Higher Medicare SNF care utilization by dual-eligible beneficiaries: can Medicaid long-term care policies be the answer?

Utilization and cost of Medicare paid skilled nursing facility (SNF) care provided in a nursing home following an acute care hospitalization have been a major health policy concern. Per capita Medicare fee-for-service spending on SNF care almost doubled over the last decade (Medpac 2012). More important, while only 5 percent of all Medicare expenditures are spent on SNF care (Medpac 2012), about 15 percent of the variation in these expenditures is explained by variation in SNF care services (Institute-of-Medicine 2013). This paper underscores the higher SNF care utilization by patients who are enrolled in both Medicare and Medicaid and referred to herein as “dual eligible.” Compared to other services, dual eligibles disproportionately use SNFs. In 2008, average Medicare spending was about 1.8 times higher and Medicare-supported SNF care was about 2.6 times higher for dual eligibles than for those who were Medicare-only (Medpac 2012). While it is well known that dual eligibles use SNF at a higher rate than their counterparts, there has been little empirical work that examines the causes and implications of longer SNF length of stay for dual-eligible beneficiaries. The central hypothesis of this paper is that dual-eligible patients have greater incentive to remain at nursing homes for longer periods of time than Medicare-only patients because of the absence of cost sharing and poorer living conditions at home. Nursing home stays beyond 100 days following SNF admission are not covered by Medicare and are typically paid out of pocket by Medicare-only patients until they spend-down their wealth (Liu, Doty, and Manton 1990; Mor, Intrator, and Laliberte 1993; Intrator et al. 1996) and become eligible for Medicaid when Medicaid pays for nursing home care. Additionally, because dual-eligible patients may have poorer living conditions in the community than their counterparts, it is plausible they are more likely to become long-stay nursing home residents. We hypothesize that state Medicaid policies play an important role in reducing the length of nursing home stays of dual-eligible patients primarily because Medicaid is responsible for financing the nursing home care of these patients once they become long-stay residents. We investigate whether three state policies are related to length of stay among dual-eligible beneficiaries: presence of certificate-of-need (CON) legislation, home and community-based services (HCBS) spending, and the average Medicaid payment rate for custodial nursing home care. These policies may also affect patients' long-term health outcomes like survival through the change in nursing home length of stay. These ideas can be summarized by two testable hypotheses: Dual eligibles are more likely to become long-stay nursing home residents than Medicare-only patients with comparable clinical conditions. State Medicaid policies aiming to reduce the costs of nursing home care affect the likelihood of becoming a long-stay nursing home resident, 30-day rehospitalization and survival of dual-eligible patients at a higher rate than those of Medicare-only patients. We tested these hypotheses using a set of community-residing Medicare beneficiaries from the 48 contiguous states who were admitted to a nursing home for Medicare paid SNF care following an acute hospital stay.