The Narrowing Dispersion of Medicare Expenditures 1997 to 2005

Jay Bhattacharya, Alan M. Garber and Thomas MaCurdy

in Research Findings in the Economics of Aging

Published by University of Chicago Press

Published in print April 2010 | ISBN: 9780226903064
Published online February 2013 | e-ISBN: 9780226903088 | DOI:
The Narrowing Dispersion of Medicare Expenditures 1997 to 2005

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This chapter investigates how the Balance Budget Act (BBA) affected Medicare expenditure trends. In the immediate post-BBA period, the most important effects were on inpatient services and home health services, where the intention was unambiguously to reduce Medicare payments. Other features of BBA, such as the introduction of prospective payment for some outpatient services and the creation of Medicare plus Choice plans, involved new payment mechanisms with the prospect for long-term expenditure control. The study assesses whether expenditures grew more or less rapidly for high-expenditure Medicare beneficiaries (as compared with people who used few Medicare-covered services) in the period following BBA's implementation. The study finds that after 1997, the growth in expenditures among the highest-cost users of Medicare-reimbursed care was less than growth among lower-cost users. Thus, the overall dispersion in expenditures fell over time. These findings suggest that the main effects of the BBA were realized as intended.

Keywords: Medicare; expenditure; balanced budget act; BBA

Chapter.  9505 words.  Illustrated.

Subjects: Economics

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