Extending the Medicare Prospective Payment System to Posthospital Care

Planning a Demonstration

by Don Henry, Scott Harrison, George T. Olson, Adele Palmer, C. Richard Neu


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In view of the apparent initial success of the Medicare hospital prospective payment system (PPS) in slowing the rate of increase in Medicare outlays for hospital care, there have been suggestions to extend the system to include the posthospital care provided to Medicare patients by skilled nursing facilities and home health agencies. This report discusses the nature of an extended PPS, its potential benefits, and ways reimbursement rates might be set. It also addresses how a demonstration could be mounted, what could be learned from it, who would have to participate in it, and how demonstration sites might be chosen.

This report is part of the RAND Corporation Report series. The report was a product of the RAND Corporation from 1948 to 1993 that represented the principal publication documenting and transmitting RAND's major research findings and final research.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.