Assessing Medicare's Prospective Payment System

Abstract

Sager et al 1 raise some interesting and important issues in this issue ofThe Journal. By reviewing hospitalization and mortality data for the Wisconsin-Medicaid elderly population in nursing homes and comparing the data with those for the noninstitutionalized Medicaid population, the authors claim a strong causal relationship between the advent of a prospective payment system (PPS) to hospitals and the rise in admissions to hospitals of the institutionalized elderly Medicaid patients. Likewise, they compare these two population groups for length of stay in the hospitals, noting a significantly greater decrease in length of stay for the institutionalized Medicaid patients than for the noninstitutionalized. Last, they describe a shift in mortality rates, with an increase in nursing home deaths and a corresponding decrease in hospital deaths. This study raises a number of significant issues that I will address, although I may be perceived as somewhat defensive of a system that