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 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 Medicare Advantage payment rates and rates of ambulatory care sensitive and elective hospitalizations amongst Medicare beneficiaries in counties with at least 10,000 Medicare beneficiaries and 3 percent MA penetration from 1999 - 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 Medicare Advantage payment rates may result in a small increase in ambulatory care sensitive admissions. Trends in ambulatory care sensitive admissions amongst chronically ill Medicare beneficiaries should be tracked following MA payment cuts.

Keywords: Medicare Advantage, payments, hospitalization rates, managed care, quality

JEL Classification: H51, I11, I12, I18