Medicare Episodes of Illness: A Study of Hospital, Skilled Nursing Facility, and Home Health Agency Care

This paper analyzes charges incurred under the Medicare program for inpatient hospital, skilled nursing facility (SNF), and home health agency (HHA) care for 1976. This research was made possible through the construction of a new data set which links a beneficiary's use of these three services. Summary highlights reveal that an overwhelming majority of the 7.5 million Medicare episodes of illness do not involve post-hospital SNF or HHA care. Those episodes of illness that use only hospital care are substantially (53%) cheaper than all other episodes. A large percentage of these charge differences reflect the greater number of hospital days of care associated with post-hospital care services. However, an analysis of the beneficiaries' demographic characteristics suggests that persons who use post-hospital care generally differ from those who receive only hospital care. We found that persons who use post-hospital SNF or HHA, or both types of care are likely to be female, to have cancer, diabetes, fractured bones or a central nervous or vascular system disease, and to be older than persons who do not use these types of care. The data also show that a beneficiary's area of residence greatly influences the amount and types of care received. Persons who reside in the New England, Middle Atlantic, and Pacific Divisions are more likely to receive post-hospital care services than persons who live elsewhere in the United States. These persons also incur among the highest per capita institutional charges in the United States. Part of this variation in institutional charges per capita is explained by the high input price index found in these areas, and in some cases by the high quantity of services index.