Utilization of Home Health Services before and after the Balanced Budget Act of 1997: What Were the Initial Effects?

Abstract

To estimate the impact of the Balanced Budget Act of 1997 (BBA), which changed the way Medicare reimbursed for home health services, on a range of home health utilization measures, and to examine whether particular subgroups of beneficiaries were differentially impacted in the post-BBA period. Secondary data from the Centers for Medicare and Medicaid Services (CMS) Standard Analytic Files for the 1 percent sample of Medicare beneficiaries for fiscal years 1997 and 1999, linked with information from CMS eligibility, provider, and cost report files as well as the Area Resources File. Logistic regression was used to estimate the effects of being in the post-BBA period on the incidence of home health service use and ordinary least squares (OLS) regression was used to estimate the effects of being in the post-BBA period on the amount and type of use by home health service users. Interaction terms we reincluded for all the independent variables to assess whether the effect was disproportionate among particular beneficiary subgroups. Results show a 22 percent decrease in the percentage using home health services post-BBA and a 39 percent decrease in the number of visits per user. Stronger reductions, though not very large, were found in the incidence of use for beneficiaries aged 85 and older, those in states with high historical Medicare home health use, and those with Medicaid buy-in. More intensive reductions in the number of services were found for those aged 85 and older, in high historical Medicare use states, nonwhites, females, those using for-profit agencies, and those treated for certain diagnoses. Less intensive reductions were associated with hospital-based agencies. This research demonstrates that public program expenditures can be sharply curtailed with financial incentives. As reimbursement shifts to a prospective payment system legislated by the BBA, utilization should be closely monitored, especially for vulnerable subgroups.