Nov 5, 2018
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Medicaid Overpays Nursing Homes

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Skilled Nursing News reported on a new study that shows that the Medicaid program may be overpaying operators by billions of dollars per year.  Medicaid is the single largest payor for skilled nursing services, covering about 62% of all nursing home residents according to a 2017 analysis by the Kaiser Family Foundation.  A pair of economists from the University of California, Los Angeles and the University of Georgia published an extensive analysis of Medicaid spending in nursing homes, determining that longer stays in SNFs don’t lead to better outcomes for residents — and thus the government shouldn’t necessarily pay for as many patient days.

“Since we find no evidence that longer stays lead to health improvements, this difference points to Medicaid overspending of … $5,480 per Medicaid stay or about 18.6% of Medicaid spending per nursing home stay,” Martin Hackmann and R. Vincent Pohl wrote in their research, published as an issue brief by the National Bureau of Economic Research. “Multiplying this fraction with national Medicaid nursing home spending of $55 billion in 2015 suggests annual savings of up to $10.2 billion.”

The researchers specifically looked at nursing home residents who started paying for services out of pocket; Medicaid covers skilled nursing care for income-qualified residents, typically after they exhaust their personal resources.  The pair found that nursing homes tend to retain residents longer in periods of low occupancy, but increase discharges of Medicaid beneficiaries once that figure hits around 89%, as they attempt to seek out the highest paying self-funding residents.

“At lower occupancies, nursing homes benefit from extended Medicaid stays, to the extent that Medicaid rates exceed the marginal cost of care. At higher occupancies, this incentive is muted because nursing homes prefer to occupy their scarce beds with more profitable private payers,” they wrote. “In contrast, private payers’ home discharge rates vary little (between 1.7% and 2.1%) and not systematically with occupancy.”

At the same time, the researchers didn’t find a solid connection between longer lengths of stay and health outcomes, noting that the one-year hospitalization rate was actually lower for Medicaid residents at high-occupancy nursing homes, when they were most likely to be discharged.

“Overall, we conclude that marginal Medicaid beneficiaries appear to be relatively healthy,” they wrote. “We also find no evidence that longer stays lead to improved health outcomes suggesting that longer nursing home stays (on this margin) likely constitute over-utilization of nursing home care.”

 



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