Working Paper: NBER ID: w10414
Authors: 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.
Keywords: home care; long-term care; Medicare reimbursement; health outcomes
JEL Codes: I1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Decline in home care utilization (I11) | Health outcomes among unhealthy beneficiaries (I14) |
| Change in Medicare reimbursement policy (I18) | Favor healthier, low-cost patients (I11) |
| Reduction in home care utilization (I11) | Increased use of institutional long-term care (I18) |
| Reduction in home care utilization (I11) | Adverse effect on health of the elderly (I12) |
| Change in Medicare reimbursement policy (I18) | Decline in home care utilization (I11) |