The relationship of Medicaid payment rates, bed constraint policies, and risk-adjusted pressure ulcers

Health Services Research, August, 2004 by David C. Grabowski, Joseph J. Angelelli

DISCUSSION

This paper offered an alternative approach to examining Medicaid reimbursement and nursing home quality in the presence of CON and moratorium policies. Rather than relying on facility-level risk adjustment strategies, which may mask or distort the empirical relationship between Medicaid payment and quality, this study employed a resident-level risk-adjusted quality measure. By merging this resident-level measure with facility, market, and payment information, this study provides new evidence of the relationship between Medicaid payment and nursing home quality. Although further research with other resident-level risk-adjusted measures of quality will be necessary, this study provides strong support for the argument that decreased state-level payment due to state budget shortfalls will be associated with lower nursing home quality. Our estimates presented above suggest that a 10 percent decrease in the Medicaid payment rate for nursing home care will be associated with a 1.5 percent overall increase in the risk-adjusted pressure ulcer rate and a 2.0 percent increase in homes that care for predominantly Medicaid residents.

We can use these results to think concretely about the implications of a reduction in the state Medicaid payment rates on the number of pressure ulcer cases among Medicaid recipients. Based on our sample of 13,736 nursing homes, the average Medicaid payment rate was $94.34 (in 1998 dollars) and there were 347,212 Medicaid recipients who were at a high risk for a pressure ulcer. Thus, over the course of the year, state Medicaid programs spent an average of $11.96 billion (i.e., $94.34 x 347, 212 x 365) dollars on nursing home care for these residents. A 10 percent reduction in the Medicaid payment rate for nursing home care would have saved approximately $1.196 billion dollars toward the care of these residents. Over the 90-day window, we observed 57,299 new pressure ulcer cases among the 521,498 nursing home residents. If we assume pressure ulcers are equally distributed across Medicaid and private-pay residents within facilities, then there were 38,150 new Medicaid pressure ulcer cases among the 347,212 Medicaid recipients in the denominator of our study. In order to adjust the 90-day pressure ulcer incidence rate to an annual incidence rate, we can multiply the 90-day amount times four for a total of 152,600.

Thus, if every state reduced their Medicaid payment rate by 10 percent, our elasticity estimate of -0.145 would imply an additional 2,213 pressure ulcer cases annually among high-risk Medicaid recipients. Put alternatively, for every $540,332 (or $621,216 in 2004 dollars) cut from state Medicaid budgets, there will be one additional pressure ulcer among those Medicaid recipients who are at a higher risk for pressure ulcers. Although this is a relatively large estimate, it is important to keep in mind that pressure ulcers are only one dimension of nursing home quality. With a reduction in the Medicaid payment rate, we may also expect greater physical restraints, daily pain, anti-psychotic drug use, catheters, feeding tubes, weight loss, hospitalizations, and other indicators of poor quality. And of course, a lower Medicaid payment rate will be associated with a decrease in access to care for Medicaid eligible individuals. All of the quality and access problems suggest potentially significant downstream costs to the Medicare program in terms of increased acute care utilization, costs that may far exceed "savings" realized from reduced Medicaid rates. The interdependence of Medicare and Medicaid thus emerges as an important issue for state and federal policymakers to consider.