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Home Care Reimbursement, Long-term Care Utilization,And Health Outcomes

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  • Robin McKnight

    ()
    (University of Oregon Economics Department and NBER)

Abstract

Long-term care currently comprises almost 10% of national health expenditures and is projected to rise rapidly over coming decades. A key, and relatively poorly understood, element of long-term care is home health care. I use a substantial change in Medicare reimbursement policy, which took the form of tightly binding average per-patient reimbursement caps, to address several questions about the market for home care. I find that the reimbursement change was associated with a large drop in the provision of home care. This drop was concentrated among unhealthy beneficiaries, which is consistent with the incentives for patient selection inherent in the per-patient caps. I find that the decline in home health utilization was not offset by increases in institutional long-term care or other medical care and that there were no associated adverse health consequences. However, approximately one-quarter of the decline in Medicare spending was offset by increases in out-of-pocket expenditures for home health care, with the offset concentrated in higher income populations. Despite the value of home health care implied by the out-of-pocket expenditures, I find that the welfare implications of the reimbursement change were ambiguous.

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Bibliographic Info

Paper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number 2004-6.

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Length: 52
Date of creation: 02 Apr 2004
Date of revision:
Handle: RePEc:ore:uoecwp:2004-6

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Keywords: medicare; prospective payment; home health care;

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References

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  1. Joseph P. Newhouse, 1996. "Reimbursing Health Plans and Health Providers: Efficiency in Production versus Selection," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1236-1263, September.
  2. Norton, Edward C., 2000. "Long-term care," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 17, pages 955-994 Elsevier.
  3. Skinner, Jonathan & Fisher, Elliott, 1997. "Regional Disparities in Medicare Expenditures: An Opportunity for Reform," National Tax Journal, National Tax Association, vol. 50(3), pages 413-25, September.
  4. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 249-275, February.
  5. Grabowski, David C., 2001. "Medicaid reimbursement and the quality of nursing home care," Journal of Health Economics, Elsevier, vol. 20(4), pages 549-569, July.
  6. Chalkley, M. & Malcomson, J.M., 1998. "Government purchasing of health services," Discussion Paper Series In Economics And Econometrics 9821, Economics Division, School of Social Sciences, University of Southampton.
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Cited by:
  1. Jonathan Skinner, 2010. "Comment on "The Narrowing Dispersion of Medicare Expenditures 1997-2005"," NBER Chapters, in: Research Findings in the Economics of Aging, pages 407-411 National Bureau of Economic Research, Inc.
  2. Huckfeldt, Peter J. & Sood, Neeraj & Escarce, Jose J. & Grabowski, David C. & Newhouse, Joseph P., 2012. "Effects of Medicare Payment Reform: Evidence from the Home Health Interim and Prospective Payment Systems," Working Paper Series rwp12-007, Harvard University, John F. Kennedy School of Government.
  3. Neeraj Sood & Peter J. Huckfeldt & David C. Grabowski & Joseph P. Newhouse & José J. Escarce, 2011. "The Effect of Prospective Payment on Admission and Treatment Policy: Evidence from Inpatient Rehabilitation Facilities," NBER Working Papers 17125, National Bureau of Economic Research, Inc.
  4. Gary V. Engelhardt & Nadia Greenhalgh-Stanley, 2008. "Public Long-Term Care Insurance and the Housing and Living Arrangements of the Elderly: Evidence from Medicare Home Health Benefits," Working Papers, Center for Retirement Research at Boston College wp2008-15, Center for Retirement Research, revised Dec 2008.
  5. Orsini, Chiara, 2010. "Changing the way the elderly live: Evidence from the home health care market in the United States," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 142-152, February.
  6. Engelhardt, Gary V. & Greenhalgh-Stanley, Nadia, 2010. "Home health care and the housing and living arrangements of the elderly," Journal of Urban Economics, Elsevier, vol. 67(2), pages 226-238, March.
  7. Katherine Baicker & Amitabh Chandra, 2011. "Aspirin, angioplasty and proton beam therapy: the economics of smarter health-care spending," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 197-235.
  8. Bernard van den Berg & Wolter Hassink, 2006. "Moral hazard and cash benefits in long-term home care, CHERE Working Paper 2006/12," Working Papers 2006/12, CHERE, University of Technology, Sydney.

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