To pay or not to pay: Medicare and the preventable adverse event: a rational decision or dangerous philosophical change?

• Author: Chaho, Amy J.

INTRODUCTION I. THE HISTORY OF MEDICARE: A. Funding and Governance B. Function and Purpose II. MEDICARE'S IMPACT ON THE MEDICAL PROFESSION, INSURANCE INDUSTRY AND THE GENERAL POPULATION III. THE NEED FOR COST CONTROLS IN HEALTHCARE AND FOR THE MEDICARE PROGRAM IV. THE ADVENT OF THE PREVENTABLE ADVERSE EVENT V. THE PROPOSED SPENDING SCHEME VI. CONGRESSIONAL POWER TO IMPOSE THE SPENDING SCHEME A. Authority B. Restraints 1. Intrinsic 2. Extrinsic: Tenth and Fourteenth Amendments; Punishment and Coercion: VII. RATIONAL RELATIONSHIP OF NON-PAYMENT AS A MEANS TO QUALITY AND COST GOALS A. Is the Payment Scheme Rationally Related to Quality Promotion? B. Is the Payment Scheme Rationally Related to Cost Savings? VIII. CONSEQUENCE: SETTING A NEW PRECEDENT? IX. THE PUBLICATION DILEMMA: INCREASED QUALITY OR INCREASED COST? A. How to Use Publicized Quality Data? B. Increased Cost with Increased Quality? C. Patient Choice Based on Quality Data X. GOAL ACCOMPLISHMENT THROUGH COOPERATION, Regulation and Information XI. CONCLUSION INTRODUCTION

These are turbulent times for health care in America. Health care costs are spiraling out of control, (1) quality evaluations reveal a plethora of errors affecting delivery and outcome of care, (2) and a growing number of citizens find themselves without the ability to afford services or obtain access to care. (3) A three-way battle wages among government regulators, health care providers, (4) and patients. (5) Government regulation is employed to improve quality and cost, hospitals and providers fight to stay economically viable while providing accessible and efficient care, and individual citizens are in desperate need of dependable and affordable medical services. (6) The reasons for this battle are as varied as the proposed solutions.

Congress now enters this fray through a proposed Medicare payment scheme that introduces a new philosophy of self-protective cost containment that masquerades as a method of quality improvement. (7) This new plan seeks to shift costs further onto hospitals and providers by the government's refusal to pay for certain services rendered for emergent, in-hospital care.(8) Congress proposes to employ a hindsight review technique that denies payment for medical care when that care is deemed to have been preventable, adverse, and with resultant serious effect as defined by Medicare officials. (9)

Medicare officials have identified ten events that they believe to be the result of preventable provider actions. (10) These events result in serious "injury" to the patient and are considered to be both costly and frequent. (11) Therefore, Medicare officials have determined that denial of payment for the necessary medical care that results from these events is permissible as quality and cost control measures. (12) However, contrary to the espoused intent of quality improvement, this scheme will likely endanger access to care and ultimately increase cost by further penalizing financially struggling hospitals and by shifting patients into the ranks of the under-insured. (13)

Furthermore, if, as expected, other insurance entities throughout the nation follow suit and deny payment for necessary medical care because of unilaterally defined "serious preventable events," (14) then foreseeable consequences include an extension of the philosophical precedent where preventability equates with non-payment. (15) This precedent is a reflection of the inherent spending power of third-party payors that may be extended to influence non-criminal personal behavior through financial penalty. (16) Refusal of payment for needed services conditioned upon the occurrence of unavoidable events represents an unjust punishment of hospitals and providers. (17) Moreover, denial of payment because a patient engages in actions which purportedly cause illness represents an invasion into the fundamental freedom of lifestyle choice that individual Americans enjoy. (18)

The government's plan to utilize non-standardized and unexplained data compiled by providers as a means to track these identified serious preventable events available for public review is also concerning. (19) This data is published prior to appeals by providers and is intended to be used as a public quality measure of the provider. (20) Publication of this data has been strongly opposed by the medical community who claim that undeserved adverse publicity and increased litigation based upon the unexplained data will result. (21)

This note proposes that Congress avoid this change in fundamental philosophy and continue to provide reasonable payment for services rendered, regardless of cause for the needed care. Instead, Medicare's vast constitutionally authorized spending power should be utilized to encourage quality improvements through extensive data compilation and cooperative analysis that focuses on quality improvement and cost balancing. (22) Through legislative power, Congress may play a central role that guides improvements, (23) while focus remains placed squarely upon the original intent of the Medicare program to enable vulnerable elderly, poor and disabled citizens to obtain health care. (24)

This note begins with a brief review of the history, purpose, governance and funding of the Medicare program. Next will be a review of the program's impact upon the medical industry. An evaluation of the need for cost and quality improvements that leads to the proposed non-payment scheme follows. Subsequent sections analyze the authority and rationality of the proposed spending scheme followed by an evaluation of consequences. The problematic publication of data compiled for proposed quality control is then briefly reviewed. Finally, this note will suggest that Congress reconsider this change in payment philosophy and instead accept a leadership role that encourages cooperative resolution to the quality improvement and cost efficiency issues that face the health care industry today.

1. THE HISTORY OF MEDICARE:

   1. Funding and Governance

      Medicare was established by Congress and President Johnson as part of Social Security in 1965 in response to a medical care crisis. (25) Retired American citizens were without affordable health care when they needed medical care most. (26) This crisis is strikingly similar to today's medical scenario. Today, the medical care crisis affects Americans younger than 65 years who are faced with exorbitant medical care costs and lack a third-party payor. (27) Today, as in 1965, adequate medical care in America is too expensive for the average American without help from employers or the government. (28)

      Medicare and associated entities (29) represent the only national health insurance programs. These programs are guaranteed by federal law to all citizens over the age of 65, the disabled and the poor. (30) Medicare is generally funded by the current work force through income tax and employer contributions. (31) Payment is disbursed through an established trust fund. (32) Medicare is an insurance program because it provides comprehensive care for a baseline fee by spreading the risk over the entire covered population. (33) In this manner it functions as any private insurance company and beneficiaries may receive care anywhere within the United States because the insurance is provided at a national level. (34) Moreover, patient choice is safeguarded because services are paid without regard for how the injury or illness developed. (35)

      Medicare consists of four parts labeled as A, B, C, and D. Part A is basic Medicare, (36) Part B is supplemental Medicare, (37) Part C encompasses the Medicare choice plans (38) and Part D includes prescription coverage. (39) Medicaid is an adjunctive yet separate entity created to provide health assistance for individuals who qualify for benefits based upon financial determinations rather than age. (40) Medigap policies are provided by private insurance companies as supplemental insurance that covers care not reimbursed by Medicare, such as deductibles and co-payments. (41)

      Medicare is managed by the Centers for Medicare and Medicaid Services (CMS). (42) CMS is an agency created by the Department of Health and Human Services (DHHS). (43) These agencies are administrative entities that act under the delegated authority of Congress and the President respectively. (44) Specifically, CMS has been granted the authority to oversee Medicare and its associated programs. (45) To (46) that end, CMS has the authority to create regulations that affect its programs and beneficiaries. (47)

   2. Function and Purpose

      The recognized purpose of the Medicare programs is to provide health care to citizens who are elderly, disabled or are in financial need. (48) Through this entity, societal cost is dispersed across all working citizens. (49) Traditionally, Medicare has reimbursed necessary medical care regardless of the cause or the preventability of the injury or illness that necessitated the care. (50)

      Moreover, the beneficiary is afforded a degree of choice between qualified providers and hospitals. (51) Beneficiaries are allowed to travel throughout the United States knowing that a facility that provides Medicare coverage will be available. (52) The program has traditionally recognized that modem health care in America is not considered to be a right but rather a luxury afforded to those who can pay or who have work benefits. (53) Therefore, by providing payment for services based on need for citizens with financial burdens and complex medical problems, Medicare has eliminated some capitalistic restraint upon access to care and choice, because all qualifying citizens have a guarantee of payment for medical services when they are needed. (54)

      2. MEDICARE'S IMPACT ON THE MEDICAL PROFESSION, INSURANCE INDUSTRY AND THE GENERAL POPULATION

         Medicare has had a significant impact upon the medical industry by defining and controlling reimbursement through use of its congressionally granted spending...