IDEAS home Printed from https://ideas.repec.org/a/tpr/restat/v74y1992i1p185-91.html
   My bibliography  Save this article

Medicare's Prospective Payment System: The Victim of Aggregation Bias?

Author

Listed:
  • Feigenbaum, Susan
  • Anderson, Gerard
  • Lave, Judith R

Abstract

Since 1979, the Medicare program has relied upon hospital cost function parameter estimates to develop a hospital-level and, subsequently, patient-level reimbursement system. This paper demonstrates that the resulting payment adjusters are derived from biased estimates of the impact of patient and hospital-specific characteristics on individual treatment cost. Because hospitals appear to differ in their treatment cost functions, aggregation bias is present in such hospital cost models. Given this misspecification of the aggregate cost relationship, policymakers may be wise to consider patient-level cost analyses in their design of a patient-based prospective payment system. Copyright 1992 by MIT Press.

Suggested Citation

  • Feigenbaum, Susan & Anderson, Gerard & Lave, Judith R, 1992. "Medicare's Prospective Payment System: The Victim of Aggregation Bias?," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 185-191, February.
    • Handle: RePEc:tpr:restat:v:74:y:1992:i:1:p:185-91
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0034-6535%28199202%2974%3A1%3C185%3AMPPSTV%3E2.0.CO%3B2-P&origin=bc
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Coyte, Peter C. & Young, Wendy & Croxford, Ruth, 2000. "Costs and outcomes associated with alternative discharge strategies following joint replacement surgery: analysis of an observational study using a propensity score," Journal of Health Economics, Elsevier, vol. 19(6), pages 907-929, November.
    2. Xufeng Qian & Louise Russell & Elmira Valiyeva & Jane Miller, 2005. "New Evidence on Medicare's Prospective Payment System: A Survival Analysis based on the NHANES I Epidemiologic Followup Study," Departmental Working Papers 200506, Rutgers University, Department of Economics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tpr:restat:v:74:y:1992:i:1:p:185-91. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kelly McDougall (email available below). General contact details of provider: https://direct.mit.edu/journals .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.