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

Robin McKnight

NBER Working Paper No. 10414
Issued in April 2004
NBER Program(s):The Program on Aging, The Health Care Program

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.

download in pdf format
   (340 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w10414

Published: McKnight, Robin. "Home Care Reimbursement, Long-Term Care Utilization, And Health Outcomes," Journal of Public Economics, 2006, v90(1-2,Jan), 293-323. citation courtesy of

Users who downloaded this paper also downloaded* these:
Coyte and Stabile w8523 Household Responses to Public Home Care Programs
Goda, Golberstein, and Grabowski w16076 Income and the Utilization of Long-Term Care Services: Evidence from the Social Security Benefit Notch
Dick, Garber, and MaCurdy w4107 Forecasting Nursing Home Utilization of Elderly Americans
Huckfeldt, Sood, Escarce, Grabowski, and Newhouse w17870 Effects of Medicare Payment Reform: Evidence from the Home Health Interim and Prospective Payment Systems
Cutler and Sheiner w4302 Policy Options for Long-Term Care
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us