Changes of Medicare Reimbursement Policies – Health System Example

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"Changes of Medicare Reimbursement Policies" is a great example of a paper on the health system.   The United States Government has introduced regulations recently which have changed the Medicare reimbursement policies. The percentage of payments to be made has been reduced, while acute care and rehabilitation have largely been either removed or payments reduced in respect to those criteria. The objective of introducing these changes was to reduce the costs of health care, but as detailed in this report, the overall impact appears to have been detrimental instead. Introduction:                             Medicare is the public health insurance program which has been formulated to provide for the health care of the elderly and the disabled.

In the year 2003, Medicare expenses cost the U. S. Government a sum of $271 billion, representing 13% of the federal budget (Frankes and Evans, 2006). The program comprises two parts – Part A which covers hospitalization and nursing facilities, and Part B which covers physician and outpatient services, laboratory charges and medical equipment.   Since costs for the Medicare program were turning out to be prohibitive, changes were introduced in the reimbursement policies, in an effort to reduce some of the expenditures and thereby bring about some trimming of the federal government budget on health care.

The sweeping changes proposed reduced payments for complex medical treatment procedures by 20 to 30%.                             Some of the major changes which were introduced and came into legal existence in 2008 were as follows (www. seniorjournal. com): reducing reimbursement for procedures such as angioplasties and implanting of drug-coated stents by 33% reducing reimbursement for implanting defibrillators by 23% Reducing reimbursements for hip and knee replacements by 10% Reimbursement for other diseases has also been cut down; hospitals and health care professionals will be fully reimbursed only if their patients are suffering from one of   13 diseases which have been listed.

  The Medicare reimbursement policies for Inpatient Rehabilitation Facilities were revised further in 2009 to be validated legally from 2010. The patients are classified into different categories based upon their clinical symptoms and payments for clinical conditions that are secondary to the major one are no longer reimbursed. (Ingenix, 2009). Cost outliner payments have also been readjusted to 3% of total estimated payments for Inpatient rehabilitation facilities.

Coverage criteria were further revised for inpatient rehabilitation facilities with several pre-conditions being exposed, such as mandating therapy treatments, to begin with, 36 hours of the midnight of the day the patient was admitted. (Ingenix, 2009).   Impact of the Medicare reimbursement policies:                             The objective of the Medicare reimbursement policies was to bring about a reduction in overall health care costs. The effect of these new policies, however, was to take care of almost prohibitively expensive for those suffering from any acute disease that was one of the 13 in the list of reimbursable ones under Medicare policies.

The overall impact of these policies has been detrimental, not only to patients but also to doctors and other health care providers. In a study that was carried out by Samson (2010) on patients suffering from bladder cancer,   these new policies have actually increased costs. The revised reimbursement policies were intended to transfer the costs of endoscopic procedures from hospitals where they were expensive to perform and get them carried out on an outpatient basis by doctors. While the objective was to shift the load from hospitals to outpatient surgeries, what happened instead was that the numbers of patients enrolling in hospitals did not reduce, but the number of patients who were being treated on an outpatient basis shot up, thereby leading to more patients receiving endoscopic procedures totally.

With new Medicare policies including bladder cancer as one of the 13 diseases where costs are to be reimbursed, the Government is now obliged to reimburse more surgeries rather than exchanging the expensive hospital procedures for less expensive ones to be performed on an outpatient basis.                             Research has also shown that by applying the new reimbursement criteria may be quite inadequate to address the needs for inpatient rehabilitation facilities, where the lion’ s share of expenses arises out of the incidental expenses and the treatment of associated symptoms, which are not covered for reimbursement.

Applying the new reimbursement rules, fewer than 13% of the inpatient facilities qualify for reimbursement (Ingenix 2009).                             One of the important categories of illness which has not been covered under the new reimbursement rules is the cardiac diseases category.

A significant amount of rehabilitation is required in these cases and has also been proved to be very beneficial. Since reimbursement policies do not extend to rehabilitation facilities in cardiac diseases, these programs are being underutilized and are likely to have a detrimental impact on prognosis and outcomes for patients with cardiac conditions (Suava et al, 2007).                             It may also be noted that health care services such as aftercare and nursing are not included for reimbursement under the new policies.   As a result, for those patients suffering from acute conditions, there will be little relief in terms of costs and such services are likely to become largely inaccessible to patients due to the high costs.

Doctors are also unlikely to come forward to treat patients when the likelihood of being reimbursed for their costs of treatment are not covered under Medicare.   This would of necessity be the case unless the disease falls under the category of one of the 13 which are included as being eligible for reimbursement.                             The new payment system which has been included under the new Medicare guidelines also aims to pay hospitals more accurately for the actual costs of care.

For example, according to Mr Slotnik, the director of Medicare policy at the Biotechnology Industry Organization, the basic costs per person for treating stroke patients with clot-busting drugs amounts to $11,578, but this is likely to be reduced by 35% with the new reimbursement guidelines (Pear, 2006). Similarly, there are likely to be significant reductions in other medical procedures as well.   But while such claims are made, it must also be borne in mind that when the reimbursement amounts paid to hospitals and health care providers is reduced, then they are likely to seek higher reimbursements from private insurers, which in turn is likely to produce disruptions in the health insurance market.

(Pear, 2006). Conclusions:                             The overall objective of the new Medicare regulations is to reduce costs by streamlining and reducing payouts. It is expected that the introduction of the new system is likely to cause radical shifts in money among hospitals and health care providers. But as detailed above, the overall impact appears to be negative; therefore it is detrimental to the U. S.

health care system in general, because it does not cover many acute health conditions, neither does it adequately cover the costs of nursing and rehabilitation.   All it manages to achieve is a shifting around of the beneficiaries, but in the process, it leaves many acute conditions and rehabilitative care unprotected. The lack of coverage in these areas makes health care virtually inaccessible to the elderly and infirm, the very people Medicare is supposed to reach.   It also impacts negatively on health care providers such as doctors, because Medicare will no longer compensate their expenses unless they fall under particular categories.

As a result, it appears likely that with Medicare opting out of several areas, private health insurers will step in to fill those gaps, which in turn is likely to jack up insurance costs and produce a detrimental effect on the U. S. health care system. Thus, on an overall basis, it appears that while the objective of the new regulations is to reduce costs, what is actually being achieved is quite the opposite.


Frankes, Michael A and Evans, Tracylain, 2006. “An overview of Medicare reimbursement regulations for advanced practice nurses,” Nursing Economics, March 1, 2006. Retrieved April 29, 2010 from:

• “Ingenix: Industry Insights”, 2009. Retrieved April 21, 2010 from:

• Pear, Robert, 2006. “Bush administration plans Medicare changes”, The New York Times, July 17, 2006; Retrieved April 29, 2010 from:

• “perfect storm developing over changes in Medicare’s hospital payment policy”, Retrieved April 29, 2010 from:

• Sampson, David 2010. “Medical reimbursement change meant to save money has opposite effect”, American Cancer Society, 8th Feb, 2010; Retrieved April 21, 2010 from:

• Suaya, J.A. Et al, 2007. “Use of cardiac rehabilitation by Medicare beneficiaries after myocardial infraction or coronary bypass surgery”, Circulation 116: 1653-1662

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