The impact of Medicare’s rural add-on payments on supply of home health agencies serving rural counties

Abstract

Intermittently since 2001, Medicare has provided a percentage increase over standard payments to home health agencies that serve rural beneficiaries. Yet the effect of rural add-on payments on the supply of home health agencies that serve rural communities is unknown. Taking advantage of the pseudo–natural experiment created by varying rural add-on payment amounts over time, we used data from Home Health Compare to examine how the payments affected the number of home health agencies serving rural counties. Our results suggest that while supply changes are similar in rural counties adjacent to urban areas and in urban counties regardless of add-on payments, only higher add-on payments (of 5 percent or 10 percent) keep supply changes in rural counties not adjacent to urban areas on pace with those in urban counties. Our findings support the recent shift from broadly applied to targeted rural add-on payments but raise questions about the effects of the amount and eventual sunset of these payments on the supply of home health agencies serving remote rural communities.

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