Previous studies of Medicare’s prospective payment system for hospitals (PPS), introduced in 1983, evaluated only its first few years, using data collected during the hospital stay to control for patients’ health. We examine transitions among health care settings over a full decade following...

Medicare’s prospective payment system (PPS), introduced in 1983, pays hospitals a fixed price for each stay rather than reimbursing costs. Previous studies evaluated its first few years using endogenous measures to control for heterogeneity in patients’ health. We examine PPS over a full...