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Martin Hackmann

November 6th, 2018

"Patient vs. Provider Incentives in Long Term Care"


We study how patient and provider incentives affect the mode and cost of long term care. Our analysis of 1 million nursing home stays yields four main insights. First, Medicaid-covered residents prolong their stays instead of transitioning to community- based care due to limited cost-sharing. Second, nursing homes shorten Medicaid stays when capacity binds to admit more profitable residents who pay out-of-pocket. Third, longer stays for marginal Medicaid beneficiaries do not improve health outcomes on average, pointing to annual overspending of $0.9bn. Fourth, transitioning from per- diem to episode-based provider reimbursement is more effective than increasing resident cost- sharing in shortening Medicaid stays.