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Midterm 2 Review

Increase in drug costs and availability of new

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Increase in drug costs and availability of new expensive drugs Tech advances keep more very low-birth-weight babies and other critically ill alive and in need of continued care Provider Payments States pay for services Directly to providers on a FFS basis Through prepayment arrangements (e.g. HMOs) Providers who accept Medicaid patients must accept Medicaid payment rates as payment in full States must make additional payments to qualified hospitals that provide inpatient services to disproportionate number of Medicaid beneficiaries Dual Eligible Account for 1 in 7 Medicaid enrollees Including nearly all elderly and ~1/3 of non-elderly beneficiaries with disabilities in Medicaid 70% of Medicaid beneficiaries dual-eligibles
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Nearly 1 in 5 Medicare beneficiaries dual-eligibles Poorest receive full assistance with Medicare premiums and cost sharing Those with more resources, assistance primarily covering Medicare premiums and cost sharing, no Medicaid benefits “Buy-in programs” Hospitals 5,000 community hospitals: 60% nonprofit, 20% for-profit, 20% government owned Excludes: Fed hospitals (VA); mental hospitals; some long-term care Key relationships between History of Hospitals 1751-1870 Pennsylvania Hospital first hospital, place of last resort Intended to serve all sick poor suffer from a curable, noncontagious illness 1870-1910 Number of hospitals 178 to 4,359 in 1909, rise of religious nonprofit hospitals, rapid changes to technology Rise of middle class, more efficient to treat everyone in central location 1910-1930 Physicians monopolize profession and control and own hospitals Physicians control new technologies 1930-1965 Gov’t provides funding because supply of beds insufficient Hill-Burton Act in 1946 $3.7 billion, 344,00 new beds Rise of third party payers, and employer-based health insurance 1965-1980 Intro of Medicare and Medicaid Rising healthcare costs 1980-2012 Intro of Prospective Payment system Decrease in utilization, monitoring physician behavior Managed Care Mergers and acquisitions, vertical integration, hospital closures, and Antitrust action Background ~30% National Health Expenditures on hospital care Number of inpatient beds has fallen because a lot of procedures have become outpatient Average length of stay decreased from ~7.6-5.6 days (1981-2005) Not consistent with shift to outpatient services because patients left should need to stay in hospital longer DRGs shorter LOS, want quick turnover to get new paying patients New gov’t imposed payment structures (e.g. BBA, PPS) lead to increase in percent of hospitals with negative total margins When gov’t programs (Medicaid/care) pay less, hospitals charge private payers more; negative correlation
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Not consistent with profit maximizing economic theory Demography 5,724 Hospitals 4,973 short-term general hospitals Nonprofit 58% (2,903); For-profit 21% (1,025); State and local gov’t 21% (1,045) 797,403beds in community hospitals
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