Medicare's Prospective Payment System (PPS) includes an adjustment that provides additional payments to hospitals that serve a disproportionately large share of low-income patients. the principal rationale for this adjustment is that low-income patients are costlier to treat, controlling for DRG. Only a few studies have directly examined this issue, however. These studies differ both over whether or not low-income patients are costlier to treat, and, if so, over how much costlier. The purpose of this study was to provide a more precise answer to these questions using data from the universe of low-income Medicare beneficiaries. Our findings indicate that, on average, low-income Medicare patients do not have costlier hospital stays compared to other Medicare patients. Overall, they had costs that were 0.20 percent lower than other Medicare patients.
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