The spillover effects of Medicare reimbursement policy on the access of Medicaid beneficiaries to nursing homes

Medicare is one of the largest insurers in the U.S. healthcare industry as it accounts for 20% of total healthcare expenditures in the country. A change in Medicare policy could affect the amount and quality of services provided to Medicare beneficiaries and non-Medicare ones, as the same healthcare provider serves patients from different insurers. Understanding how Medicare policy affects the provision of services to non-Medicare beneficiaries is essential for policy design because the indirect effects from a change in Medicare’s policy may compensate or weigh against the direct/intended effects. Therefore, a complete cost/benefit analysis of the policy change would include how Medicare affects the providers’ willingness to treat non-Medicare patients. I evaluate how Medicare reimbursement policy changes the willingness to treat Medicaid patients, the most vulnerable subpopulation of non-Medicare beneficiaries.

Building on the extensive empirical evidence on how Medicare/Medicaid policies influence the provision of services to their own beneficiaries, I am pursuing a novel approach to shed light on how Medicare and Medicaid interact to affect health care use of recipients in the other program. The current gap in the literature is partially due to the separate data collection processes of Medicare and Medicaid programs which makes it difficult to have information at the provider level on the services rendered to each program. I use the publicly available information on resident census collected in the standard certification survey, a survey that is applied to all U.S. nursing homes every 12 to 15 months. These data provide an opportunity to study how a higher Medicare reimbursement policy can affect access to long-term care of Medicaid beneficiaries.

My results suggest that an increase in Medicare fees has induced nursing homes working at capacity to decrease the share of Medicaid admissions by 1.4pp. A natural extension is to investigate if Medicaid beneficiaries are receiving alternative care like in-home care services or if some of them have unmet needs. I use the National Long-Term Care Survey (NLTCS) to answer inquires about medical conditions, income, health insurance source, home health services, and informal care, among other variables. The NLTCS would allow me to determine if Medicare policy has had a negative spillover effect on Medicaid patients’ welfare, by displacing them to the community without alternative options, or if the change in Medicare’s reimbursement helped to create a more balanced long-term care system by discouraging institutionalization of Medicaid patients.