What happens when Medicare cuts hospital prices? Assessing the impact on inpatient discharges among the elderly.

Key findings. (1) Between 1995 and 2009, growth in Medicare inpatient prices varied widely across hospital markets. Faster growth typically occurred in less urban areas that had a large market share of for-profit hospitals. (2) By 2008-2009, elderly patients were going to the hospital at the same rate as in the mid-1990s, but their stays were much shorter, and they received much more intensive services. (3) Medicare price cuts, largely attributable to the Balanced Budget Act of 1997, were associated with a decrease in the num­ber of elderly discharges and a decrease in the number of staffed hospital beds, highlighting possible effects of hospital price cuts under health reform.