Working Paper: NBER ID: w16859
Authors: Vivian Y Wu; Yuchu Shen
Abstract: This study examines the long term impact of Medicare payment reductions on patient outcomes using a natural experiment - the Balance Budget Act (BBA) of 1997. We use predicted Medicare revenue changes due to BBA, with simulated BBA payment cuts as an instrument, to categorize hospitals by degrees of payment cuts (small, moderate, or large), and follow Medicare patient outcomes in these hospitals over a 11 year panel: 1995-1997 pre-BBA, 1998-2000 initial years of BBA, and 2001-2005 post-BBA years. We find that Medicare AMI mortality trends stay similar across hospitals when comparing between pre-BBA and initial-BBA periods. However, the trends began to diverge in 2001-2005: hospitals facing large payment cuts saw increased mortality rates relative to that of hospitals facing small cuts in the post-BBA period (2001-2005) after controlling for their pre-BBA trends. We find support that part of the higher AMI mortalities among large-cut hospitals are explained by reductions in staffing level and operating cost following the payment cuts.
Keywords: Medicare; Payment Reductions; Patient Outcomes; Balanced Budget Act
JEL Codes: I1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Medicare payment reductions (H51) | increased acute myocardial infarction (AMI) mortality rates (I12) |
| large payment cuts (J33) | increased acute myocardial infarction (AMI) mortality rates (I12) |
| payment cuts (J65) | reductions in staffing levels (J63) |
| payment cuts (J65) | reduced financial resources allocated per bed (I22) |
| reduced staffing levels (J63) | increased acute myocardial infarction (AMI) mortality rates (I12) |
| reduced financial resources allocated per bed (I22) | increased acute myocardial infarction (AMI) mortality rates (I12) |