Medicare's disproportionate share adjustment and the cost of low-income patients

by Gerald Kominski, Stephen H Long

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This study investigates whether or not hospitals have higher costs for inpatient care provided to low-income Medicare patients, after controlling for other cost differences already accounted for by Medicare payments. Differences were estimated in Prospective Payment System-adjusted costs and outlier-adjusted length of stay for low-income patients relative to matching non-low-income cases from the same hospital in 85 high-volume diagnosis-related groups. Low-income Medicare patients do not have costlier hospital stays, although their stays are 2.5% longer. The authors conclude that disproportionate share payments are not justified on grounds of higher treatment costs.

Originally published in: Journal of Health Economics, v. 16, 1997, pp. 177-190.

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