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

Author

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  • Robin McKnight
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.

Suggested Citation

  • Robin McKnight, 2004. "Home Care Reimbursement, Long-term Care Utilization, and Health Outcomes," NBER Working Papers 10414, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:10414
    Note: AG EH
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    References listed on IDEAS

    as
    1. Chalkley, Martin & Malcomson, James M., 2000. "Government purchasing of health services," Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 15, pages 847-890 Elsevier.
    2. Jennifer Schore, 1994. "Patient, Agency, and Area Characteristics Associated with Regional Variation in the Use of Medicare Home Health Services," Mathematica Policy Research Reports c343cd55478f4997ba4a3b513, Mathematica Policy Research.
    3. 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.
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    5. Valerie Cheh, "undated". "The Final Evaluation Report on the National Home Health Prospective Payment Demonstration: Agencies Reduce Visits While Preserving Quality," Mathematica Policy Research Reports 4d80eb1fa9014a63942031e30, Mathematica Policy Research.
    6. Skinner, Jonathan & Fisher, Elliott, 1997. "Regional Disparities in Medicare Expenditures: An Opportunity for Reform," National Tax Journal, National Tax Association;National Tax Journal, vol. 50(3), pages 413-425, September.
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    10. 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.
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    Full references (including those not matched with items on IDEAS)

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    • I1 - Health, Education, and Welfare - - Health

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