Spending variation in Medicaid long-term care services and the relationship between institutional and community-based services

This paper examines variation in Medicaid spending on long-term care, and considers whether expansions in the use of home and community based services (HCBS) have reduced the demand for institutional long-term care over time and across state Medicaid programs. For the work, MAX data were used to examine the use and cost of long-term care services among aged and disabled Medicaid beneficiaries. Regression analysis was used to develop estimates that were adjusted by demographics, Medicaid aid category, and illness burden. Adjusted estimates were then used to examine the use of, and possible substitution among, long-term care services over time and across states. In addition, the range of variation in expenditures, and the relationship between spending and outcomes among users of long-term care services was also explored. Results show that use of HCBS services increased over the 2000-2007 time period, while use of institutional long-term care services declined. Virtually no relationship between the use of HCBS and institutional long-term care across states was observed. Findings also showed more state variation in institutional long-term care spending than in HCBS spending. Finally, institutional long-term care spending was strongly correlated with mortality among users. Study findings suggest that although there were offsetting trends in use of HCBS and institutional long-term care over time, the lack of correlation across states suggest that Medicaid programs have not been able to substitute services among these modalities. The significant negative correlation between institutional long-term care spending and mortality among users suggests that higher spending may be related to higher quality of care.