Abstract
The introduction of Medicare's prospective payment system (PPS) has led to changes in the way hospitals are being used. This article examines concomitant changes in the use of Medicare-covered services during the last 90 days of life, using data on more than 34,000 Medicare beneficiaries who died during the years 1982-1986. We focus on questions pertaining to changes in practice patterns that include location of death, hospital utilization, use of other covered services, and spending. We find that use of hospitals and other health services by Medicare beneficiaries during the last 90 days of life changed markedly over this period, which included the introduction of PPS in late 1983. The percentage of deaths occurring in hospitals decreased sharply from 1982 to 1986, especially in PPS states relative to waivered states; this effect seems primarily due to reductions in length of stay rather than reduced admission rates, which did not change significantly. Use of home care, durable medical equipment (DME), and physicians' office services also increased sharply during the last 90 days of life, but with no consistent evidence that the introduction of PPS was associated with these changes or with the level or mix of Medicare expenditures for these patients. Medicare spending in this period of life rose at the same rate as medical care price inflation, and about 75 percent of reimbursements continued to be hospital payments, despite the utilization changes.
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