Working Paper: NBER ID: w21654
Authors: Neeraj Sood; Abby Alpert; Kayleigh Barnes; Peter Huckfeldt; Jose Escarce
Abstract: Policymakers are increasingly interested in reducing healthcare costs and inefficiencies through innovative payment strategies. These strategies may have heterogeneous impacts across geographic areas, potentially reducing or exacerbating geographic variation in healthcare spending. In this paper, we exploit a major payment reform for home health care to examine whether reductions in reimbursement lead to differential changes in treatment intensity and provider costs depending on the level of competition in a market. Using Medicare claims, we find that while providers in more competitive markets had higher average costs in the pre-reform period, these markets experienced larger proportional reductions in treatment intensity and costs after the reform relative to less competitive markets. This led to a convergence in spending across geographic areas. We find that much of the reduction in provider costs is driven by greater exit of “high-cost” providers in more competitive markets.
Keywords: healthcare costs; payment reform; competition; Medicare; home health care
JEL Codes: D21; D22; D4; D78; I11; I13; L2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| IPS reductions in reimbursement (I18) | treatment intensity changes (C22) |
| IPS reductions in reimbursement (I18) | provider costs changes (I11) |
| market competition levels (L13) | treatment intensity changes post-IPS (I12) |
| market competition levels (L13) | provider costs changes post-IPS (J32) |
| high-cost providers exit (D49) | convergence in spending across geographic areas (F62) |