Outcomes of Medicaid home- and community-based long-term services relative to nursing home care among dual eligibles.

Objective: To provide the first plausibly causal national estimates of health outcomes for older dual-eligible recipients of Medicaid HCBS relative to nursing home care and to explore possible mechanisms for the effect.

Data Sources: We use 2005 and 2012 Medicaid Analytic eXtract (MAX), a national compilation of Medicaid claims, merged with Medicare claims to identify hospital admissions, our main outcome variable.

Study Design: We model the effects of HCBS using a longitudinal instrumental variables framework. To address the endogeneity of HCBS receipt, we instrument for it using the county percentage of nonelderly long-term care users who receive HCBS. The percentage of nonelderly users is highly predictive of HCBS use for an elderly beneficiary, but because the instrument was derived from a separate population, the exclusion restriction is unlikely to be violated.

Population Studied: 1,312,498 older adults (65+) dually enrolled in Medicaid and Medicare and are using long-term care. We also examine heterogeneity of effects by race/ethnicity and the presence of dementia.

Principal Findings: HCBS users have 10 percentage points higher (P < .01) annual rates of hospitalization than their nursing home counterparts when selection bias is addressed; rates of potentially avoidable hospitalizations are 3 percentage points higher (P < .01). These differences persist across races, dementia status, and intensity of HCBS spending.

Conclusions: Shifting Medicaid long-term care funding for older adults from nursing homes to HCBS, while well-motivated, results in the unintended consequence of substantially higher hospitalization rates for older dual eligibles. The quality and/or quantity of services may be inadequate for some HCBS recipients. Hospitalizations are costly to Medicare but also to the HCBS recipient in terms of stress and risks. Although consumer preferences to remain at home may outweigh poor outcomes of HCBS, the full costs and benefits need to be considered. HCBS outcomes-not just expansion-need more attention.