Cutting medicare hospital prices leads to a spillover reduction in hospital discharges for the nonelderly.
OBJECTIVE
To measure spillover effects of Medicare inpatient hospital prices on the nonelderly (under age 65).
Healthcare Cost and Utilization Project State Inpatient Databases (10 states, 1995-2009) and Medicare Hospital Cost Reports.


METHODS
Outcomes include nonelderly discharges, length of stay and case mix, staffed hospital bed-days, and the share of discharges and days provided to the elderly. We use metropolitan statistical areas as our markets. We use descriptive analyses comparing 1995 and 2009 and panel data fixed-effects regressions. We instrument for Medicare prices using accumulated changes in the Medicare payment formula.


RESULTS
Medicare price reductions are strongly associated with reductions in nonelderly discharges and hospital capacity. A 10-percent reduction in the Medicare price is estimated to reduce discharges among the nonelderly by about 5 percent. Changes in the Medicare price are not associated with changes in the share of inpatient hospital care provided to the elderly versus nonelderly.


CONCLUSIONS
Medicare price reductions appear to broadly constrain hospital operations, with significant reductions in utilization among the nonelderly. The slow Medicare price growth under the Affordable Care Act may result in a spillover slowdown in hospital utilization and spending among the nonelderly.
RAND Corporation, Arlington, VA.
Chapin
C
White
D000328:Adult; D000368:Aged; D006301:Health Services Needs and Demand / Q000706:statistics & numerical data; D017721:Hospital Costs / Q000706:statistics & numerical data / Q000639:trends*; D006786:Hospitals, Urban / Q000706:statistics & numerical data; D006801:Humans; D007902:Length of Stay / Q000191:economics* / Q000639:trends; D006278:Medicare / Q000191:economics* / Q000706:statistics & numerical data* / Q000639:trends; D008875:Middle Aged; D008962:Models, Theoretical; D010351:Patient Discharge / Q000191:economics* / Q000706:statistics & numerical data* / Q000639:trends; D058991:Patient Protection and Affordable Care Act; D014481:United States
Medicare; access/demand/utilization of services; health economics; hospitals; instrumental variables; prices