Working Paper: NBER ID: w31691
Authors: Norma Coe; David A. Rosenkranz
Abstract: Moral hazard and provider-induced demand may contribute to overutilization of scarce health care resources. The U.S. health care system includes several compensatory cost-containment mechanisms, but their effects depend on how patients and providers respond. We investigate hospice programs’ responses to a cap in the Medicare hospice benefit on their average annual payments per patient. We estimate their intensive margin responses to the cap by leveraging variation in cap-related financial incentives generated by the policy’s nonlinear design and the transition between fiscal years. We find that programs on track to exceed the cap in the last three months of a fiscal year raise their enrollment rates by 5.7% and their live discharge rates by 4.3% on average, reducing their cap liabilities. The marginal enrollees have longer average remaining lifetimes and are less likely to have been recently hospitalized. Their hospice spells are also more likely to be fragmented by subsequent live discharges. On the extensive margin, we find that cap liabilities are associated with terminations of Medicare provider certification numbers, suggesting that the cap impacts market structure. Current policy discussions about reducing the cap should consider its potential effect on market structure.
Keywords: hospice care; Medicare; provider payment incentives; healthcare utilization; policy implications
JEL Codes: I01; I11; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| hospice programs on track to exceed the cap in the last three months of a fiscal year (H51) | increase their enrollment rates (I24) |
| hospice programs on track to exceed the cap in the last three months of a fiscal year (H51) | increase their live discharge rates (C22) |
| hospice programs on track to exceed the cap in the last three months of a fiscal year (H51) | adjust their census to decrease average annual payments (C80) |
| marginal enrollees (I18) | tend to be healthier (I12) |
| cap liabilities (G32) | terminations of Medicare provider certification numbers (I18) |