Effects of Medicare payment reform: Evidence from the home health interim and prospective payment systems

Peter J. Huckfeldt, Neeraj Sood, José J. Escarce, David C. Grabowski, Joseph P. Newhouse

Research output: Contribution to journalArticlepeer-review

22 Scopus citations


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.

Original languageEnglish (US)
Pages (from-to)1-18
Number of pages18
JournalJournal of Health Economics
Issue number1
StatePublished - Mar 2014

Bibliographical note

Funding Information:
The authors wish to acknowledge the role of Melinda Beeuwkes Buntin at the outset of this project. This study was funded in part by National Institute of Aging (NIA) Grant R01-AG031260 and a Grant (No. R01-HS018541 ) from the Agency for Healthcare Research and Quality . The authors thank Mark Totten for his excellent programming support and seminar participants at RAND, UC-Irvine, and the NBER Summer Institute Health Care Workshop.


  • Medicare
  • Prospective payment
  • Selection
  • Treatment intensity


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