Medicare Postacute Care Payment Reforms Have Potential To Improve Efficiency Of Care, But May Need Changes To Cut Costs

Published in: Health Affairs, v. 31, no. 9, Sep. 2012, p. 1941-1950

Posted on RAND.org on September 01, 2012

by David C. Grabowski, Peter J. Huckfeldt, Neeraj Sood, Jose J. Escarce, Joseph P. Newhouse

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Research Question

  1. How will changes in payment policy for Medicare postacute care, as mandated in the Affordable Care Act, affect spending and patient care?

The Affordable Care Act mandates changes in payment policies for Medicare postacute care services intended to contain spending in the long run and help ensure the program's financial sustainability. In addition to reducing annual payment increases to providers under the existing prospective payment systems, the act calls for demonstration projects of bundled payment, accountable care organizations, and other strategies to promote care coordination and reduce spending. Experience with the adoption of Medicare prospective payment systems in postacute care settings approximately a decade ago suggests that current reforms could, but need not necessarily, produce such undesirable effects as decreased access for less profitable patients, poorer patient outcomes, and only short-lived curbs on spending. Policy makers will need to be vigilant in monitoring the impact of the Affordable Care Act reforms and be prepared to amend policies as necessary to ensure that the reforms exert persistent controls on spending without compromising the delivery of patient-appropriate postacute services.

Key Finding

Several ACA reforms, such as bundled payments and accountable care organizations, show promise for lowering the long-run spending trajectory. But policymakers will need to be vigilant in monitoring the rate of growth and be prepared to amend payment policies as necessary to achieve long-term containment of spending and financial sustainability for Medicare.

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