The effect of state medicaid case-mix payment on nursing home resident acuity.

A number of studies have observed that access to nursing home care for Medicaid recipients is delayed relative to private-paying individuals (Feder and Scanlon 1980; Shapiro, Roos, and Kavanagh 1980; Friedman 1982; Greenless, Marshall, and Yett 1982; Gruenberg and Willemain 1982; Weissert and Cready 1988; U.S. General Accounting Office 1990; Ettner 1993; Reschovsky 1996). Moreover, many of these studies indicate that functionally more dependent, or “heavy care,” Medicaid recipients have the longest delays in obtaining care. These individuals typically receive care in the hospital, in other long-term care settings, or informally from family and friends until they gain access to a nursing home. These delays in obtaining nursing home care significantly increase patient costs due to increased hospitalizations (U.S. General Accounting Office 1990), and may negatively affect health care outcomes if patients are not receiving the appropriate care. Over the last two decades, there has been a substantial increase in the number of states adopting case-mix adjusted Medicaid payment systems, which pay nursing homes according to resident care needs (Harrington et al. 1999). By 2002, 32 states used some form of case-mix payment, up from 19 states in 1991 and just 4 states in 1981. Although there are several case-mix methods currently in practice that use alternative formulae, the majority of systems classify residents into homogeneous categories based on their estimated resource utilization. Associated with each of these categories is a case-mix index or weight, which represents, at least relatively, the time or cost of caring for the average resident in the group (Fries 1990; Fries et al. 1994). Nursing homes with a higher case-mix index score or weight, on average, would be reimbursed a higher rate. As such, case-mix adjustment is designed to achieve a more equitable distribution of Medicaid payments among providers. By compensating homes more for the “heavy care” of more disabled residents, an objective of case-mix payment is also to encourage better access to nursing home care for functionally more dependent Medicaid residents (Schlenker 1986; Murtaugh et al. 1988; Butler and Schlenker 1989; Arling and Daneman 2002). Previous studies have generally found support for increased access for heavy-care patients under case-mix payment (Holahan and Cohen 1987; Butler and Schlenker 1989; Feder and Scanlon 1989; Schlenker 1991; Thorpe, Gertler, and Goldman 1991; Norton 1992; Arling and Daneman 2002; Grabowski 2002; Swan and Pickard 2003). However, these studies were limited in a number of important ways. First, most existing analyses were restricted to a single state or just a few states. Despite the potential of gathering data in greater detail, such localized studies are quite limited in the extent to which they can provide a broader picture on the issue of nursing home access under case-mix payment. Second, with few exceptions, most existing studies used a cross-sectional design or a simple before- and after-case-mix introduction approach, based on data observed at only two points in time (typically between 1 or 2 years apart). Thus, these studies were unable to reveal and substantiate trends over a longer time period. Finally, most existing studies have used facility-level aggregate resident acuity information, as a crude proxy for resident case mix. This study offers new evidence on the impact of introducing Medicaid case-mix payment on nursing home resident acuity using national longitudinal data from the most recent years (1996–2002). To our knowledge, this study is the first to examine this issue using nationwide resident-level Minimum Data Set (MDS) assessments. Importantly, the MDS is employed by state Medicaid programs for case-mix classification using variants of the Resource Utilization Group (RUG) system (Fries et al. 1994), and used by the Centers for Medicare and Medicaid Services (CMS) for reimbursement of Medicare Skilled Nursing Facility (SNF) care and quality control (Mor 2004). Thus, findings from our study have important implications for state Medicaid policy with regard to the financing and delivery of nursing home care to a vulnerable segment of the population—the frail and needy elders in the U.S.