• Cost shifting from Medicaid to Medicare in the dual eligibles

    From Health Affairs, “State Spending On Dual Eligibles Under Age 65 Shows Variations, Evidence Of Cost Shifting From Medicaid To Medicare“:

    Roughly half of Medicare beneficiaries under age sixty-five are also eligible for Medicaid. These “dual eligibles” have been the subject of much research because of their low income and poor health status. Previous studies suggest that some states seek to shift costly health care services for this group out of state-run Medicaid programs and into the federally funded Medicare program—for example, replacing nursing home care with hospital care. Using state-level data on dual eligibles under age sixty-five, we found support for this hypothesis. In states with below-average per capita Medicaid spending, corresponding Medicare spending was above average. These state-level estimates also revealed a nearly threefold difference in total—Medicare plus Medicaid—price-adjusted spending per person, ranging from $16,309 in Georgia to $43,587 in New York. Such large variations among people with serious diseases suggest inefficiency. Some states may be spending too little for Medicaid, meaning that some patients’ needs are not being met, or some states may be spending too much, meaning that more services are being provided than needed. Such inefficiency exposes patients to unnecessary risk, drives costs up unnecessarily, and highlights the large potential gains arising from improved care coordination for dual eligibles.

    Can we start with the fact that half of people over 65 can qualify for Medicaid? That speaks pretty poorly about the financial stability of the elderly population. (ed – Sorry – I’m tired and I misread. This is besides the point anyway so ignore – Aaron)

    Once you get past that, though, this manuscript speaks pretty well to the potential pitfalls of keeping Medicare and Medicaid financed at different levels of government. Medicare, of course, is a federally run single-payer system for everyone over 65. Medicaid, on the other hand, is a state run system where the federal government matches some percentage of payments so that states aren’t totally responsible for financing. The trick, though, lies in the dual eligibles, or people who are on both Medicare and Medicaid.

    States, of course, would like the federal government to pay for more so that they can pay for less. So whatever they can get shifted to Medicare for dual-eligibles, the better. Medicaid, for instance, pays for nursing home care (which Medicare does not), so if they can get a patient admitted to the hospital instead, then they can get Medicare to pay. But this probably isn’t good for patients. If that was occurring differently in different states, you’d expect great variation in the amounts states spend on Medicaid versus Medicare:

    If people are unhealthy, you’d expect more health care spending period. But as you can see, the proportion spent on Medicare versus Medicaid is all over the map. This means that states are likely finding ways to get Medicare to pay for a larger percentage of care in some states. Here’s a better way of looking at that:

    There’s really no positive relationship between Medicare spending per person (x-axis) and Medicaid spending per person (y-axis). You’d expect that if increased spending was just a measurement of “illness” in the population. There is, however, a negative relationship:

    We also found evidence of a negative association between Medicaid and Medicare spending for dual eligibles under sixty-five (Exhibit 3), with a weighted correlation coefficient between Medicare and Medicaid spending for this group of −0.40 (Formula). That is, for these beneficiaries, Medicare expenditures appeared to substitute for Medicaid expenditures. States with lower rates of Medicaid spending experienced higher rates of Medicare expenditures, and vice versa.

     Bottom line – some states (like NY) seem to be pretty proficient at getting Medicare to foot the bill. Others (like TX) seem to be less profoficient. It’s likely cost-shifting, it’s inefficient, and it’s inequitable.
    UPDATE: Edited for clarity, fixed a mistake, and added in the negative relationship info.
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    • I’m glad the evidence shows NY to be proficient in its efforts to shift costs for dual-eligibles from Medicaid to Medicare. Ask any provider about the aggressiveness of state regulators and auditors in pushing this agenda, and you’ll hear countless (horror) stories.

      Please note — it’s not about assuring delivery of cost-effective health care services, it’s all about holding down state Medicaid expense no matter what the consequences for patients. Since the recession hit and state revenues dropped, it’s only gotten worse. It’s all a very logical result of not having single-payer universal health coverage.

    • I think you need to exchange the labels on your second graph.

    • I have a minor quibble with this article. One of the examples of potential cost shifting is in nursing homes: low Medicaid rates obviously save the state money but they cause poor staffing. That impacts quality of care and leads to more hospitalizations. True, and empirically demonstrated (the Intrator et al article quoted there, iirc).

      However, that doesn’t apply to the younger duals. Very few of them use nursing home services (I’m talking about long-stay, long-term care nursing home stays). CMS’s data show that only about 4 percent of disabled Medicaid beneficiaries used nursing homes in 2008, and the disabled eligibility group contains younger duals.

      I think that a better example of cost shifting for younger duals would be community-based, psychosocial model mental health services like Assertive Community Treatment. I think ACT has been shown to reduce hospitalizations. If the same holds true of similar interventions, you could expect states that underinvest in those to have higher hospitalization rates and Medicare spending for younger duals, who have a very high prevalence of behavioral health conditions.

      The nursing home cost shift is very likely to be true for the senior duals, though.

      • Yes, among the younger dual eligibles, where mental illness is a common condition, the shift from state to federal sources of funding began with the closure of state mental hospitals. It was a noble effort, but without the community supports needed, these younger people found themselves re-institutionalized–sometimes nursing homes, but increasingly in private psychiatric facilities where not surprisingly the average length of stay often equaled whatever the maximum allowed was in each state’s Medicaid program.