Home Care Reimbursement, Long-Term Care Utilization, and Health Outcomes

53 Pages Posted: 20 Apr 2004 Last revised: 13 Mar 2010

See all articles by Robin McKnight

Robin McKnight

Wellesley College; National Bureau of Economic Research (NBER)

Date Written: April 2004


Long-term care currently comprises almost 10% of national health expenditures and is projected to rise rapidly over coming decades. A key, and relatively poorly understood, element of long-term care is home health care. I use a substantial change in Medicare reimbursement policy, which took the form of tightly binding average per-patient reimbursement caps, to address several questions about the market for home care. I find that the reimbursement change was associated with a large drop in the provision of home care. This drop was concentrated among unhealthy beneficiaries, which is consistent with the incentives for patient selection inherent in the per-patient caps. I find that the decline in home health utilization was not offset by increases in institutional long-term care or other medical care and that there were no associated adverse health consequences. However, approximately one-quarter of the decline in Medicare spending was offset by increases in out-of-pocket expenditures for home health care, with the offset concentrated in higher income populations. Despite the value of home health care implied by the out-of-pocket expenditures, I find that the welfare implications of the reimbursement change were ambiguous.

Suggested Citation

McKnight, Robin, Home Care Reimbursement, Long-Term Care Utilization, and Health Outcomes (April 2004). NBER Working Paper No. w10414, Available at SSRN: https://ssrn.com/abstract=528995

Robin McKnight (Contact Author)

Wellesley College ( email )

106 Central Street
Wellesley, MA 02181
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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