Medicare Interim Payment System's Impact on Medicare Home Health Utilization

The Medicare home health interim payment system (IPS) implemented in fiscal year 1998 provided very strong incentives for home health agencies (HHAs) to reduce the number of visits provided to each Medicare user and to avoid those beneficiaries whose Medicare plan of care was likely to exceed the average beneficiary cost limit. We analyzed multiple years of data from the Medicare Current Beneficiary Survey (MCBS) to examine how the IPS affected subgroups of the Medicare population by health and socioeconomic characteristics. We found that the IPS strongly reduced overall utilization, but that few subgroups were disproportionately affected.