Effects of Five Major Laws on Table 2.5: Inpatient Hospital Utilization Under Medicare hospital admissions, the admissions per 1,000 enrollees per year, the average covered days per admission, and the covered days of care per 1,000 enrollees per year for fiscal years 1980 through 1985 are shown in table 2.5. The number of admissions in fiscal year 1985 increased about 9 percent We believe that legislative changes during the period could have played a key role in holding down the increase in hospital costs. For example, TEFRA established cost-per-case limits and a ceiling on the rate of increase in reimbursement to most hospitals. Under PPS, Medicare payments to hospitals were limited to amounts projected under the TEFRA provisions. Both the TEFRA limits and PPS provided hospitals incentives to reduce length of stay; we believe these changes in law have been responsible for a significant portion of the decrease in length of stay. In addition, ORA provided that Medicare be the secondary payor in cases where the beneficiary has coverage under automobile, no-fault, or liability insurance. The four subsequent laws (see pp. 16-18) expanded this program making Medicare the secondary payor, as explained earlier. HCFA estimates that the Medicare secondary payor program saved Medicare about $460 million in fiscal year 1985. Effects of Five Major Laws on Cost of Providing Medicare Part B Table 2.6: Total Medicare Part B Benefit The total benefit costs for part B services increased about 109 percent from fiscal year 1980 through fiscal year 1985, from about $10.5 billion to about $21.9 billion; the cost per Medicare enrollee increased about 91 percent, from $382 to $729. The total benefit cost of providing part B services during fiscal years 1980 through 1985 is shown in table 2.6. As can be seen from table 2.6, the cost per enrollee increased at a relatively uniform rate from 1981 through 1983, but the growth rate began to decline in 1984 and 1985. Based on this decline, it appears that those 2 years were most affected by the legislative changes. The decline in growth rate for fiscal years 1984 and 1985 can be seen more clearly when the growth rate for those 2 years is compared with the rate for fiscal years 1973 through 1983 (see table 2.7). The total benefit cost of Medicare part B services converted to 1985 dollars (using the consumer price index for all medical services), the number of enrollees, the cost per enrollee in 1985 dollars, and the growth rate in cost per enrollee for fiscal years 1973 through 1983 and 1984 and 1985 are shown in table 2.7. These results suggest that the legislative changes could have played a major role in reducing the rate of increase in the cost of Medicare part B services. For example, one of the most significant provisions of DEFRA, which affected part B cost outlays-the physician fee freeze-became effective in fiscal year 1984. In addition, most of the savings from a number of the TEFRA provisions relating to part B costs, such as the reduction in payments to radiologists and pathologists, were expected in fiscal years 1984 and 1985. 5 Although the average growth rate was substantially lower in 1984 and 1985, the difference between the growth rate in those 2 years and 1973 through 1983 was not statistically significant at the 90percent confidence level. Effects of Five Major Laws on Cost of Home Health Care Table 2.8: Cost of Home Health Care (1985 Dollars), Fiscal Years 1980 Through 1985 Unlike the legislative changes for hospital and physician care, changes for home health care services were generally designed to expand benefits rather than to control the costs of these services. For example, section 930 of ORA expanded home health benefits under Medicare by providing for the coverage of an unlimited number of visits. Before this law, there was a limit of 100 visits during a benefit period. Section 930 also eliminated the requirement that a beneficiary be hospitalized 3 days before receiving home health services under part A. It is generally believed that home health care is less costly than care in hospitals or SNFS, and it appears that home health services were expanded in an effort to hold down total program costs. The cost of providing home health care, the number of visits, the cost per visit, and the number of visits per 1,000 Medicare enrollees for fiscal years 1980 through 1985 (in constant 1985 dollars) are shown in table 2.8. Source: HCFA's Bureau of Data Management and Strategy; data for fiscal year 1985 are current through Based on calculations from figures in table 2.8, we found the total cost Effects of Five Major Laws on Medicare Cost The Balanced Budget and Emergency Deficit Control Act of 1985 (Public Law 99-177) was enacted on December 12, 1985. The law, commonly known as Gramm-Rudman-Hollings, sets up a series of budget targets under a process for eliminating the federal deficit by fiscal year 1991. Under the law, the Office of Management and Budget and CBO were to submit a joint report to the Comptroller General each year, estimating the amount by which federal expenditures exceed the legislative ceilings and the percentage reduction in each budget account necessary to achieve the desired spending levels. The Comptroller General was to reach judgement on the estimates provided and to issue a report to the President specifying actions needed to reduce the deficit through acrossthe-board reductions. The law required the President to then order the spending reductions the Comptroller General specified. In a July 7, 1986, ruling, the Supreme Court declared the Comptroller General's role under the law unconstitutional because the Comptroller General is an officer of the legislative branch and, as such, may not carry out the executive functions assigned to him under the law. The reductions the President ordered for fiscal year 1986 were then invalidated. However, Public Law 99-366 reaffirmed the reductions under Gramm-Rudman-Hollings for fiscal year 1986. Gramm-Rudman-Hollings provides that if across-the-board reductions are made, the reductions for the Medicare program are limited to reducing payment amounts for covered services by 1 percent in fiscal year 1986 and 2 percent for fiscal year 1987 and each subsequent year. Medicaid was exempted from reductions under this legislation. The appropriation amount, reduction amount, and the balance of funds for Medicare in fiscal year 1986 are shown in table 2.9. The amounts shown in the table do not include changes to the Medicare budget as a result of COBRA, mentioned above, which was enacted after the across-the-board reductions for fiscal year 1986; across-the-board reductions for fiscal year 1987 have not been made. |