Full Citation
Title: Health Care Spending Growth under the Prospective Payment System: Evidence from Medicare Home Health Care
Citation Type: Miscellaneous
Publication Year: 2012
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Abstract: This paper explores the causes of the dramatic rise in total Medicare home health spending under the prospective payment system. In 2000, Medicare home health care introduced the prospective payment system to control the spending growth that had occurred under the fee-for-service payment system. However, total spending under the new system has continued to increase significantly. I examine the underlying forces behind the growth in the three factors that contributed to this spending increase: 1) the number of Medicare home health patients, 2) the number of episodes per patient, and 3) the payment amount per episode. Using the Medicare Claims and Provider of Services File from 1999 to 2009, I find strong empirical support that the prospective payment system provided unintended incentives for home health agencies to adjust their service provision patterns to increase profits. This led to an increase in all three factors, independent of the health needs of patients. In particular, the number of Medicare home health patients contributed the most to the total spending increase. In addition, many profit maximizing behaviors were most evident among for-profit home health agencies. Furthermore, the incentives built into the prospective payment system attracted to the market a substantial number of for-profit agencies. These new agencies pursued profitable home health provision patterns more aggressively than agencies established prior to the prospective payment system. Overall, the increase in the for-profit market share accounts for about one-third of the increase in total Medicare spending between 2001 and 2009.
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Authors: Kim, Hyunjee
Publisher: University of Michigan
Data Collections: IPUMS USA
Topics: Health
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