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Health care policies and rural health populations.

Interest in the health needs of various populations ebbs and flows, often unrelated to any particular socioeconomic change. The delivery of health care to rural populations is a good example. In the late 1980s and early 1990s, the U.S. Senate Rural Health Caucus and the House Rural Health Coalition were very active organizations. They pressed a rural health agenda in congressional hearings and, through legislative initiatives, funded federal rural health programs and created new ones.

In more recent years, the House coalition has continued a lower level of activity and the Senate Caucus has been somnolent. Until the fall of 1996, there hadn't been a congressional hearing on rural health for 4 years. Also, in the budget-cutting momentum associated with the Fiscal Year 1996 appropriations debate, some of the federal rural health programs came very close to being eliminated entirely or being significantly pared back. Advocacy for rural health care seemed diminished both within and outside of the U.S. Congress. Selected actions near the end of the 104th Congress might indicate a reversal in this trend. In September, the chairman of the Subcommittee on Health of the Wavs and Means Committee held a hearing with just such a focus. I was one of eight individuals invited to testify before the subcommittee. Regardless of whether one practices in a rural or an urban area, there are reasons to pay attention to health care challenges facing rural populations, potential renewed interest in these challenges, and related policy initiatives.

Health care delivery in rural areas merits attention first because delivery systems are rapidly building bridges between urban and rural areas. At their most aggressive, urban-based health care systems are purchasing rural hospitals and clinics, making the financial health of these facilities a factor in calculating the corporation's bottom line. Less aggressive but still relevant is the competition among urban-based delivery systems to build referral patterns that serve as a feeder system for patients requiring care beyond the capacity of a rural facility. Similarly, more managed care plans are assessing whether it makes good financial sense to expand into traditional fee-for-service bastions. Second, technology, supported in no small part through federal initiatives, is at the brink of wholesale application of telemedicine and telehealth that connects patients and providers hundreds of miles from each other. Imbedded within this development are the thorny questions of who is liable, who gets reimbursed, and how licenses of providers should be structured when state boundaries become largely irrelevant as health care systems and their providers extend care across entire regions of the country. Technology is racing ahead while policymakers are becoming increasingly aware of the need to develop answers. Meanwhile, depending on how these policies are crafted, both urban health care entities looking to rural frontiers for expansion and rural populations and providers stand to gain.

The third reason nurse executives employed in metropolitan areas will want to track rural health policy has to do with Medicare, a program without geographic boundaries. With the need to enact major changes to sustain Medicare over the next 25 years, the program will be the subject of much debate. Some of the discussions will surely focus on the unfair distribution of Medicare dollars between rural and urban areas. While rural advocates look to the federal government for assistance with a range of problems, this payment inequity is becoming increasingly vexing. Should Congress enact policy to address this inequity, urban health care that relies on Medicare dollars may well feel the pinch. So, while there are trends that blur the differences between rural and urban-based care, especially when it is delivered by one system, there are also trends that pit one against the other. With the potential for rural health care challenges to come into focus during the 105th Congress, each of these scenarios has implications for health care delivery and, consequently, for nursing management. While each of these issues warrants fuller exploration, the remainder of this column focuses on the potential divisive nature of Medicare payment policy.

Background on the AAPCC

With the Medicare rhetoric of presidential and congressional campaigns behind us, policy work must be done to ensure the program's viability. Both Republicans and Democrats alike look to Medicare managed care as a vehicle for expanding choice for the elderly as well as holding down cost of care for this population. Consequently, managed care has and will continue to be encouraged through various policy initiatives. While scores of related issues will be debated, one that pits urban against rural areas is Medicare capitation pavment known as the adjusted average per capita cost (AAPCC). The AAPCC determines the Medicare payment rate for managed care. It is calculated using a national average cost per Medicare boneficiary as well as a per capita per county formula that adjusts for age, gender, whether or not an individual resides in a nursing home, the cost of care in each county, and other factors. The cost of care is an important component since fal some counties have limited availability of providers so care is delivered less frequently and the cost is subsequently less; (b) the care in some counties is delivered with great efficiency and so costs less; while (c) other counties may have delivery systems that are marked by inefficiency and consequently care costs significantly more and drives up the AAPCC.

Currently, Medicare risk contractors are paid 95% of the AAPCC that HCFA would expect to spend on fee-for-service (FFS) reimbursement for a Medicare beneficiary in the same county. In 1997, Medicare payment rates to health maintenance organizations will increase about 5.9% compared to a 10.1% increase in 1995. The smaller rate increase is due to lower than expected payouts for hospital and nonhospital expenses. In return for the AAPCC payment, managed care is obliged to provide all Medicare-covered services. Should a managed care plan end up with a surplus between the HCFA payment and the managed care plan's projected revenue requirements for services, the plan can reduce the premium charged to beneficiaries or provide additional benefits at no cost to the beneficiary. A third option that may be exercised but generally isn't, allows the plan to return the surplus back to HCFA. With this background in mind, how the AAPCC payments affect rural versus urban providers and beneficiaries can be explored.

AAPCC payment rates reflect significant variation from county to county. To illustrate this point, Richmond County, New York, receives the highest monthly amount of $767.35 compared to the lowest rate of $220.92 for Arthur County, Nebraska. Bruce Vladeck, the HCFA administrator, states that this HMO payment rate formula is flawed and short-changes rural areas and efficient urban markets. (Efficient urban markets include such communities as Honolulu, Minneapolis, and Seattle, each of which receives a below average AAPCC payment). Too often the low payment rate discourages managed care companies from marketing products in rural areas.

The opposite is also true. Counties receiving high-payment rates tend to attract health plans. Today, rural counties receive payments about 30% below the national average, and most rural areas do not have managed care plans. Managed care plans that do serve rural counties are concentrated in higher paying counties and near urban areas. While Congress and the Administration are intent on facilitating choice of health plans for Medicare beneficiaries regardless of where beneficiaries live, the current AAPCC payment formula is a disincentive to achieving this goal. If changes are made in the formula, they may be implemented not by infusing more money into Medicare to shore up below-average AAPCC pavments but rather by reallocating dollars, with consequences for elder health care in both urban and rural counties.

Impact of the AAPCC on Medicare


Regardless of where they live, American workers pay the same 2.9% of payroll tax to the Medicare Trust Fund. However, with the advent of Medicare managed care, what urban versus rural retirees get back in services and pay out of pocket when they retire may be vastly different. According to HCFA, 4.5 million Medicare beneficiaries are enrolled in 234 risk-based managed care plans. In terms of the Medicare-eligible population, rural areas have higher proportions of elderly than urban areas and higher rates of disability and chronic illness. Ordinarily one would think that these characteristics necessitate a greater need for health care. Yet rural residents have less access to health care services and rural Medicare beneficiaries have lower utilization rates for hospitals and physicians than their urban counterparts. Over the past 15 years, inequitable payment rates for services, difficulty in finding health care providers, and the closure of hundreds of rural hospitals have characterized rural America's struggle with issues that are as difficult to wrestle with as the problems now facing urban areas.

Medicare beneficiaries in rural counties frequently have no managed care option while their urban counterparts have not only a managed care option but can often choose among a number of plans. In addition to differences in the availability of plans, concomitant differences also exist in benefits. For example, let's say that two sisters in their 70s live in different counties. One resides in Dade County, Florida (Miami) while the other lives in rural Wibaux, Montana. Because of where she lives, the Wibaux Medicare beneficiary only has access to traditional Medicare FFS benefits. Her sister in Miami has a choice of health plans, and a number of benefits not available in FFS plans including a substantial prescription drug benefit. The Miami resident also has reduced co-payments and deductibles. Bottom line, the sister in Miami pays less in out-of-pocket costs and also gets more benefits from her health plan.

In summary, every provider recognizes that health care has been a vortex of change in recent years. While these changes may seem most noticeable in metropolitan areas, rural America is caught up in challenges that are no less stressful or complex. The continuation of inequitable policy and threats to frontline federal programs designed to address health care problems in rural America should serve as a catalyst for increasing attention to this population's needs. As is apparent from the need for correction in the AAPCC formula, consequences of this renewed attention may affect all of us directly and indirectly, regardless of where we work.
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Author:Wakefield, Mary K.
Publication:Nursing Economics
Date:Nov 1, 1996
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