Have Medicaid reimbursements been a credible measure of the cost of pediatric care?

OBJECTIVE Despite uncertain validity as a measure of cost, Medicaid reimbursements may be used to compare the costs of different pediatric interventions. We explored the credibility of Medicaid reimbursements as a measure of the costs of inpatient care associated with two different approaches to follow-up care for high-risk indigent infants. DESIGN Analysis of Medicaid reimbursements within a randomized trial of primary follow-up care. PATIENTS Infants </=1500 g at birth in a large county hospital (Parkland Memorial Hospital). INTERVENTION Conventional care after nursery discharge (with well-baby care and care for chronic illnesses provided in our follow-up clinic) or primary care (with care for acute illnesses also provided in the follow-up clinic). Measures to prevent a lapse in Medicaid coverage were included in all clinic visits. OUTCOME MEASURES The completeness, comparability, and plausibility of Medicaid reimbursements for inpatient care of the two groups between nursery discharge and 1 year adjusted age. RESULTS A high percentage (90% to 91%) of both groups were enrolled in Medicaid. However, with fewer clinic visits in the conventional care group, Medicaid coverage often lapsed in this group, particularly among the highest risk infants. As a result, the proportion of hospital days reimbursed by Medicaid was substantially lower for conventional care than primary care infants (53% [92/174] vs 96% [298/310]). An even larger disparity was observed for pediatric intensive care days (10% [6/61] vs 100% [33/33]). Implausible Medicaid reimbursements included a lower reimbursement rate per day in the pediatric intensive care unit than on the pediatric floor (1 infant), a lower reimbursement rate per day for hospital care than home care (1 infant), and a mean reimbursement rate per day for our private pediatric teaching hospital ($1244/day) that did not exceed that for the private nonteaching pediatric hospital ($1268/day). The reimbursement rate for our public teaching hospital was particularly low ($507/day) despite a high acuity of illness (21% of hospital days in the pediatric intensive care unit). CONCLUSIONS Without proper validation, reimbursements from Medicaid (or any program that replaces it) should not be assumed to provide an unbiased or acceptably accurate measure of the relative or absolute cost of pediatric health care interventions.