Medicaid enrollment among elderly medicare beneficiaries: individual determinants, effects of state policy, and impact on service use.

Medicaid has traditionally been an important third-party payer for impoverished and disabled elderly persons. For low-income elderly persons who meet financial criteria,1 the Medicaid program assumes the out-of-pocket expenses associated with Medicare coinsurance and entitles beneficiaries to a comprehensive set of acute and long-term care benefits. Despite its potential for improving access to health care among low-income elderly persons, relatively little is known about take-up rates for Medicaid or its impact on service use among those enrolled. Existing literature has focused primarily on contrasting the characteristics and patterns of service use of dually enrolled persons (frequently referred to as “dual eligibles”) with those of other Medicare beneficiaries using bivariate associations (O'Brien and Feder 1999; Lamphere et al. 1998; Health Care Financing Administration 1997; Feder 1997; Merrell et al. 1997; Rowland 1996; Laschober and Olin 1996). Such studies consistently report relatively lower health status and higher service use among dual enrollees. Although more recent research has used multivariate models to control for potential confounders when estimating the effect of Medicaid enrollment on service use and costs (Hurd and McGarry 1997; Ettner 1998; Liu et al. 1998; Harber and Mitchell 1997; Kenney et al. 1995), the analyses have generally failed to address the bias that would result from the likely endogeneity of the dual enrollment indicator. Endogeneity would occur, for example, if unobserved or unmeasured need for Medicaid-covered services leads to both program enrollment and high service use. It may also arise if past service use results in Medicaid eligibility and subsequent enrollment. To the extent that differences between Medicaid eligible persons enrolled and not enrolled in the program are not completely explained by demographic and health-status variables, endogeneity due to selective enrollment is an important concern which may lead to overestimation of the effects of dual enrollment on service use if not explicitly addressed. Evidence beginning to accrue suggests that Medicaid participation rates among eligible community-dwelling elderly persons are well below 100 percent. Underenrollment is believed to occur among those eligible for full Medicaid benefits as well as those eligible for more restricted benefits under newer programs, such as the Qualified Medicare Beneficiary (QMB) and Specified Low-Income Medicare Beneficiary (SLMB). The Congressional Research Service estimated that only one third of elderly persons with incomes below the FPL were enrolled in Medicaid in 1987 (Congressional Research Service 1988). Using data from the Survey of Income and Program Participation and the National Medical Expenditure Surveys, Ettner (1997) reported similar participation rates. Recent research explicitly addressing enrollment by elderly persons in state Medicaid QMB and SLMB programs suggests that 45 percent of those eligible for benefits in the lowest income category (up to 100 percent of the poverty level) are not participating. Participation among those with incomes between 100 percent and 120 percent of poverty is believed to be even lower (Barents Group 1999). Several reasons have been offered for these relatively low participation rates. Lack of information about program and eligibility criteria (Public Policy Institute 1992) may play a role. The welfare stigma associated with government assistance may also keep some eligible beneficiaries from enrolling (Moffitt 1983 and 1987). Large state variation in take-up rates, however, suggests that institutional barriers to program participation, including lack of effective outreach efforts and cumbersome enrollment processes, may be important factors underlying low participation rates. Findings reported in Families USA (1998), Nemore (1999), and Lamphere and Rosenbach (2000) lend support to this hypothesis. The purpose of this study is to gain a better understanding of the factors associated with Medicaid enrollment among low-income, community-dwelling elderly persons and to examine the effect of Medicaid enrollment on elderly persons’ use of health care services, taking into account selective program participation. Of particular interest in the enrollment analysis is whether state allocation of resources for Medicaid home- and community-based services (HCBS) influences Medicaid enrollment by eligible, community-dwelling beneficiaries. A key feature of our analysis is to estimate simultaneously the residential status of Medicare beneficiaries (community versus institution) and the probability of Medicaid enrollment among community-dwelling eligible beneficiaries, and to use these estimates to form individual-level predictions of the probability of Medicaid enrollment. These predicted values are then substituted into the service use equations yielding estimates of the effect of dual enrollment on acute and long-term care use among community-living elderly Medicare beneficiaries that are free of (residence setting and program participation) selection biases.