SUBACUTE CARE, MEDICARE BENEFITS, AND NURSING-HOME BEHAVIOR

Two policy changes in 1988, one administrative and one legislative all owed greater Medicare coverage of subacute care in skilled nursing fac ilities (SNFs). The Medicare Catastrophic Coverage Act (MCCA) of 1988, in conjunction with an administrative directive, or transmittal, from the Health Care Financing Administration (HCFA), changed the Medicare SNF benefit structure substantially. In this study, we specified a si multaneous equation system to explain the effects of the benefit chang es on Medicare use. The results suggest that the two policy changes in creased Medicare use in Pennsylvania SNFs substantially; however, the increase was associated with facility and case mix characteristics, wh ich suggest that the increase was largely attributable to reclassifica tion of current patients from other payer categories, Medicaid and sel f-pay, rather than new admissions. The effects of the MCCA and the HCF A transmittal on increased Medicare use were unanticipated and have im portant implications for the way in which subacute care is defined and financed in future benefit discussions.