Estimating the Effects of the Balanced Budget Act of 1997 on the Home Health Care Use of the Dually Eligible: A Natural Experiments Approach

Abstract

This research examines the use of home health agency services used by older adults after the implementation of changes to Medicare's payment scheme mandated by the Balanced Budget Act (BBA) of 1997. The objective of this study is to identify differential effects the BBA may have had on home health service use between dually eligible and Medicare-only beneficiaries. The results of this study suggest that although dually eligible and Medicare-only beneficiaries experienced a substantial decline in home health service use, the dually eligible had a relatively larger decline. Following the BBA, the dually eligible had more office-based physician visits but fewer inpatient hospital days, relative to the Medicare-only population. Finally, the author estimates cost savings to Medicare due to the BBA to be $1 billion in the 2 years following the legislation, whereas Medicaid programs shouldered a larger percentage of the home health service bill.