Use of Medicare services before and after introduction of the prospective payment system.

Objective: The case mix-adjusted pattern of use of health care services, especially posthospital care, is compared before and after the introduction of Medicare's Prospective Payment System (PPS).
Data Sources: The 1982 and 1984 National Long Term Care Surveys (NLTCS) linked to Medicare administrative records 1982-1986 provide health and health service use data for 12-month periods before and after the introduction of PPS.
Study Design: Case-mix differences between pre- and post-periods are controlled by using the Grade of Membership model to identify health groups from the NLTCS data. Differences in timing (e.g., hospital length of stay) were controlled using life table models estimated for each health group, that is, service use patterns pre- and post-PPS are compared within groups.
Principal Findings: Hospital LOS and admission rates declined post-PPS. Changes in the timing and location of death occurred but, overall, mortality did not increase. Changes in post-acute care service use by elderly, chronically disabled Medicare beneficiaries were observed: home health service use increased overall and among the unmarried disabled population.
Conclusions: PPS did not adversely affect quality of care as reflected in mortality or in hospital readmissions. Moreover, the differential use of post-acute care, and changes in hospital LOS by health group, indicate that the system responded, specific to marital status and age, to the severity of needs of chronically disabled persons.