Understanding the effects of PPS on Medicare home health use

This study examines changes between 1983 and 1985 in the use of Medicare home health services. The key finding is that while overall increases in the proportion of Medicare enrollees who use home health services and the average number of visits received were relatively small, they were much greater than they would have been without the Prospective Payment System. The introduction of prospective payment for Medicare hospital services appears to have increased Medicare outlays for home health by an estimated 25%. In an effort to reduce patient stays, it appears that hospitals discharged more patients to home health and that home health users were discharged earlier, thus increasing both the number of users and the number of visits received per user. The study also found that changes in nursing home bed supplies and Medicaid reimbursement rates appear to bring about changes in home health use. These results have implications for understanding the impacts on home health services of changes in Medicare and Medicaid policies in other sectors.