Modeling the impact of Medicare Advantage payment cuts on ambulatory care sensitive and elective hospitalizations

Abstract

Objective: To assess relationships between changes in Medicare Advantage (MA) payment rates and Medicare beneficiary hospitalizations and to simulate the effects of scheduled payment cuts on ambulatory care sensitive (ACS) and elective hospitalization rates.

Data: State Inpatient Database discharge abstracts from Arizona, Florida, and New York merged with administrative Medicare enrollment and MA payment data.

Study design: Retrospective, fixed effect regression analysis of the relationship between MA payment rates and rates of ACS and elective hospitalizations among Medicare beneficiaries in counties with at least 10,000 Medicare beneficiaries and 3 percent MA penetration from 1999 to 2005.

Principal findings: MA payment rates were negatively related to rates of ACS admissions. Simulations suggest that payment cuts could be associated with higher rates of ACS admissions. No relationship between MA payments and rates of elective hospitalizations was found.

Conclusions: Reductions in MA payment rates may result in a small increase in ACS admissions. Trends in ACS admissions among chronically ill Medicare beneficiaries should be tracked following MA payment cuts.

Figure 1

Average Monthly Medicare Advantage Payment Rates (U.S.$2005) in Study Counties, 1999–2005 Source: Author's calculations based on Medicare Advantage Ratebooks, 1999–2005. 398 county years from 74 counties in Arizona, Florida, and New York with at least 10,000 Medicare beneficiaries and 3 percent Medicare Advantage penetration. All payment rates inflation-adjusted and reported in 2005 dollars.