Medicare-Medicaid dual eligibles are often talked about as a single type of patient. They have significant levels of disability and chronic disease, and account for a disproportionately large spending in both Medicare and Medicaid budgets. But dual eligibles are a diverse group.

A few recent studies into health spending on dual eligibles have sought to isolate which Medicare-Medicaid enrollees are the most expensive, and why. Answering those questions will be important as state Medicaid agencies, the Centers for Medicare and Medicaid Services (CMS), Special Needs Plans for Dual Eligibles (D-SNP) and Medicaid managed care organizations implement payment reforms and care integration demonstrations to reduce costs and improve care for dual eligibles.

Studies to Isolate High Costs Among Dual Eligibles:

The Medicaid and CHIP Payment and Access Commission (MACPAC) is one organization that has looked at dual eligibles spending more closely. MACPAC’s 2013 report to Congress breaks down full-benefit dual eligibles into four categories based on what type of long-term services and supports (LTSS) they received. MACPAC found that dual eligibles in nursing homes or in other LTSS institutions cost four times for than dual eligibles who don’t use LTSS services.

An excellent new study published in Medicare and Medicaid Research Review (MMRR), the house journal of CMS, makes a similar conclusion, but with some important differences.

New Study Finds Nursing Home Users Cost Less Than Community-Based Care Users:

Study authors include Robert L.Kane, Andrea Wysocki, Shriram Parashuram, and Tetyana Shippee of the University of Minnesota, plus Terry Lum of the University of Hong Kong. They analyzed dual eligibles spending data from 2005 in seven states, on spending for dual eligibles and for Medicare-only beneficiaries.

Enrollees in Medicaid managed care were excluded because they did not account for large portions of nursing home residents, a primary focus for the research.

Here is an overview of some of the most interesting findings:

  • Much of the higher cost of health care attributed to dual eligibles status may be due to their higher disease burden and/or associated long term care (LTC) use.
  • Medicaid only non-duals who used long term care had higher predicted medical care expenditures than Medicaid-Medicare beneficiaries who did not use long term care.
  • Medicare-Medicaid enrollees who do not receive long term care have substantially lower Medicare and Medicaid expenditures than those who do, but have higher Medicare expenditures than Medicare-only beneficiaries.
  • Adjusting for chronic illness prevalence – measured in case mix scores – substantially diminishes the differences in dual and non-dual expenditures for medical care, but not for long term care.
  • Among LTC users who are also Medicare-Medicaid enrollees, the medical expenditures are higher for those in the community compared to nursing home residents.

The first set of findings is consistent with what MACPAC found: Dual eligibles with long term care needs are much more expensive compared to non-LTC dual eligibles, and contribute significantly to the high cost of care for dual eligibles as a whole. This is not surprising.

However, the MMRR study’s conclusion that nursing home users are less expensive than community-based care users is critically important for understanding health costs and spending for dual eligibles.  In the author’s words:

“Our findings suggest that nursing homes may be subsidizing Medicare by reducing hospital use and lowering medical expenditures. The difference is not likely due to case mix, which is higher in nursing homes than in community LTC. The mechanism for the savings is not clear. Presumably some cases are treated in the nursing home that would otherwise have been sent to a hospital.”

The results hold interesting implications for improving quality of care, optimizing value, reducing hospitalizations, managing fast-growing state LTC budgets, protecting beneficiary rights under the Americans with Disabilities Act (ADA) and Olmstead v. L.C., adapting to the demographic shift, and effectively integrating Medicare and Medicaid financing and care delivery for dual eligibles.

The study has plenty of tables with detailed findings for those who want to dig deeper. Read the full study here.