If you don't participate in Medicare, you still might have to play by its rules

September 1, 2004

MANAGED CARE executives may not keep an eye on Medicare, assuming it's an entirely different model and patient population. If recent trends continue, however, Medicare patients and Medicare rules could play an increasing role in a managed care patient mix.

Medicare claims can be identified by payer type. Medicare can be the primary or secondary payer on the claim; when Medicare is considered the secondary payer, it is assumed that the commercial carrier takes responsibility for reimbursement to the hospital.

TRENDS As of fiscal year 2003, the secondary payer market represents about 2% of all inpatient admissions based on the Medpar claims files. Between 2001 and 2002, the number of hospital inpatient admissions in which Medicare was the secondary payer increased by 17%; 2003 growth represented a 10% increase. In comparison, admissions where Medicare was the primary payer only rose 3% to 4%, respectively. All metrics referenced in this article are based on the CMS Medpar files, which is a publicly available inpatient dataset covering fiscal year October 1 through September 30.

PERFORMANCE IMPLICATIONS As might be expected, admissions outside of the typical Medicare population carry a different demographic. They're more likely to be male (57%) while the traditional Medicare patient is typically female (57%).

In more detail, who are these patients that make up the claims content where primary payer is not Medicare? A commonly held-but mistaken-belief is that Medicare is strictly for senior citizens.

While the federal program primarily serves an older population, patients may also qualify for Medicare through other means. Two of the more common ways are as an end-stage renal disease patient or through a disability. In some cases, disability patients may come through workers' compensation programs.

Some of the differences within the patient demographics are highlighted in the claims content: for claims where Medicare is secondary, DRG 209 (major joint and limb reattachment procedures of lower extremity) represents the single largest admission. Where Medicare is primary, DRG 127 (heart failure and shock) represents the largest number of admissions.

While seven out of the top 10 DRGs (ranked by number of admissions) are common to both groups, the mix of these admissions varies by group depending on payer. The remaining six DRGs unique to the payer groups are more reflective of the demographic population utilizing these stays. Differences in the charges, reimbursements and cost differentials by DRG may indicate to the payer community a growing interest on the Medicare demographic as impacting managed care operations (see chart below).

For managed care executives, there are a variety of ways to interpret how this mix of demographics and shift in payer responsibility for Medicare patients may affect their business.