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Abstract

We trace key policy changes that affected use of the Medicare home health benefit from the 1980s through the prospective payment system implemented in 2000, analyzing the impact on three measures of home care use: expenditures, users and visits. We demonstrate the impact of policies generated in the legislative, the judicial, and the executive branches of government and the gaming behavior of home health agencies in response to policy changes. Our analysis suggests that the policy itself and the implementation process are critical to understanding benefit use. The incentives in the policies and agency reactions had the potential to generate fraud in two directions, either over or underuse. Throughout this history, use of the benefit was driven less by patient need than by arbitrary interpretations of eligibility. These interpretations were in turn influenced by opposing ideologies favoring redistribution based on market principles versus those based on need.

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