Health Economics and Financing 5th Edition By Thomas E
File: c10; Chapter 10: Long-Term Care True/False
1) Increasing demand for long-term care is associated with macroeconomic and demographic trends as well as individual life style choices. For instance, higher workforce participation by women has raised the opportunity cost of care giving. Answer: True Reference: 10.1 Development of the Long-Term Care Market Level: Easy 2) Home health care providers meet only functional and social needs of patients. Answer: False Response: Medical needs are a smaller, but important part of home health care. Reference: 10.3 Defining LTC: Types of Care Level: Easy 3) Medicare accounts for more than half of all nursing home funding. Answer: False Response: Medicaid accounts for more than half of all nursing home funding. Reference: 10.4 Medicaid: Nursing Homes as a Two-Part Market Level: Easy 4) Originally, Medicaid has been created to provide medical insurance for indigent women and children. Now, however, the majority of Medicaid expenditures are for the elderly. Answer: True Reference: 10.4 Medicaid: Nursing Homes as a Two-Part Market Level: Easy 5) Nursing homes set their prices by estimating the elasticity of demand for private pay patients. Typically, nursing homes first try to fill as many of their beds as possible with patients willing to pay prices above the Medicaid reimbursement rate. Only then they proceed to fill the remaining beds with Medicaid patients. Answer: True Reference: 10.4 Medicaid: Nursing Homes as a Two-Part Market Level: Medium 6) An economist is asked to choose an appropriate cost escalation index for long term care providers. Using an index that relied more on housing and employment cost indices than on technology cost increases would probably result in lower cost escalation than a more general hospital cost index. Answer: True Response: Over half of all costs for nursing homes are for labor & benefits. Reference: 10.3 Defining LTC: Types of Care Level: Difficult 7) The existence of financial reimbursement cycles reflects the self-interest of all parties involved in the provision of medical and long term health care services. Answer: True Response: Patient, provider, payer. Reference: 10.10 Financial Reimbursement Cycles Level: Easy 8) Middle and low income taxpayers benefit from several federal tax incentives to buy long term care insurance. Answer: False Response: Unlike IRA contributions, which have preferential tax treatment, savings for long term care have no such benefit. Reference: 10.8 LTC Insurance Level: Medium 9) More than 10% of U.S. health care spending goes to nursing homes. Answer: False Response: The share of health care spending on nursing homes is about 5%. Reference: 10.1 Development of the Long-Term Care Market Level: Easy 10) Long term care facilities covered by Medicaid include facilities for the mentally impaired and the permanently disabled. Answer: True Reference: 10.3 Defining LTC: Types of Care Level: Easy 11) In the market for nursing home services, after reaching the quantity where the private market’s willingness-to-pay matches the Medicaid reimbursement rate, demand becomes essentially perfectly elastic at the Medicaid reimbursement rate, as all remaining beds can typically be filled with Medicaid patients. Answer: True Reference: 10.4 Medicaid: Nursing Homes as a Two-Part Market Level: Medium 12) Payments to hospices from Medicare can be characterized as having reached the fourth stage of a typical financial reimbursement cycle: total cost control through global budgets. Answer: False Response: The market for hospice services seems to be at an expansion stage right now, incentivized to a great extent by the Medicaid reimbursements based on administered prices. It will reach the fourth stage of a typical financial reimbursement cycle only when the growth will be moderated through stricter reimbursement mechanisms, such as global budgets. Reference: 10.10 Financial Reimbursement Cycles Level: Medium Multiple Choice 13) The full economic impact of nursing home certificate of need restrictions on a local economy is difficult to quantify because a) it is difficult to measure the opportunity cost of the real estate that could have been used for a nursing home. b) it is difficult to measure the opportunity cost to the Medicaid program of the patient per diem payment. c) fees for filing a CON application vary significantly from state to state. d) it is difficult to measure the opportunity cost of the caregivers who are financially uncompensated while caring for loved ones waiting for a nursing home space. e) more economic analysis is needed. Answer: d Reference: 10.5 Certificate of Need: Whose Needs?/Competing for Certificates of Need, Not for Patients Level: Difficult 14) Payments to physicians from Medicare can be characterized as having reached which stage of a typical financial reimbursement cycle? a) The First Stage: fees paid to trusted voluntary organizations. b) The Second Stage: cost reimbursements. c) The Third Stage: complex administered prices. d) The Fourth Stage: total cost control through global budgets adjusted to match growth in GDP. e) The Fifth Stage: start over. Answer: d Reference: 10.10 Financial Reimbursement Cycles Level: Medium 15) Payments to hospitals from private insurers can be characterized as having reached which stage of a typical financial reimbursement cycle? a) The First Stage: fees paid to trusted voluntary organizations. b) The Second Stage: cost reimbursements. c) The Third Stage: complex administered prices. d) The Fourth Stage: total cost control through global budgets adjusted to match growth in GDP. e) The Fifth Stage: start over. Answer: c Reference: 10.10 Financial Reimbursement Cycles Level: Easy 16) The institution of payment according to one of eighty home health resource groups (HHRGs) limits the payments to a provider over a 60 day period. No matter how many times a provider visits a home during the 60 day period, the price remains at the HHRG designated amount. This is an example of which stage of the financial reimbursement cycle? a) The First Stage: fees paid to trusted voluntary organizations. b) The Second Stage: cost reimbursements. c) The Third Stage: complex administered prices. d) The Fourth Stage: total cost control through global budgets adjusted to match growth in GDP. e) The Fifth Stage: start over. Answer: c Reference: 10.10 Financial Reimbursement Cycles Level: Difficult 17) Which of the following statements is incorrect? The practice of transitioning post-acute-care hospital patients to nursing homes a) may generate some savings to Medicare due to shortened hospital stays. b) may overstretch Medicaid budget. c) is profitable for nursing homes because it fills beds that would otherwise stay empty for prolonged periods of time. d) aims to achieve system-wide cost savings due to substitution of expensive hospital care with less expensive nursing home care. e) has not really generated the level of system-wide savings that were originally anticipated because demand for new services provided outside of the hospital has exceeded savings from shortened hospital services. Answer: c Reference: 10.6 Cost Control By Substitution Level: Medium 18) The case-mix reimbursement system for nursing homes may not be perfect because a) it provides nursing homes with incentives to admit only severely ill patients. b) it provides nursing homes with incentives to admit only less costly patients. c) even with differential payment rates, if differences in payment rate are not correctly matched with differences in cost, nursing homes may find it profitable to accept some patients while turning others away. d) when the state pays only a single fixed rate per day for nursing home care, it means that some patients may be denied care. e) with revenue per day fixed, a nursing home can increase profits by accepting only less costly patients who need very little care. Answer: c Reference: 10.7 Case-Mix Reimbursement Level: Difficult 19) Medicaid payments to nursing homes using a case-mix adjustment a) makes it harder for patients who are sicker to get care. b) is an effort to relate the cost of care with the severity of patients’ needs. c) uses the DRG system of administered prices. d) always considers resource utilization groups (RUGs). e) reflects certificate of need requirements. Answer: b Reference: 10.7 Case-Mix Reimbursement Level: Medium 20) Which of the following statements about the certificate of need legislation is false? a) Patients benefit from the certificate of need legislation in the nursing home market, since CON legislation ensured incentives for nursing homes to provide high-quality care to attract more patients. b) Current providers benefit from the certificate of need legislation in the nursing home market, as they face less competition from potential market entrants. c) Taxpayers benefit from the certificate of need legislation in the nursing home market, since they have less nursing homes to support through tax payments to Medicaid. d) State regulators benefit from the certificate of need legislation in the nursing home market, as CON regulations reduced state Medicaid budgets. e) Nursing home owners benefit from the certificate of need legislation in the nursing home market, as restricted entry into the market leads to excess profits. Answer: a Reference: 10.5 Certificate of Need: Whose Needs?/Who Pays? Level: Medium 21) Long term care insurance a) pays more than 10% of U.S. nursing home and home health care bills. b) is widespread in the U.S. c) is popular because significant financial benefits go to the heirs of the individual who purchased the insurance. d) must be purchased so far in advance of anticipated need that savings become a good alternative to insurance. e) pays mostly for medical care, with less budget allocated to lifestyle choices, such as housing, food, social amenities. Answer: d Reference: 10.8 LTC Insurance Level: Medium 22) The wealthiest group in America is in the age category of a) 35 to 44 years old. b) 45 to 54 years old. c) 55 to 64 years old. d) 65 to 74 years old. e) 75 and older. Answer: d Reference: 10.9 Retirement, Assisted Living, And The Wealth Elderly Level: Easy 23) It would be safe to predict that the graph showing the relationship between the individuals’ income and nursing home utilization a) is positively sloped. b) is negatively sloped. c) has a U-shape. d) has an inverted U-shape. e) can be either positively sloped or U-shaped, depending on the assumptions about other demographic characteristics. Answer: c Response: At low incomes utilization is high, as all bills are paid by Medicaid. At medium incomes utilization levels drop, because in the absence of Medicaid financing the necessity to pay out-of-pocket significantly reduces the demand. At high income levels utilization becomes high again, as wealthy people are willing to pay for and can afford a nice nursing facility. Reference: 10.4 Medicaid: Nursing Homes As A Two-Part Market Level: Difficult 24) Long term care insurance a) is not useful to the family of a policyholder. b) is just as popular as traditional indemnity type health insurance. c) cannot be purchased after age 65. d) is unpopular because financial benefits really accrue to the survivors, heirs and family members of the person receiving care, not the beneficiary. e) can be used to cover residence at selective over-55 living communities. Answer: d Reference: 10.8 LTC Insurance Level: Medium Essay 25) Explain how the market for nursing home care is a two part market in which those who can afford to pay out of pocket subsidize those with less money who are dependent on Medicaid to pay for nursing home. It may be helpful to draw a graph of the market demand. Answer: A student could draw Figure 10.3, lower right panel, and explain that private pay patients demand the first units of nursing home beds at prices along the demand curve until the price drops sufficiently down to equal the Medicaid payment rate. After this rate is achieved, the nursing home faces a horizontal, perfectly elastic, demand curve for Medicaid residents. This is a subsidy by wealthier nursing home residents to poorer nursing home residents. Reference: 10.4 Medicaid: Nursing Homes as a Two-Part Market Level: Difficult 26) After the CON legislation has been repealed in several states, how did the nursing home markets in those states respond? Who benefits when certificate of need legislation (CON) is repealed in the nursing home market? Answer: Increased competition since 1990 has been observed in such markets. Waiting times for nursing home beds have decreased. Residents benefit from decreased waiting time. Providers who had market power lose out on monopoly profits if more entrants are in the market. Competition for private pay clients may increase the quality in the market so all nursing home residents would benefit. Reference: 10.5 Certificate of Need: Whose Needs? Level: Medium 27) What are some of the difficulties in implementing case-mix adjusted payment schedule in nursing homes? What are the criteria used to determine a case-mix weight? What are the strengths and weaknesses of such a system? Answer: In a fixed payment system, nursing homes have an incentive to turn away the sickest patients. A case-mix adjusted payment schedule would include a ranking of severity of patients’ needs, to provide an incentive for nursing homes to accept severely ill patients too. Activities of Daily Living (ADLs) such as bathing, dressing, toileting, ambulating, continence and feeding are used as areas of ranking the severity of a patient’s needs. A strength of such a system is that ideally cash flow should follow the efforts and time spent on each patient. A weakness might be that it is difficult to match payments to actual costs very accurately, and some reimbursement categories might be more profitable (i.e. over-compensated) than others. It might lead to a ratcheting up of the assessments of residents’ infirmities, a gaming of the system in an effort to classify most patients in the most profitable reimbursement category. Reference: 10.7 Case-Mix Reimbursement. Level: Medium 28) Use the concept of cost control by substitution to explain how the efforts to reduce healthcare costs by making cataract surgery an ambulatory surgery have actually increased Medicare spending on cataract surgery. Answer: Providing incentives to reduce utilization and costs in one, usually more expensive, part of the health care system (e.g. hospitals) by making it easier for patient to obtain the same care in a less expensive setting (e.g. outpatient care) instead, often leads to higher, not lower, system-wide expenditures. When a treatment becomes available in a less expensive setting, demand for such a treatment increases. Increased costs due to higher utilization in a less expensive setting usually outweigh any cost savings due to lower utilization in a more expensive setting. Though inpatient costs have decreased for cataract surgery, the existence of a treatment in an outpatient setting has resulted in an increase in the demand for the service, so much so that total spending on cataract surgeries increased. Reference: 10.6 Cost Control by Substitution Level: Medium 29) Research shows that much more money is spent on medical care for the elderly today than 50 years ago. What is the likely reason? Do today’s elderly tend to be sicker and more likely to be disabled than in prior years? Answer: No, today’s elderly tend to be healthier and less likely to be disabled than in prior years. However, readily available insurance coverage (institution of Medicare in 1965) and increased personal wealth made more money available for medical care. Hence, the demand increased. Reference: 10.2 Age And Health Care Spending Level: Easy 30) Discuss your opinion about the efficiency (or lack of thereof) of the Medicaid reimbursement mechanism for nursing home care. Do you expect the Medicaid reimbursement mechanism for nursing home care to change in the future, or to remain as is? Why? Answer: Long term care used to be a tiny portion of the program, it was not planned to be one of the major spending categories. However, multiple flaws in the design of the program created unintended economic incentives for various market participants to game the system. The colossal market for nursing home care has developed since the system allowed for significant profits to be made. The market does not appear to be efficient, as for many years there was no incentive to compete for patients and maintain high quality of care because of a continuous shortage of beds. Another serious concern about efficiency, as well as equity, comes from the fact that many middle-class and wealthy people are able to conceal their financial assets, qualify for Medicaid and get into a nursing home , while many truly needy people are still waiting for an available bed. These and other reasons together increased Medicaid expenditures beyond any societal expectations, raising serious concerns about Medicaid’s looming insolvency. Significant parts of that spending can be presumed wasteful and inefficient. The current reimbursement system under Medicaid will have to change sooner or later. Since reimbursement for nursing home care is currently at the Stage 3 of the financial reimbursement cycle (complex administered prices), it would be reasonable to expect that at some point the reimbursement principles will change to Stage 4: global budget control. That should increase efficiency, by decreasing the excess profit opportunities. Reference: 10.4 Medicaid: Nursing Homes as a Two-Part Market Level: Difficult
Reviews
There are no reviews yet.