NEW FINDING

SUMMARY

This addendum presents the results of using the full cost method of defining Medicaid
costs. The full costs definition of Medicaid costs yields higher average values of
Medicaid costs from birth to 60 days after birth and larger estimated reductions in
Medicaid costs relative to the prorated Medicaid cost variable (see Tables I and II).
The difference in the definition of Medicaid costs has the most dramatic influence on
the findings for Minnesota, in which the savings in Medicaid costs associated with
prenatal WIC participation increases from an estimate of $277, which is not
statistically significant at conventional two-tailed significance levels, to an estimate of
$636, which is statistically significant at the .05 level. The alternative definitions of
Medicaid costs have the smallest impact on the findings for Florida and Texas. These
results are not surprising, given that the study states vary considerably in the nature of
services eligible for reimbursement, and the maximum number of hospital days that
Medicaid will reimburse for a given episode of illness. Both Florida and Texas, for
example, imposed limits on the number of inpatient days that could be reimbursed by
Medicaid, and, thus, service periods that extended beyond the 60-day postpartum
period were less likely to be reimbursed in full by Medicaid. However, even in these
states, the estimated savings in Medicaid costs associated with prenatal WIC
participation increase with the definition that includes the full reimbursements for
services starting within the first 60 days of birth.

° In all five study states, the benefits of prenatal WIC participation, as
measured by the estimated savings in Medicaid costs, exceeded the costs of
providing prenatal WIC benefits. For newborms and mothers, the estimated
benefit-cost ratios ranged from 1.92 in Florida to 4.21 in Minnesota, with
intermediate values of 2.57 in Texas, 3.17 in South Carolina, and 3.94 in
North Carolina. For newborns only, the benefit-cost estimates were 2.98 in
Texas, and 4.75 in North Carolina. Thus, for every dollar spent on the
prenatal component of the WIC program, the associated savings in Medicaid
costs for illnesses beginning in the first 60 days after birth ranged from $1.92
to $4.21 for newborns and mothers and from $2.98 to $4.75 for newborns
only.

Including the full reimbursements for Medicaid claims that extended beyond the first
60-day postpartum period increases the estimated benefit-cost ratios from prenatal
WIC participation and the associated Medicaid cost savings, relative to prorating
Medicaid reimbursements to include only the portion of costs incurred during the first
60 days postpartum.



THE ANALYSIS

° In all five study states, prenatal WIC participation by Medicaid beneficiaries
is associated with increased birthweight, longer gestational age, a lower
incidence of low birthweight, and a lower incidence of preterm birth.

° In all five study states, receiving inadequate levels of prenatal care is
associated with increased Medicaid expenditures during the first 60 days after
birth. As with the findings on the effects of prenatal WIC participation, the
estimated cost savings associated with receiving adequate versus inadequate
levels of prenatal care for newborns alone exceeded the cost savings for
newborns and mothers combined.

The primary results of this study and their interpretation are based on straightforward
analytic models in which Medicaid costs and newborn birthweight depend on prenatal
WIC participation, newborn characteristics, and maternal characteristics. This model
specification was judged to be the most appropriate after several methodological
problems and issues were assessed and examined.

One of the issues considered was how to treat Medicaid claims for health care that
extended beyond the 60-day postpartum period specified by the legislation.

There are three ways to operationalize the 60-day time period. One way is to
consider only the costs incurred for health care that began and ended within that time
period. This approach was rejected as too conservative, because it would have
excluded costs incurred for many of the sickest infants. Another approach is to
consider the full costs of illnesses that began within the 60-day postpartum period,
regardless of when they ended. An intermediate approach is to prorate Medicaid
reimbursements with a start date of service within the first 60 days of birth but whose
end date of service was outside of the 60-day postpartum period.

The intermediate approach was selected for the main report as it best reflected the
intent of the legislation mandating the study. All of the benefit-cost ratios presented
in the original report use the prorated Medicaid cost variable.



TABLE I

RESULTS FOR ALTERNATIVE DEFINITIONS OF MEDICAID
COSTS FROM BIRTH TO 60 DAYS AFTER BIRTH

Prorating Reimbursements for Medicaid Claims

Full Reimbursements for Medicaid Claims

Extending Beyond 60 Days Extending Beyond 60 Days Postpartum
Estimated Savings Estimated Savings
Mean Value of from Prenatal Mean Value of from Prenatal

Reimbursements

WIC Participation

Reimbursements

WIC Participation

Florida

Newborns and Mothers $2,483 $347" $2,530 $376"
Minnesota

Newborns and Mothers $3,815 $277 $4,092 $636"
North Carolina

Newborns $1,942 $744" $2,051 $907"

Newborns and Mothers $2,812 $598" $2,919 $753"
South Carolina

Newborns and Mothers $2,433 $565" $2,586 $736"
Texas

Newboms $1,866 $573" $1,921 $6017

Newborns and Mothers $3,247 $493" $3,299 $519"

SOURCE: WIC/Medicaid birth-event analysis file for Florida, Minnesota, North Carolina, South Carolina, and Texas.

NOTE: The unit of observation is the birth event. Observations with Medicaid costs from birth to 60 days after birth < $200 are

excluded.

*Medicaid costs include hospital costs only.

“CD: Signficant at the .05 (.01) level, two-tailed test.



Submitted to:

Dr. Janet Tognetti

THE SAVINGS IN MEDICAID COSTS FOR NEWBORNS AND
THEIR MOTHERS RESULTING FROM PRENATAL
PARTICIPATION IN THE WIC PROGRAM

ADDENDUM

October 1991

Authors:
Barbara Devaney

Linda Bilheimer ,
Jennifer Schore

Submitted by:

Mathematica Policy Research, Inc.

U.S. Department of Agriculture P.O. Box 2393
Food and Nutrition Service Princeton, NJ 08543-2393
Office of Analysis and Evaluation (609) 799-3535

3101 Park Center Drive, 2nd floor

Alexandria VA 22302

Co-Principal Investigators:
Linda Bilheimer
Barbara Devaney

Project Director: Barbara Devaney



TABLE IL

ESTIMATED BENEFIT-COST RATIOS
FULL REIMBURSEMENTS FOR MEDICAID CLAIMS SPANNING THE
60-DAY POSTPARTUM PERIOD

Prorating Reimbursements for Full Reimbursements for Medicaid
Medicaid Claims Extending Beyond Claims Extending Beyond 60-Day
60-Day Postpartum Period* Postpartum Period

Florida

Newborns and Mothers

Minnesota

Newborns and Mothers. 1.83 421
North Carolina

Newborns 3.90 4.75

Newborns and Mothers 3.13 3.94
South Carolina®

Newborns and Mothers

Texas

‘Newborns
Newborns and Mothers 2.44 2.57

SOURCE: WIC/Medicaid database for Florida, Minnesota, North Carolina, South Carolina, and Texas.

*All estimates are statistically significant at the .01 level (two-tailed test), except in Minnesota where the estimate is statistically at the .07
level (two-tailed test) and at the .03 level (one-tailed test).

*AIl estimates are statistically significant at the .01 level (two-tailed test), except in Minnesota where the estimate is statistically significant at
the .05 level (two-tailed test).

“Medicaid costs refer to hospital costs only.



STUDY DESIGN

THE SAVINGS IN MEDICAID COSTS FOR NEWBORNS AND

THEIR MOTHERS RESULTING FROM PRENATAL
PARTICIPATION IN THE WIC PROGRAM

ADDENDUM

This report is an addendum to a study mandated by the Commodity Distribution
Reform Act and WIC Amendments of 1987 (Public Law 100-237) and the Joint
Resolution Continuing Appropriation for Fiscal year 1988 (Public Law 100-202). The
Department of Agriculture released the original study on October 1, 1990. The
primary objective of the study was to determine the savings in Medicaid costs for
newboms and their mothers during the first 60 days after birth resulting from
participating the Special Supplemental Food Program for Women, Infants, and
Children (WIC) during pregnancy. The original report presents the basic results of
the study. This addendum discusses an alternate approach to calculating Medicaid
costs beyond the Congressionally mandated 60 day period, and presents the resulting
increased benefit/cost ratios for prenatal WIC participation.

The WIC/Medicaid study analyzed the effects of prenatal WIC participation on
Medicaid costs and birth outcomes in five states: Florida, Minnesota, North Carolina,
South Carolina, and Texas. The study period was 1987 for Florida, Minnesota, North
Carolina, and South Carolina and January through June 1988 for Texas. In each of
the five study states, the analysis database was constructed from multiple program
data files: (1) Medicaid files, which provided Medicaid cost and eligibility data on
newborns and their mothers; (2) Vital Records birth files, which provided data on
matemal characteristics, birthweight and other newborn characteristics, prenatal care,
and infant deaths; and (3) WIC program files, from which the Medicaid mothers were
identified as either WIC prenatal participants or nonparticipants and which provided
WIC cost data on the participants. These data files were linked to create a database
of 1987 Medicaid births (1988 in Texas) that included data on Medicaid costs, WIC
participation status and costs, birthweight and other pregnancy outcomes, and some
information on maternal characteristics, including age, race, previous live births,
education, marital status, and the use of prenatal care.



REVIEW OF THE
ORIGINAL STUDY
FINDINGS

The study is limited to women who were eligible for Medicaid in each of

the five study States. Since the income criteria for Medicaid eligibility were
extremely stringent in 1987 (1988 in Texas), (33 to 88 percent of poverty), the
women in this study are, by definition, extremely low income. The basic study
results indicated that prenatal participation in the WIC program improves birth
outcomes and generates savings in Medicaid costs for mothers and newborns. The
following specific findings were reported:

°

Prenatal participation in the WIC program is associated with substantial
savings in Medicaid costs for newborns and their mothers during the first 60
days after birth. Estimated savings in newborn and maternal Medicaid costs
due to prenatal WIC participation ranged from $277 in Minnesota to $598 in
North Carolina, with intermediate values of $347, $493, and $565 for
Florida, Texas, and South Carolina (hospital costs only), respectively.

When newborn and maternal Medicaid costs were able to be separated, the
estimated savings in newborn Medicaid costs associated with prenatal WIC
participation were even greater than the estimated savings when newborn and
maternal costs are combined; these estimates were $744 in North Carolina
and $573 in Texas.

In all five study states, the benefits of prenatal WIC participation, as
measured by the estimated savings in Medicaid costs, exceeded the costs of
providing prenatal WIC benefits. For newborns and mothers, the estimated
benefit-cost ratios ranged from 1.77 in Florida to 3.13 in North Carolina,
with intermediate values of 1.83 for Minnesota and 2.44 for both South
Carolina and Texas. For newborns only, the benefit-cost estimates were 3.90
in North Carolina and 2.84 in Texas. Thus, for every dollar spent on the
prenatal component of the WIC program, the associated savings in Medicaid
costs during the first 60 days after birth ranged from $1.77 to $3.13 for
newborns and mothers and from $2.84 to $3.90 for newborns only.