Does Health Status Explain Higher Medicare Costs of Medicaid Enrollees?
Liu, Korbin, Long, Sharon K., Aragon, Cynthia, Health Care Financing Review
Because of their low income and limited financial resources, some Medicare beneficiaries are also covered for health care by Medicaid. These dually eligible beneficiaries have been the subject of wide-ranging policy interest because their health care costs are dramatically higher than those of other Medicare beneficiaries. Highlighting this point are the frequently cited statistics that dually eligible beneficiaries account for 30 percent of total Medicare expenditures, while comprising only 16 percent of Medicare's enrollee population. Similarly, dually eligible beneficiaries are 17 percent of Medicaid recipients but account for 35 percent of total Medicaid expenditures. One reason why dually eligible beneficiaries have such high health care costs is that they are sicker and more disabled than other Medicare enrollees. The extent to which health status and other personal characteristics account for the differences in health care, however, is much less clear.
Because Medicare and Medicaid are separate programs with different sets of rules on coverage, payment, and provider certification, questions arise about the efficiency with which health care is delivered to dually eligible beneficiaries. It has been noted, for example, that the discontinuity resulting from the separate programs leads to cost-shifting and movement of patients to satisfy revenue, rather than patient, needs. Given the fragmented health care system, it is reasonable to hypothesize that the higher costs of dually eligible beneficiaries may be attributable to how care is provided to them as well as to their greater needs. Although some innovative programs have been developed to coordinate services for dually eligible beneficiaries, including the integration of acute and long-term care, such initiatives are relatively new and currently cover only a small proportion of the dually eligible population.
As policymakers continue to seek ways to efficiently meet the health care needs of this population, it would be helpful to better understand both the components and distributions of health care costs incurred by this group. In extending prior research on the determinants of health care costs in the Medicare population, we analyzed the Medicare costs of elderly persons who were dually eligible in comparison to other Medicare beneficiaries. Although prior research clearly showed that differences in health status and other personal characteristics are important reasons for the higher costs of dually eligible beneficiaries, our aim was to estimate how much of the difference could be attributed to such characteristics.
We use data from the MCBS in our analysis. Our findings are naturally limited by the information available in the MCBS, but that data source provides extensive information on the personal characteristics of Medicare enrollees. Netting out the costs that are attributable to health status and other characteristics provides an estimate of how much the remaining higher Medicare costs of dually eligible beneficiaries might be attributable to inefficiencies in how health services are provided to them. The following sections provide background on the dually eligible population, a description of the data source and methods, findings from our analysis, and a discussion of policy and research implications.
Medicare and Medicaid Interactions
Medicare covers the cost of hospital care, physician services, and other acute care services for elderly and disabled individuals. Because Medicare requires cost-sharing for most services, approximately three-quarters of enrollees have supplementary coinsurance policies, such as medigap or employee-sponsored insurance benefits (Moon, Brennan, and Segal, 1998). Medicare does not cover all services needed by this population, particularly long-term care (LTC). The restrictions on Medicare's coverage create an even larger problem for the indigent and disabled elderly, as they have significantly greater health care needs and are unable to afford most supplementary coverage plans (Rowland and Lyons, 1996). …