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Health Care Costs and Financing

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Increased State Medicaid reimbursement for nursing home care reduces residents' risk of being hospitalized

A recent Institute of Medicine report questioned the adequacy of Medicaid nursing home payment rates in ensuring quality of care to residents. The importance of Medicaid reimbursement to nursing home care quality is described in a recent study supported in part by the Agency for Healthcare Research and Quality (HS09723).

The study found that a $10 increase in the 1993 Medicaid reimbursement rate above the mean rate of about $75 a day reduced by 9 percent a resident's risk of hospitalization. This finding underscores the importance of properly aligning State Medicaid and Federal Medicare long-term care policies because States currently have no incentive to increase reimbursement rates to avoid residents' hospitalization, according to Brown University researchers, Orna Intrator, Ph.D., and Vincent Mor, Ph.D.

Drs. Intrator and Mor examined initial health status assessments and hospitalizations and deaths (for those not hospitalized) in the 6 months following hospitalization among 2,080 randomly selected residents from 253 nursing homes in 10 States in 1993. Of all the residents studied, more than 65 percent listed Medicaid, 31 percent listed Medicare, and more than 31 percent listed a private payment source for nursing home care. The overall hospitalization rate was 15 percent, but this ranged from 9 percent in Oregon to 25 percent in Iowa.

Despite this great variation in rate of hospitalization, there was a decreasing trend in hospitalization with increasing nursing home daily reimbursement rates. Also, nursing home residents in States with a case-mix reimbursement system (that is, homes were reimbursed more for sicker residents) were 30 percent less likely to be hospitalized than residents in States without a case-mix reimbursement system. Residents in States with higher Medicaid reimbursement rates were also less likely to die. For every $10 increase above the $75 per diem, the odds of mortality were reduced by 12 percent.

See "Effect of State Medicaid reimbursement rates on hospitalizations from nursing homes," by Drs. Intrator and Mor, in the March 2004 Journal of the American Geriatrics Society 52, pp. 393-398.

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