Table of Contents

1. Table of Contents

2. Maryland Demographics Demographic factors have a significant effect on health care utilization. Age, race, and area of residence all contribute to health care needs. Relative to the nation as a whole, Maryland has a greater proportion of non-whites but fewer children, elderly, and residents living outside metropolitan areas. Throughout the decade, the population growth rate has declined both nationally and at the state level. Since 1992, Maryland�s population has grown at a slower rate than the national average. The disparity in growth rates has widened in the last two years. The proportion of children under the age of 5 has been declining steadily since 1992 in Maryland and in the U.S. since 1993. The percentage of elderly has been rising, although the rate of increase has been decelerating both in Maryland and the nation as a whole. Maryland significantly differs from the nation in its percentage of minorities. Nationally, non-whites comprise 17.3 percent of the population, while in Maryland, the proportion of non-whites is 31.5 percent. Maryland�s health care system must address the special needs of the large and growing presence of non-whites in order to improve the health status of its residents.

3. Maryland Demographics

4. General Health Status Age-adjusted rates for four of the top ten causes of death in the state are below the national average. These causes of death include: heart disease, cerebrovascular disease, accident and adverse events, and chronic obstructive pulmonary disease (COPD). Maryland�s rates exceed the nation�s for the remaining six causes. There is a considerable gap between the U.S. and state age-adjusted mortality rates for septicemia (73.2 percent), HIV (59.5 percent), and diabetes (29 percent). Maryland ranked sixth in the nation in reported AIDS cases in 1997. Relative to the nation, both drug users and females account for larger percentages of the state�s AIDS cases. The state�s case rate for women ranks fourth in the nation. Violent crime exerts a negative influence on the health status of Marylanders. The age-adjusted homicide rate in Maryland is 59.5 percent above the national average, and the state ranked third in the nation in violent crime offenses in 1996. The state rates also exceed the national rates for other causes of death including: cancer (5.4 percent ) and pneumonia/influenza (7.1 percent). Smoking, however, is less prevalent in Maryland than in the nation as a whole. In 1996, 23.5 percent of the U.S. population smoked compared to 20.9 percent of the population in the state.

5. General Health Status: Age-Adjusted Death Rates for Maryland in 1996Maryland�s Top 10 Causes of Death

6. Age-Adjusted Mortality Rates by Race Blacks have higher mortality rates than whites for many causes of death. In 1996, the overall age-adjusted mortality rate for blacks was 70 percent higher than that of whites. Nationally, the rate for blacks exceeded the rate for whites by 58 percent. The age-adjusted death rate for whites was 466.8 per 100,000 population compared to an age-adjusted death rate for blacks of 738.3 per 100,000 population. The disparity between blacks and whites is especially great for males. Black males in Maryland have mortality rates that are 76 percent higher than white males. Black males who reside in the state are 3 percent more likely to die than their national counterparts. In contrast, black females in Maryland have a lower mortality rate than the corresponding U.S. average; however, black females in the state have a mortality rate that is 54 percent higher than white females who reside in Maryland. In 1996, the national and statewide mortality rates for blacks were higher for all leading causes of death except chronic obstructive pulmonary diseases, suicide, and Alzheimer�s disease. The differences between blacks and whites in Maryland are particularly striking in the cases of HIV infection and homicide. For HIV deaths per 100,000 population, the age-adjusted mortality level was 55.6 for blacks and 5 for whites. For homicides per 100,000 population, the age-adjusted mortality level was 36.8 for blacks and 3.30 for whites.

7. Age-Adjusted Mortality Rates by Race:1996 Rates for Maryland Residents

8. Health Status of Children Compared to the national averages for many health-related measures, Maryland�s children are at an advantage. The state�s children are more likely to be born to mothers who received prenatal care in their first trimester. Also, Maryland toddlers are more likely to receive necessary immunizations. Advantages of living in the state are not experienced equally by children in all racial and gender categories, however. Because of its higher percentage of black residents, the overall infant mortality rate for Maryland has historically been higher than the U.S. rate. The state�s white infant mortality has generally been slightly below the national average. For most of the last 7 years, the state�s black infant mortality has also been below the national average. Maryland�s overall infant mortality rate for 1997 was 2.6 percent higher than in 1996. The year 1997 marked the state�s first rise in infant mortality in half a decade, driven by a significant increase in the black infant mortality rate in the Baltimore Metropolitan Area. In 1997, fewer low birth weight babies were born to whites in Maryland compared to the nation (6.4 percent versus 6.5 percent). However, more low birth weight babies were born to blacks in Maryland (13.6 percent) relative to the nation as a whole (13 percent).

9. Health Status of Children: Infant Mortality Rates

10. Insurance Coverage One of the most important influences on demand for health care services is health insurance. Historically, the proportion of Maryland�s population without health insurance has been below the national average. This pattern has held for black and white residents of the state. Nationally, 15.7 percent of the population was uninsured in 1997 compared to 13.4 percent of the Maryland population (680,000 residents). About 100,000 of the uninsured in Maryland were children under the age of 18 residing in families with incomes below 200 percent of the federal poverty rate. Since July 1998, over 30,000 of these children have enrolled in the State�s Children Health Insurance Program (S-CHIP). In 1995 and 1996, approximately 86 percent of the state�s full-time workers (under age 65) and their dependents had health insurance, a higher percentage than their national counterparts. Within Maryland, insured individuals are more likely to have private coverage than the national average. Medicare enrollment in the state is below the national average, primarily because the proportion of residents who are 65 years and older is also below average. Nearly half of the state�s non-elderly impoverished residents are enrolled in Medicaid, a proportion that is slightly above average. Nevertheless, the state�s below-average poverty rate results in a lower percentage of residents on Medicaid compared to the national level.

11. Insurance Coverage*

12. Influence of HMOs Among the Insured Approximately 1.7 million Maryland residents are enrolled in HMOs, making the state�s HMO market share among the highest in the nation. Approximately 33.5 percent of the total state population (38.7 percent of the insured population) was enrolled in HMOs in 1997, compared to 27 percent nationwide (32 percent of the insured population). HMO enrollees increased by 10.1 percent between 1996 and 1997, representing a gain of more than 156,000 new members. One in three Maryland residents now receives health care services through an HMO. In 1997, the HMO market share in the state increased by 8.6 percent among the population (9.3 percent among the insured) compared to a national increase of 13 percent (13.8 percent among the insured). Considering Maryland�s history of higher than average HMO market share, it is not surprising that the state�s rate has slowed as the national rate has risen. Over 44 percent of privately insured Marylanders and over 33 percent of Medicaid recipients received their health care coverage through HMOs in 1997. Medicare and Medicaid showed significant gains in HMO enrollments from 1996 to 1997, but private HMO enrollment grew only 6 percent in 1997. The Medicaid HMO and MCO population increased by 30 percent due to the implementation of Maryland�s mandatory Medicaid managed care program (HealthChoice). HealthChoice enrolled more than 300,000 Maryland Medicaid recipients in managed care organizations by December, 1997. Historically, Maryland Medicare HMO enrollment has been behind the national trend, but the gap is narrowing. Medicare HMO coverage in Maryland doubled in 1997, moving much closer to the national average. In 1996, just 5.48 percent of Maryland Medicare beneficiaries were enrolled in an HMO compared to 12.18 percent in 1997.

14. Availability and Use of Health Care Services Utilization is influenced by the supply of health care resources, including the availability of substitutes. A limited supply tends to restrict utilization. A large supply is not always beneficial, especially in markets where the supplier has the ability to induce demand due to a lack of complete consumer knowledge or because the supplier acts as the agent for the consumer. Such is the case in health care markets where most consumers do not have the knowledge to choose which services will meet their needs. Health care services and providers are generally more widely available in Maryland than in the nation as a whole. The extent of health care resources across the state indicates the presence of some overcapacity. Although the number of hospital beds has been decreasing nationally, the supply of inpatient services still exceeds the demand. In Maryland, the occupancy rates for community hospitals fell by 3 percent in 1996 to 68 percent, resulting in an average rate that continues to be better than the national value (61 percent). The supply of nursing home beds is closer to demand both in Maryland and nationally. The 1996 nursing home occupancy rates also declined from 1995 by 3 percent in Maryland to 89 percent and by 1 percent nationally to 90 percent. Community hospitals in Maryland are characterized by a lower admission rate than the national average as well as a shorter mean stay, but the rates for emergency room use are closer (310 versus 351 nationally). Maryland residents visit community hospitals as outpatients (excluding emergency visits) at almost one half the national rate. However, the surgical rate in the state�s community hospitals is higher than the national average (94.8 versus 88.9 per 1,000 population).

15. Use of Health Care Services: Community Hospital Rates, 1996

16. Physician Supply Because physicians act as agents for consumers, they have the ability to induce demand. Thus a large supply of physicians may increase demand for services and the cost of care. Currently, it is believed that physicians� ability to induce demand is less than originally thought with one notable exception: Surgeons have a greater ability to induce demand. Maryland�s 1996 per capita supply of non-federal physicians in patient care is the third highest among all states. The state�s supplies of primary care and specialty physicians were 20 percent and 42 percent greater, respectively, than the national average. The distribution of physicians across the state varies significantly. Primary care and specialty care practitioners are in ample supply in Maryland�s primarily urban areas, but in most rural counties, physician per capita levels are well below the national average. Maryland�s per capita levels of physician assistants, nurse practitioners, and dentists exceed the national averages for those practitioners.

17. Physician Supply

18. Comparing Maryland to Other States National rankings of state health care produced in 1998 by ReliaStar and the Morgan Quitno Corporation ranked Maryland within the top half and top third of all states, respectively. Both systems rank states based on a composite index from one to fifty. Maryland�s ranking by Morgan Quitno from 1996 through 1998 remained fairly stable, but its ReliaStar rank dropped between 1990 and 1998. The construction of the ReliaStar composite score derives from 17 weighted measures clustered in 5 categories. The state consistently ranks near the top in support for public health. Adequacy of prenatal care, motor vehicle deaths, and prevalence of smoking are other categories in which Maryland performs well. The areas with the state�s four lowest rankings are violent crime, infant mortality, premature death, and infectious disease. The Morgan Quitno rankings represent each state�s average over 23 categories. Maryland received its worst rankings for AIDS, deaths from cancer, sexually transmitted disease, and infant mortality. Its best rankings were for percent of population lacking access to primary care, adults who are binge drinkers, adults who smoke, and the number of community hospitals.

19. Comparing Maryland to Other States*

20. Slow Growth In Health Care Expenditures is Market Wide Growth in health care expenditures slowed for all payers in 1997, indicating that reduced growth is now market wide. In contrast, only public payers experienced slow growth in 1996. Aggregate government expenditures increased 3.6 percent in 1997, while private expenditures increased 2.3 percent. The growth rate in public expenditures made for the state�s residents slowed in 1996 and 1997. The growth rate for private expenditures increased in 1996 but fell slightly in 1997. Nationally, the growth rate for total health care expenditures also dropped from 4.91 in 1996 to 4.8 percent in 1997. Public expenditures grew at a slower rate than in 1996 (5.34 percent as opposed to 5.76 percent). Private expenditures grew at a faster rate (4.31 percent versus 4.2 percent in 1996). 1997 is the second year in a row that the growth rate for national public expenditures has slowed. The decreases in public expenditures growth rates are attributable to a number of factors including declining Medicaid enrollments and an overall trend in public program to make greater use of all forms of managed care. The growth rate for national private expenditures increased for the third consecutive year in 1997. Rising out-of-pocket costs suggest that consumers bear most of the increase.

21. Slow Growth in Expenditures is Market Wide National Health Expenditures Growth Rate

22. How Much Does Health Care Cost? In Maryland, 1997 health care expenditures were $15.9 billion, a growth of 2.8 percent from 1996. This small rate of increase continues the state�s trend of slow growth in expenditures. National figures show the slowest rate of growth in almost 35 years. The average per capita expenditure across all residents for all services was $3,128, rising 2.4 percent from 1996 and following the same trend of slow growth seen in overall expenditures. In 1997, per capita expenditure increases for insured services slowed significantly. The growth rate in Medicaid program expenditures declined from 4.9 percent in 1996 to 3.9 percent in 1997. Medicare and Medicaid enrollees have the highest per capita expenditures, reflecting the greater health care needs of these populations.

24. Where Does the Health Care Dollar Come From? In 1997, the overall health care dollar was shared by Maryland payers in a manner similar to the previous year. The government�s share of expenditures rose slightly. Although the private sector accounts for most of the health expenditures in the state (55.5 percent), Maryland follows the national trend of increased public sector funding for health care. Forty percent of total health care expenditures in 1997 were financed by private insurance. Nearly one quarter (23 percent) of all expenditures were funded by Medicare. Private individuals (for uninsured services, coinsurance, and deductibles) and the Medicaid program each contributed 16 percent of expenditures. Increases in expenditures were driven by medical inflation rather than by significant expansions in health care coverage among residents of the state.

25. Where Does The Health Care Dollar Come From?

26. Where Does the Health Care Dollar Go? Information on government HMO expenditures is not complete, making it difficult to compare changes in the distribution of expenditures by services. To provide the basis for a limited comparison, HCACC distributed government HMO expenditures across service categories using corresponding non-HMO programs as a guide. The graph at the right reflects HCACC�s estimats. The most significant change in service category distribution is the increase proportion of total dollars apportioned to nursing home expenditures, driven mostly by increases in Medicaid spending. This growth results from increases in the payment rates for both days and ancillary services. Total home health expenditures increased by 8.3 percent in 1997. Medicare home health expenditures in Maryland dropped by 2 percent, while Medicaid home health expenditures grew by 8 percent. The apportionment method indicates a slight decline in inpatient expenditures between 1996 and 1997. This comparison probably underestimates the true change that occurred since it is likely that HMOs spend proportionately less on inpatient care relative to non-HMOs. Lower inpatient utilization may be the explanation for both increased hospital costs that have been reported as well as slowed inpatient expenditures. When HMO expenditures are apportioned to service categories, Maryland�s overall distribution of health care dollars approximates the national percentages for most service categories.

27. Where Does The Health Care Dollar Go?

28. HMO Shares of Insurance Enrollment and Expenditures Significant changes occurred in the HMO and non-HMO third party delivery systems throughout the year, despite the slow growth in expenditures. In 1997, total HMO spending grew by 18 percent, mostly due to the considerable increases in expenditures by public sector HMOs. Expenditures for Medicare and Medicaid HMOs increased more than their respective enrollments. Public sector non-HMOs experienced declines in expenditures that were proportionately smaller than corresponding declines in enrollment. The population that remains in such programs often incurs more cost than the population that moves to HMOs. The majority of enrollees in government programs were not in HMOs in 1997, and expenditures were the highest in these programs.

30. Per Capita Expenditures for HMOs and Non-HMOs In 1997, the average per capita expenditure for all residents of the state rose 2.4 percent from 1996 to $3,128. Per capita expenditures (including administrative costs) for insured residents for covered services rose by 3.1 percent to $3,222. The rate of increase differed by payer, however, with the slowest growth being 2.4 percent for the privately insured population. Per capita spending for the insured population for covered services, excluding program administration expenditures increased by 2.7 percent in 1997. Comparable figures for Medicare and Medicaid were 1 percent and 2.9 percent, respectively, relatively small changes in spite of the fluctuations in enrollment and expenditures seen this year. Non-HMO enrollees tend to incur more expense than their HMO counterparts. For each of the payers, non-HMO enrollees have higher per capita expenditures than those enrolled in HMOs, and the differences are especially large for the public sector payers. The reasons for this difference include both program efficiencies used by HMOs and perhaps the underlying health status of the population that enrolls in HMOs. For instance, Medicare HMO enrollees tend to be healthier than their Medicare non-HMO counterparts. Per capita expenditures for the private HMO population increased more than for the private non-HMO population in 1997 (3.8 percent versus 2 percent).

32. Expenditures for HMOs and Non-HMOs in the Private Sector Physician services consume a higher portion of total expenditures for private HMOs than for private non-HMOs. This 9 percentage point gap between the two delivery systems does not translate into 9 percent higher physician expenditures for HMOs, however, because non-HMOs have higher per capita expenditures than HMOs. Compared to non-HMOs, private HMOs allocate a slightly higher portion of expenditures to inpatient care but lower percentages to outpatient care and prescription drugs. The proportion of non-HMO expenditures attributable to non-medical administrative spending is nearly twice the proportion spent by private HMOs. HMOs often use capitation payments to reimburse providers, reducing claims processing costs.

34. Regional Per Capita Expenditures* Per capita health care expenditures vary by region. Differences in the age and income of the population are the primary cause of such variation. Other contributors include regional differences in the mix of payers and supply of practitioners and the practice patterns they imply. The average per capita expenditure in Baltimore is the highest in the state at $3,134, and this region is the only one to exceed the state average of $2,904. The underlying reason for this high expense is the significant Medicaid and Medicare enrollments that characterize the region. Because per capita expenditures for government payers are significantly above those for private payers, regions with relatively larger Medicare and Medicaid enrollment will have higher per capita spending. Baltimore is also noteworthy for having the state�s highest incidence of deaths due to major diseases. The Southern region has the lowest average per capita expenditure in Maryland, 18 percent lower than Baltimore, and 11 percent below the state average. Southern Maryland includes the lowest percentages of older adults and elderly in the state. Per capita expenditures in this region are also restrained by the region�s below average enrollment in Medicaid and above average proportion of residents who are uninsured.

36. Regional Distribution of Expenditures and Enrollment Accounted for by Medicare and Medicaid Medicare played its most significant role as a payer on the Eastern Shore, where it covered nearly 27 percent of health expenditures. Medicare was a much less important source of funding in Southern Maryland, where it paid just 18 percent of that region�s expenditures. Medicaid�s greatest impact was in Baltimore and the Eastern Shore where it paid for 19 percent of each of these regions� expenditures. Only 11 percent of expenditures in the National Capital Area was covered by Medicaid. The maximum proportion of expenditures covered by Medicare and Medicaid together was 53 percent on the Eastern Shore. The minimum portion paid by the public payers was 37 percent in the National Capital Area. The regional variation in the relative levels of payer enrollment helps to explain why payer shares of total expenditures vary significantly. For example, the Eastern Shore, Western Maryland, and Baltimore have the highest proportions of residents in Medicare as well as the largest percentages of expenditures covered by Medicare. The National Capital Area and Southern Maryland are characterized by the highest percentages of privately insured residents. In these regions, private insurance pays for the highest percentages of health expenditures. Because a region�s total spending is affected by its mix of insurance coverage (or lack thereof) among its residents, perfect correlations will never be drawn between the expenditures and enrollment associated with specific payers.

37. Regional Distribution of Expenditures* & Enrollment

38. Who Pays for Practitioner Services? Practitioner services are the largest single component of health care expenditures for the state and its residents. Services provided by practitioners totaled more than $5.7 billion in 1997. Approximately two-thirds of this $5.7 billion were for physician services, and the remainder were for services rendered by non-physician health professionals. Practitioners are an important subject for study not only because they account for a large share of Maryland�s health care dollar, but also because they control the consumption of most other health care services, such as hospital and pharmaceutical services. Any policy aimed at controlling health care spending by altering or constraining utilization needs to address health practitioners as a primary focus. Spending on health care practitioners was stable between 1996 and 1997, representing approximately 37 percent of total health care spending in both years. Of the total practitioner expenditures in 1997, approximately 67 percent were spent on physician services. The remainder was spent on services rendered by non-physician health professionals, such as mental health practitioners and physical therapists, as well as services provided by freestanding ambulatory facilities. Of the total payments to physicians, private insurer payments accounted for 63 percent, government payments accounted for 24 percent, and 14 percent of all payments to physicians were out-of-pocket. Over 40 percent of payments to non-physician health professionals were out-of-pocket. Government payers accounted for nearly 40 percent of total payments to non-physician health professionals.

40. The Impact of Age on Average Practitioner Spending Average annual payment per patient varies considerably with age and by payer. Private HMOs show the least variation in average payment by age group. Average payment grew from $252 for the under 9 age group to $1,777 for enrollees over 75. For Medicare recipients, the highest average practitioner payments are for patients under age 18. This category consists of a small number of children, most of whom qualified for Medicare because they have end stage renal disease (ESRD). Medicare�s largest group of enrollees, those over age 65, demonstrate the pattern seen in private HMOs: Older patients tend to consume more health resources. Other Medicare groups represent individuals who qualified for Medicare due to a permanent disability. The average practitioner payment for the under 18 age groups in Medicaid was between $298 and $492 in 1997. Working age adults have higher average payments, but the over 65 show a drop in average practitioner payments per patient. These enrollees are the very few who have Medicaid as their primary insurance coverage for practitioner services or who receive particular services covered by Medicaid by not Medicare. Private non-HMO enrollees have significantly higher fee-for-service expenditures than HMO enrollees up to the age of 65. Lower expenditures for HMOs reflect their use of capitation and greater management and perhaps greater health needs by individuals enrolled in non-HMOs.

42. Distribution of Practitioner Payments for Insured Services Practitioner evaluation and management (E&M) services account for the largest portion of overall spending and utilization, although procedural services rank a close second in their share of practitioner payments. E&M services, including routine office visits, comprise 40 percent of all services and 36 percent of all payments. Procedural services, including all major and ambulatory procedures, contain 16 percent of all services but 33 percent of payments, a reflection of the high mean payment associated with these services. Imaging services constitute about 10 percent of both services and payments. Testing services display the opposite pattern of procedures, representing 26 percent of all services but only 7 percent of payments, a reflection of their low mean payment. Services in the Other category, which includes chemotherapy and chiropractic services, represent a small portion of both payments (3.2 percent ) and services (3.0 percent). Unclassified services - those for which the procedure code did not fall into another category - represent a reasonably large portion of payment (10 percent). Although the percentage of services performed in this category has declined since 1996 (from 9.5 percent to 4.3 percent), the mean payment nearly doubled, resulting in a similar payment percentage for both years.

44. Distribution of Service Volume and Payments by Payer Medicaid recipients use proportionately more evaluation and management services, and proportionately less procedural services, imaging, and tests, than do enrollees in the private sector or Medicare. The different service mixes among the payers reflect the underlying population characteristics of the enrollees. The Medicaid service distribution is skewed toward routine and preventive services because of the predominance of young enrollees. Medicare enrollees are the elderly, who have more complex health care needs and use higher proportions of imaging, tests, and procedures. Private payer enrollees have less complicated health care needs than the elderly. Thus, they have more minor procedural services than do the Medicare population. The distribution of practitioner payments by payer is similar to the distribution of practitioner services. Medicaid spends 58 percent of its practitioner dollars on evaluation and management services, but these services constitute only 31 percent of private payer spending and about 42 percent of Medicare spending. Procedural services account for one-third of all private payer and Medicare practitioner payments, but only 19 percent of Medicaid payments. Medicare spends proportionately more of its dollars on imaging and testing than do the other payers.

45. Distribution of Service Volume and Payments by Payer

46. High Interest Procedures and Mandated Benefits Allowed charges for the high interest procedures vary considerably across the payers. It is widely understood that Medicaid pays significantly less for its services than does Medicare or the private market. Medicaid�s average allowed charge across all practitioner childbirth services ($647) is less than half those of private payers ($1,519 for HMOs and $1,706 for non-HMOs). Medicaid�s average allowed charge for prostate procedures ($255) is only about one-quarter of the private payer allowed charges ($1,090 for HMOs and $1,024 for non-HMOs). Trans Urethral Resection Prostectomy (TURP) as a percent of all prostate surgeries rose dramatically for private payers from 1996 to 1997. The HMO population showed TURP rates of 42 percent last year versus 90 percent this year, and the non-HMO population rate rose from 62 percent last year to 87 percent this year. The screening tests, mammography, prostate-specific antigen testing (PSA), and bone density studies to detect osteoporosis, can all lead to the early identification of disease. The allowed charges for these services are some indication of their accessibility for patients. Payers with the highest and lowest allowed charges are not consistent across these screening services, but Medicaid has the lowest rates for mammography and bone density. The average Medicaid payment for mammography is $38, considerably less than the average payments by private payers ($64 for HMOs and $58 for non-HMOs). Medicaid also pays less for bone density studies ($18) compared to non-HMOs ($123), Medicare ($109), and HMOs ($88). Although the very low payment for a bone density study seems likely to affect access, this is probably the least relevant screen for Medicaid enrollees. It is not needed by the majority, who are young women and children, and most elderly Medicaid enrollees have Medicare as a primary payer.

48. Changes in Average Payments by Private & Government Payers: 1996-1997 Generally, the usual payments for commonly performed procedures by private payers appear to have dropped from 1996 to 1997. The average payments for broad service categories showed small increases, however, suggesting an increase in the intensity of services between 1996 and 1997. The following examples show the variation among payers, with the extremes represented by Medicare and HMOs. In these examples, payments by Medicare usually increased, and payments by HMOs usually decreased. The average Medicare payment for an emergency room (ER) visit increased by 10 percent between 1996 and 1997 to $61. The ER payments by all other payers decreased in 1997, particularly for HMOs whose payments declined from $95 to $86. In 1997, Medicare paid 10 percent more for initial hospital visits: $136 compared to $124 in 1996. Other payers decreased their reimbursements for these services, ranging from 1.2 percent for Medicaid (from $25 to $24.71) to 7.6 percent for non-HMOs (from $173 to $160). The disparity between payers is also seen in payments for tests and imaging. Medicare reimbursement for level IV surgical pathology increased by 14 percent in 1997 to $92.21, while HMO reimbursement decreased by 8.2 percent to $65.92. HMOs and non-HMOs paid considerably less for CAT scans of the head or brain in 1997: 14 percent and 11 percent, respectively. Medicare reimbursement for CAT scans increased by only 1 percent, but Medicaid�s payment increased the most, 7.2 percent more than in 1996. In contrast to the rising payments for cataract removal experienced by all other payer groups, non-HMOs decreased their reimbursement by 13 percent. All payers reduced their reimbursement rate for upper gastrointestinal endoscopy with biopsy.

49. Changes in Average Payments for Private & Government Payers:1996-1997

50. Distribution of Total Payments to Practitioners Primary care physicians received just 19 percent of practitioner payments in 1997. Specialty care physicians accounted for 61 percent of all payments. Practitioner utilization showed a different pattern. Primary care physicians provided 27 percent of all practitioner services, and specialty care physicians accounted for 55 percent of services. The lower average payment per service for primary care physicians explains the discrepancy between service utilization and payments for this group. Non-physician health care professionals accounted for 7 percent of all practitioner payments and 8 percent of services. There is considerable variation in the mean payment per service among the practitioner specialties. The $42 mean payment for a primary care physician�s service is about one-third lower than the $66 mean reimbursement for a specialty care physician�s service, and about 20 percent lower than the $53 mean payment for a service provided by non-physician health practitioners. Within each of these provider groups, there is substantial variation in mean payments to individual specialties. Among primary care physicians, internists account for the highest share of both payments and services. Almost half of all primary care physicians� services and payments are attributable to internists. Among specialty care physicians, cardiologists, radiologists, and general surgeons each account for 6 percent of all practitioner payments. Podiatrists and home health providers claim the largest shares of payments to non-physician health care professionals.

51.

52. Distribution of Payments by Diagnostic Categories, by Payer In order to analyze the thousands of ICD-9 disease codes that appear on practitioner claims, the Commission grouped the claims according to major diagnostic categories (MDCs). The distribution of practitioner services and payments among the MDCs appears to correspond to the characteristics of the payer�s population. Within the privately insured, non-HMO population, services for diseases and disorders of the musculoskeletal system rank first overall, and are associated with 15 percent of payments and 19 percent of services. This category includes broken bones associated with falls and back pain. Diseases of the circulatory system rank second in practitioner payments. Services involving management of health care and prevention (including physical exams and immunization) are the second most common examples. The HMO FFS services have a diagnosis pattern similar to that found in the private non-HMO group, although at slightly different percentages. These similarities must be viewed cautiously because of the absence of capitated services in the HMO claims which are more likely to include more specialty care and services by non-physician professionals. For Medicare patients, diseases of the circulatory system (including heart disease) claim the largest share of practitioner services and payments, accounting for 21 and 22 percent, respectively. Diseases and disorders of the musculoskeletal system are ranked second in the Medicare population, accounting for 12 percent of all practitioner payments. In addition to the examples mentioned above, this category also includes arthritis and osteoporosis. In Medicaid, services to treat mental diseases and disorders are the dominant diagnosis, constituting one-third of the practitioner payments and nearly one-fourth of the practitioner services. As with the private insurers, the management of health care and prevention services ranked second in service volume, but for Medicaid it also ranked second in payment.

53. Distribution of Payments by Top 6Diagnostic Categories, by Payer

54. Looking Toward the Future

56. Sources Of Data