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Effects of Medicare Payment Reform: Evidence from the Home Health Interim and Prospective Payment Systems

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  • Peter J. Huckfeldt
  • Neeraj Sood
  • José J. Escarce
  • David C. Grabowski
  • Joseph P. Newhouse

Abstract

Medicare continues to implement payment reforms that shift reimbursement from fee-for-service towards episode-based payment, affecting average and marginal reimbursement. We contrast the effects of two reforms for home health agencies. The Home Health Interim Payment System in 1997 lowered both types of reimbursement; our conceptual model predicts a decline in the likelihood of use and costs, both of which we find. The Home Health Prospective Payment System in 2000 raised average but lowered marginal reimbursement with theoretically ambiguous effects; we find a modest increase in use and costs. We find little substantive effect of either policy on readmissions or mortality.

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  • Peter J. Huckfeldt & Neeraj Sood & José J. Escarce & David C. Grabowski & Joseph P. Newhouse, 2012. "Effects of Medicare Payment Reform: Evidence from the Home Health Interim and Prospective Payment Systems," NBER Working Papers 17870, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:17870
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    1. Sood, Neeraj & Alpert, Abby & Barnes, Kayleigh & Huckfeldt, Peter & Escarce, José J., 2017. "Effects of payment reform in more versus less competitive markets," Journal of Health Economics, Elsevier, vol. 51(C), pages 66-83.
    2. Daifeng He & Peter McHenry & Jennifer M. Mellor, 2020. "Do financial incentives matter? Effects of Medicare price shocks on skilled nursing facility care," Health Economics, John Wiley & Sons, Ltd., vol. 29(6), pages 655-670, June.
    3. Brendan Walsh & Seán Lyons & Samantha Smith & Maev‐Ann Wren & James Eighan & Edgar Morgenroth, 2020. "Does formal home care reduce inpatient length of stay?," Health Economics, John Wiley & Sons, Ltd., vol. 29(12), pages 1620-1636, December.
    4. Judite Gonçalves & France Weaver, 2017. "Effects of formal home care on hospitalizations and doctor visits," International Journal of Health Economics and Management, Springer, vol. 17(2), pages 203-233, June.
    5. Norton, E.C., 2016. "Health and Long-Term Care," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 951-989, Elsevier.
    6. Elodie Adida & Hamed Mamani & Shima Nassiri, 2017. "Bundled Payment vs. Fee-for-Service: Impact of Payment Scheme on Performance," Management Science, INFORMS, vol. 63(5), pages 1606-1624, May.
    7. Hyunjee Kim & Edward C. Norton, 2015. "Practice Patterns among Entrants and Incumbents in the Home Health Market after the Prospective Payment System was Implemented," Health Economics, John Wiley & Sons, Ltd., vol. 24(S1), pages 118-131, March.
    8. Walsh, Brendan & Wren, Maev-Ann & Smith, Samantha & Lyons, Seán & Eighan, James & Morgenroth, Edgar, 2019. "An analysis of the effects on Irish hospital care of the supply of care inside and outside the hospital," Research Series, Economic and Social Research Institute (ESRI), number RS91, June.
    9. Chiara Orsini, 2019. "The mortality effects of changing public funding for home health care: An empirical analysis of Medicare home health care in the United States," Health Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 921-936, July.
    10. Keane, Claire & Seán Lyons & Mark Regan & Walsh, Brendan, 2022. "Home support services in Ireland: Exchequer and distributional impacts of funding options," Research Series, Economic and Social Research Institute (ESRI), number SUSTAT111, June.
    11. Stadhouders, Niek & Kruse, Florien & Tanke, Marit & Koolman, Xander & Jeurissen, Patrick, 2019. "Effective healthcare cost-containment policies: A systematic review," Health Policy, Elsevier, vol. 123(1), pages 71-79.
    12. Jing Gu & Neeraj Sood & Abe Dunn & John Romley, 2019. "Productivity growth of skilled nursing facilities in the treatment of post-acute-care-intensive conditions," PLOS ONE, Public Library of Science, vol. 14(4), pages 1-14, April.

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    More about this item

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • I1 - Health, Education, and Welfare - - Health

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