At the federal level, CMS, within the Department of Health and Human Services (HHS), is responsible for overseeing the design and operation of states’ Medicaid programs, and states administer their respective Medicaid programs’ day-to-day operations. In conformance with federal requirements, states establish beneficiaries’ eligibility for Medicaid, and determine the services that will be provided to beneficiaries and how they will be provided in their state. Eligibility for Medicaid is based on a variety of categorical and financial requirements. Historically, categories of Medicaid eligibility included pregnant women, low-income children and their parents, individuals who are aged, and individuals with disabilities. In 2014, certain low-income adults who did not fall into one of these groups may be eligible for Medicaid in states that chose to expand coverage to these individuals under PPACA. Dual-eligible beneficiaries, who are eligible for both Medicaid and Medicare, generally fall into two categories: (1) low-income seniors (individuals aged 65 years old and over) and (2) individuals with disabilities under the age of 65. While some characteristics of state programs vary, Medicaid generally covers a wide range of health care services. These include hospital care; outpatient services, such as physician services, laboratory and other diagnostic tests; prescription drugs; dental care; and LTSS in institutions Non-institutional LTSS include home health and and in the community.personal care services, among other services. Medicaid is the nation’s primary payer for LTSS, and provided approximately 41 percent of LTSS funding in the United States in 2010. As we have previously reported, nearly all states enroll some Medicaid beneficiaries in a form of managed care. the scope of services they provide and the populations they enroll in managed care. Some states contract with managed care organizations to provide the full range of covered Medicaid services to certain enrollees, for which they pay a set, or capitated, amount per member per month. Alternatively, states may rely on arrangements, such as limited benefit plans—which provide a limited set of services, including dental care or behavioral health services—or primary care case management programs in which enrollees are assigned a primary care provider who is responsible for providing primary care services and for coordinating other needed health care. States often provide long-term care services outside of managed care arrangements. GAO, Medicaid: States’ Use of Managed Care, GAO-12-872R (Washington, D.C.: Aug. 17, 2012). top 10 percent of Medicaid spending were responsible for 51 percent of Medicaid spending on dual-eligible beneficiaries. The research also indicates that there is a subset of Medicaid-only beneficiaries who are very costly, such as those with institutional care needs or chronic conditions. One study showed that high-expenditure Medicaid beneficiaries in 2001 included subgroups from each eligibility category, with the elderly and disabled making up the greatest shares of this high-expenditure group. The largest portions of spending were for hospital care for children and adults, intermediate care for individuals with disabilities, and nursing home care for the elderly. showed that annual per capita expenditures ranged from $8,000 to nearly $16,000 for Medicaid beneficiaries with chronic conditions, including asthma, coronary heart disease, congestive heart failure, diabetes, or hypertension. This study also noted that annual per capita expenditures may double and sometimes triple when single chronic conditions are coupled with mental illness and a drug or alcohol disorder. Intermediate care included intermediate care facility services for persons with intellectual disabilities, services in institutions for mental disease for the elderly, and inpatient psychiatric care under age 21. Kaiser Family Foundation, Medicaid’s High Cost Enrollees (Washington, D.C.: March 2006). beneficiaries (less than 1 percent of the total Medicaid population) and 21.9 percent of total Medicaid expenditures on other dual-eligible beneficiaries (13.8 percent of total Medicaid beneficiaries). (See fig. 1). At the beneficiary level, per-capita spending on high-expenditure Medicaid-only beneficiaries greatly exceeded that of all other Medicaid- only beneficiaries, but was less than what was spent on high-expenditure dual-eligible beneficiaries. (See table 1.) Overall, per capita spending by states on high-expenditure Medicaid-only beneficiaries was approximately 18 times higher than per capita spending on all other Medicaid-only beneficiaries. This was similar to the pattern of spending for dual-eligible beneficiaries, with per capita spending significantly higher for high- expenditure dual-eligible beneficiaries compared with all other dual- eligible beneficiaries. At the state level, there was wide variation in spending per capita on high- expenditure Medicaid-only beneficiaries. (See fig. 2.) Per-capita expenditures by state per beneficiary ranged from $20,896 to $83,365. Key characteristics—such as having a disability, having certain conditions, delivery/childbirth, and residing in a LTC facility—were strongly associated with being a high-expenditure Medicaid-only beneficiary. These key characteristics had consistently strong associations with being a high-expenditure Medicaid-only beneficiary even when the data were examined separately for each eligibility group. We found that about two-thirds of the high-expenditure group was comprised of beneficiaries who were eligible for Medicaid due to disability. only beneficiary was 18.3 percent for disabled Medicaid-only beneficiaries, which was higher than for any other eligibility group. (See table 2.) In contrast, non-disabled children and adult beneficiaries each had less than a 3 percent probability of being in the high-expenditure group, but made up 16.1 and 15 percent, respectively, of the high- expenditure Medicaid-only beneficiaries. Overall, hospital services and LTSS represented the bulk of spending for high expenditure Medicaid-only beneficiaries—almost 65 percent. In contrast, payments to managed care organizations and premium assistance constituted the largest proportion of expenditures for all other Medicaid-only beneficiaries. In addition, when we examined Medicaid- only high-expenditure and other beneficiaries separately by eligibility group, the differences in service use were generally consistent, but the proportion of expenditures for the different services varied. Separately examining high-expenditure Medicaid-only beneficiaries in LTC institutions and beneficiaries with spending in the top 1 percent of expenditures showed that these beneficiaries had the highest spending for hospital services and LTSS. For high-expenditure Medicaid-only beneficiaries as a whole, hospital services comprised 30.6 percent, LTSS in non-institutional settings comprised 24.3 percent, and LTSS in institutions comprised 9.7 percent of their expenditures. Other expenditures were for drugs, managed care and premium assistance, and non-hospital acute care. In contrast to high- expenditure Medicaid-only beneficiaries, the largest share of total expenditures for all other Medicaid-only beneficiaries was for managed care and premium assistance (57.2 percent), followed by non-hospital acute care (16.6 percent), hospital services (11.9 percent), drugs (9.7 percent) and LTSS in non-institutional settings (4.5 percent). (See fig. 3.) The general pattern of greater hospital and LTSS service use by high expenditure Medicaid-only beneficiaries compared with greater spending on managed care and premium support by all other Medicaid-only beneficiaries was consistent across eligibility groups. However, there were some differences in expenditures by eligibility category among high- expenditure Medicaid-only beneficiaries and all other Medicaid-only beneficiaries. Beneficiary Profile Beneficiary A was a 61-year-old disabled African American male in 2009, with $73,539 in total Medicaid expenditures in that year. He was not enrolled in managed care at any point in the year. He was indicated to have diabetes, a mental health condition, and resided in a long-term care facility. His expenditures were highly concentrated in LTSS non-institutional care (81.9 percent). About 10 percent of his expenditures were for prescription drugs. Disabled: For high expenditure Medicaid-only beneficiaries in the disabled category, LTSS non-institutional (27.5 percent), hospital (24.8 percent), and LTSS institutional services (11.9 percent) represent almost two-thirds of their expenditures. (See fig. 4.) In contrast, all other Medicaid-only beneficiaries in the disabled category had over half of their expenditures for managed care and premium assistance (52.1 percent), and had almost no LTSS institutional expenditures (0.1 percent). Overall, 79.5 percent of expenditures for Medicaid-only beneficiaries in the disabled group were for the high- expenditure beneficiaries. Children: Medicaid-only children had almost no LTSS institutional expenditures (less than 1 percent), whether in the high-expenditure group or not. (See fig. 5.) High-expenditure Medicaid-only children had 70 percent of their expenditures for hospital (46.1 percent) and LTSS non-institutional services (23.9 percent). For all other Medicaid-only children, over 58 percent of their expenditures were for managed care and premium assistance, followed by non-hospital acute (18.8 percent) and hospital services (9.8 percent). About 22 percent of expenditures for Medicaid-only children were for those in the high-expenditure group. Adults: Similar to children, Medicaid-only adult beneficiaries had almost no LTSS institutional expenditures (less than 1 percent of each of their total expenditures) whether in the high-expenditure group or not. (See fig. 6.) Hospital services represented over half the expenditures for high-expenditure adult beneficiaries. The remaining expenditures were almost equally distributed between non-hospital acute care (15.2 percent), drugs (14.2 percent), and managed care and premium support (14.1 percent). LTSS non-institutional services were a relatively small part of their total expenditures (3.4 percent). The greatest share of expenditures for all other Medicaid-only adult beneficiaries were for managed care and premium support (58.4 percent) followed by hospital (16.2 percent) and non-hospital acute care (15.4 percent) services. About 22 percent of expenditures for Medicaid-only adult beneficiaries were for the high-expenditure group. Aged: For the aged, both high-expenditure and all other Medicaid- only beneficiaries had LTC institutional expenditures, but the share of those expenditures differed—28.2 percent compared with 4.2 percent. Among the high-expenditure Medicaid-only aged beneficiaries, hospital (28.6 percent), LTSS institutional (28.2 percent), and LTSS non-institutional (15.4 percent) services represented over 70 percent of total expenditures. (See fig.7.) For all other Medicaid-only aged beneficiaries, managed care and premium support represented 48.3 percent of their expenditures, followed by drugs (18.2 percent), hospital (13.7 percent), and non-hospital acute care (10.6 percent) services. Over 73 percent of expenditures for the Medicaid-only aged were for those in the high-expenditure group. LTSS spending differed for high expenditure Medicaid-only beneficiaries living in LTC facilities and those living in the community. (See fig. 8.) Among high-expenditure Medicaid-only beneficiaries residing in a LTC facility, expenditures for LTSS in institutional settings (50 percent), hospital services (27.2 percent), and LTSS in non-institutional settings (7.3 percent) accounted for almost 85 percent of their total expenditures. Among high-expenditure beneficiaries not residing in a LTC facility, expenditures for LTSS in non-institutional settings (28.4 percent) were much greater, and expenditures for hospital services were similar (31.4 percent)—and these two services represented almost 60 percent of their total expenditures. In addition, the percentage of expenditures on drugs and non-hospital acute care was greater for high expenditure Medicaid-only beneficiaries who were not living in LTC facilities. While hospital services were the largest expenditure category among high-expenditure beneficiaries not residing in a LTC facility, per-capita hospital expenditures for beneficiaries residing in a LTC facility were over two times as much ($21,589 compared with $9,978). (See table 4.) Beneficiaries with expenditures within the top 1 percent for their state— the top one-fifth of the high-expenditure group—had a greater share of spending on hospital services, LTSS in non-institutional settings, and LTSS in institutional settings compared with all of the high-expenditure beneficiaries. Spending on these services comprised almost 80 percent of the total expenditures for beneficiaries with expenditures within the top 1 percent for their state. (See app. IV for complete table of results, and app. V for the demographic characteristics and spending for some randomly selected beneficiaries in that group.) HHS reviewed a draft of this report and provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the Secretary of HHS and to interested congressional committees. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or YocomC@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix VI. This appendix describes the methodology for addressing three objectives that examine: (1) states’ spending for high-expenditure beneficiaries, both Medicaid-only and dual-eligible beneficiaries, compared with other Medicaid beneficiaries; (2) the characteristics associated with high- expenditure Medicaid-only beneficiaries; and (3) the services that contributed to high expenditures for Medicaid-only beneficiaries, and how they compared with service usage by all other Medicaid-only beneficiaries. We analyzed data from the fiscal year 2009 Medicaid Statistical Information System (MSIS) Annual Person Summary File. The summary file consolidates individual beneficiaries’ claims for the fiscal year, including data on their enrollment and information on their expenditures. The summary file also includes beneficiary specific information regarding enrollment categories, expenditures among six categories, dual eligibility status, age, gender, payment arrangements—including fee-for-service payments and capitated payments made to managed care organizations—and indicators for five conditions and two service categories.in the full claims files (for example, the summary file may not include The summary file excludes some encounter details included details regarding the care encounter, such as individual cost per encounter; however, it does include monthly enrollment data). We made several adjustments to the summary file in order to ensure that the data were reliable for our purposes. Specifically we excluded: records with unknown eligibility status (eliminated 5,166,648 records, or 7.21 percent of total records); all records associated with duplicate MSIS IDs or Social Security numbers within a state (eliminated 277,363 records, or 0.39 percent of total records); records with negative total spending amounts (eliminated 975,869 records, or 1.36 percent of total records), which may reflect adjustments to claims made in the prior year; records of individuals who were only enrolled in a stand-alone, separate Children’s Health Insurance Program during the year (eliminated 471,507 records, or 0.66 percent of total records); records associated with a payment adjustment rather than an individual (eliminated 202,456 records, or 0.28 percent of total records); records of individuals whose age appeared to conflict with their identified eligibility group (eliminated 65,016 records, or 0.09 percent of total records). For example, records of individuals in the child eligibility group whose age was 85 and older; records with unknown dual status (eliminated 698 records, or less than 0.01 percent of total records); and, records of individuals whose age was over 65, but indicated as having delivered a child (eliminated 126 records, or less than 0.01 percent of total records). After making these adjustments, we were able to retain 64,457,343, or 90 percent, of the summary file’s 71,617,026 original records. In order to determine variations in states’ spending for high-expenditure Medicaid-only beneficiaries compared with other Medicaid beneficiaries, we calculated the total number of Medicaid enrollees and total Medicaid expenditures in each state. We then calculated these same statistics for our subpopulations of Medicaid-only and dual-eligible beneficiaries based on the “last-best” indicator of dual eligibility status available in the summary file. Medicaid-only beneficiaries were eligible for Medicaid but not Medicare. Dual-eligible beneficiaries were eligible for both Medicaid and Medicare. Next, we determined the number of beneficiaries whose total expenditures fell within the top 5 percent of total expenditures within each state (we calculated these figures separately for Medicaid-only and dual-eligible beneficiaries). We termed these 2,763,407 beneficiaries as high-expenditure beneficiaries. We then separately calculated the total expenditures for our high-expenditure beneficiaries and other beneficiaries in each state for Medicaid-only and dual-eligible beneficiaries, and summed this data at a national level. To examine the characteristics associated with high-expenditure Medicaid-only beneficiaries, we determined the percentage of high- expenditure Medicaid-only beneficiaries with key characteristics and used logistic regression to examine the effect of having key beneficiary characteristics on the probability of being a high-expenditure Medicaid- only beneficiary. The key beneficiary characteristics for which we describe the high-expenditure beneficiary population and represented as independent variables in our logistic regression model included: eligibility group (disabled, child, adult, aged), age, gender, race/ethnicity, geographic location, participation in capitated managed care, period of enrollment in Medicaid (whether full year or partial year), as well as whether the beneficiaries had any of five health conditions or had received any of two services. Finally, our logistic regression models included characteristics of states’ Medicaid programs, including their spending on high-expenditure beneficiaries and long-term services and supports (LTSS) in non-institutional settings (also called home and community based services) and capitated managed care penetration rates.beneficiary population, as well as the probabilities that demonstrate the association of each characteristic with the likelihood of being in the high- expenditure group if all beneficiaries had a particular characteristic while holding all other characteristics constant. Probabilities were calculated by converting the odds that resulted from our logistic regression models. The size of the independent effect of each enrollee characteristic is expressed as a probability, with greater values reflecting a greater chance that the characteristic increased the likelihood of being a high-expenditure beneficiary. Medicaid-only beneficiaries had a hypothetical 5 percent probability of being in the high-expenditure group by chance alone. All probabilities were significant at the 0.05 level. We report percentages that describe the high-expenditure In order to determine which service categories contributed to expenditures for high-expenditure Medicaid-only beneficiaries, we examined how total expenditures for high-expenditure Medicaid-only beneficiaries were distributed among the following six expenditure categories: (1) hospital care, (2) non-hospital acute care, (3) drugs, (4) managed care and premium assistance, (5) long-term services and supports (LTSS) in non-institutional settings, and (6) long-term services and supports in institutional settings. of spending among each of the six expenditure categories for beneficiaries in our high-expenditure group compared to the distribution of spending among each of the six expenditure categories for all other Medicaid-only beneficiaries. The summary file includes information on spending for 30 types of services. We consolidated 28 of these types of services into the six categories we report. We conducted this performance audit from September 2012 through February 2014 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The table below demonstrates the characteristics of high-expenditure Medicaid-only beneficiaries, and how expenditures were distributed within each characteristic of interest. For each subpopulation, we also calculated the per-capita expenditures in dollars. High-expenditure Medicaid-only beneficiaries who resided in a long-term care (LTC) facility during fiscal year 2009 had the highest per capita expenditures ($79,464). Our logistic regression analysis found that key characteristics—such as having a disability, having certain conditions, delivery/childbirth, and residing in a LTC facility—were consistently strongly associated with being a high-expenditure Medicaid-only beneficiary when looking at all records, and when the data was examined separately for each eligibility group. The table below demonstrates the characteristics of Medicaid-only beneficiaries with expenditures in the top 1 percent of total expenditures (558,798 beneficiaries). For each subpopulation, we also calculated the per capita expenditures in dollars. The top 1 percent of Medicaid-only beneficiaries had per capita spending of $94,821, over 2.5 times that of beneficiaries in the top 5 percent of total expenditures whose per capita spending was $35,983 (top 1 percent included). We examined individual cases of a random group of Medicaid-only beneficiaries in the top 1 percent of expenditures. Some of these beneficiaries illustrated the trends identified in our analysis, but we also found beneficiaries who demonstrated that there was diversity among the high-expenditure group. Below are some examples of the characteristics and spending patterns for individual beneficiaries. Overall, per capita spending in the top 1 percent ranged from $19,068 to $43,728,641, with an average expenditure of $94,821. In addition to the contact named above, Sheila K. Avruch, Assistant Director; Giselle Hicks; Drew Long; Vikki Porter; Kristal Vardaman; Eric Wedum; Jennifer Whitworth; and Carla Willis made key contributions to this report. Medicaid: States Reported Billions More in Supplemental Payments in Recent Years. GAO-12-694. Washington, D.C.: July 20, 2012. High Risk Series: An Update. GAO-13-283. Washington, D.C.: February 14, 2013. Medicaid: CMS Needs More Information on the Billions of Dollars Spent on Supplemental Payments. GAO-08-614. Washington, D.C.: May 30, 2008. Medicaid Demonstration Waivers: Recent HHS Approvals Continue to Raise Cost and Oversight Concerns. GAO-08-87. Washington, D.C.: January 31, 2008. Medicaid Long-Term Care: Information Obtained by States about Applicants’ Assets Varies and May Be Insufficient. GAO-12-749. Washington, D.C.: July 26, 2012. Medicaid: Data Sets Provide Inconsistent Picture of Expenditures. GAO-13-47. Washington, D.C.: October 29, 2012. Medicaid Home and Community-Based Waivers: CMS Should Encourage States to Conduct Mortality Reviews for Individuals with Developmental Disabilities. GAO-08-529. Washington, D.C.: May 23, 2008. Medicaid: States’ Use of Managed Care. GAO-12-872R. Washington, D.C.: August 17, 2012.

Summary: Medicaid is an important source of health coverage for millions of low-income individuals. Research on Medicaid has demonstrated that a small percentage of beneficiaries account for a disproportionately large share of Medicaid expenditures. Understanding states' expenditures for high-expenditure populations—both those dually eligible for Medicare and Medicaid, and those who are Medicaid-only—could enhance efforts to manage Medicaid expenditures. GAO was asked to examine the demographics and service usage of Medicaid beneficiaries, particularly those who are not eligible for Medicare. This report examines high-expenditure Medicaid-only beneficiaries, considering (1) states' spending on them compared with all other Medicaid beneficiaries; (2) their key characteristics; and (3) their service usage compared with all other Medicaid-only beneficiaries. GAO analyzed beneficiary and expenditure data from the Medicaid Statistical Information System Annual Person Summary File for 2009, the most recent year available at the time GAO conducted its work. GAO defined high-expenditure beneficiaries as those with total expenditures in the top 5 percent of expenditures within each state. GAO combined these data at a national level, and analyzed the characteristics associated with being a high-expenditure beneficiary, the probability of being a high-expenditure Medicaid beneficiary, and what services contributed to high expenditures. In fiscal year 2009, states spent nearly a third (31.6 percent) of all Medicaid expenditures on the most expensive Medicaid-only beneficiaries, who were 4.3 percent of total Medicaid beneficiaries. States spent another third (33.1 percent) on all other Medicaid-only beneficiaries, who represented 81.2 percent of total Medicaid beneficiaries. Among dual eligible beneficiaries, a similar pattern existed, with a small proportion of the population accounting for a disproportionate share of expenditures. Certain characteristics significantly increased the probability of being a high-expenditure Medicaid-only beneficiary. Specifically, the results of GAO's analyses indicate that the probability of being a high-expenditure Medicaid-only beneficiary was: 24.4 percent for those residing in a long-term care facility, 20.8 percent for those with human immunodeficiency virus/acquired immunodeficiency syndrome, 18.3 percent for those with disabilities, and 13.3 percent for new mothers or infants. Overall, hospital services and long-term services and supports in non-institutional and institutional settings comprised nearly 65 percent of the total expenditures for high-expenditure Medicaid-only beneficiaries, with smaller proportions for drugs, payments to managed care organizations and premium assistance, and non-hospital acute care. In contrast to high-expenditure beneficiaries, payments to managed care organizations and premium assistance comprised 57.2 percent of total expenditures for all other Medicaid-only beneficiaries. HHS provided technical comments on a draft of this report, which were incorporated as appropriate.