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High Medicare Costs for Nursing Home Residents

Published on November 6th, 2010

Kaiser Health News had an article about the high cost of Medicare for nursing home residents.  Medicare beneficiaries who reside in long-term care facilities account for an excessive and preventable portion of Medicare spending because of high rates of hospitalization, emergency room visits and skilled nursing care, according to reports released by the Kaiser Family Foundation (KFF).   See reports here, here, and here.

“When we step back…delivery systems reforms may not only improve quality of care…but may also reduce spending,” said Gretchen Jacobson, a KFF principal policy analyst and co-author of the reports. (KHN is a program of the foundation.)

The three reports include quantitative data and information from interviews with doctors, nursing home officials and other health care providers and families of long-term care residents, many of whom acknowledged an inflated emphasis on hospitalizations and testing for that patient population.

While Medicare doesn’t pay for residence in nursing homes, assisted living facilities or other long-term care programs, Medicare does cover emergency room visits, hospitalizations and other medical treatments.

According to the reports, the 1.7 million Medicare beneficiaries who were in long-term care for all of 2006, or who died in care before the year’s end, cost the program an average of $14,538 per person — more than twice the average expenditure for all Medicare beneficiaries that year. Individuals in that category comprised just 5 percent of Medicare’s 47 million beneficiaries but accounted for 9 percent of all Medicare spending, or $25 billion.

Hospital expenses accounted for nearly 40 percent of Medicare spending on patients who lived in long-term care facilities. If the number of hospital stays could be cut by 25 percent, the researchers estimated, Medicare could save at least $2.1 billion in 2010, and would likely result in additional savings to Medicaid, which pays for more than 60 percent of nursing home residents. Medicaid is the state/federal health program for the poor.

Previous studies have estimated that 30 to 67 percent of these hospitalizations could be prevented with "well-targeted interventions," according to one of the Kaiser reports. Before those savings can take place, the current system of care must overcome what one of the reports called a “culture of hospitalization” that pervades the perceptions and behaviors of physicians, caretakers , and family members alike, experts said.

Physicians often prefer inpatient treatment due to convenience: hospitals have all the diagnostic tools they need in one place, and doctors can easily divide their time between multiple patients. Nurses interviewed for the qualitative report also said they felt unprepared or unqualified to deal with patients’ health problems in a residential facility or didn’t want to risk liability by ignoring potentially life-threatening ailments.

“The perception of best care is ‘Let’s send Mrs. M to the emergency room and see what the ER finds,’” said Dr. Cheryl Phillips, who is chief medical officer of the health-focused Bay Area nonprofit On Lok Lifeways and past president of the American Geriatrics Society.

A lack of qualified staff, combined with protocols and license restrictions, have further exacerbated the trend of defaulting to hospitalization. Proper coordination of care among nurses, physicians, and family members is essential in preventing unnecessary hospitalizations in the future, researchers concluded.

The reports showed that many of the hospitalizations of residents of long-term care facilities occurred within the first few months of their stay, when patients are often transitioning from a hospital setting into residential care. Providers often fail to ensure that medical records move with the patient from one facility to the next, and emergency room physicians may alter prescribed dosages without knowing a patient’s history or notifying anyone of the change.

Financial incentives for team-based, patient-centered care are needed to hold providers responsible for their patients’ health outcomes, researchers concluded. Which incentives—or disincentives—will work best is an open question. Under the current system, physicians profit from longer, more frequent hospitalizations, regardless of their necessity.

Phillips believes that a section of the reform bill that prioritizes coordination of care for individuals with multiple life-threatening ailments will by definition include most Medicare beneficiaries who are in long-term care.

An additional clause in the new health law, denying payment to hospitals that readmit certain patients within 30 days of the initial visit, is expected to further discourage unnecessary hospitalizations. That provision takes effect in October 2012.



Joe Pioletti
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