Home Health Medicaid Medicaid/Medicare Nursing Home Nursing Homes

Does home health care reduce long-term care costs?

It has long been posited that increased used of home health care will decrease the use of long-term care.  Clearly, there are some patients who need assistance, but for whom long-term care is not needed.  If most of these people who would use home health care would otherwise be in long-term care, home health care costs will decrease long-term care costs.  On the other hand, if most people who use home health services would have not needed long-term care services (e.g., they would receive care from a family member) then increasing use of home health can increase cost to payers.

A paper by Guo, Konetzka and Manning (2015) examines just this question using  Medicaid claims data for adult enrollees of the Cash and Counseling Demonstration and Evaluation (CCDE) program.

We find that the use of Medicaid-financed home care services significantly reduced but only partially offset utilization and Medicaid expenditures on nursing facility services. A $1000 increase in Medicaid home care expenditures avoided 2.75 days in nursing facilities and reduced annual Medicaid nursing facility costs by $351 among people over age 65 when selection bias is addressed.

The authors use participation in the CCDE program as an instrument. “Although expanding the amount of home care services used by the treatment group was not a primary goal of the intervention, this is what happened. Cash and Counseling expanded the supply of home care workers because treatment group participants were allowed to hire family and friends.”

It is not surprising that increasing use of home health services decreased long-term care costs but the offset was not one for one. However, overall patient utility was likely higher as more patients had access to home health services than otherwise. An investigation of the societal merits of a home health program would also need to take into account any deadweight loss that would occur in order to fund these programs.



  1. The authors begin their report by stating at the outset, “Limited evidence exists on whether expanding home care saves money overall or how much institutional long-term care can be reduced.”

    The fact that they are not familiar with the canon should give us all pause.

  2. Seeing as the annual difference was only $351, I do think that people should see about opting for care at a facility of some sort. Now I know that I’m not to that age where I should be worried about this but I do know that one day, I probably will be. When that time comes, I’ll be sure to be educated on as much as possible so that I’m not in the dark on things.

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