From a public spending point of view, post-acute care is particularly problematic. Most of Medicare’s geographic spending variation is due to this type of care. Part of the story is that Medicare pays for post-acute care in several different ways, with different implications for efficiency.
For example, traditional Medicare (TM) — which spends ten percent of its total on post-acute care — pays skilled nursing facilities per diem rates but inpatient rehabilitation facilities a single payment per discharge. Post-acute care is also available through Medicare Advantage (MA), which operates under a global, per-enrollee, payment. Unlike TM, MA plans establish networks, may require prior authorization for post-acute care, and can charge more in cost-sharing for post-acute care than TM does.
These different payment models offer different incentives that may affect who receives care, in what setting, and for how long. In Health Affairs, Peter Huckfeldt, José Escarce, Brendan Rabideau, Pinar Karaca-Mandic, and Neeraj Sood assessed some of the consequences of those incentives. Focusing on hospital discharges for lower extremity joint replacement, stroke, and heart failure patients between January 2011 and June 2013, they examined subsequent admissions to skilled nursing and inpatient rehabilitation facilities, comparing admission rates, lengths of stays, hospital readmission rates, time spent in the community, and mortality for MA and TM enrollees. To do so, they used CMS data on post-acute patient assessments for patients with discharges from hospitals that received disproportionate share or medical education payments from Medicare.