The Long-term Impact of Medicare Payment Reductions on Patient Outcomes
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The Long-term Impact of Medicare Payment Reductions on Patient Outcomes (http://www.nber.org/papers/w16859) This study examines the long term impact of Medicare payment reductions on patient outcomes using a natural experiment - the Balance Budget Act of 1997.We use predicted Medicare revenue changes due to BBA, with simulated BBA payment cuts as an instrument, to categorize hospitals by degrees of payment cuts (small, moderate, or large), and follow Medicare patient outcomes in these hospitals over a 11 year panel: 1995-1997 pre-BBA, 1998-2000 initial years of BBA, and 2001-2005 post-BBA years. We find that Medicare AMI mortality trends stay similar across hospitals when comparing between pre-BBA and initial-BBA periods. However, the effect became measurable in 2001-2005: hospitals facing large payment cuts saw increased mortality rates relative to that of hospitals facing small cuts in the post-BBA period (2001-2005) after controlling for their pre-BBA trends. We find support that part of the worsening AMI patient outcomes in the large-cut hospitals is explained by reductions in staffing level and operating cost following the payment cuts, and that in-hospital mortality is not affected partly due to patients being discharged earlier.
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Dr. James J. Heckman is the USC Presidential Scholar-in-Residence at the Leonard D. Schaeffer Center for Health Policy & Economics. Dr. Heckman is also the Henry Schultz Distinguished Service Professor of Economics at the University of Chicago, where he has served since 1973. In 2000,...
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