Projecting the impact of the Money Follows the Person program on state Medicaid long-term care expenditures: Designing a cost projection model and applying it to Idaho's Medicaid program

Background: It is well established that access to home and community based services (“HCBS”) as an alternative to institutional long-term care (“LTC”) leads to better health outcomes. Because Medicaid is the primary payer for formal LTC services, changes in Medicaid policies favoring access to HCBS play a crucial role in “rebalancing” the nation's LTC delivery system. Prior research indicates that expanding Medicaid HCBS may result in lower per patient expenditures. A key part of Medicaid's rebalancing effort is the recently expanded Money Follows the Person (“MFP”) program, whereby the federal government offers enhanced match funds to assist state Medicaid programs in transitioning institutionalized LTC patients to the community. Problem: Despite the potential benefits of increasing access to Medicaid HCBS, in this time of budget cuts, policymakers may be resistant to expanding such services. Method/Data: A systematic model to project the impact of MFP on a state's Medicaid expenditures over 10 years was designed using established cost projection methodologies, Medicaid Statistical Information System (“MSIS”) data, and pertinent Medicaid policies. The model was applied to Idaho, a state embarking on an MFP program. Using MSIS data, the model can be applied to other states as well. Results: High and low model projections indicate that, after accounting for estimated increased acute care expenditures, Idaho Medicaid will be $18-35 Million more cost effective over ten years with MFP. Projected efficiencies may be partially offset by the “moral hazard” of expanding HCBS. Discussion: Well implemented rebalancing efforts are crucial to improving LTC quality and cost-effectiveness.