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CHAPTER 7 FINANCING OF PALLIATIVE AND END-OF-LIFE CARE FOR CHILDREN AND THEIR FAMILIES [Let me mention] the frustrations that we did have with insurance. You need to have a business degree, I think, to deal with these things. Winona Kittiko, parent, 2001 Wearing my administrator’s hat, I myself see [hospital palliative care] programs as a major risk. They . . . require short-term renovation costs and continuing personnel costs, and invite concern about lost long-term opportunities: What if we had put a profitable cardiac [catheterization] unit into the same space or a chemo infusion center?” Thomas J. Smith (Lyckholm et al., 2001) Health insurance—whether public or private—has traditionally focused on acute care services intended to cure disease, prolong life, or restore functioning lost due to illness or injury. It has excluded most preventive services as well as extended care for long-term, chronic illness. Medicaid has been the major exception. From the outset, this federal-state program has covered many long-term care services for beneficiaries with serious chronic health problems and disabilities. Early on, it added a range of preventive services, particularly for children. Medicare and private insurers have gradually added coverage for various preventive services (e.g., screening mammography), influenced in part by contentions that such services could reduce subsequent spending on disease treatment. Medicare and most Medicaid programs and private insurers also now cover at least one form of supportive care—hospice—for patients who are dying.
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Nevertheless, gaps and other problems in the financing of palliative and end-of-life services contribute to access and quality concerns for adults and children living with life-threatening conditions. Complete lack of insurance is an obvious problem. Yet, even when a person is insured, coverage limitations, financing methods and rules, and administrative practices can create incentives for undertreatment, overtreatment, inappropriate transitions between settings of care, inadequate coordination of care, and poor overall quality of care. Low levels of payment to providers can discourage them from providing certain treatments and from treating some patients at all. Obtaining a good picture of financing for palliative and end-of-life care services for children is difficult. Unlike virtually all elderly Americans, children are covered not by a single insurance program (Medicare) but, instead, by thousands of private insurers and a multitude of state Medicaid and other public programs that have differing eligibility and coverage policies. These policies are poorly or not conveniently documented and constantly changing, so such information as is available on private health plans and Medicaid programs may be incomplete or out of date.1 Further, because death in childhood is relatively uncommon, data from surveys (e.g., of hospice and home care services) may not provide reliable estimates. Insofar as available data permit, this chapter describes payment sources for palliative, end-of-life, and bereavement care for children and their families; reviews relevant coverage and reimbursement policies for private health plans and Medicaid; and recommends directions for changes in coverage and reimbursement policies. 1 For those covered by Medicare (particularly the almost 90 percent who are enrolled in the traditional fee-for-service Medicare program), fairly good claims information is available about payment for most kinds of hospital, physician, and other covered services. In addition, the Current Beneficiary Survey tracks service use, out-of-pocket payment, supplemental coverage, health status, and other information that provides a broader picture of health care use and spending for Medicare beneficiaries. These data have been analyzed to determine the share of Medicare spending accounted for by care during the last six months of life, assess the proportion of expenses for different kinds of health services not paid by Medicare, and evaluate beneficiary use of hospice and other services. No such data are available for children.
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WHO PAYS FOR PALLIATIVE AND END OF LIFE CARE FOR CHILDREN? General Sources of Payment Policymakers have long made children, especially poor and sick children, a special focus of programs that promote healthy growth and provide access to needed health services. At the national level, the creation of the Maternal and Child Health Bureau in 1935 (Title V of the Social Security Act) was an important affirmation of the federal government’s interest and involvement in services for pregnant women, infants, and “crippled” children (Gittler, 1998).2 Since then, the program has expanded its focus to include other children with serious chronic health problems. The creation of Medicaid in 1965 significantly expanded access to health insurance and health services for children in low-income families, whether or not they had medical problems. Recently, the State Children’s Health Insurance Program (SCHIP) has sought to extend coverage for poor children through Medicaid expansions or other strategies. Most children (and adults) are, however, covered by private health plans sponsored by employers. As summarized in Figure 7.1, in 2000, almost two-thirds of this country’s 72 million children (under age 19) were covered by employment-based or other private health insurance (AHRQ, 2001b). An estimated 20 percent of children had public insurance (primarily Medicaid and then SCHIP).3 A significant proportion of children—some 15 percent of those under age 19—were not insured. (For those aged 19 to 24, the figure is 33 percent.) National figures on coverage do not reflect the substantial variation across states. For example, in Maryland in 1997, approximately 78 percent 2 An earlier Maternity and Infancy Act, which was passed in 1921, expired in 1929. The Children’s Bureau dates back to 1912. In 1985, Congress changed the terminology for the relevant Title V components from “crippled children” to “children with special health care needs” to reflect expansions in the program’s focus and changing attitudes. (see www.ssa.gov/history/childb2.html and www.mchdata.net/LEARN_More/Title_V_History/title_v_history.html). 3 Under special provisions, Medicare covers those diagnosed with end-stage renal disease who are insured under Social Security or who are spouses or dependent children of such insured persons. In 1997, approximately 2,200 individuals under age 15 were receiving Medicare-covered dialysis (see http://www.hcfa.gov/medicare/esrdtab1.htm). According to the United Network for Organ Sharing, about 600 children under age 18 received kidney transplants in 2000 (http://www.unos.org/Newsroom/critdata_transplants_age.htm#kidney).
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FIGURE 7.1 Source of health insurance coverage for children ages 0 to 18. NOTE: Figure combines data reported separately for the 0–17 and the 18-year-old age groups. SOURCE: Compiled from data from Center for Cost and Financing Studies, Agency for Healthcare Research and Quality: Medical Expenditure Panel Survey Household Component, 2000. of children were covered by private insurance, 6 percent by Medicaid, and 16 percent had no insurance (Tang et al., 2000). In neighboring West Virginia, the comparable figures are 54 percent, 35 percent, and 11 percent, respectively. Arizona, Alaska, and Texas had more than 25 percent of children uninsured compared to less than 8 percent in Hawaii, Minnesota, Vermont, and Washington state. These variations reflect a mix of factors including state economic conditions, immigration, demographics, and political choices about such matters as taxation and spending priorities. In 1999, of children in poor families (at or below 100 percent of the poverty level or $13,290 for a family of three in that year), an estimated 26 percent were uninsured. Of children in near-poor families (up to 200 percent of the poverty level), an estimated 21 percent were uninsured (Broaddus and Ku, 2000).4 In 1999, an estimated 85 to 94 percent of low-income, 4 One study of high-cost children in California (including those with conditions not likely to cause death in childhood) suggested that children with high health costs were more likely than other children to be covered by private insurance (about one-half) than by Medicaid (about one-third) or other sources (Ku, 1990). In this study, which included individuals up to age 25, younger children were more likely to have costs covered by private insurance and older children (over age 17) were more likely to be uninsured.
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uninsured children were eligible for Medicaid or SCHIP, but their parents or guardians had not enrolled them (Broaddus and Ku, 2000; Dubay et al., 2002a). Approximately two-thirds of the eligible but uninsured children were eligible for Medicaid and the other third for SCHIP. Among children identified as eligible for Medicaid, participation in the program ranges from a high of 93 percent in Massachusetts to a low of 59 percent in Texas (Dubay et al., 2002b; see also HCFA/CMS, 2000g). For children with serious medical problems, hospital social workers or other health care personnel often assist low-income families in enrolling the child in Medicaid, SCHIP, or any other special programs. A recent survey indicated that from 1997 to 2001 the number of uninsured children (under age 18) dropped from 12.1 percent to 9.2 percent while the percentage of children reported to have difficulty getting care dropped from 6.3 to 5.1 percent during this period (Strunk and Cunningham, 2002). Access to Care: More Than Just Insurance Coverage Lack of insurance does not necessarily mean the lack of access to all health care, especially for children with life-threatening medical conditions. Uninsured children may have some care paid for or provided by their families, “safety-net providers,” philanthropy, and other sources, but they may also go without needed services. Improved financing of care is one cornerstone of improved access to care for children, including children and families living with life-threatening medical conditions (IOM, 1998; Lambrew, 2001). When children are insured and parents are not, children may still suffer. For example, some research suggests that insured children are less likely to have preventive care if their parents are uninsured (Gifford et al., 2001). As a result, some federal and state insurance initiatives are also reaching out to parents. For example, states can apply for waivers of SCHIP or Medicaid requirements to cover parents directly or through subsidies for enrollment in employer-based plans (AHSRHP, 2001). Variability in Coverage of Palliative, End-of-Life, and Bereavement Care Coverage of end-of-life and palliative care services for children who die and their families varies tremendously, both across payer types (e.g., private insurance, Medicaid) and among payers of the same type. Regional variation in coverage policies and their day-to-day interpretation is substantial, as is variation by size and other characteristics of employers. Moving across a state border or changing jobs can result in substantial changes in services covered for seriously ill children and their families. The next sections of this report review what is known about how three
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major sources of insurance (private, Medicaid, and SCHIP) cover important palliative, end-of-life, and bereavement services. Other sources of funding for children’s care—including federal Title V programs, safety-net providers, philanthropy, family out-of-pocket payments, and clinical trials—are discussed briefly. The focus is on coverage of hospice, home health care, inpatient care, pharmaceuticals, psychosocial services, and respite care. Provider payment methods and levels and other important financing issues are discussed in subsequent sections. Employment-Based and Other Private Insurance General As noted above, almost two-thirds of children in the United States are covered by private health insurance, mostly through plans sponsored by employers that also offer—usually for an additional charge—coverage for an employee’s family. Many employers, especially small, low-wage employers, do not offer health insurance, in part because their profit margins are slender and in part because premiums are typically much higher for small firms. Even when employers offer insurance, some employees do not “take up” coverage because the required employee contribution is too high or because better or less expensive coverage is available through a spouse. Some self-employed and other parents are able to buy family coverage individually. These individuals tend to face high premiums, and those with past medical problems may have difficulty obtaining any coverage. Older children may be able to obtain coverage in their own right as an employee or college student. Some states have programs to help provide private insurance to uninsured individuals. Summary data on coverage rates do not depict the extent of instability in employer-sponsored coverage. Insurance coverage for children and families may be interrupted or altered for a variety of reasons. Parents may lose their jobs or take new jobs that either offer coverage from different health plans or do not include health benefits at all.5 In addition, employers may change the scope of benefits they offer or switch health plans, which may mean changes in provider networks or administrative procedures. This can affect continuity of care, a particular concern for families with a seriously ill child. As discussed in Chapter 5, other employer-provided benefits, includ- 5 Federal law generally requires that firms with 20 or more employees allow eligible former employees and covered spouses and children to pay for continued coverage at group rates (actually, at 102 percent of the group premium) for up to 18 or 36 months, depending on the circumstances (http://www.dol.gov/dol/pwba/public/pubs/COBRA/cobra99.pdf). Not all individuals or families can, however, afford such continuation coverage.
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ing paid or unpaid leave, may help children with serious medical conditions and their families. Flexible spending accounts, funded with pre-tax dollars, can pay for health care services not covered by an employee’s health plan and for deductibles, copayments, and coinsurance that are required for covered services. Many states have laws requiring that private health plans cover or offer coverage for a wide range of services (e.g., infertility treatments, breast implant removal), some of which (e.g., hospice, mental health care) are relevant to palliative and end-of-life care. Self-insured employers generally claim freedom from such requirements under the Employee Retirement Income Security Act of 1974, commonly referred to as ERISA. Most large and many middle-sized employers are self-insured. Private Insurance Coverage of Home Hospice Care As an insurance benefit, hospice coverage normally includes home-based nursing care, physician services, physical or occupational therapy, respiratory therapy, medical social services, medical supplies and certain equipment, and prescription drugs. The benefit usually includes a limited amount of inpatient care if needed for respite or symptom management. A study by Gabel and colleagues (1998) analyzed information about private hospice coverage from a national random sample of more than 1,500 employers with 200 or more employees each. It also drew on information from focus groups that included employee benefits managers and their insurance advisers. The researchers found that a substantial majority of employers surveyed (83 percent) offered formal hospice benefits. Most of the rest covered a similar range of services through high-cost case management programs that allow case managers discretion to pay for and assist in arranging services not otherwise covered by a health plan. Large employers were more likely to offer hospice benefits than were mid-size employers. Many private insurance plans have adopted the hospice eligibility and coverage rules used by the Medicare program. Almost half of respondents to the survey by Gabel and colleagues reported that their health plan hospice benefit restricted eligibility to individuals with a life expectancy of six months or less. Another 30 percent did not know whether such a requirement existed in their plan. Unlike Medicare, 28 percent of the plans were reported to include an individual dollar cap on hospice benefits (e.g., $5,000), and 31 percent limited the length of stay. A second study by Jackson and colleagues (2000) reported an analysis of booklets that summarized benefit plans for 70 large employers. According to these summaries, most employers (88 percent) offered hospice benefits. Most required a physician’s certification of a terminal illness, but only half specified a prognosis of six months or less of remaining life. Most plans
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did not require cost sharing (e.g., paying a fixed amount per visit or a percentage of the charge) for the services, and the majority did not set lifetime day or dollar maximums. Further, in interviews with nine employer representatives, the researchers found more flexibility in the administration of benefits than was suggested by the written plan summaries. The typical comment was that waiving certain benefit restrictions on hospice care was “the right thing to do” (Jackson et al., 2000, p. 4). Based on their interviews, Jackson and colleagues categorized the nine employer plans as following a Medicare-like model, a comprehensive model, or an unbundled approach. Only two plans followed the Medicare approach of requiring the suspension of curative treatment. Two of the three managed care plans used an unbundled approach, placing the plan’s case manager in a central position to enroll individuals in hospice and approve individual care plans and services. In contrast to the studies described above, Bureau of Labor Statistics (BLS) data, which are based on a large sample of large- and medium-sized private employers (those with 100 or more workers), showed lower rates of hospice coverage in 1997—just 60 percent across all categories (BLS, 1999). The BLS data indicated that health maintenance organization (HMO) plans were more likely to cover hospice than other plans (69 percent versus 43 percent, respectively). A separate BLS survey of state and local government employers reported that 64 percent offered hospice coverage in 1998 (BLS, 2000). No individual employer example can represent the variability described above, but as an illustration, Table 7.1 presents the hospice coverage listed in the 2002 benefits description for the large Blue Cross Blue Shield options for federal employees. Among other restrictions, the plan requires prior approval. Coverage excludes bereavement services but includes inpatient care to provide brief respite for family members. As with all the other health plans offered to federal employees, the benefit structure is approved and sometimes directed by the federal Office of Personnel Management rather than unilaterally determined by the insurer or health plan. Private Insurance Coverage of Home Health Care Health plan rules, licensure regulations, and physician and family reluctance to accept hospice can make home hospice coverage less helpful than it might otherwise be for children who die and their families. For these children and families, home health care providers, including those affiliated with hospices, may offer an array of supportive medical and other services including home nursing care. Also, home health agencies may start providing care before a child is recognized as dying. Continuity with the same organization and personnel may be reassuring to a child and family, even
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TABLE 7.1 2002 Hospice Coverage Benefits for Blue Cross Blue Shield Federal Employees Health Insurance Plan Hospice Care You Pay–Standard Option You Pay–Basic Option Hospice care is an integrated set of services and supplies designed to provide palliative and supportive care to terminally ill patients in their homes. We provide the following home hospice care benefits for members with a life expectancy of six months or less when prior approval is obtained from the Local Plan and the home hospice agency is approved by the Local Plan: • Physician visits • Nursing care • Medical social services • Physical therapy • Services of home health aides • Durable medical equipment rental • Prescription drugs • Medical supplies Nothing Nothing Inpatient hospice for members receiving home hospice care benefits: Benefits are provided Preferred: $100 per admission copayment Preferred: $100 per day copayment up to $500 per admission when home hospice care is covered by the family’s health plan and would otherwise be acceptable to parents. The Bureau of Labor Statistics reported that 85 percent of large and medium-sized private employers provided some home health care coverage (BLS, 1999). HMO plans were more likely to cover these services than other plans (93 percent versus 81 percent). Health plans that pay for home health care may, however, exclude certain services that are often or sometimes included in hospice benefits (e.g., physical therapy, bereavement care). Moreover, state licensure requirements may restrict licensed home health care providers from providing certain end-of-life services such as bereavement care. In addition, employersponsored plans often limit coverage for home health care to a certain
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Hospice Care You Pay–Standard Option You Pay–Basic Option for up to five (5) consecutive days in a hospice inpatient facility. Each inpatient stay must be separated by at least 21 days. These covered inpatient hospice benefits are available only when inpatient services are necessary to: • Control pain and manage the patient’s symptoms; or • provide an interval of relief (respite) to the family Note: You are responsible for making sure that the home hospice care provider has received prior approval from the Local Plan. Please check with your Local Plan and/or your PPO directory for listings of approved agencies. Member: $300 per admission copayment Member/Non-member: You pay all charges Non-member: $300 per admission copayment plus 30% of the Plan allowance, and any remaining balance after our payment Not covered: Homemaker or bereavement services All charges All charges NOTE: PPO = preferred provider organization. SOURCE: Blue Cross and Blue Shield, 2002 Service Benefit Plan, p. 63, http://www.fepblue.org/pdf/2002sbp.pdf (emphasis in the original). number of nursing or therapy visits (e.g., 60 visits per year) or require that care be expected to lead to improvement in the health condition. Thus, services needed by chronically or terminally ill patients on an ongoing basis such as nursing visits, respiratory therapy, and physical therapy may be limited or excluded altogether under an employer’s plan. In one study of Medicare financing of end-of-life services, end-of-life care providers (including home health agencies as well as hospices) reported the need for end-of-life consults from a hospice team for dying patients not enrolled in hospice in order to assist in symptom management and end-of-life care planning (Huskamp et al., 2001). Such consultative services for a patient receiving home health care would not ordinarily be covered by private health insurance (unless the health plan waived coverage restric-
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tions as described earlier). In these situations, lack of coverage for consultations by hospice or other palliative care experts may lead to avoidable pain and other suffering for dying children and their families. As discussed in Chapter 6, telemedicine could help extend information and advice to support home health providers for children and families in smaller communities and rural areas. Private insurer coverage for telemedicine services is limited (OAT, 2001). Private Insurance Coverage of Inpatient Hospital Care The centerpiece of most private health insurance has traditionally been coverage for inpatient hospital services, which continue to be generously covered compared to other services. Thus, much of the emergency, intensive, and palliative care—including nursing care, diagnostic tests, medications, and many other services—that is provided to children with life-threatening conditions is routinely covered. If, however, patients, families, and physicians choose to forgo curative or life-prolonging care in favor of inpatient care that is exclusively but intensively palliative, some health plans may refuse to pay if the plan limits inpatient coverage to treatment intended to cure or restore function. (As discussed later, even if coverage is not an issue, the case-based and other payment systems for hospitals are based on data and assumptions that exclude modern palliative services, which is a disincentive for hospitals to provide these services.) The committee found no systematic information on the extent to which coverage is approved or denied when inpatient pediatric care is exclusively palliative. Private Insurance Coverage of Outpatient Prescription Drugs Unlike Medicare, most employers that offer insurance to employees cover outpatient prescription drugs, subject to various limitations such as cost sharing requirements. Information from a large survey of employers indicates that nearly all employees (96 percent) covered by employer health plans had prescription drug coverage in 1997 (Marquis and Long, 2000). Even for small employers and low-wage employers, more than 85 percent provided outpatient drug coverage. BLS data for medium- and large-sized private employers also show very high levels of employer coverage of outpatient prescription drugs (BLS, 1999). For nearly 80 percent of covered workers, the level of cost sharing for prescription drugs was no higher than for physician services; about 18 percent faced higher cost sharing for drugs. Spending for prescription drugs has increased dramatically during the last decade. Health plans have responded by increasing the level of cost
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faculty practice plans as one indicator of a service’s economic value to the institution. However valuable they may be to dying children and their families, services that are not reimbursed or are reimbursed at a low level put the services in jeopardy of understaffing or elimination. Payment for Hospice Care Under Medicare and Medicaid, hospices are paid on a per diem basis. These rates were based on data from a demonstration project that ended in the early 1980s and have not been adjusted to reflect the introduction of many effective but expensive palliative medications and other interventions (MedPAC, 2002). Different per diem rates apply for four categories of hospice service: routine home care, continuous home care (for patients requiring eight or more hours of hospice care during a day), general inpatient care, and inpatient respite care.37 In addition, hospices face caps on overall payments and on total payments for inpatient care (HCFA/CMS, 2001a). Use of these interventions could consume much of the current per diem for routine care (or exceed it). As noted above, this may create access problems for patients with particularly high-cost needs. Private insurers may also use per diem payments, but some pay separately for certain expensive services such as palliative radiology, chemotherapy, durable medical equipment, and medications (Huskamp et al., 2001). To the extent that private payers cover such expensive services separately, hospices are under less pressure to restrict potentially effective palliative services or to refuse potentially expensive patients. Concerns about prognostic and other requirements for Medicare and Medicaid coverage of hospice care were discussed above. The major issue related to hospice payments per se (not coverage and election requirements) has focused on the level of per diem payments and not the per diem method itself (Lynn and O’Mara, 2001). One advantage of per diem compared to per service payment is that it allows providers more flexibility to focus resources where patients need them most. The level of per diem payments set by Medicare and Medicaid represent public policy decisions about the desired quality and type of hospice care. To increase legislators’ understanding of the adequacy of per diems and to inform decisions about the need to re-base payments given signifi- 37 For FY 2002, Medicaid rates are $110.56 for routine home care; $644.70 for continuous home care ($26.86 hourly rate); $120.23 for inpatient respite care; and $491.19 for general inpatient care (HCFA/CMS, 2001a).
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cant changes in palliative care in the last two decades, Congress should direct CMS to undertake a comprehensive analysis of the costs of effective palliative care and then ensure that per diem rates reflect these costs. MANAGED CARE AND END-OF-LIFE CARE In many respects, health care in the United States has been transformed in the last decade by the growth of managed care. By 1999, 91 percent of individuals with employer-sponsored private insurance were enrolled in managed care, including HMOs, PPOs, and multiple variants on these structures. As indicated above, the use of managed care by state Medicaid programs has also become widespread, with more than half of the children covered by Medicaid now enrolled in managed care plans. Both across and within managed care plan types, benefit design and administrative practices vary greatly. In general, the recent trend in employment-based plans has been somewhat away from the most restrictive or tightly managed plans toward plans that offer more flexibility in choice of provider and somewhat fewer administrative hurdles such as prior approval of services (Draper et al., 2002).38 Such choice and flexibility often means higher costs. Management Techniques with Implications for Palliative and End-of-Life Care Managed care plans use a variety of techniques to control costs, including utilization review, restricted provider networks, and payment incentives for economical provider practice. Some techniques pose potential problems for patients and families, especially for children with fatal or potentially fatal medical problems (see, e.g., Sulmasy, 1995; Morrison and Meier, 1995; IOM, 1997; Fox, 1999; Huskamp et al., 2001). Utilization Review Managed care plans may employ several utilization review procedures to control costs. These procedures include requirements for authorization prior to the use of services and retrospective review of services. Plans will 38 In 2001, 48 percent of insured individuals with private employer-sponsored coverage were enrolled in PPO plans (up from 41 percent in 2000), 23 percent were in HMO plans (down from 29 percent in 2000), 22 percent were in point-of service (POS) plans, and 7 percent were in indemnity plans (down from 27 percent in 1996 and 73 percent in 1988) (KFF, 2002).
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usually require prior authorization for families with children needing home hospice care. In managed care plans with tight utilization management processes and stringent criteria for authorizing services, the gap between nominal and meaningful coverage for certain services can be substantial. The committee found no systematic documentation of the extent to which children with life-threatening medical conditions and their families encounter serious problems with review requirements for hospice, home care, or other services to meet their needs for palliative or end-of-life care. Provider Networks Most managed care plans select a subset of providers in the area to be members of their provider network. These plans then provide patients financial incentives to use network providers as opposed to providers who are not members. More restrictive plans such as staff model HMOs cover services only if provided by network providers, with exceptions for emergency services under certain circumstances. Less restrictive plans typically require higher cost sharing when members use nonnetwork rather than network providers. By creating networks, plans can negotiate discounted rates with many providers who are willing to accept lower fees in exchange for the higher level of patient volume likely to result from being listed as a network provider for a health plan. Plans may also choose to retain providers in the network based on analysis of the costs they generate or their practice patterns. A defined network of providers may make it more feasible for insurers to analyze and monitor provider practice patterns and outcomes and then design and institute remedies to identified problems. The use of provider networks raises several concerns for dying children and their families. The breadth and depth of provider networks vary across plans. Some plans may not include specialists appropriate for treating a fatal or potentially fatal condition (e.g., the network may include a specialist in adult cases—but not child cases—of a particular condition) or may not include appropriate geographic representation of various specialists. Even if a plan’s network includes appropriate specialties, it may not include a sufficient number of qualified physicians in each specialist category. This may create unacceptably long waiting times for children in need of specialized care. Arrangements may exist for referral to outside specialists, but families may find their options unsatisfactory. In general, free choice of physician and medical center is a particular issue when a child is seriously ill. Other concerns include turnover of network providers, which can disrupt continuity of care and relationships of trust. An employer’s switch to a
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new health plan can mean that new relationships must be established with a number of unfamiliar physicians and other providers. (In some regions and for less tightly controlled plans, overlap in provider networks may be substantial and thus minimize this problem.) Shifting Financial Risk A third type of cost-control tool involves passing financial risks for enrollee care to providers. As noted earlier, health plans are increasingly passing financial risks to groups of clinicians or, in some cases, to individual clinicians through the use of capitation, withholds, and bonuses. Some health plans capitate primary care physicians for their own professional services, such that the physician absorbs all the extra costs if utilization is higher than expected. Under a withhold arrangement, a percentage of a clinician’s payment is withheld at the time of service delivery. These funds are then distributed to clinicians if they meet certain performance targets, such as controlling pharmacy costs, controlling total health costs, or limiting the number of specialty referrals. Alternatively, plans may pay bonuses when such targets are met. These payment arrangements are intended to encourage cost-effective practice patterns. The concern is that these arrangements create incentives to reduce service provision or to reject sicker patients with higher-cost needs. Many children with fatal or potentially fatal problems fall in this category. Medicaid Payment to Managed Care Plans States initially found managed care plans receptive to enrolling Medicaid beneficiaries. More recently, like Medicare, state Medicaid programs have found less enthusiasm, particularly from plans with large private enrollments. Some plans are refusing to enter or continue in the Medicaid market, and others are limiting Medicaid enrollments. Particular complaints include low capitation rates and burdensome administrative requirements (Holahan et al., 1999). In a survey of state Medicaid agencies in late 2000, agency staff cited financing as the reason for about 70 percent of managed care plan departures from their state program (NASHP, 2001). Publicly held companies may be particularly sensitive to Wall Street assessments of their Medicaid participation (CSHSC, 1999). States have argued, in part, that the plans were paid too much in the early days of voluntary enrollment, when they attracted healthier beneficiaries, and that rates are now more appropriate. In addition, federal requirements set upper limits on what states can pay relative to comparable populations with fee-for-service coverage. As a cost-containment feature, this provision makes sense, but it may not support some of the goals of Medic-
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aid managed care, including greater coordination of care. According to Holahan and colleagues (1999), this provision is one reason why states with high Medicare capitation rates tend to have high Medicaid capitation rates. Other reasons for rate variations include a state’s cost-containment objectives and the age of a program. With new programs and voluntary programs, managed care plans may benefit from enrolling healthier beneficiaries, including those without established physician relationships (see, e.g., Freund et al., 1989; Leibowitz et al., 1992). With mandatory enrollment and more mature programs, the lack of satisfactory risk adjustment for the health status or riskiness of populations served becomes a serious concern for health plans (see, e.g., Buntin and Newhouse, 1998; MedPAC, 1998a). This is especially the case when Medicaid payment rates are well below Medicare and private rates. Mandatory enrollment without a satisfactory risk adjustment strategy may create financial incentives for undertreatment, a particular threat to children with special health care needs. In establishing interim criteria for states enrolling these children in capitated managed care, HCFA (now CMS) required only that states use a payment mechanism that “accounts” for special needs populations (criterion quoted in Kaye et al., 2000, p. 149). In 1999, just two state Medicaid programs—Colorado and Maryland— used health-related risk adjustments, although some states used elements of risk-adjustment for subsets of beneficiaries (e.g., Michigan for Title V children and Delaware for SSI enrollees [Kaye et al., 2000]). Some states use only demographic variables (e.g., age, sex) to adjust rates. In general, demographic variables alone do not perform well in predicting variation in beneficiary costs. Many state Medicaid programs use multiple rate categories as a blunt method of risk adjustment, although the rate categories are usually sufficiently broad that they achieve little risk adjustment. Even with adjustments based on health status, it may be difficult to set an adequate prospective capitation rate for high-risk children (Fowler and Anderson, 1996). Some states deal with predictably high-expense groups, including children with special health care needs, by “carving out” special programs for them (Andrews et al., 1997; Inkelas, 2001). Payments for these programs may or may not be based on capitation and may or may not include adjustments for differences in population risks. One study in California of a carve-out for children with special health care needs suggested that the problem increased the identification of such children as eligible for services (Inkelas, 2001).
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DIRECTIONS FOR POLICYMAKERS AND INSURERS Positive Aspects of the Current Financing System Notwithstanding its well-publicized inadequacies, this country’s complex and unwieldy mix of public and private insurance, philanthropy, and other arrangements funds many needed medical and other supportive services for seriously ill or injured children and their families. In focusing on the system’s weaknesses, it is important not to forget its strengths including access for many to helpful services and advanced technologies that save and extend lives, restore function, and otherwise prevent or reduce much illness and suffering. Children whose parents are covered by health plans sponsored by large employers often have excellent access to care to cure or prolong life. Coverage for palliative and supportive care—often to supplement curative and life-prolonging care—may also be generous. Even when employer plans have restrictions on palliative and supportive care, plan administrators may waive or work around many of these restrictions to provide needed services to gravely ill children and their families. For children in low-income families, Medicaid and other federal or state programs cover a wide range of services, including long-term home and community-based services, that are often excluded or very restricted in private insurance plans. This care is particularly important for children and families living with neurodegenerative disorders and other severe chronic conditions. State programs often include case management services that help families find and coordinate the complex array of services and providers needed by such children. Required enrollment by Medicaid beneficiaries in managed care may have some negative features as discussed below, but it also may provide the foundation for more coordinated care and better monitoring of the quality of care for those with complex health problems. One reason that Title V programs are interested in managed care is that its structures should, in theory, make it easier to link children with special health care needs to a medical home that coordinates their complex care. Finally, it is important to recognize that coverage limitations, payment limits, and other restrictions are not designed to cause suffering or to frustrate patients, families, and physicians—although they frequently do. Rather, the intent is to control the cost of health insurance and health services so that they are affordable for governments, employers, and individuals.
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Problems with the Current Financing System General Perhaps the most obvious deficiency in this country’s health care system is the lack of universal coverage—public or private—for all children and adults under age 65. Although public or private insurance does not guarantee access to reliable, effective, coordinated care and lack of coverage does not mean that care is unavailable, uninsurance does have negative consequences for children and families. For children with serious medical conditions and their families, lack of insurance and underinsurance can seriously disrupt the provision, coordination, and continuity of care—although most will receive at least crisis care. The struggle to find crisis care and other needed services may, however, drain family resources (and sometimes lead to bankruptcy), put parents’ jobs in jeopardy if they must substitute for paid caregivers and case managers, trigger a frustrating search for so-called safety-net or free care providers, or all of these. In addition, as employers or states restructure their programs, families are often subject to switches in health plans offered, revisions in a health plan’s terms of coverage (e.g., reduction in home health care benefits), or changes in a plan’s provider networks. These changes may be disruptive, resulting in the end of coverage for a valued service or the loss of continued access to trusted and familiar providers. A less visible consequence of uninsurance or underinsurance is that physicians, hospital staff, and others may—instead of providing care—have to spend valuable (uncompensated) time trying to locate some source of payment or service for seriously ill children. Further, parents distracted by financial worries may find it difficult to provide all the emotional support their children need from them. Finally, physicians, hospitals, and hospices may find levels of payment too low to allow them to provide the services they believe are needed by a child. In some cases, they may refuse to serve patients covered by a low-paying plan or program, notably state Medicaid programs, which typically pay providers considerably less than other public and private programs. Although all of these problems affect seriously ill children and families, most can be addressed only by broad policy changes—for example, policies that extend public or private insurance to all—that are beyond the charge to this committee. The committee’s recommendations deal with more specific deficits in the financing of palliative, end-of-life, and bereavement care for children and families. Based on its experience and judgment and review of relevant research and proposals of other groups, the committee recommends several changes in public and private coverage of hospice services for children, additional changes to encourage the integration of palliative ser-
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vices with curative or life-prolonging care, and analytic work to support the design and implementation of these changes. Chapter 10 includes directions for further research to refine and support these recommendations and assess their implementation and consequences. Hospice Several factors contribute to low use of hospice care by children who die, including physician and parent attitudes or lack of knowledge and the large proportion of child deaths that are sudden and unexpected. Coverage limitations also constitute a barrier in state Medicaid programs and some private insurance plans. In particular, although state Medicaid programs must (under EPSDT provisions) cover hospice care for children even if they do not cover it for adults, the six-month prognosis requirement and the requirement that curative care be forgone (both of which are federal rules) are a problem. If the federal government abandons or fails to enforce EPSDT requirements, then children in six states would, like adults in those states, not be covered for hospice care. Many private insurance plans also use the six-month prognosis requirement. Some hospices successfully rely on philanthropy to serve Medicaid-covered children who fall outside restrictive rules for hospice benefits; others cannot, or they may have other priorities. Health plans may impose a variety of additional restrictions on hospice and other palliative services. These include caps on the number or amount of services covered, preauthorization requirements for each use of a service or use above a certain level, variable cost-sharing requirements, prescriptions restricted to a closed formulary, waiting lists, or limited “slots” for certain expensive services. In general, hospices have been comfortable with the per diem payment method created when Medicare first added hospice coverage. Over the last two decades, however, the beneficial but often expensive advances in pain management and other palliative care strategies have strained hospice budgets and led some to limit acceptance of patients with high-cost needs or to forgo effective but costly palliative interventions. At a minimum, the adoption of an outlier payment provision should counter the incentive to refuse very high cost patients. Other options that should be considered include reevaluation of each category of per diem rates, higher per diems for the more expensive first two and last two days of care (a response to late referrals and short lengths of stay) and separate payment for pharmaceuticals, blood transfusions, and similar products. The federal advisory committee on Medicare payment policies recently recommended that the adequacy of Medicare’s hospice payment rates be evaluated to determine
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whether they are adequate given the current costs of providing appropriate care (MedPAC, 2002). Recommendation: Public and private insurers should restructure hospice benefits for children to add hospice care to the services required by Congress in Medicaid and other public insurance programs for children and to the services covered for children under private health plans; eliminate eligibility restrictions related to life expectancy, substitute criteria based on diagnosis and severity of illness, and drop rules requiring children to forgo curative or life-prolonging care (possibly in a case management framework); and include outlier payments for exceptionally costly hospice patients. Extension and Integration of Palliative and Bereavement Care Even with these recommended changes, additional reforms are needed to promote the integration of palliative care from the time of diagnosis through death and into bereavement and to make palliative care expertise more widely available. No child should die in pain or other distress because health plans fail to cover specialized expertise in symptom management. Families should also not have to face a choice between expert palliative care for their child and publicly funded home health assistance for children with special needs. When families choose home care for a seriously ill child, palliative care consultations should be available to children whose home care personnel lack the necessary expertise and experience to manage their physical or psychological symptoms. Further, in recognition of the central role of parents and guardians in decisionmaking for children (as opposed to adults) with life-threatening conditions, physician reimbursement should cover extended and intensive communication and counseling of parents or guardians, whether or not the child is present. Informing and counseling parents of children with life-threatening conditions is a critical but time-consuming obligation for clinicians that is undervalued in current reimbursement policies. Another pillar of competent and compassionate care for families who have suffered a child’s death is bereavement care, which health plans should cover in its own right. Parents or siblings who seek counseling under their health plan’s mental health benefits generally will be covered only under diagnoses such as depression and perhaps not even then, depending on health plan coverage criteria and practices. The recording of such diagnoses can result in later problems in securing health insurance, especially outside an employer-based plan.
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The committee recognizes the cost pressures on employers, private health plans, and state Medicaid programs, particularly during periods of recession or slow economic growth. Because Medicaid covers many children with serious chronic health problems, the cost to states of even limited coverage expansions must be considered. Thus, the Centers for Medicare and Medicaid Services should develop estimates of the cost of adopting these recommendations in Medicaid, taking into account the possibility of avoided costs (e.g., hospitalization related to inadequately managed care at home). The analyses being undertaken for the demonstration projects described earlier in this report and in Appendix H should be helpful. Recommendation: In addition to modifying hospice benefits, Medicaid and private insurers should modify policies restricting access to other palliative services related to a child’s life-threatening medical condition or death. Such modifications should reimburse the time necessary for fully informing and counseling parents (whether or not the child is present) about their child’s (1) diagnosis and prognosis, (2) options for care, including potential benefits and harms, and (3) plan of care, including end-of-life decisions and care for which the family is responsible; make the expertise of palliative care experts and hospice personnel more widely available by covering palliative care consultations; reimburse bereavement services for parents and surviving siblings of children who die; specify coverage and eligibility criteria for palliative inpatient, home health, and professional services based on diagnosis (and, for certain services, severity of illness) to guide specialized case managers and others involved in administering the benefits; and provide for the Centers for Medicare and Medicaid Services to develop estimates of the potential cost of implementing these modifications for Medicaid. Implementation To implement the recommendations related to improved benefits for palliative, end-of-life, and bereavement care, eligibility criteria must be defined. Federal officials should work with state Medicaid officials, pediatric organizations, and private insurers to define diagnosis and severity criteria to establish children’s eligibility for pediatric palliative care and hospice services and family members’ eligibility for bereavement services. In addition, federal officials should also take the lead in examining the appropri-
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ateness of diagnostic, procedure, and other payment-related classification schemes that were originally developed for adult services. These schemes include DRGs for hospital payment and an RBRVS for physician payment. Many private payers and Medicaid programs have adopted these classification schemes (although not necessarily the level of payment associated with them). Given the confusion about billing for palliative care services and the frequent denials of payment for improper coding or documentation, access to care may also be improved by providing clearer guidance about accurate coding and documentation of covered palliative services. Although providers faced with claims denials and hassles may sometimes render services without billing for them, they may also opt not to provide the services or to avoid patients that need such services. Recommendation: Federal and state Medicaid agencies, pediatric organizations, and private insurers should cooperate to (1) define diagnosis and, as appropriate, severity criteria for eligibility for expanded benefits for palliative, hospice, and bereavement services; (2) examine the appropriateness for reimbursing pediatric palliative and end-of-life care of diagnostic, procedure, and other classification systems that were developed for reimbursement of adult services; and (3) develop guidance for practitioners and administrative staff about accurate, consistent coding and documenting of palliative, end-of-life, and bereavement services. Again, these recommendations target only a subset of financial barriers to competent and reliably available palliative, end-of-life, and bereavement care. Uninsurance, underinsurance, certain managed care requirements, and radically low levels of provider payment also constitute significant barriers. Reducing or removing these barriers will require far more comprehensive changes in policies.
Representative terms from entire chapter: