Risks for Nursing Home Placement and Medicaid Entry Among Older Medicare Beneficiaries with Physical or Cognitive Impairment.

Issue: More than half of individuals who age into Medicare will experience physical and/or cognitive impairment (PCI) at some point that hinders independent living and requires long-term services and supports. As a result of Medicare’s limits on covered services, Medicare beneficiaries with PCI experience financial burdens and reduced ability to live independently. Goal: Describe the characteristics and health spending of Medicare beneficiaries with PCI and estimate the likelihood of Medicaid entry and long-term nursing home placement. Methods: The Health and Retirement Study 1998–2012 is used to estimate long-term nursing home placement, as well as Medicaid entry. The Medicare Current Beneficiary Survey 2012 provides information on health care spending and utilization. Key findings and conclusions: Almost two-thirds of communitydwelling Medicare beneficiaries with PCI have three or more chronic conditions. More than onethird of those with PCI have incomes less than 200 percent of the federal poverty level but are not covered by Medicaid; almost half spend 10 percent or more of their incomes out-of-pocket on health care. Nineteen percent of individuals with PCI and high out-of-pocket costs entered Medicaid over 14 years, compared to 10 percent without PCI and low out-of-pocket costs. BACKGROUND As life expectancy increases, the quality of those additional years can vary tremendously from person to person. More than half of people who live to age 65 will experience physical and/or cognitive impairment (PCI) at some point during the rest of their lives that would hinder independent living and require long-term services and supports.1 Physical and cognitive impairment in older adults can affect their ability to perform self-care tasks—also known as “activities of daily living” or ADLs—like eating, bathing, and dressing, requiring them to seek help from family members, friends, personal caregivers, residential care services, or nursing homes. Paid caregiving arrangements can be very expensive, often beyond the financial means of the average older American. A semiprivate room in a nursing home costs more than $80,000 per year.2 Medicare covers home health and skilled nursing facility services for a period of time following acute hospitalization, but does not cover personal care assistance or longterm nursing facility services. To learn more about new publications when they become available, visit the Fund’s website and register to receive email alerts. Commonwealth Fund pub. 1911 Vol. 37 The mission of The Commonwealth Fund is to promote a high performance health care system. The Fund carries out this mandate by supporting independent research on health care issues and making grants to improve health care practice and policy. Support for this research was provided by The Commonwealth Fund. The views presented here are those of the authors and not necessarily those of The Commonwealth Fund or its directors, officers, or staff. For more information about this brief, please contact: Amber Willink, Ph.D. Assistant Scientist, Department of Health Policy and Management Johns Hopkins Bloomberg School of Public Health awillin2@jhu.edu 2 The Commonwealth Fund For individuals with low incomes, Medicaid provides a safety-net health insurance program. Ten million people are dually eligible for Medicare and Medicaid. For these people, Medicaid supplements Medicare coverage by paying deductibles and coinsurance, as well as the Part B premium. Medicaid also covers long-term nursing home stays, and in most states, at least some homeand community-based services. Many people “spend down” their own resources to qualify for Medicaid;3 as these costs shift to Medicaid, this results in significant state and federal expenditures. State and federal governments are concerned about burgeoning Medicaid costs and are looking to better understand how to provide greater-value care to dually eligible beneficiaries and to understand and address the causes for increased entry and dependency on the Medicaid program.4 This issue brief uses data from the nationally representative Health and Retirement Study (HRS) from 1998–2012 to describe the needs of individuals with PCI, as well as their likelihood for home placement and Medicaid entry. We also use the 2012 Medicare Current Beneficiary Survey to describe out-of-pocket costs for Medicare beneficiaries and total annual Medicare spending. (See How This Study Was Conducted.)