FR on vacation

The staff of First Reading will be on vacation for a few weeks.

Medicare and nursing homes

Rising costs in Medicare, Medicaid, and other federal health-related programs represent the central long-term fiscal challenge facing the nation. The Congressional Budget Office (CBO) is therefore increasingly focusing on analyzing the causes of those rising costs and potential policy responses.

Thus begins the preface to a recent report from CBO on Medicare payments to skilled nursing facilities (SNF). In this study, in calculating how Medicare's payment rates impact the volume of SNF services, CBO used two separate analyses: geographic-level and provider-level. In the geographic-level analysis, data came from 3,436 hospital service areas. In the provider-level analysis, volume was the number of Medicare-covered SNF days provided by a facility in a year. Changes in payment rates were calculated using "a Laspeyres-type index" and a mix of patients in the base year and the following year.

The paper found that the volume of SNF services varied positively with payment rates. At the provider level, SNF volume responded only to increases in payment rates, while at the geographic level, SNFs responded to both increases and decreases in payment rates.

Background Paper: The Impact of Medicare's Payment Rates on the Volume of Services Provided by Skilled Nursing Facilities (pdf, 32pp/732kB), July 2007