LIS Non-LIS S e** Plan type PDP MAPD
Note:
Annual drug spending g $2,700$6,1 153.75
>$6,153.75
42% 58 74 11 10 5 21 24 19 15 22 31 69 61 39
38% 62 76 11 9 4 21 19 18 16 27 45 55 71 29
39% 61 72 13 10 5 44 14 13 11 19 76 24 81 19
rescription drug plan), MAPD (M p Medicare Advanta agePrescription Drug [plan]). A small n LIS (low-income subsidy), PDP (pr umber of benefic ciaries were exclu uded from the an nalysis because o missing data. Totals may not s of sum to 100 perce due ent nu to rounding. *A beneficiary is assigned LIS status if that individu received Part Ds LIS at some point during the year. A a ual t e e **If a beneficiary was enrolled in bo a PDP and an MAPD plan d w oth a during the year, t that individual wa classified in th type as he f ater m ment. of plan with a grea number of months of enrollm rt a nominator file from CMS. m MedPAC analysis of Medicare Par D prescription drug events data and Part D den
Source:
In 2009, beneficia aries with an nnual drug spending of m s more than $2,700 were more likely t be to female than bene eficiaries with annual spending below $2,700 (62 percent an 61 percen w nd nt comp pared with 58 percent). 8 Bene eficiaries with annual spe h ending great than $6,1 ter 153.75 are m more likely to be disabled o d beneficiaries und age 65 and receive the low-incom subsidy (LIS) compa der me ared with tho ose with annual spen a nding below $2,700. $ Most beneficiarie with spend es ding greater than $6,153 r 3.75 are enr rolled in stan nd-alone presc cription drug plans (PDP (81 perce compare with Med Ps) ent) ed dicare Advan ntage Presc cription Drug plans (MA g PDs) (19 percent). Ben neficiaries w annual spending belo with ow $2,70 on the ot 00, ther hand, are more likely to be in M MAPDs com mpared with those with highe annual spending (39 percent com er p mpared with 1 percent). This finding reflects the fact 19 g e that most LIS enr m rollees are more costly on average a are in P m o and PDPs.
171
Chart 10-16. Part D spe ending and utiliz a zation pe enrolle 2009 er ee,
Part D Total gro spending (billions) oss Total num mber of presc criptions* (million ns) Average spending per prescription n Per enro ollee per mon nth Total spending -pocket spend ding** Out-ofPlan lia ability Low-inc come cost sh haring subsidy y Numbe of prescript er tions*
Note:
Plan type PD DP MAP PD $54 .6 15 91 $6 60 $26 60 4 41 15 50 6 68 4 .4 $19.2 2 423 3 $45 5 $169 9 36 6 111 21 3.7 7
LIS status LIS Non-LIS $ $40.5 598 $68 $ $339 8 192 140 5.0 $3 33.2 7 740 $ $45 $163 58 104 N N/A 3.6
$73.8 1,338 $55 $228 39 136 52 4.1
DP PD (Medicare AdvantagePresc A cription Drug [pla an]), LIS (low-inco ome subsidy), N/ (not /A PD (prescription drug plan), MA ap pplicable). Part D prescription dru event (PDE) records are class ug r sified into plan ty ypes based on the contract identif fication on each record. Fo purposes of cl n or lassifying the PD records by LIS status, monthly LIS eligibility in DE S y nformation in Par Ds rt de enominator file was used. Estima w ates are sensitive to the method u e used to classify P PDE records to e each plan type an LIS nd status. Numbers may not sum to to m otals due to roun nding. Number of prescr riptions standardized to a 30-day supply. y *N **Out-of-pocket (O OOP) spending in ncludes all payments that count t toward the annua OOP spending threshold. al g Plan liability inclu udes plan payme ents for both cove ered and noncov vered drugs. P rt nd file MedPAC analysis of Medicare Par D PDE data an denominator f from CMS.
Source:
In 200 gross spen 09, nding on drug for the Part D program to gs t otaled $73.8 b billion, with rou ughly threequarte ($54.6 billi ers ion) accounte for by Medicare beneficia ed aries enrolled in prescriptio drug plans on (PDPs Part D enr s). rollees receivin the low-inc ng come subsidy (LIS) accoun y nted for about 55 percent ($ $40.5 million of the total. n) n scriptions filled by Part D enrollees totale 1.34 billion with nearly 7 percent (915 ed n, 70 The number of pres million accounted for by PDP en n) f nrollees. The 38 percent of enrollees wh received the LIS account f ho ted e for ab bout 45 percen (598 million of the total number of pre nt n) n escriptions fille ed. care beneficia aries enrolled in Part D plan fill 4.1 presc i ns criptions at $2 per month on average. PDP 228 h Medic enrolle have high average monthly spend ees her m ding and more prescriptions filled compa e s ared with Medicare Advan ntagePrescri iption Drug (M MAPD) plan enrollees. e a hly ty 111) is conside erably lower t than that of PD DP The average month plan liabilit for MAPD enrollees ($1 enrolle ($150), while average monthly out-o ees w of-pocket (OO spending iis similar for e OP) enrollees in bo oth types of plans ($36 vs. $41). The average mo 6 e onthly low-inco ome cost shar ring subsidy is much lower for s PD ( ed e 8). MAP enrollees ($21) compare with PDP enrollees ($68 Avera monthly spending per enrollee for an LIS enrollee ($339) is more than double that of a non-LIS age e n enrolle ($163), wh the averag number of prescriptions filled per mon by an LIS enrollee is 5.0 ee hile ge nth compared with 3.6 for a non-LIS enrollee. LIS enrollees hav much lowe OOP spend S ve er ding, on avera age, than non-LIS enroll n lees ($8 vs. $58). Part Ds LIS pays for m most of the co sharing for LIS enrollees ost r s, averaging $140 per month.
172
Chart 10-17. Part D risk scores vary ac s cross reg gions, by plan type y nd S an by LIS status, 2009
PDP region All regions 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 ME, NH T CT, MA, RI, VT NY NJ DE, DC, MD PA, WV VA NC SC GA FL AL, TN MI OH IN, KY WI IL MO AR MS LA TX OK KS IA, MN, MT, NE, ND, SD, WY NM CO AZ NV OR, WA ID, UT CA HI AK Mean Minimum Maximum
Note:
State(s)
Perc cent enrolle in ed PDPs vs. s MAP PDs
Perc cent of Pa D art enro ollees receiv ving LIS
Aver rage risk score (RxHCC) e Pa D art 1 .101 PD DP 1.123 MAPD D 1.060 LIS 1.201 Non-LIS 1.041
Average absolute risk score Average nor rmalized risk sc core (mean = 1 1.0) 0 0.983 0.9 973 0.949 0.963 0.970 1 .010 1.0 010 1.004 1.013 0.998 1 .033 1.0 1.019 1.022 056 1.011 1 .042 1.0 042 0.987 1.036 1.052 1 .035 1.0 1.034 1.026 021 1.034 020 1.016 1 .011 1.0 1.011 1.022 1 .004 0.9 1.005 1.004 996 0.992 1 .015 1.0 013 0.997 1.019 0.998 1 .026 1.0 1.008 1.023 009 1.057 1 .031 1.0 020 1.031 1.018 1.025 1 .054 1.0 1.060 1.059 065 1.056 1 .043 1.0 031 1.065 1.028 1.030 030 0.953 1 .001 1.0 1.026 0.994 1 .030 1.0 041 1.008 1.056 1.017 014 0.989 1 .020 1.0 1.018 1.012 0 0.958 0.9 966 0.939 0.992 0.950 0.989 0.9 980 0.955 0 0.987 0.991 1.0 1 .002 008 0.973 1.027 0.993 0.996 0.9 983 1.003 0 0.972 0.998 0.9 1 .006 990 1.012 0.968 1.004 1.0 022 1.008 1 .019 0.992 1.015 1.0 1 .031 027 1.030 1.022 1.018 0.993 0.9 986 0.980 0 0.988 0.996 0.962 0.9 952 0.945 0 0.980 0.973 0.913 0 0.929 0 0 0.919 0.961 0 0.951 0 0.919 0 0.913 0 0.955 0 0.935 0 0.929 0 1 .000 0.913 0 1 .054 0.9 908 0.9 921 0.9 914 0.9 929 0.9 956 0.9 910 0.9 912 0.9 967 0.9 926 0.9 911 1.0 000 0.9 908 065 1.0 0.908 0.946 0.941 1.009 0.965 0.939 0.924 0.956 0.962 0.931 1.000 0.908 1.065 0.950 0.907 0.945 0.959 0.958 0.921 0.929 0.943 0.905 0.896 1.000 0.896 1.060 0.918 0.942 0.924 0.977 0.967 0.930 0.926 0.960 0.967 0.902 1.000 0.902 1.059
88% 69 57 81 85 53 80 75 79 79 54 67 63 65 83 66 87 71 83 90 67 71 80 85 74 63 49 43 47 60 59 52 48 97 65 43 97
49% 42 46 35 41 33 38 43 45 44 34 47 34 36 41 33 38 35 45 54 49 45 38 29 27 39 29 31 28 31 28 39 29 61 38 27 61
rescription drug plan), MAPD (M p Medicare Advanta agePrescription Drug [plan]), Rx n xHCC LIS (low-income subsidy), PDP (pr prescription drug hierarchical cond dition category). Part D risk score are calculated by CMS using the RxHCC mod es d del (p de eveloped before 2006. Risk score shown here are not adjusted f LIS or institutiionalized status (multipliers) and are es for no ormalized so that the average across Part D enro t ollees in each gro equals 1.0. If a beneficiary w enrolled in bo a oup f was oth PD and an MAP plan during th year, that individual was class DP PD he sified in the type of plan with a gre eater number of months of enrollment. rollment files from CMS. m MedPAC analysis of Medicare enr
Source:
173
Chart 10-17. Part D risk scores vary ac s cross reg gions, by plan type y nd S continued) an by LIS status, 2009 (c
Unde Part D, pa er ayments to stand-alone prescription drug plans ( p (PDPs) and Medicare Adva antagePrescription Drug plans (MA g APDs) are a adjusted to a account for d differences in n enrollees expect costs using the prescription drug hierarchica condition c ted g al category (RxHCC) model developed before 2006. The RxHCC model use age, gend disability d b C es der, y status and medic diagnosis to predict Part D bene spending As is true f any risks, cal efit g. for adjus stment mode the RxHC model do not expla all variatiion in future payments. T el, CC oes ain The mode may also produce high scores in areas with high service use becau there are el p her n h e use e more opportunitie to make diagnoses in those area s and the Rx e es d n xHCC mode uses el diagn noses among other facto in its sco g ors ore. malized aver rage risk sco ores for Part D enrollees varied from 0.913 (Reg s m gion In 2009, the norm nd ( hat expected co osts per enro ollee 25 an Region 31) to 1.054 (Region 11), meaning th average e range from abou 8.7 percent below the national av ed ut e verage to about 5.4 perc cent above th he national average across regio ons. The overall avera risk scor for PDP enrollees (1. 123) is highe than that of MAPD o age re e er enrollees (1.06) and is consis a stently so ac cross all regiions, except in Arizona ( t (Region 28), where most (57 percent) Par D enrollees are enrolle in MAPD In contra normaliz e p rt s ed Ds. ast, zed risk scores for bo PDP and MAPD enrollees are s s oth d similar in mo regions, w the ost with differ rence exceed ding 0.05 (5 percentage points) in o e only three reg gions: New J Jersey (Reg gion 4), Michigan (Reg gion 13), and Arizona (R Region 28). The overall avera risk scor for enrolle receiving the low-inc o age re ees g come subsid (LIS) (1.201) dy is hig gher than tha of non-LIS enrollees (1.041) and iis consistent so across all regions. In at S tly s . contr rast, normaliz risk sco zed ores for both LIS and non n-LIS enrolle are similar in most ees regions, with the difference exceeding 0.05 (5 percen e ntage points only in Ha s) awaii (Region n 33), where a rela w atively small share of enr rollees receiive the LIS (29 percent). .
174
Chart 10-18. Part D spe ending varies ac v cross reg gions eve after en ontrollin for prices and health s ng status, 20 009 co
PDP region 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 State(s) ME, NH CT, MA, RI, VT NY NJ DE, DC, MD PA, WV VA NC SC GA FL AL, TN MI OH IN, KY WI IL MO AR MS LA TX OK KS IA, MN, MT, NE, ND, SD, WY NM CO AZ NV OR, WA ID, UT CA HI AK Mean Minimum Maximum erage spending National ave Note: Percent P en nrolled in PDPs 88% 69 57 81 85 53 80 75 79 79 54 67 63 65 83 66 87 71 83 90 67 71 80 85 74 63 49 43 47 60 59 52 48 97 65 43 97 Percent of Part D P enrollees receiving LIS 49% 42 46 35 41 33 38 43 45 44 34 47 34 36 41 33 38 35 45 54 49 45 38 29 27 39 29 31 28 31 28 39 29 61 38 27 61 Relative av verage Part D sp pending per capita* Unadjusted 1.02 1.04 1.22 1.24 1.11 1.04 1.00 1.11 1.10 1.06 0.98 1.07 1.02 1.01 1.07 0.95 0.97 1.01 0.94 1.03 1.08 1.01 1.03 0.94 0.83 0.78 0.84 0.78 0.80 0.88 0.89 0.93 0.93 1.33 1.00 0.78 1.33 $2,629 Adjuste ed** 0.97 1.01 1.15 1.18 0.99 1.08 0.98 1.05 0.99 0.96 0.91 0.97 0.96 1.00 1.02 2 1.04 4 0.96 1.01 0.90 0.93 1.02 2 0.92 2 1.02 2 1.02 2 1.00 0.86 1.00 0.89 0.92 2 1.01 1.05 0.98 1.12 2 1.23 1.00 0.86 1.23 A N/A
PD (prescription drug plan), LIS (low-income subsidy), N/A (not av DP ( vailable). *S Spending include payments for ingredient costs and dispensing f es a fees. Figures (pe capita spendin and index valu er ng ues) ar for beneficiarie residing in a community setting only. Per capit based on full-y re es c g ta year equivalent e enrollment. **A Adjusted spending controls for re egional difference in prices, dem es mographic charac cteristics (such a age, gender, as disability, and LIS status), and ben neficiaries health status as meas h sured by medical diagnoses used for prescription drug d tion categories. hierarchical condit cumen, LLC, ana alysis for MedPA AC. Ac
Source:
Averag per capita drug spending for drugs under Pa D varies wid ge r art dely across pres scription drug plan (PDP) region ns. The na ational average per capita spen nding was $2,62 in 2009. Rela 29 ative to the natio onal average, th unadjusted re he egional averag per capita spending ranges from 78 percent (0.78) in New Mexico (Region 26) and Arizon (Region 28) t 133 ge f t n na to percen (1.33) in Alask (Region 34). nt ka Adjusti per capita drug spending fo regional differ ing or rences in prices and beneficiariies health statu reduces the s us variatio across PDP regions: After th adjustment, the difference b on he t between minimu and maximum decreases fro um om 0.55 (1 1.33 minus 0.78 to 0.37 (1.23 minus 0.86). Re 8) m elative to the nat tional average, the adjusted av verage per capit ta spendi ranges from 86 percent (0.8 in New Mexico (Region 26) to 123 percent (1.23) in Alask (Region 34). ing 86) ) t ka
175
Chart 10-19. Top 15 therapeutic classe of drugs unde es er y ng volume, 2 2009 Part D, by spendin and v
Top 15 therapeutic classes by spending 5 c
Dollars Billions Percen nt Antihyperlipidemics Antipsycho otics Diabetic th herapy Antihyperte ensive therapy agents Peptic ulce therapy er Asthma/CO OPD therapy agents Antidepres ssants Platelet ag ggregation inhibitors Analgesics (narcotic) s Cognitive disorder therap d py (antidemen ntia) Anticonvulsant Antivirals Calcium & bone metabolism regulators Analgesics (anti-inflamma s atory/ antipyretic, non-narcotic) , Antibacteri agents ial t s Subtotal, top 15 classes c Total, all classes
Note: Source:
Top 15 therap peutic classe by volume es e T

Prescriptions Millions Pe ercent Antihyp pertensive ther rapy agent ts Antihyp perlipidemics Beta ad drenergic bloc ckers Diabetiic therapy Diuretic cs Antidep pressants Peptic ulcer therapy esics (narcotic) ) Analge Calcium channel bloc m ckers Thyroid therapy d Antibac cterial agents Asthma a/COPD thera apy agents Anticon nvulsants Calcium & bone meta m abolism regulators esics (anti-inflam mmatory/ Analge antipy yretic, non-nar rcotic) tal, sses Subtot top 15 clas al, Tota all classes
$6.5 5.9 5.5 4.9 4.6 4.3 3.0 3.0 2.9 2.7 2.6 2.4 1.8 1.7 1.5 53.3 73.8
8.7% % 8.0 7.5 6.6 6.3 5.8 4.1 4.0 3.9 3.7 3.5 3.3 2.5 2.3 2.0 72.3 100.0
138.7 126.1 84.6 83.3 75.8 71.9 64.3 63.5 56.3 46.5 37.8 36.9 35.3 27.9 25.6
10 0.4% 9 9.4 6 6.3 6 6.2 5 5.7 5 5.4 4 4.8 4 4.7 4 4.2 3 3.5 2 2.8 2 2.8 2 2.6 2 2.1 1 1.9
974.5 1,337.9
2.8 72 0.0 100
OPD (chronic ob bstructive pulmon nary disease). Vo olume is the num mber of prescriptiions standardized to a 30-day supply. CO Th herapeutic classi ification based on the First DataB Bank Enhanced T Therapeutic Clas ssification System 1.0. m rt MedPAC analysis of Medicare Par D prescription drug event data from CMS.
In 2009, gross sp pending on prescription drugs cover by Part D plans totaled $73.8 billion. p d red The top 15 therap t peutic classe by spend es ding account for about 72 percent of the total. ted t t More than 1.3 billion prescrip e ptions were dispensed in 2009, with the top 15 t d n therapeutic class by volum accountin for about 73 percent o the total. ses me ng of Eleve therapeut classes are among th top 15 ba en tic a he ased on both spending a volume. h and Centr nervous system agen (antipsyc ral s nts chotics, antic convulsants, and antidepressants) dominate the list by spending accounting for over on g, g ne-fifth of the spending, while e cardiovascular ag gents (antihy yperlipidemics, antihype ertensive the erapy agents beta s, adren nergic blocke calcium channel blo ers, ockers, and d diuretics) do ominate the list by volum me, accou unting for ne early 50 perc cent of the prescriptions in the top 15 therapeutic classes. p
176
Chart 10-20. Generic dispensin rate fo the to 15 the G d ng or op erapeutic c cl lasses, by plan type, 200 b 09
By order of aggregate spending o Antihyperlipidemics Antipsych hotics Diabetic th herapy Antihypert tensive therapy agents Peptic ulc therapy cer Asthma/C COPD therapy agents y Antidepressants Platelet ag ggregation inhibitors Analgesic (narcotic) cs Cognitive disorder ther rapy (antideme entia) Anticonvu ulsant Antivirals Calcium & bone metab bolism regulat tors Analgesic (anti-inflammatory/ cs antipyre etic, non-narcotic) Antibacter agents rial All therap peutic classes s
Note:
PDP share of all s pres scriptions 64% 84 66 64 69 72 72 69 73 75 76 77 66 67 70 68
Gen neric dispens sing rate All PDPs MAPDs 61% 38 60 72 71 9 77 8 93 4 80 25 58 81 88 70 56% 37 58 70 67 10 75 7 93 3 79 22 56 79 87 69 69% % 39 66 76 79 7 81 9 94 4 83 35 64 85 89 74
PD (prescription drug plan), MA DP PD (Medicare AdvantagePresc A cription Drug [pla an]), COPD (chro onic obstructive pu ulmonary disease Shares are ca e). alculated as a pe ercent of all presc criptions standar rdized to a 30-da supply. Therap ay peutic cla assification is ba ased on the First DataBank Enhanced Therapeutiic Classification S System 1.0. Gen neric dispensing rate is de efined as the pro oportion of generi prescriptions dispensed within a therapeutic cla ic d ass. Part D presc cription drug eve ent re ecords are classif fied as PDP or MAPD records based on the con M b ntract identificatio on each recor on rd. rt MedPAC analysis of Medicare Par D prescription drug event data from CMS.
Source:
In 200 Part D en 09, nrollees in sta and-alone pr rescription dr plans (PD rug DPs) accounted for 68 perce of prescriptions dispen ent nsed under Part D. PDP e P enrollees acc counted for a dispro oportionately high share of prescriptio for classe such as antipsychotics y o ons es s, antico onvulsants, and antivirals Most of the prescription in these classes were t a s. e ns taken by low wincom subsidy (L me LIS) beneficia aries, of who more than 80 percent are enrolled in PDPs. om n Overa analgesic (narcotic) have the highest generic dispensing r all, cs rate (GDR) (9 percent), 93 follow by antiba wed acterial agent (88 percen and non-n ts nt) narcotic analgesics (81 pe ercent) comp pared with 70 percent ac 7 cross all ther rapeutic class ses. G P verages 69 percent acros all therape p ss eutic classes compared w s, with The GDR for PDP enrollees av 74 pe ercent for Me edicare Advan ntagePresc cription Drug (MAPD) pla enrollees. Across the 15 an . therapeutic classe GDRs for PDP enrolle were gen es, r ees nerally lower than for MA PD enrollee es t n or ctive pulmonary disease therapy. with the exception of agents fo asthma/chronic obstruc APDs. The largest differences were for e P There were large differences in GDRs for PDPs and MA antihy yperlipidemic and antivir cs rals, with a 13 percentage point differe e ence. Some of the differe ence in the GDRs reflec the fact th most ben e cts hat neficiaries rec ceiving the L are in PDPs. On avera LIS age, LIS enrollees are less likely to take a generic medicatio in a given therapeutic class (see C on Chart 1). 10-21
177
Chart 10-21. Generic dispensin rate fo the to 15 the G d ng or op erapeutic c cl lasses, by LIS st b tatus, 2009
By order of aggregate spending o Antihyperlipidemics Antipsych hotics Diabetic th herapy Antihypert tensive therapy agents Peptic ulc therapy cer Asthma/C COPD therapy agents y Antidepressants Platelet ag ggregation inhibitors Analgesic (narcotic) cs Cognitive disorder ther rapy (antideme entia) Anticonvu ulsant Antivirals Calcium & bone metab bolism regulators s Analgesic (anti-inflammatory/ cs antipyre etic, non-narcotic) Antibacter agents rial All therap peutic classes s
Note:
LIS sha of are prescrip ptions 35% 83 48 36 51 58 53 43 59 51 64 4 67 34 4 49 45 45
All 61% 38 60 72 71 9 77 8 93 4 80 25 58 81 88 70
Gener dispensing rate ric g LIS Non-LIS S 56% 37 53 70 66 11 74 7 92 3 78 16 53 82 86 68 63% 40 67 73 76 6 80 9 95 5 83 43 61 81 89 72
( tive pulmonary diisease). Shares are calculated as a percent of all LIS (low-income subsidy), COPD (chronic obstruct rescriptions stand dardized to a 30-day supply. The erapeutic classific cation is based o the First DataBank Enhanced on pr Th herapeutic Class sification system 1.0. Generic disp pensing rate is d defined as the pro oportion of generic prescriptions dispensed within a therapeutic clas Part D prescr ss. ription drug even (PDE) records are classified as LIS or non-LIS nt s ecords based on monthly LIS eligibility information in Part Ds den ominator file. Es n stimates are sens sitive to the meth hod re us to classify PD records as LI or non-LIS. sed DE IS rt ominator file from CMS. m MedPAC analysis of Medicare Par D prescription drug event data and Part D deno
Source:
In 2009, Part D enrollees rec e ceiving the lo ow-income s subsidy (LIS) accounted for 45 perce ) ent of pre escriptions dispensed un d nder Part D. In 10 of 15 therapeutic classes ranked by spending, the sha of prescriptions disp are pensed to LIS beneficiar S ries was grea than 45 ater perce and in 3 classes the share was greater than 60 percent ent, e n t. The generic dispensing rate (GDR) for no g on-LIS bene eficiaries ave erages 72 pe ercent acros all ss thera apeutic class ses, compare with 68 percent for LI beneficiaries. Across the top 15 ed IS thera apeutic class ses, GDRs fo non-LIS beneficiaries are higher t or b than those fo LIS or beneficiaries in all but one cla (asthma a ass a/chronic obs structive pulmonary dise ease therapy y agents). There are large differences in GDRs acro classes between LIS and non-L beneficia e d n oss S LIS aries. The largest differ rence is for antivirals (27 percentage points). So a 7 e ome of the difference in the GDRs for this the erapeutic cla likely refl ass lects differen nces in the m of drugs taken betwe mix een the tw groups. wo
178
Chart 10-22. Pharmacies partic cipating in Part D 2009 D,

Pharmacies Totals Pharmacy class y Chain ph harmacy Independent pharmac cy Franchis pharmacy se Governm ment pharmac cy Alternate dispensing site* e Other** y Pharmacy type Retail Long-ter care rm Mail order Physicia ans office Institutio on MCO ph harmacy Clinic Specialty pharmacy Other
Note:
Prescriptions s 1,337.9 millio on 61.2% 33.8 1.1 0.4 3.2 0.3 78.8% 9.2 7.3 <0.1 0.4 0.6 0.9 2.1 0.7
Gro spending oss g $73.8 billion 58.6% 37.0 1.1 0.4 2.6 0.3 77.4% 10.6 6.2 <0.1 0.5 0.4 0.9 2.9 1.0
65,283 61.7% % 32.6 1.2 1.0 3.4 N/A 91.4% % 2.7 0.2 1.0 1.1 0.2 1.4 0.2 1.8
are able). Some phar rmacies could no be classified b ot because of missin and ng MCO (managed ca organization), N/A (not availa ther data issues. Prescription size is standardized to a 30-day sup e d pply. Pharmacy c class and type ar based on 2009 re ot Na ational Council fo Prescription Drug Programs cl or D lassification. *A Alternate dispensing site includes physician offices, emergency dep partments, urgent care centers, an rural health fac t nd cilities. **Number of presc criptions and spe ending for other class include inst c titutions and pha armacies that cou not be classif uld fied ecause of missing and other data issues. a be R Retail includes all community pha armacies, grocer pharmacies, an department s ry nd store pharmacies s. Other type inclu udes the Indian Health Service, Department of Ve H D eterans Affairs ho ospitals, nuclear pharmacies, military/U.S. Coas Guard pharmac st cies, compounding pharmacies, a facilities spe and ecializing in intrav venous infusion. ding for other typ include pharm pe macies that could not be classified because of mis d d ssing Number of prescriptions and spend nd an other data issues. rt MedPAC analysis of Medicare Par D prescription drug event data from CMS.
Source:
In 200 more tha 65,000 pha 09, an armacies dis spensed pres scription drug to Medicar beneficiaries gs re enroll in Part D. Most pharm led macies (61.7 percent) are chain pharm macies, follow by wed indep pendent phar rmacies (32.6 percent). 6 Chain pharmacies account for about 60 pe n s r ercent of pres scriptions and spending, while indep pendent phar rmacies acco ount for about 34 percent of prescriptio and 37 p ons percent of spend ding. Retail pharmacies account for more than 90 percent of the pharmac s r 9 f cies and abo 80 percen of out nt presc criptions and spending. Lo ong-term car pharmacie account fo 2.7 percent of pharmac re es or cies, but ab bout 9 percent of prescrip ptions and ne early 11 perc cent of spend ding. Mail-ord pharmaci der ies accou for less th 1 percen of pharmac unt han nt cies but acco ount for slight over 7 percent of tly presc criptions and about 6 perc cent of spend ding. 09, ent ent In 200 specialty pharmacies account for over 2 perce of prescriptions and nearly 3 perce of spend ding, compar with fewe than 1 perc red er cent of presc criptions and spending in previous yea ars.
179
Chart 10-23. Prescripti ions disp pensed, by pharm macy haracter ristics an urban nd nicity, 2009 ch
Metropolitan n CBSA d designation Microp politan Rural
Number of pharmacie es As perc cent of total Prescript tions dispens sed By pha armacy locatio on By beneficiary locati ion Pharma class and pharmacy loc acy cation Chain pharmacy p Independent pharma acy Franchise pharmacy y Govern nment pharma acy Alterna dispensing site* ate g Pharma type and pharmacy loca acy p ation Retail** * Long-te care erm Mail ord der Specialty pharmacy Other Pharma type and beneficiary loc acy b cation Retail** * Long-te care erm Mail ord der Specialty pharmacy Other
Note:
52,978 81.2% 81.1% 78.1 63.6% 31.4 0.9 0.3 3.7 75.6% 10.3 9.0 2.6 2.6 77.8% 9.4 7.7 2.2 2.9
7,172 11 1.0% 11.1% 12 2.6 57 7.4% 38 8.9 2 2.3 0 0.6 0 0.8 92 2.1% 6 6.2 <0 0.1 0 1.7 1 80 0.6% 9 9.4 6 6.3 1.9 1 1.8 1
5,120 7.8% 7.5% 9.2 43.2% 53.6 1.8 0.7 0.7 95.9% 2.5 <0.1 0 1.6 85.0% 7.1 5.4 1.5 1.9
d ). a ore and CBSA (core-based statistical area) A metropolitan area contains a core urban area of 50,000 or mo population, a a an st wer ) wer micropolitan area contains an urba core of at leas 10,000 (but few than 50,000) population. Few than 1 percent of rescription drug event records could not be classified because the CBSA designat e e tion could not be identified. Pharm e macy pr cla and type are based on the 20 National Cou ass e 009 uncil for Prescrip ption Drug Progra ams classificatio Number of on. pr rescriptions is sta andardized to a 30-day supply. Totals may not su to 100 percen due to roundin 3 um nt ng. *A Alternate dispens sing site includes physicians offic s ces, emergency d departments, urg gent care centers and rural healt s, th facilities. **Retail includes all community pha a armacies, grocer pharmacies, a department s ry and store pharmacies s. Other type includ physicians offices, institutions, managed care organization ph des o e harmacies, clinic the Indian Hea cs, alth O Se ervice, Departme of Veterans Affairs hospitals, nuclear pharmac ent A cies, military/U.S Coast Guard p S. pharmacies, co ompounding pharmacies, and fac cilities specializin in intravenous infusion. ng s rt MedPAC analysis of Medicare Par D prescription drug event data from CMS.
Source:
180
Chart 10-23. Prescripti ions disp pensed, by pharm macy haracter ristics an urban nd nicity, 2009 (continued) ch
In 2009, of the ph harmacies th participated in Part D 81 percen (52,978) w hat D, nt were in metro opolitan area about 11 percent (7,172) were in micropolita areas, and the remain as, n an ning 7.8 percent (5,12 were in rural areas. This distribut 20) T tion is simila to that of P D enrollees ar Part (see Chart 10-11). Distributio of prescr ons riptions disp pensed follow similar p wed patterns regar rdless of whe ether they were classifie by pharm w ed macy location or benefic ns ciary location ns. In me etropolitan areas, chain pharmacies account for about 64 pe r ercent of all prescription ns dispe ensed under Part D, while independe pharmac ent cies account for slightly more than 3 t 30 perce of the pre ent escriptions dispensed. In micropolita areas, ind d n an dependent p pharmacies accou for a larg share of prescription dispensed (38.9 perce unt ger ns d ent), but cha pharmac ain cies still account for a majority of the prescrip a ptions dispen nsed (57.4 p percent). In rural areas, m most presc criptions disp pensed (53.6 percent) are accounte for by inde 6 ed ependent ph harmacies. Retai pharmacie account fo the larges share of pr il es or st rescriptions dispensed u under Part D in all areas, but there are some differences For examp in metropolitan areas, retail e s. ple, pharm macies acco ount for 75.6 percent of prescriptions and roughlly the same share of p s beneficiaries (77.8 percent) obtain their prescriptions at retail ph o p s harmacies. O the other On hand, in micropolitan and rur areas mo than 90 p ral ore percent of pr rescriptions are account ted for by retail pharm y macies, but beneficiaries residing in those areas obtain few than 90 s n s wer perce (80.6 per ent rcent and 85 percent) of their medic 5 f cations at ret pharmac tail cies. Long-term care pharmacies located in metropolitan a p l areas accou for a larger share of unt presc criptions (10.3 percent) compared with micropol itan areas (6 percent) and rural ar c w 6.2 reas (2.5 percent). The prescriptio filled by beneficiaries residing in different areas do not v p ons s n vary as much; 9.4 per rcent are fille by benefic ed ciaries in me etropolitan a areas compa ared with 9.4 4 perce and 7.1 percent filled by those in micropolita and rural areas, respe ent p d n an ectively. p and aries residing in Most mail-order pharmacies are located in metropoli tan areas, a beneficia opolitan area fill more prescriptions through ma as p s ail-order pha armacies (7.7 percent) metro comp pared with th hose in micro opolitan and rural areas (6.3 percen and 5.4 pe nt ercent).
181
Web li inks.
Drugs D
Chap pters in sever of MedPA ral ACs Reports to the Congr ress provide information o the Medic on care Part D program, as does MedP a PACs March 2010 Part D Data Book and Paymen Basics ser h nt ries. /medpac.gov v/chapters/Ma ar11_Ch13.pd df http:// http:// /www.medpa ac.gov/chapte ers/Mar10_Ch h05.pdf http:// /www.medpa ac.gov/docum ments/Mar10_ _PartDDataB ook.pdf http:// /www.medpa ac.gov/chapte ers/Mar09_Ch h04.pdf http:// /www.medpa ac.gov/chapte ers/Mar08_C Ch04.pdf http:// /www.medpa ac.gov/chapte ers/Mar08_C Ch05.pdf http:// /www.medpa ac.gov/chapte ers/Jun07_C Ch07.pdf http:// /www.medpa ac.gov/chapte ers/Mar07_C Ch04.pdf http:// /www.medpa ac.gov/public cations/congr ressional_rep ports/Jun06_ _Ch07.pdf http:// /www.medpa ac.gov/public cations/congr ressional_rep ports/Jun06_ _Ch08.pdf http:// /www.medpa ac.gov/public cations/congr ressional_rep ports/June05 5_ch1.pdf http:// /www.medpa ac.gov/public cations/congr ressional_rep ports/June04 4_ch1.pdf http:// /www.medpa ac.gov/docum ments/MedPA AC_Payment t_Basics_09_ _PartD.pdf
Analy of Medicare payment systems and follow-on b ysis t biologics can be found in MedPACs J June 2009 Report to the Congress. /www.medpa ac.gov/chapte ers/Jun09_C Ch05.pdf http://
ysis g d edPACs Janu uary 2007 an nd Analy of Medicare spending on Part B drugs can be found in Me Janua 2006 Rep ary ports to the Congress. C /www.medpa ac.gov/docum ments/Jan07_ _PartB_mand dated_report.pdf http:// http:// /www.medpa ac.gov/publica ations/congre essional_repo orts/Jan06_O Oncology_ma andated_repo ort.pdf
A ser ries of Kaiser Family Foun r ndation fact sheet data sp s potlights prov vide informat tion on the Medic care Part D benefit. b /www.kff.org/ /medicare/rxdrugbenefits s/partddatasp potlights.cfm http://
CMS information on Part D. o /www.cms.go ov/Prescriptio onDrugCovG GenIn/ http:// http:// /www.cms.hh hs.gov/MCRA AdvPartDEnrolData/ rformanceDa http:// /www.cms.go ov/Prescriptio onDrugCovG GenIn/06_Per ata.asp#TopO OfPage http:// /www.cms.go ov/Prescriptio onDrugCovG GenIn/09_Pro ogramReport ts.asp
182
SECTION
Other services
Dialysis Hospice Clinical laboratory
Chart 11-1. Number of dialysi facilities is gro o is owing an share of nd fo or-profit and free estanding dialysi provid g is ders is in ncreasing g
Aver rage annual perc cent change 20052 20002010 2010
2000 Total num mber of: Dialysis facilities s Hemodi ialysis station ns Mean num mber of hemodial lysis stations Percent of all facilities: o Noncha ain Affiliated with any chain d Affiliated with largest two chains d t Hospital based b Freestand ding Rural Urban For profit Nonprofit
Note: Source:
2005
2010
3,805 59,596
4,542 78,889
5,413 95,489
4% % 5
4% % 4
16
17
18
0.3
N/A N/A N/A 18% % 82 25 75 78 22
24% % 76 60 14 86 25 75 78 22
20% % 80 61 10 90 24 76 82 18
N/A N/A N/A 2 5 4 4 4 2
0.3 5 4 3 4 3 4 5 1
N/ (not available). Nonprofit includes facilities des /A signated as eithe nonprofit or go er overnment. ompiled by MedP PAC from the CM facility survey file and Dialysis Compare file. MS y s Co
Between 2000 an 2010, the number of freestanding and for-pro facilities increased, w nd e g ofit while hospital-based an nonprofit facilities decreased. Fre nd eestanding f facilities incr reased from 82 perce to 90 per ent rcent of all fa acilities, and for-profit fa cilities increased from 7 percent to 82 78 o perce of all faci ent ilities. Two national for-profit chains own about 60 percent of all facilitie and about 70 percent of s es t all fre eestanding fa acilities. nd e as Between 2000 an 2010, the proportion of facilities l ocated in rural areas ha remained relativ vely constan nt. The number of fa n acilities has increased 4 percent per year since 2 i r 2000. The a average size of a facilit has increa ty ased slightly, as evidenc by the m ced mean number of hemodia alysis station ns per fa acility, which increased from 16 in 2000 to 18 in 2010. h f
185
Chart 11-2. Medicare spendin for ou M ng utpatient dialysis services s s fu urnished by frees d standing and hos g spital-ba ased dialysis fa acilities, 2004 an 2009 nd
10 0 9 8 Dollars (in billions) 7 6 5 4 3 2 1 0 04 200
Source: ompiled by MedP PAC from the 20 and 2009 institutional outpatie files from CM 004 ent MS. Co
Drug gs Com mposite rate se ervices $3.0 32%
$3.2
42% 42%
31% $4.4 69% 58% 58%
$6.2
68%
2009
Between 2004 an 2009, exp nd penditures fo composite rate servic and dialy or e ces ysis drugs increased by abo 4 percent per year. During this ti me, expenditures for co out D omposite rate e servic increase by 7 perc ces ed cent per year while expe nditures for dialysis drug decrease by r gs ed 2 per rcent per yea ar. Frees standing dialysis facilitie treat most dialysis ben es t neficiaries a accounte for 87 per and ed rcent of expenditures in 2004 and 91 percent of expenditu n o ures in 2009. Between 20 (reporte in . 008 ed MedP PACs June 2010 Data Book) and 20 B 009, total Me edicare expe enditures for dialysis servic at freest ces tanding dialy facilities increased b 7 percent to $8.3 billion. ysis s by t d pending for dialysis drugs and the in crease in the proportion of total dial d n lysis The decline in sp spending for com mposite rate services is due to statut d tory and regu ulatory chan nges. Beginn ning in 2005, CMS implemented policies that increased M p Medicares payment rate for compos e site rate services but lowered the rate for dialysis drugs. s e Desp the decre pite ease in the drug paymen rate, the t d nt total volume of most dialysis drugs d (holding price con nstant) incre eased betwe 2004 and 2009 with one excepti een ion. Between n 2007 and 2008, the volume of erythropoi t o iesis-stimula ating agents (ESAs), a c class of drug gs used to treat ane emia, a comm conditio among di alysis patien declined The declin in mon on nts, d. ne the vo olume of ES was linked to new cl SAs linical eviden about th appropria use of the nce he ate ese drugs as well as changes in CMSs paym s C ment policies for ESAs. s
186
her Oth services
Chart 11-3. Dialysis fa D acilities capacity increas betw y sed ween 200 00 an 2010 nd
6,00 00 5,413 3 5,50 00 5,00 00 4,50 00 Dialysis facilities 4,00 00 3,50 00 3,00 00 2,50 00 2,00 00 1,50 00 1,00 00 50 00 0 2000 2010 Dialysis fac cilities Hemodialysis stations 20.0 0.0 59.6 40.0 3,805 5 95.5 80.0 60.0 100.0 140.0 Hemodialysis stations (in thousands) 120.0
Source:
ompiled by MedP PAC from the 20 Facility Surve file from CMS and the 2010 D ialysis Compare database from C 000 ey CMS. Co
Providers have met the dema for furnishing care t an increas m and to sing number of dialysis r patients by openi new facilities. In 2010, an averag facility ha about 18 hemodialysis ing ge ad statio ons. Between 2000 an 2010, the total numbe of dialysis facilities gr nd e er s rew by about 4 percent annually, and the number of hemodialysi stations g rew by 5 percent annua e is ally.
187
Chart 11-4. Character C ristics of dialysis patient by typ of f s ts, pe fa acility, 20 009
60% %
50% %
Percent of patients
40% %
30% %
20% %
10% %
0% %
Elderly (ag ge 75+ years) Female African n American Hispaniic Medica aid Diabet tes Hyperte ension
Patient chara P acteristic
Primar cause of E ry ESRD
LDOs
Note: Source:
Not LDOs
Freestand ding
Hosp pital-based
DO ). es ally LD (large dialysis organization), ESRD (end-stage renal disease) The facility type are not mutua exclusive. ator Management Inf formation System files, and Dialy m ysis MedPAC analysis of dialysis claims files, denomina files, Renal M ompare files from CMS. m Co
Acros the differe provider types, the proportion of patients wh are elderly female, ss ent p f ho y, Africa American Hispanic, and dually eligible for M edicaid does not differ b more than 1 an n, a e by n perce entage point between 20 and 200 (data not s t 008 09 shown for 20 008). ggests that providers did not change the mix of p p d e y patients they cared for This analysis sug een nd arge dialysis organizations, which ac ccount for ab bout betwe 2008 an 2009, including the la 60 pe ercent of all facilities. f In 2008 and 2009 freestandi facilities were more llikely than hospital-base facilities t 9, ing ed to treat African Ame ericans and dual eligible Freestand es. ding facilities account fo about 90 s or perce of all dial ent lysis facilities.
188
her Oth services
Chart 11-5. The ESRD popula D ation is g growing, and mos ESRD st D u patients undergo dialysis
1998 Patient ts (thousands) Perce ent 2003 Patie ents (thous sands) Percent 2008 Pa atients (tho ousands) Pe ercent
Total Dialysis In-center hemodialysis r s Home he emodialysis Peritonea dialysis al Unknown n Functionin graft and ng kidney transplants t
Note: Source:
351.4 4 255.2 2 225.1 2.5 5 26.6 1.1
100% % 73 64 1 8 <1
449 .4 320 .5 291 .8 1 .9 25 .9 0 .9
100 0% 71 65 5 <1 6 <1
5 548.0 3 382.3 3 350.8 3.8 26.5 1.2
10 00% 7 70 6 64 1 5 < <1
96.2 2
27
128 .9
29 9
165.6
3 30
ES SRD (end-stage renal disease). Totals may not equal sum of com T e mponents due to rounding. ompiled by MedP PAC from the Un nited States Rena Data System. al Co
Perso with end ons d-stage rena disease (E al ESRD) requir either dialysis or a kid re dney transplant to ma aintain life. The total num T mber of ESR patients i ncreased by 5 percent a RD y annually betwe 1998 an 2008. een nd In hemodialysis, a patients blood flows through a ma b t achine with a special filt that remo ter oves waste and extra fluids. In pe es a eritoneal dialysis, the pa atients blood is cleaned by using the d e lining of his or he abdomen as a filter. Peritoneal dia g er P alysis is usually performed in a patie ents home e. Most ESRD patie ents undergo hemodialys administ o sis tered in dialy ysis facilities three times a s s week Between 1998 and 2008, the total number of iin-center hemodialysis p k. 1 patients increased by 5 pe ercent annually while the number of patients us f sing the pred dominant hom me alityperiton neal dialysis sremained about the s same. Althou only a sm proportion ugh mall moda of all dialysis pati ients underg home hem go modialysis, t number o these patients grew 4 the of perce annually during this time period. ent t Functioning graft patients are patients wh have had a successf kidney tra t e ho d ful ansplant. Patie ents undergo oing kidney transplant may receive e either a living or a cadav g veric kidney donation. In 2008 34 percen of the kidn 8, nt neys were fro living don om nors and 66 percent were from cadaver don nors.
189
Chart 11-6. Diabetics, the elde D erly, Asian Amer ricans, a and Hispanics are amo the fastest g H s ong growing segmen nts of the ESR popu f RD ulation
Percent P of total in 2008 i Total (n = 547,982) Age (years) 019 2044 4564 6579 80+ Sex Male Female Race/ethnicity White African American Native American A Asian American A Hispanic Non-His spanic Underlyin cause of ESRD ng E Diabete es Hyperte ension Glomerulonephritis Other ca auses
Note: Source:
Av verage annual pe ercent change e 2 20032008 4%
100%
1 18 45 27 8
2 1 5 4 6
56 44
4 4
61 32 1 5 15 85
4 4 4 7 7 4
38 24 15 23
5 4 2 5
ES SRD (end-stage renal disease). Totals may not equal sum of the components due to rounding. T e e ompiled by MedP PAC from the Un nited States Rena Data System. al Co
Amon end-stage renal disea (ESRD) patients, 36 percent are over age 6 About 60 ng e ase 6 e 65. 0 perce are White ent e. Diabe etes is the most common cause of renal failure. m r The number of ESRD patient increased by 4 percen annually b n ts d nt between 200 and 2008 03 8. Amon the fastes growing groups of pat ng st tients are tho who are over age 80, Asian ose e Amer ricans, and Hispanics. H
190
her Oth services
Chart 11-7. Aggregate margin vary b type o freesta A e ns by of anding dialysis fa acility, 20 009
Type of fa acility All facilitie es Urban Rural LDOs Non-LDOs
Note: Source:
Percentage of Medicare p o payments going to fre eestanding fa acilities 100% 83 17 69 31
Ag ggregate marg gin 3.1% 4.1 1.4 4.4 0.3
LD (large dialysis organization). Margins include payments and c DO costs for compos ite rate services and injectable drugs. ompiled by MedP PAC from 2009 cost reports and the 2009 institut c tional outpatient f from CMS. file Co
For 2009, the agg 2 gregate Med dicare margi for compo in osite rate ser rvices and in njectable dru ugs was 3.1 percent. 3 As in earlier year we contin to see hi rs, nue igher margin for facilitie affiliated w the larg ns es with gest two chains. This finding stem from differences in the composite rate cost pe treatment and c ms e e er t drug payment pe treatment. Compared with their co er ounterparts, the composite rate cost per t treatm ment was hiigher for the two largest ment was low and the drug payme per treatm wer ent chain ns. In 2009, the gap between the Medicare margins for u e m urban and ru facilities widened ural s because of chang in the wage index and differenc in the volume of drug furnished ges w ces gs d acros providers. The Comm ss mission will continue to m monitor the a adequacy of Medicares paym ments for urb and rural facilities in upcoming y ban years. Some rural facilitie may bene e es efit from the low-volu ume adjustm ment that is in ncluded in th new endhe -stage renal disease paym ment method that began in 2011.
191
Chart 11-8. Medicare hospice use and spendi M e d ing grew w su ubstantially from 2000 to 2009 m o
2000 Beneficiar ries in hospice Medicare payments (in billions) n Average length of stay among decedents (in days) n Median le ength of stay among decedents (in days) n
Note:
2008 1,05 55,000 $11.2 83
2009 1,0 088,000 $12.0 86
A Average annu ual p percent chang ge 20002008 9.4% 18.4 5.5
Percen nt chang ge 200820 009 3.1% % 7.1 3.6
3,000 513 $2.9 54
17
17
17
0.0
0.0
verage length of stay is calculate for decedents who received ho ed ospice care at the time of death o before death a e or and Av re eflects the total number of days th decedent was enrolled in the M he s Medicare hospice benefit during his/her lifetime. e o or atabase, and the 1 percent hospice claims Standa 100 ard MedPAC analysis of the denominato file, the Medicare Beneficiary Da nalytic File from CMS. C An
Source:
The number of Medicare ben n M neficiaries re eceiving hosp pice service more than doubled es n betwe 2000 an 2009, sug een nd ggesting that access to h t hospice care has grown. e a gth care decede ents who use hospice g ed grew The average leng of stay among Medic subst tantially over the decade from 54 da in 2000 to 86 days i 2009. This growth refl e, ays in s lects an increase in len ngth of stay among hosp pice users w the longe stays wh median with est hile length of stay rem mained unch hanged (see Chart 11-12 2). Total Medicare payments to hospices qu uadrupled fro 2000 to 2 om 2009 due to increased enrollment and lo onger lengths of stay.
192
her Oth services
Chart 11-9. Hospice use incre H u eased ac cross ben neficiary groups y s fr rom 2000 to 2009 0 9
Pe ercent of dece edents using h hospice 2000 All FFS bene eficiaries MA benef ficiaries Dual eligib bles Nondual eligibles e Age (years) <65 6584 85+ Race/ethnicity White Minority y Gender Male Female Beneficia location ary Urban Rural, adjacent to urban a Rural, nonadjacent to urban n o
Note: Source:
2008 40.1% 39.2 43.9 4 35.8 41.5 4
2009 42.0% 40.9 46.0 37.5 43.4
A Average annu ual percentage age Percenta point change point cha e ange 20002008 200820 009 2.2 2.2 1.6 2.3 2.1 1.9 1.7 2.0 1.6 1.9
22.9% 21.5 30 0.9 17.5 24 4.5
17.0 24 4.7 21.4
25.0 39.3 45.3 4
26.0 40.9 48.0
1.0 1.8 3.0
0.9 1.5 2.6
23 3.8 17.2
41.8 4 30.2
43.7 32.1
2.3 1.6
1.9 1.7
22 2.4 23 3.3
36.7 43.0 4
38.5 45.0
1.8 2.5
1.7 2.0
29 9.4 19 9.2 16 6.7
41.7 4 36.2 31.5
43.5 38.0 33.6
1.5 2.1 1.9
1.8 1.8 2.1
FS ce), FF (fee-for-servic MA (Medicare Advantage). e e are Database from CMS. MedPAC analysis of data from the denominator file and the Medica Beneficiary D
Hosp pice use grew substantia in all ben w ally neficiary grou from 2000 to 2008 a continue to ups and ed grow in 2009 for almost all be eneficiary gr roups. Hosp ice use amo Native N ong North Americ can beneficiaries dec clined one-te enth of a percentage poin in 2009 (d nt data not sho own). Desp this grow hospice use continued to vary b demograp pite wth, by phic and ben neficiary chara acteristics. Medicare dec M cedents who were older White, fem o r, male, Medica Advantag are ge enrollees, not dual eligible, or lived in an urban area were more likely to use hospice tha o an their counterparts s.
193
Chart 11-10. Number of Medica o are-participating hospice has g es in ncreased largely driven b for-pr d, y by rofit hos spices
2,00 00 1,80 00 1,60 00 1,40 00 Number of providers 1,20 00 1,00 00 80 00 60 00 40 00 20 00 0 2001 2005 2007 7 2009 2010 Nonprofit N For profit F Government/o G other Voluntary clos V sure or merge er
Source: CMS Providing Data Quickly Query. https://pdq.cms.hhs.gov/index.js a sp.
There were more than 3,500 Medicare-p e e participating hospices in 2010. A maj jority of them m were for-profit ho ospices. Between 2001 an 2010, the number Me nd e edicare-partiicipating hos spices grew by more tha an 1,000 For-profit hospices ac 0. ccounted for about 90 pe ercent of tha growth. at In 2010, just over 40 hospice voluntarily exited the Medicare pr r es y rogram due t a closure or to merger, compare with just over 60 hosp ed o pices annuallly from 2007 to 2009. 7
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Chart 11-11. Hospice cases an length of stay, by H c nd h , diagnosis 2008 s,

Diagnosis share s of total c cases Percent of cases with h length of stay greater than 180 days s
Cancer (e except lung ca ancer) Circulator except hea failure ry, art Lung canc cer Debility, NOS N Heart failu ure Alzheimer and similar disease rs Unspecific symptoms/s c signs Chronic airway obstruc a ction, NOS Dementia a Organic psychoses p Genitourin nary disease Respirato disease ory Nervous system, excep Alzheimers s pt s Other Digestive disease All
Note:
22% % 10 9 9 8 6 6 6 5 4 3 3 3 1 1 100
10% 19 8 24 22 34 24 26 29 28 5 11 32 12 9 20
OS se y s usion of patients with NO (not otherwis specified). Percent of cases by diagnosis does not sum to 100 due to the exclu multiple diagnoses s. h S cal S. MedPAC analysis of 100 percent hospice claims Standard Analytic File from CMS
Source:
In 2008, the most common te erminal diagnosis among Medicare hospice pati g ients was cance accountin for nearly one-third of cases. The next most common dia er, ng y o e agnoses wer re heart failure and other circula t atory conditio (18 perc ons cent of case and Alzhe es) eimers disease, deme entia, organic psychoses and other neurologica conditions (17 percent of cases). s, al t Length of stay va aries by diag gnosis. At lea one-quar of hospice patients w Alzheim ast rter with mers disea ase, chronic airway obstruction, dem mentia, organ psychose and othe neurologic nic es, er cal conditions had le engths of sta exceeding 180 days. L ay g Long hospic stays were least comm ce mon amon beneficiar ng ries with can ncer, genitou urinary disea ase, and digestive disea ase.
195
Chart 11-12. Long hospice stay are ge ys etting longer, wh shor hile rt tays rem main virtu ually unc changed, 2000 an 2009 nd st
250 2000 200 Length of stay (days) 2009 237 7
150
141
100 76 56 6 50 17 3 0 10th perce entile 25th percentile h Median n 75th percentile 90th percen ntile 3 6 5 17 7
Note:
ata ce ed e or Length Da reflect hospic length of stay for Medicare decedents who use hospice at the time of death o before death. L of stay reflects the total number of days the decede was enrolled in the Medicare hospice benefit during his/her lif f e ent fetime. ator M ciary Database fr rom CMS. MedPAC analysis of the denomina file and the Medicare Benefic
Source:
Long hospice sta have gro ays own longer. For example hospice le F e, ength of stay at the 90th y perce entile grew fr rom 141 day in 2000 to 237 days in 2009, an increase of m ys o n more than 60 0 perce ent. Short stays in hospice have changed little since 2000 The medi length of stay in hospice t c ian f 0. held steady at 17 days from 2000 to 2009. Hospice llength of sta at the 25th percentile was s 7 2 ay h 5 day in 2009, down slightly from 6 days in 2000. ys d y s
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Chart 11-13. Hospice average length o stay am H a of mong de ecedents, by benefic y ciary and hospic charac d ce cteristics 2008 s,
Average length of sta e ay amon decedents ng s ( days) (in
Beneficia ary Diagnos sis Cance er Neuro ological Heart t/circulatory Debili ity COPD D Other r Site of service s Home e Nursin facility ng Assist living facility ted
53 129 76 94 104 83
86 104 142
Hospice For prof fit Nonprofit Freesta anding Home health based h Hospita based al
Note:
98 68 86 70 63
OPD (chronic ob bstructive pulmon nary disease). Av verage length of stay is calculate for Medicare b ed beneficiaries who died o CO in 2008 and used hospice that yea and reflects the total number of days the deced ar e f dent was enrolled in the Medicare d e ospice benefit du uring his/her lifetime. ho h S cal dicare Beneficiar Database, Medicare ry MedPAC analysis of 100 percent hospice claims Standard Analytic File data, Med ospice cost repor and Provider of Services file data from CMS. rts, r ho
Source:
Hosp pice average length of st varies by both benef e tay y ficiary and pr rovider char racteristics. Bene eficiaries with neurologic conditions chronic ob h cal s, bstructive pu ulmonary dis sease, and debili have the longest average length of stay while beneficiariies with canc have the ity e cer e short test average length of stay. Bene eficiaries who receive ho o ospice servic in assiste living facilities and nu ces ed ursing faciliti ies have a longer average length of stay than beneficiar h ries who rece eive care at home. profit hospice have a longer averag length of s es ge stay than no onprofit hosp pices. For-p standing hos spices have a longer ave erage length of stay than home hea h althbased o or Frees hospital-based ho ospices.
197
Chart 11-14. Hospice aggregat Medicare marg H a te gins, 200 022008

Percent of o hospices s (2008) All Freestand ding Home hea based alth Hospital based b For profit Nonprofit Urban Rural Below cap p Above cap Above cap (including cap ove erpayments)
Note:
2002 5.5% % 9.2 2.0 9.1 14.9 0.2 6.1 0.7 N/A N/A N/A
2005 4.6% 7.2 3.1 9.1 9.9 1.0 5.1 0.2 5.1 -0.8 20.7
2006 6.4% 9.7 3.8 12.7 12.0 1.5 7.1 0.8 7.0 0.3 20.7
2007 5.8% 8.7 2.3 10.6 10.4 1.7 6.4 1.4 6.1 2.5 20.5
2008 5.1% 8.0 2.7 12.2 10.0 0.2 5.6 1.3 5.5 1.0 19.0
100% 67 17 16 52 35 69 31 90 10 10
N/ (not available). Margins for all provider categories exclude ove /A erpayments to ab bove-cap hospice except where es, e sp pecifically indicat ted. Margins are calculated based on Medicare-a llowable, reimbu d ursable costs. Pe ercent of hospices does no sum to 100 by freestanding/pro ot ovider-based cat tegories and own nership categorie because skille nursing facility es ed y ba ased hospices an government hospices are not broken out sepa nd h arately. spice cost reports 100 percent ho s, ospice claims St tandard Analytic File, and Medica are MedPAC analysis of Medicare hos rovider of Service data from CM es MS. Pr
Source:
The aggregate Medicare margin oscillate in a relati vely narrow range between 2002 an a M ed nd 2008. The margin was 5.1 pe n ercent as of 2008. Margin estimates do not inclu Medicar nonreimbu s ude re ts, bereavemen nt ursable cost such as b and volunteer costs (at most 1.5 percent and 0.3 per v t rcent of totall costs, resp pectively). Margins also do not include the costs and revenues associated w fundrais n t with sing. Frees standing hos spices had higher margins than prov h vider-based (home healt and hospitalth based) hospices, in part due to difference in their in , es ndirect costs Provider-based hospic s. ces indire costs are higher than those of fre ect e n eestanding p providers and are likely i inflated due to the allocation of overhead fro the paren provider. o om nt In 2008, for-profit hospice ma t argins were strongly pos sitive at 10.0 percent. Th aggregate 0 he e margin for nonpro hospices was 0.2 pe ofit s ercent. The s subset of no onprofit hosp pices that we ere freestanding had a higher ma argin of 3.2 percent (not shown in ta p t able). Hosp pices that exceeded the cap (Medica ares aggreg gate average per benefic e ciary paymen nt limit) had a 19 pe ercent margin before the return of th cap overp e he payments.
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Chart 11-15. Medicare margins are higher amo M s ong hosp pices with more long stays, 2008 m g 2
20%
15%
10% 1 14.4% 5% Margin 5.1% 0% 1.9% 6.5%
-5%
-11.0% %
-10%
-15% 1 2 3 4 5 Perce of stays greater than 180 days (q ent n quintiles)

Note: o xceed the cap on the average an nual Medicare payment per n Margins exclude overpayments to hospices that ex eneficiary. Margins are calculated based on Medicare-allowable, r d reimbursable cos sts. be spice cost reports and 100 percen hospice claims Standard Analy File from CM s nt ytic MS. MedPAC analysis of Medicare hos s
Source:
Medicares per-diem-based payment sys p stem for hos pice provide an incenti for longe es ive er lengths of stay. Hosp pices with mo long-stay patients ge ore y enerally hav higher ma ve argins. Hospices in the lowes length-of-s st stay quintile have a mar rgin of 11.0 percent com 0 mpared with a 14.4 perc h cent margin for hospic in the se ces econd highes length-of-s st stay quintile e. Margins are somewhat lower in the highe length-of r est f-stay quintile (6.5 perce compare ent) ed with the second highest quintile (14.4 percent) becau some ho t h use ospices in th highest he verage. quintile exceeded Medicares aggregate payment ca and must repay the ov d s ap Hosp pices exceed ding the cap had a 19 pe ercent margiin before the return of ov e verpayments s (Chart 11-14).
199
Chart 11-16. Hospices that exc ceeded M Medicare annua payme es al ent ca selec ap, cted years
2002 Percent of hospices o exceeding the cap g Average payments ove p er the cap pe hospice er exceeding the cap g (in thousa ands) Payments over the cap s p as a perce of overall ent Medicare hospice spen nding 2004 2005 2006 2007 2008*
2.6% %
5.8% %
7.8%
9.4%
10.4%
10.2%
$470
$749
$755
$731
$612
$571
0.6% %
1.7% %
2.2%
2.4%
2.0%
1.7%
Note:
Th cap year is de he efined as the per riod beginning No ovember 1 and e ending October 3 of the following year. 31 *D to a change in data availability, the 2008 estim Due mates are based on a different m d methodology than the 20022007 n 7 es stimates and are not precisely co omparable to earl years. lier h S c care hospice cos reports, Provid of st der MedPAC analysis of 100 percent hospice claims Standard Analytic File data, Medic ervices file data from CMS, and CMS Providing Data Quickly syst f C D tem. Data on tota spending for e al each fiscal year a are Se fro the CMS Office of the Actuary om y.
Source:
The percent of ho p ospices exce eeding Medi icares aggre egate average per bene eficiary paym ment limit, or cap, wa 10.2 perce in 2008. as ent Medicare payments over the cap represe ented 1.7 pe ercent of tota Medicare hospice al spending in 2008 8. Estim mates of hospices excee eding the cap for 2008 m not be co p may omparable to estimates for e prior years displa ayed in the chart becaus a new me c se ethodology w used in 2 was 2008. On the basis of additiona analyses performed with the new methodolog we believ the perce of s al p w gy, ve ent hospices exceeding the cap increased ea year fro 2002 to 2 ach om 2008, while t total paymen nts over the cap have declined since 2006. s
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Chart 11-17. Length-of f-stay an live discharge rates fo abovend e or nd w-cap ho ospices, 2008 an below
Percent of ho ospice users with stays exce eeding 180 da ays Above-ca ap Below-ca ap hospices s hospice es 41% 19 48 44 43 47 48 19% 9 30 18 23 24 22 Live discharges as a percent o all discharg of ges Above-ca ap Below-cap hospices s hosp pices 44% % 24 37 52 49 52 55 16 6% 10 0 18 8 16 6 21 20 0 22 2
Diagnosis s All Cancer Neurological conditions s Heart/circ culatory Debility COPD Other
Note:
CO OPD (chronic ob bstructive pulmon nary disease). Le ength-of-stay dat reflect the perc ta cent of hospice u users in 2008 wh hose ho ospice length of stay was beyond 180 days. s d h S c minator file from C CMS. MedPAC analysis of 100 percent hospice claims Standard Analytic File and denom
Source:
Abov ve-cap hospices have su ubstantially more patient with very llong stays and more live m ts e disch harges than below-cap hospices for all diagnose b h es. Between 44 perc cent and 48 percent of above-cap ho p ospices patients with ne eurological conditions, heart or circulator conditions or chronic obstructive pulmonary disease had ry s, c d stays exceeding 180 days co es. s ompared with 18 percen t to 30 perce at below h ent w-cap hospice For all diagnoses the live dis a s, scharge rate at above-c hospice were at least double a es cap es and in som cases more than trip the rates at below-ca hospices. For exampl among me m ple ap le, patients with hea or circulat art tory conditions, 52 perce of discha ent arges at abo ove-cap hosp pices were live dischar rges compar with 16 percent at be red p elow-cap hospices.
201
Chart 11-18. Hospice cap is un H c nrelated t use of hospic service to ce es ac cross sta ates, 200 08
Percen of: nt Decedents using hospice 58% 54 53 50 48 48 48 46 45 45 Ho ospices exc ceeding th cap he 25% 28 10 0 0 2 0 0 11 3
Top 10 sta ates with high hest hospice use rates Arizona Utah Florida Iowa Delaware Colorado Oregon Rhode Island Texas Michigan
Source:
ator y e d MedPAC analysis of the denomina file, the Medicare Beneficiary Database, 100 percent hospice claims Standard nalytic File data, Medicare hospic cost reports fr ce rom CMS and CM Providing Da Quickly syste MS ata em. An
Six of the 10 stat with the highest use of hospice a tes h among Medicare decede ents have a very small percentage (0 percent to 3 percent of hospice exceeding the cap. Th finding l e t) es g his demo onstrates tha high rates of hospice use can be a at s achieved without hospic exceedin ces ng the cap.
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Chart 11-19. Medicare spendin for clinical lab M ng boratory services s, fis scal yea 2000 ars 2010
9 Independe and physician office ent 8 7 6 Dollars (in billions) 5.3 5 4.3 4 3 2 1 0 2000
Note:
Hospital based b 7.2 6.9 6.4 5.9 9 4.9 7 2.7 2.4 2.2 1.7 9 1.9 3.9 3.2 2.9 2.8 3.0 6.8
7.9
8.1
3.3
3.2
2.2
2.4 4
2.7
2.9
2 3.2
3.5
3.7
4.0
4.2
4.6
4.9
2001
2002
2003
200 04
2005
2006
07 200
2008
2009
010 20
pending is for se ervices paid unde the clinical labo er oratory fee sched dule. Hospital-ba ased services are furnished in lab e bs Sp ow wned or operated by hospitals. To spending ap d otal ppears on top of e each bar. The se egments of each bar may not sum to h m the totals on top of each bar due to rounding. o e CMS, Office of the Actuary.
Source:
Medicare spendin for clinica laboratory services gr ng al y rew by an av verage of 9.7 percent pe 7 er year between 2000 and 2006 This grow was drive by rising v 6. wth en volume, as t there was on nly one increase in la payment rates during those year Spending declined by 0.5 percen in ab g rs. g y nt 2007 due to a dro in hospita op al-based lab spending a nd increased by 4.4 per rcent in 2008 8, 11.2 percent in 2009, and 2.4 percent in 2010. 4 In 2010, Medicar spent $8.1 billion (1.6 percent of t re 1 total program spending) on clinical la m ab servic ces. Hosp pital-based la abs share of total clinica lab spendiing increase from 44 percent in 20 to al ed 000 46 pe ercent in 200 but fell to 39 percent in 2009. 06
203
Web li inks. Oth services her

Dialysis
More information on Medicares payment syste for outpatie dialysis se n p em ent ervices can be found in e MedP PACs Paymen Basics serie nt es. http:// /www.medpac c.gov/docume ents/MedPAC C_Payment_B Basics_10_dia alysis.pdf
The U.S. Renal Data System prov U vides informati about the incidence and prevalence of patients with renal ion f diseas their demographic and cl se, linical characte eristics, and th spending p heir patterns. http:// /www.usrds.o org
The National Institu of Diabete and Digest N ute es tive and Kidn ey Diseases and the Natio onal Kidney Found dation provide health inform e mation about kidney disea for consum ase mers. http:// /www.niddk.nih.gov/ http:// /www.kidney.o org/
CMS provides specific informati about eac dialysis fac ion ch cility. http:// /www.medicare.gov/Dialys sis/Home.asp
Chapt 6 of the MedPAC Marc 2011 Repo to the Cong ter M ch ort gress provide information about the es n financ performan of dialysis facilities. cial nce s http:// /medpac.gov/ /chapters/Mar r11_Ch06.pdf f
PACs June 20 Report to the Congres recommend changes to how Medica pays for 005 o ss ds o are MedP composite rate ser rvices and inje ectable drugs s. http:// /www.medpac c.gov/publicat tions%5Ccon ngressional_re eports%5CJu une05_ch4.pd df
PACs Octobe 2003 report describes ho Medicare c er t ow could modern nize the outpa atient dialysis s MedP payment system. http:// /www.medpac c.gov/publicat tions/congres ssional_report rts/oct2003_D Dialysis.pdf
PACs comme on revision to payment policies und the physic ent ns der cian fee sched dule for calen ndar MedP year 2004 includes changes in how to pay fo services fur 2 s h or rnished by ne ephrologists. /medpac.gov/ /documents/100603_RevP PhysFeeSched d_CB_comm ment.pdf http://
PAC comment on CMSs proposed ru to impleme provisions of the Medic ted s ule ent s care MedP Impro ovements for Patients and Providers Act of 2008 that modernize th outpatient dialysis paym P t t he ment system by broaden m ning the paym ment bundle in 2011 and im n mplementing a quality incentive program in m 2012. http:// /medpac.gov/ /documents/E End%20Stage e%20Renal%2 20Disease.pd df
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Hospice
More information on Medicares payment syste for hospice services can be found in M n p em e n MedPACs Paym ment Basics series. /www.medpac c.gov/docume ents/MedPAC C_Payment_B Basics_10_ho ospice.pdf http://
Additional informat tion and analy related to the Medicar hospice be ysis o re enefit and the financial perfor rmance of hos spice provide can be fou in Chapte 11 of MedP ers und er PACs March 2 2011 Report to the Congress. http:// /www.medpac c.gov/chapter rs/Mar11_Ch1 11.pdf
Additional analyses of Medicare hospice visit patterns can be found in the online ap s e t n ppendix to the e hospice chapters in the March 2011 and Mar 2010 Rep to the Congress. n 2 rch port http:// IX.pdf /www.medpac c.gov/chapter rs/Mar11_Ch1 11_APPENDI http:// /www.medpac c.gov/chapter rs/Mar10_Ch0 02E_APPEND DIX.pdf
Recom mmendations for reforms to the hospice payment sy s t e ystem and ste to improve accountability eps e and oversight of the benefit can be found in Chapter 6 of M o n C MedPACs Ju 2009 Rep to the une port Congress. http:// /www.medpac c.gov/chapter rs/Mar09_ch0 06.pdf
Inform mation and an nalysis related to the Medic d care hospice benefit, with a specific foc on the hos cus spice cap, can be found in Chapter 8 of MedPACs June 2008 R c s Report to the Congress. http:// /www.medpac c.gov/chapter rs/Jun08_Ch0 08.pdf
v ed pice benefit. CMS maintains a variety of information relate to the hosp /www.cms.gov/center/hosp pice.asp http://
s o or aries. CMS also provides information on hospice fo its beneficia /www.medicare.gov/Publications/Pubs/p pdf/02154.pdf f http://
205
Clinical laboratory
More information on Medicares payment sys o s stem for clinic lab service can be fou in MedPA cal es und ACs Paym ment Basics se eries. http:// /www.medpac c.gov/docume ents/MedPAC C_briefs_Paym ment_Basics_ _10_clinical_l lab.pdf mation about CMSs regula C ation of clinica laboratories including th number an type of cert al s, he nd tified Inform labs in the United States, can be found on the CMS webs n S e site. http:// /www.cms.gov/CLIA
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601 New Jersey Avenue, NW Suite 9000 Washington, DC 20001 (202) 220-3700 Fax: (202) 220-3759 www.medpac.gov

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J U N E

Health Care Spending and the Medicare Program

Medicare beneficiary demographics ........................................................................... 19

2-1 2-2 2-3 2-4 2-5 2-6

Dual-eligible beneficiaries ............................................................................................ 29

3-3 3-4 3-5 3-6

Quality of care in the Medicare program................................................................... 39

4-1 4-2 4-3 4-4 4-5 4-6 4-7

Medicare beneficiary and other payer financial liability ......................................... 51

5-1 5-2 5-3 5-4 5-5 5-6

Acute inpatient services ............................................................................................... 61 Shortterm hospitals

6-1 6-2 6-3 6-4 6-5 6-6

6-25 6-26 6-27 6-28 6-29

Ambulatory care .......................................................................................................... 93 Physicians

Hospital outpatient services

7-11 7-12 7-13 7-14 7-15 7-16 7-17 7-18

Number of Medicare-certified ASCs increased by 41 percent, 20032010 ....................................... 113

Post-acute care ........................................................................................................... 119

8-3 8-4 8-5 8-6 8-7

8-8 8-9 8-10 8-11

8-12 8-13 8-14 8-15

Long-term care hospitals

8-16 8-17 8-18 8-19 8-20

Medicare Advantage.................................................................................................. 143

9-1 9-2 9-3 9-4 9-5 9-6 9-7 9-8 9-9

Prescription drugs ...................................................................................................... 155

10-18 10-19 10-20 10-21 10-22 10-23

Other services ............................................................................................................. 183 Dialysis

11-1 11-2 11-3 11-4 11-5 11-6 11-7

National health care and Medicare spending

4Nation health care and Medicare spending nal a s

Medic care 23% %

Medicaid 17% Priv vate health in nsurance 34%

Other third-party payers s 8%

Medicare share of total s M s spending varies by type of se ervice, 2009 2

20% % 29% 10% % 0% % Hospita al 21% %

6Nation health care and Medicare spending nal a s

25% All public spending A 20%

Health spending as a percent of GDP

Trustees project Medicare spending to inc M e crease as a hare of GDP G sh

Share of GDP (percent)

8Nation health care and Medicare spending nal a s

25% Per enrollee change (percent)

Trustees - inte T ermediate CBO C Trustees - low T w

Dollars (in billions)

10Natio health care and Medicare spending onal e e

Tota spending 2000 = $227 billion al 2 b

Other 10% Oth her hospital 4% DME 2%

Inpatie ent hospita al 39%

r Other 8% Other al hospita 5% Home health 4% Hospice 3%

Physician fee schedule 18% ealth Home he Hospice 4% 1%

DM ME 2% % Phys sician fee sc chedule 12%

Managed care 18%

Managed care 22%

Nex 15% xt 24%

20% % 10% % 0% % Percent of beneficiaries Percen of program spending nt m 14%

12Natio health care and Medicare spending onal e e

Estimate High Intermedia ate Low

Chart 1-12. Medicare faces se M erious ch hallenges with lo ong-term m financing

14Natio health care and Medicare spending onal e e

16Natio health care and Medicare spending onal e e

Web li inks. Nat tional he ealth care and Me e edicare s spending g