TAILIEUCHUNG - Do Low-income Medicare Patients Have Costlier Hospital Stays

Medicare's Prospective Payment System (PPS) includes an adjustment that provides additional payments to hospitals that serve a disproportionately large share of low-income patients. the principal rationale for this adjustment is that low-income patients are costlier to treat, controlling for DRG. Only a few studies have directly examined this issue, however. These studies differ both over whether | RAND Do Low-Income Medicare Patients Have Costlier Hospital Stays Gerald F. Kominski Stephen H. Long DRU-418-HCFA July 1993 Prepared for Health Care Financing Adminstration This Draft IS intended to transmit preliminary results of RAND research. It is unreviewed and unedited. Views or conclusions expressed herein are tentative and do not necessarily represent the policies or opinions of the sponsor. Do not quote or cite this Draft without permission of the author. - ill - PREFACE This study was funded by the Health Care Financing Administration as part of the RAND UCLA Harvard Center for Health Care Financing Policy Research under Cooperative Agreement 18-C-98489 9-06. The total budget was 72 768. V - SUMMARY BACKGROUND Medicare s Prospective Payment System PPS includes an adjustment that provides additional payments to hospitals that serve a disproportionately large share of low-Income patients. The principal rationale for this adjustment is that low-income patients are costlier to treat controlling for DRG. Only a few studies have directly examined this Issue however. These studies differ both over whether or not low-income patients are costlier to treat and if BO over how much costlier. The purpose of this study was to provide a more precise answer to these questions using data from the universe of low-income Medicare beneficiaries. Research on hospitals costs for low-income patients has been based on two sources hospital-level data and patient-level data. The original research on which the Congress at least In part based the disproportionate share adjustment in 1986 involved hospital-level cost regressions. Studies of the 1981 cost reports conducted by the Congressional Budget Office CBO the Prospective Payment Assessment Commission ProPAC and the Health Care Financing Administration HCFA all suggested that Medicare cost per case was significantly statistically and quantitatively higher in larger urban hospitals that served a very large share of low-income .

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