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Reducing public expenditures for physician services: the price of paying less.

The purpose of this paper is to examine how physicians respond to changes in payment levels from government insurers. Our analysis focuses on two issues: controlling overall program expenditures, and assuring full access to care for program clients. We review evidence from natural experiments in which payment levels were increased, frozen, or decreased. These studies show that freezing or reducing payment levels is not effective in controlling program expenditures, because physicians responded by increasing the quantity and complexity of services provided. Furthermore, when government programs freeze or reduce their payment levels, physicians are less likely to treat the clients of these programs. We conclude that policymakers must seek alternative strategies for controlling program expenditures.

Cost Control↗

Impact of administrative restrictions on antibiotic use and expenditure in Ontario: time series analysis.

OBJECTIVE: In a potential attempt to guide antibiotic prescribing based on current clinical evidence and mitigate the spread of antibiotic resistance, in March 2001 the Ontario Drug Benefit programme restricted reimbursement of two fluoroquinolone antibiotics--ciprofloxacin and ofloxacin--to its beneficiaries. Our objective was to determine the impact of this policy on the volume and cost of antibiotic prescribing. METHOD: Weekly administrative data on antibiotic prescribing volumes and expenditures were analysed between January 1999 and September 2002 to estimate the effect of the policy changes using time series analysis. RESULTS: The policy changes were associated with a statistically significant shift downwards for the fluoroquinolones as a category (1905 fewer prescriptions each week, representing a saving of Can$105,707 a week), driven by a decrease in prescriptions for ciprofloxacin (2084 fewer prescriptions a week, saving Can$129,421 a week). Nitrofurantoin (200 more prescriptions a week, costing an extra Can$2082 a week) and trimethoprim-sulphamethoxazole (532 more prescriptions a week, costing an extra Can$1473 a week) demonstrated a statistically significant shift upwards. The latter also showed a decrease in trend and nitrofurantoin an increase in trend during the time period. There was no statistically significant change in either the total number of antibiotic prescriptions or expenditures associated with the policy of limiting their use. CONCLUSIONS: Although no direct cause and effect can be shown with these observational data, the results suggest that the change in reimbursement policy to restrict prescribing of fluoroquinolones decreased their use and associated expenditures. These decreases were offset by increases in the use of other antibiotics. The balance of consequent benefit and harm of these shifts in prescribing patterns needs to be examined carefully. Alternative solutions to encourage appropriate use of antibiotics deserve exploration.

Aged↗

Effects of state Medicaid home care Medicare maximization programs on Medicare expenditures.

Some state Medicaid programs have attempted to shift home health care costs to Medicare by using retrospective Medicare maximization billing practices. We used a two-part model with random effects to analyze whether retrospective billing practices increase Medicare expenditures for dual eligibles by analyzing primary data collected from 47 state Medicaid offices supplemented with Medicare Current Beneficiary Survey (MCBS) data from 1992-1997. Retrospective billing practices were projected to increase Medicare home health care expenditures by 73.8 million dollars over six years, although this was not statistically significant. We also found significantly higher Medicare spending in states with lower Medicaid spending levels, suggesting that states with high Medicaid utilization have potential to shift some of these expenditures to Medicare.

Adolescent↗

The impact of new drug introduction on drug expenditure in primary health care in Catalunya, Spain.

BACKGROUND: Introduction of new drugs is a dynamic process with a high impact on consumption and expenditure. OBJECTIVE: To analyze the prescription of new drugs and the associated costs in public health care in Catalunya, Spain, in 2002. The analysis also attempts a perspective of consumption in relation to the grade of therapeutic innovation of the new drugs. METHODS: Prescription data on all 86 new drugs licensed for use during 1998-2002 were analyzed, using the prescription item as unit and the cost. RESULTS: Prescription for new drugs in 2002 represented 4% of overall items prescribed and 13% of the cost. The mean new drug item cost was 39, while that of overall drugs was 13. New drug item increase over the previous year was 18.6% compared with 5.2% of the overall drugs, and the proportional cost increased by 25.7% and 9.9%, respectively. Ten new drugs represented 55.1% of the expenditure of this group. Antiasthmatic drugs represented 20.7% of the expenditure on new drugs, angiotensin-receptor blockers represented 18.6%, antiaggregants 9.7%, and nonsteroidal antiinflammatory drugs 6.9%. New drugs providing significant or modest therapeutic improvement represented 25.6% of overall new drug items and 32.3% of their cost. CONCLUSIONS: New drugs have a mean cost growth rate greater than that of existing drugs, with only a quarter of them offering advantages over existing drugs. More detailed evaluations of new medications are warranted before they can be recommended for general use so that a better distribution of the limited resources available may be made when prescribing drugs that are newly available through prescription.

Drug Approval↗

Personal characteristics and contextual factors associated with residential expenditures for individuals with mental retardation.

A multivariate analysis was done to determine the relative importance of facility, resident, and community characteristics to expenditures. Facility factors associated with higher expenditures included ownership, facility size, facility services, and location. Individuals with a greater number of activity of daily living limitations, developmental disabilities, and more severe levels of mental retardation had higher expenses. Findings could improve our understanding of the costs of long-term residential care, assisting us to economically and effectively bring this population into the community. Data used are from the 1987 National Medical Expenditure Survey Institutional Population Component.

Adult↗

Patterns of municipal health expenditure in interwar England and Wales.

This article aims to fill a gap in the history of medical services in England and Wales in the interwar period by focusing on the historiographically neglected municipal sector--a relative neglect that is particularly unjustified given that this sector provided an increasingly wide array of medical services over the period. Focusing on the highly urbanized county boroughs, this article investigates whether and how expenditure on municipal health services changed over the interwar period, and whether these patterns were replicated by boroughs across England and Wales. It is found that many of the largest personal health services were experiencing a common pattern of growing investment over the period, but that county boroughs did not act uniformly in their spending decisions. Considered regionally, the Northeast and the West Midlands were found to perform poorly in expenditure terms compared to the data set as a whole, while the large conurbations of Leeds, Manchester, and Liverpool raised the average performance of the Northwest and Yorkshire. Regional patterns are found to be less consistent in the south of the country, where voluntary provision and demands arising from the boroughs' geographical position (for example, seaside resorts) may have exerted significant influences over levels of expenditure on health.

England↗

Dental services: use, expenditures and sources of payment, 1987.

BACKGROUND: This article provides per capita estimates of dental care utilization, expenditures, mix of services and sources of payment for each of several socioeconomic and demographic categories. METHODS: The focus of the analyses presented here is on dental care utilization by the U.S. population during 1987. Specifically, national estimates are provided for dental visits, expenditures, sources of payment and procedure type for each of several socioeconomic and demographic categories using household data from the 1987 National Medical Expenditure Survey, or NMES. RESULTS: During 1987, less that 50 percent of Americans visited a dental office. Americans made approximately 292 million dental visits and received approximately $30 billion worth of dental care, of which $10 billion was paid by insurers, $17 billion was paid out of pocket and $1.6 billion was not reimbursed. CONCLUSIONS: These analyses establish the magnitude of the dental care market and the amounts paid by individual patients, private insurance companies and Medicaid. They also reveal that the type of care received varies among people in distinct socioeconomic and demographic groups. PRACTICE IMPLICATIONS: Although the dental care market is substantial, many Americans do not visit a dentist. By understanding these analyses, practitioners will be better positioned to meet the dental needs of all Americans.

Adolescent↗

Comparison of management strategies for extreme prematurity in New Jersey and the Netherlands: outcomes and resource expenditure.

OBJECTIVE: To quantify differences in resource expenditure in the perinatal period and long-term outcome of extremely premature infants who received systematically different approaches to neonatal intensive care. METHODS: Perinatal management, mortality, prevalence of disabling cerebral palsy (DCP), and resource expenditure of 2 population-based inception cohorts of extremely premature infants born in the mid-1980s were compared. Electronic fetal monitoring, tocolysis, cesarean section delivery, and assisted ventilation were used to characterize management approaches. Participants included all live births at 23 to 26 weeks' gestation in a 3-county area of central New Jersey (NJ) from 1984 to 1987 (N = 146) and throughout the Netherlands (NETH) in 1983 (N = 142). Mortality and the prevalence of DCP were the primary outcomes. Numbers of hospital days with and without assisted ventilation were the measures of resource expenditure. RESULTS: Electronic fetal monitoring (100% vs 38%), cesarean section (28% vs 6%), and assisted ventilation (95% vs 64%) were all more commonly used in NJ than in NETH. Ten percent of NJ deaths occurred without assisted ventilation, compared with 45% of Dutch deaths. A total of 1820 ventilator days were expended per 100 live births in NJ, compared with 448 in NETH. The increase in the number of nonventilator days (3174 vs 2265 days per 100 live births) did not reach statistical significance. Survival to age 2 (46 vs 22%) and the prevalence of DCP among survivors (17.2 vs 3.4%) were significantly greater in NJ at age 2 than in NETH at age 5. CONCLUSIONS: Near universal initiation of intensive care in NJ, compared with selective initiation of intensive care in NETH, was associated with 24.1 additional survivors per 100 live births, 7.2 additional cases of DCP per 100 live births, and a cost of 1372 additional ventilator days per 100 live births.

Analysis of Variance↗

The impact of state laws limiting malpractice damage awards on health care expenditures.

Twenty-eight states have laws that limit payments in malpractice cases, and several studies indicate that these laws reduce the frequency and severity of malpractice claims and lower premiums. Moreover, proponents believe that such laws reduce health care expenditures by reducing the practice of defensive medicine. However, there is a dearth of empirical evidence about the impact of these laws on the cost of health care. We used multivariate models and relatively recent data to estimate the impact of state tort reform laws that directly limit malpractice damage payments on health care expenditures. Estimates from these models suggest that laws limiting malpractice payments lower state health care expenditures by between 3% and 4%.

Compensation and Redress↗

Medical expenditures for disability and disabling comorbidity.

Disability and disabling comorbidity place a disproportionately large burden on the health care system. National Medical Care Utilization and Expenditure Survey data show that medical care expenditures for noninstitutionalized persons amounted to $154 billion ($691 per capita) in 1980. The medical expenditure per capita for people reporting two or more disabling chronic conditions ($2456) was 5 times the amount incurred by those with no limiting conditions ($486) and more than 1.5 times the amount incurred by those with one limiting condition.

Adolescent↗

The impact of payor/provider type on health care use and expenditures among the frail elderly.

OBJECTIVES: This study examined whether health care expenditures and usage by the frail elderly differ under three payor/provider types: Medicare fee for service, Medicare health maintenance organization (HMO), and dual Medicare-Medicaid enrollment. METHODS: In-home interviews were conducted among 450 frail elderly patients of a San Diego, Calif, health care system. Cost and use data were collected from providers. RESULTS: Analyses revealed no difference in total expenditures between fee-for-service and HMO enrollees, but Medicare-Medicaid beneficiaries' expenditures were 46.8% higher than those for HMO enrollees and 52.2% higher than those for the fee-for-service group. Fee-for-service participants were less than half as likely as HMO enrollees to have two or more hospital admissions, but hospital usage rates between those two payor/provider groups did not differ. Not were there payor/provider differences in access to home health care, but HMO home health care users received significantly fewer services than the others. CONCLUSIONS: The care provided to these HMO beneficiaries resulted in a combination of restricted home health use and higher multiple hospitalizations. This raises compelling questions for future research. For the dually enrolled, stronger cost containment may be required.

Activities of Daily Living↗

The effects of CON repeal on Medicaid nursing home and long-term care expenditures.

Certificate-of-need (CON) and construction moratorium laws are used widely by states as a potential mechanism for constraining Medicaid nursing home expenditures. However, there is only limited empirical work examining whether these policies are effective at lowering Medicaid spending. Using aggregate state-level data from 1981 through 1998, this study found that states that repealed their CON and moratorium laws had no significant growth in either nursing home or long-term care Medicaid expenditures. In the context of declining occupancy rates within the nursing home market, this study provides strong evidence that states have little to fear in terms of increased expenditures with the repeal of CON and moratorium laws.

Aged↗

National health expenditures, 1988. Office of National Cost Estimates.

Every year, analysts in the Health Care Financing Administration present figures on what our Nation spends for health. As the result of a comprehensive re-examination of the definitions, concepts, methods, and data sources used to prepare those figures, this year's report contains new estimates of national health expenditures for calendar years 1960 through 1988. Significant changes have been made to estimates of spending for professional services and to estimates of what consumers pay out of pocket for health care. In the first article, trends in use of and expenditure for various types of goods and services are discussed, as well as trends in the sources of funds used to finance health care. In a companion article, the benchmark process is described in more detail, as are the data sources and methods used to prepare annual estimates of health expenditures.

Centers for Medicare and Medicaid Services, U.S.↗

Measuring the relationship between income and NHEs (national health expenditures).

This article uses recently published time series data for the Organization for Economic Cooperation and Development countries to estimate income elasticities for health care expenditures. Several different models and alternative specifications are examined to determine the sensitivity and robustness of the estimated relationships. Income is the dominant-determinant of health care spending and longrun income elasticity for health care is significantly greater than unity. This implies that health care is a luxury good, and expenditures will tend to rise with the level of national income. There is little evidence that the degree of public finance reduces the level of health care expenditures.

Data Collection↗

Do hospitals behave like consumers? An analysis of expenditures and revenues.

Hospitals adjust expenditures to be a constant proportion of their revenues. An unexpected 10-percent change in hospital revenue generates a 3.5-4.8 percent expenditure change (in the same direction) the year it occurs, with declining changes thereafter (10 percent in total). Non-profit and government hospitals adjust expenditures about 80 percent of the way toward their longrun change near the end of the third year of the revenue change; for-profit hospitals do this at the end of the fourth year. Hospitals with revenue increases make an 80-percent adjustment toward the end of the third year; those with revenue declines do so near the end of the fourth year.

Capital Expenditures↗

Using an affordability analysis to budget capital expenditures.

A healthcare organization or system often needs to make capital expenditures to expand or renovate its facilities or to finance other important projects. It may be difficult, however, for an organization to gauge how much of its resources it can afford to commit to capital projects. To help the organization evaluate the feasibility of a capital expenditure, an analysis of financial resources should first be conducted. Using an actual healthcare system whose name has been changed to protect its identity, this article outlines how healthcare financial managers can perform an affordability analysis, based on the debt-to-capital ratio or debt service coverage, to determine the amount of resources to allocate for future capital expenditures.

Budgets↗

An innovative approach to reducing medical care utilization and expenditures.

In a retrospective study, we assessed the impact on medical utilization and expenditures of a multicomponent prevention program, the Maharishi Vedic Approach to Health (MVAH). We compared archival data from Blue Cross/Blue Shield Iowa for MVAH (n = 693) with statewide norms for 1985 through 1995 (n = 600,000) and with a demographically matched control group (n = 4,148) for 1990, 1991, 1994, and 1995. We found that the 4-year total medical expenditures per person in the MVAH group were 59% and 57% lower than those in the norm and control groups, respectively; the 11-year mean was 63% lower than the norm. The MVAH group had lower utilization and expenditures across all age groups and for all disease categories. Hospital admission rates in the control group were 11.4 times higher than those in the MVAH group for cardiovascular disease, 3.3 times higher for cancer, and 6.7 times higher for mental health and substance abuse. The greatest savings were seen among MVAH patients older than age 45, who had 88% fewer total patients days compared with control patients. Our results confirm previous research supporting the effectiveness of MVAH for preventing disease. Our evaluation suggests that MVAH can be safely used as a cost-effective treatment regimen in the managed care setting.

Adult↗