John D. MacArthur Professor of Health Policy and Management, HKS and HSPH; Professor of Health Care Policy, HMS
Medicare continues to implement payment reforms that shift reimbursement from fee-for-service toward episode-based payment,
affecting average and marginal payment. We contrast the effects of two
reforms for home health agencies. The home health interim payment
system in 1997 lowered both types of payment; our conceptual model
predicts a decline in the likelihood of use and costs, both of which we
find. The home health prospective payment system in 2000 raised average
but lowered marginal payment with theoretically ambiguous effects; we
find a modest increase in use and costs. We find little substantive
effect of either policy on readmissions or mortality.
Huckfeldt, Peter J., Neeraj Sood, José J. Escarce, David C. Grabowski, and Joseph P. Newhouse. "Effects of Medicare Payment Reform: Evidence from the Home Health Interim and Prospective Payment Systems." Journal of Health Economics 34 (March 2014): 1-18.