The Spillover Effect of a Change in Medicare Reimbursements on Provider Behavior in the Non‐Medicare Population for Bariatric Surgery

• DOI: http://doi.org/10.1002/wmh3.178
• Date: 01 March 2016
• Published date: 01 March 2016

The Spillover Effect of a Change in Medicare

Reimbursements on Provider Behavior in the

Non-Medicare Population for Bariatric Surgery

David B. Muhlestein, Thomas Wickizer, and Abigail Shoben

In 2006, the United States’ Centers for Medicare and Medicaid Services (CMS) released a national

coverage determination (NCD) which required bariatric surgery procedures to be performed in

accredited centers of excellence, which decreased the rate of procedures among Medicare benef‌iciaries.

The NCD’s effect on the non-Medicare population is unknown. In this study, we evaluate temporal

rates of bariatric surgery using data from the Healthcare Cost and Utilization Project’s National

Inpatient Sample from 1998 to 2010. We observed similar decreases in rates of bariatric surgery in

both the Medicare and non-Medicare populations with the decreases occurring concurrently. This

suggests signif‌icant Medicare spillover onto the non-Medicare population and indicates CMS has

the ability to inf‌luence provider behavior beyond the Medicare population.

KEY WORDS: bariatric surgery, Medicare, hospital reimbursement

Introduction

Through the Centers for Medicare and Medicaid Services (CMS), the United

States federal government administers its Medicare insurance program, which

principally provides health insurance for the elderly (Medicare.gov, 2013).

Medicare is the largest government-run health insurance program in the United

States and in 2013 represented nearly $600 billion in spending (Centers for

Medicare & Medicaid Services, 2014). Due to increases in the number of covered

lives and the cost of health care, the total spending through Medicare is expected

to grow at an annual rate of up to 6.8 percent through 2021 (Keehan et al., 2012).

Coupled with f‌inancial pressures, this expected growth has led to strong political

pressures to lower the cost of spending of Medicare (Seraf‌ini, 2012). In 2010, the

Patient Protection and Affordable Care Act was passed, which has signif‌icantly

expanded access to insurance for Americans, raising questions about the cost of

health care going forward (Elmendorf, 2011). As America wrestles with how to

inf‌luence the cost of care, the question arises of how CMS may be able to

inf‌luence the broader health-care system through its plans and strategies.

World Medical & Health Policy, Vol. 8, No. 1, 2016

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Medicare Coverage Decisions

CMS is responsible for reimbursing health care provided by physicians and

other health-care practitioners. Determination of which procedures are covered

by the Medicare program is based on statute and covered procedures must be

“reasonable and necessary for the prevention of illness” (Centers for Medicare &

Medicaid Services, 2012a). These coverage decisions may (i) include def‌ining

which types of procedures or treatments are reimbursable, and (ii) mandate that

certain criteria be met prior to reimbursement, e.g., mandating that certain

procedures are performed in facilities accredited by a specif‌ic facility. These

coverage decisions and reimbursement policies directly impact provider behavior

(Mitchell, Hadley, & Gaskin, 2002).

There are two approaches to deciding whether a procedure is covered by

Medicare (Medicare Payment Advisory Commission, 2003). First, CMS may make

a National Coverage Determination (NCD) that specif‌ies whether a specif‌ic

procedure is covered for all of Medicare. Alternatively, if an NCD has not been

released by Medicare, or if an existing NCD is unclear about specif‌ic cases,

regional Medicare contractors may make a Local Coverage Determination (LCD),

which def‌ines coverage decisions for the region covered by the Medicare

contractor. The LCD may not go against an NCD, but when the NCD is silent on

a matter, the LCD may f‌ill the void. Each LCD, though, is not bound by precedent

set by other LCDs; in the absence of an NCD, this results in variations of covered

services across Medicare regions (Foote, Wholey, Rockwood, & Halpern, 2004).

With ten Medicare regions, each composed of multiple states or territories

(Centers for Medicare & Medicaid Services, 2015), a variety of different coverage

decisions may exist across the country for the same procedures.

Periodically, CMS is required to make changes to its reimbursement policies as

the practice of medicine evolves. Parties who have a f‌inancial interest in how

Medicare reimburses certain forms of treatment have a vested interest in engaging

with CMS as reimbursement changes are considered. This process can take many

months and involves multiple steps (Centers for Medicare & Medicaid Services,

2003, 2012a; Medicare Payment Advisory Commission, 2003). CMS may begin to

reevaluate an existing NCD at its own discretion or upon the request of an outside

party (known as “A Formal Request for Consideration”) (Centers for Medicare &

Medicaid Services, 2003, p. 55,638). Following the initiation of a review, the CMS

will evaluate the NCD and, if the issue is complex, will refer the issue to the

Medicare Coverage Advisory Committee (MCAC), which provides independent

recommendations regarding coverage decisions. The MCAC, composed of scientif‌ic

and technical experts, publicly meets and then recommends to Medicare whether it

should modify its coverage policy; CMS may or may not adopt this recommenda-

tion. Subsequently, CMS will make a proposed coverage determination, which is

followed by a period of public comment and a f‌inal coverage determination, and

then determine an appropriate reimbursement level for the newly covered services.

Medicare has long had a NCD for bariatric surgery with a signif‌icant change

going into place in 2006. Prior work has evaluat ed how this changed NCD affected

Muhlestein/Wickizer/Shoben: Bariatric Surgery Spillover 75