Post-Hospital Care Spending Problematic for Medicare

In efforts to improve the value ratio of healthcare and to standardize health spending, the federal government is taking a second look at Medicare spending on post-acute services, including nursing home care and home healthcare, according to a report from Kaiser Health News and The Washington Post.

According to a KHN analysis, Medicare spending per capita on post-acute services has grown at least 5 percent a year in nearly 70 percent of the most populous hospital markets. This translates to approximately 17 percent, or $62 billion, spent on post-acute care in 2012, according to a Medicare Payment Advisory Commission report presented to the Subcommittee on Health from the Committee on Ways and Means in the House of Representatives this past June. In some locations, including Louisiana, Massachusetts, Mississippi, Oklahoma and Texas, spending on post-acute care is as high as 25 percent of Medicare spending.

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The report notes increased post-acute spending may be due in part to a Medicare initiative in the 1980s to decrease the length of inpatient stays. The resulting post-acute care market is large and encompasses many types of care — home healthcare, nursing homes, inpatient rehabilitation facilities and long-term care hospitals. Each one of these options is radically different in terms of how much it costs Medicare. Cost averages range from $13,000 for an average home healthcare purchase, to $40,000 for an average inpatient rehabilitation facility stay, according to a MedPac analysis.

Indeed, Medicare patients can be profitable for post-acute care facilities, with earnings ranging between 6 and 14 percent, depending on facility type, according to MedPac estimates. Facilities may defend these profits by insisting they make up for losses due to Medicaid patients, according to the report. In addition, a system of skewed incentives surrounding when Medicare payment policies for care out of the hospital may a system in which post-acute care facilities attempt to admit patients with few needs and keep them as long as possible, according to the report.

Judy Feder, a professor at the Georgetown School of Public Policy in Washington, D.C. commented to KHN, "the incentive is to avoid the sick and skimp on services […]. It's nobody's fault, it's just the incentives," she said.

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