As part of efforts to rein in the federal budget and constrain the growth in Medicare spending, some policy leaders and experts have proposed to increase Medicare premiums and cost-sharing obligations.  Today, 54 million people ages 65 and over and younger adults with permanent disabilities rely on Medicare to help cover their health care costs.  With half of all people on Medicare having incomes of less than $23,500 in 2013, and because the need for health care increases with age, the cost of health care for the Medicare population is an important issue.¹ 

Although Medicare helps to pay for many important health care services, including hospitalizations, physician services, and prescription drugs, people on Medicare generally pay monthly premiums for physician services (Part B) and prescription drug coverage (Part D).  Medicare has relatively high cost-sharing requirements for covered benefits and, unlike typical large employer plans, traditional Medicare does not limit beneficiaries’ annual out-of-pocket spending.  Moreover, Medicare does not cover some services and supplies that are often needed by the elderly and younger beneficiaries with disabilities—most notably, custodial long-term care services and supports, either at home or in an institution; routine dental care and dentures; routine vision care or eyeglasses; or hearing exams and hearing aids.

Many people who are covered under traditional Medicare obtain some type of private supplemental insurance (such as Medigap or employer-sponsored retiree coverage) to help cover their cost-sharing requirements.  Premiums for these policies can be costly, however, and even with supplemental insurance, beneficiaries can face out-of-pocket expenses in the form of copayments for services including physician visits and prescription drugs as well as costs for services not covered by Medicare.  Although Medicaid supplements Medicare for many low-income beneficiaries, not all beneficiaries with low incomes qualify for this additional support because they do not meet the asset test.

Because people on Medicare can face out-of-pocket costs on three fronts—cost sharing for Medicare-covered benefits, costs for non-covered services, and premiums for Medicare and supplemental coverage—it is important to take into account all of these amounts in assessing the total out-of-pocket spending burden among Medicare beneficiaries.  Our prior research documented that many beneficiaries bear a considerable burden for health care spending, even with Medicare and supplemental insurance, and that health care spending is higher among older households compared to younger households.² 

This new analysis builds on prior work to examine out-of-pocket spending among Medicare beneficiaries, including spending on health and long-term care services and insurance premiums, using the most current year of data available (2010) from a nationally representative survey of people on Medicare.  It explores which types of services account for a relatively large share of out-of-pocket spending, which groups of beneficiaries are especially hard hit by high out-of-pocket costs for services and premiums, and trends in out-of-pocket spending on services and premiums between 2000 and 2010.

Data and Methods

The analysis is based on data from the Medicare Current Beneficiary Survey (MCBS) Cost and Use file from 2000 to 2010 (the most recent year of data available).  The dataset includes detailed information on Medicare-covered and non-covered services, utilization, and spending, including spending by Medicare, Medicaid, third-party payers, and out-of-pocket payments by beneficiaries.  The types of services included in the MCBS are dental, home health, inpatient hospital, long-term care facility, medical providers and supplies, outpatient hospital, prescription drugs, and skilled nursing facility.  The MCBS does not include spending and use for personal care services and supports, which can be a significant expense for people on Medicare who require long-term services and supports (LTSS) in the community.  Therefore, any out-of-pocket spending on personal care and support delivered in the home or the value of unpaid personal care and support services is not included in the out-of-pocket spending estimate for home health services.

The analysis excludes beneficiaries enrolled in Medicare Advantage plans, totaling 10.8 million or 22 percent of the 48.4 million Medicare beneficiaries represented in the 2010 MCBS, because the MCBS does not include reliable utilization and out-of-pocket spending data for this population, which would introduce significant bias if this population was included in the analysis.

To estimate total out-of-pocket spending per beneficiary in traditional Medicare, including premiums and services, we calculate for each sample person the sum of out-of-pocket spending on insurance premiums for Medicare Parts A and B and supplemental insurance coverage and medical and long-term care services reported in the MCBS.  These amounts are averaged across the entire sample of traditional Medicare beneficiaries and weighted to be representative of the traditional Medicare beneficiary population or specific subgroups of beneficiaries.  References to “total out-of-pocket spending” in this analysis always include both premiums and service spending.  We also often refer to the separate components of total spending (either out-of-pocket spending on services or premiums) in presenting results.

For analysis of high out-of-pocket spending, we divide traditional Medicare beneficiaries’ total out-of-pocket spending (including services and premiums) into quartiles and deciles, and estimate the share of beneficiaries overall and by subgroup who have spending in the top quartile and top decile of total out-of-pocket spending.  For a more detailed discussion of methods, data, and limitations, see Methodology.

Key Findings

In 2010, Medicare beneficiaries spent $4,734 out of their own pockets for health care spending, on average, including premiums for Medicare and other types of supplemental insurance and costs incurred for medical and long-term care services.

• Premiums for Medicare and supplemental insurance accounted for 42 percent of average total out-of-pocket spending among beneficiaries in traditional Medicare in 2010 (Exhibit ES.1).
• Of the remaining 58 percent of average total out-of-pocket spending on services, long-term facility costs are the largest component (accounting for 18 percent of total out-of-pocket spending), followed by medical providers/supplies (14%), prescription drugs (11%), and dental care (6%).  Neither long-term care services and supports nor dental services are covered by Medicare.

Out-of-pocket spending rises with age among beneficiaries ages 65 and older and is higher for women than men, especially among those ages 85 and older. 

• Out-of-pocket spending tends to increase with age; in 2010, beneficiaries ages 85 and older spent three times more out-of-pocket on services, on average, than beneficiaries ages 65 to 74 ($5,962 vs. $1,926).
• On average, women on Medicare pay more out of pocket for services and premiums combined than men on Medicare ($5,036 vs. $4,363, respectively, in 2010), and this difference grows somewhat wider with age.  Women ages 85 and over spent an average of $8,574 in 2010 on services and premiums while men ages 85 and over spent an average of $7,399 in total.  This difference is primarily attributable to higher long-term care facility costs among older women.

As might be expected, beneficiaries in poorer health, who typically need and use more medical and long-term care services, have higher out-of-pocket costs, on average.  This is the case whether measured by self-reported health status, number of chronic conditions or limitations in activities of daily living (ADLs), or use of services, such as hospitalizations, post-acute care, and long-term care.

• Average out-of-pocket spending on services rises as beneficiaries’ health status declines, and rises with the number of functional impairments and chronic conditions.  For example, average out-of-pocket spending on services by beneficiaries in poor self-reported health was 2.5 times greater than among beneficiaries who said they were in excellent health ($4,505 vs. $1,774, respectively, in 2010).  Similarly, beneficiaries with three or more ADL limitations spent five times more on services as those with no ADLs or IADLs in 2010 ($7,737 vs. $1,528, on average).
• Beneficiaries with Alzheimer’s disease, Parkinson’s disease, and end-stage renal disease (ESRD) have relatively high out-of-pocket spending on services compared to beneficiaries with certain other conditions ($8,305, $5,841 and $5,439, respectively, on average in 2010), but their higher costs are driven by use of different types of services.  For example, for people with Alzheimer’s disease, long-term care facility costs accounted for a majority of their average out-of-pocket costs in 2010, while those with ESRD faced higher out-of-pocket costs for medical services.

Just as Medicare spends more on beneficiaries who use more Medicare-covered services, more extensive use of services leads to higher out-of-pocket spending.  This is especially true for beneficiaries who have multiple hospitalizations and post-acute care use and those who live in long-term care facilities.

• Average out-of-pocket spending on services rises with the number of hospitalizations; Medicare beneficiaries with one hospitalization in 2010 paid $4,475 out of pocket on services, on average, while those with two or more hospitalizations paid $6,216.
• Patients with a hospital readmission within 30 days of discharge spent roughly $1,200 more on services than those with only one inpatient stay in 2010 ($5,687 vs. $4,475, respectively, on average), including higher spending for medical providers and supplies, inpatient hospital services, and skilled nursing facility (SNF) services.
• Among beneficiaries who were hospitalized in 2010, those who received post-acute care in a SNF had significantly higher out-of-pocket spending on services than those who were discharged without SNF care ($9,508 vs. $3,645, respectively, on average); this was especially the case for long-term care facility residents with an inpatient stay and post-acute SNF care.  Among beneficiaries with an inpatient stay followed by a skilled nursing facility stay, average out-of-pocket spending on SNF services was seven times greater among facility residents ($4,258) than among community residents ($595) in 2010.
• The small share of beneficiaries who live in long-term care facilities face significantly higher out-of-pocket spending on medical and long-term care services than those in the community (averaging $17,534 and $1,858, respectively, in 2010).  While most of their spending on services is for long-term care facility expenses, facility residents also incur higher costs for inpatient hospital and post-acute care services than beneficiaries living in the community.

Spending on premiums, a significant component of total out-of-pocket spending among Medicare beneficiaries, varies less across subgroups of the Medicare population than spending on services.  Unlike out-of-pocket spending on services, premium spending does not vary by health status or utilization, though it does vary somewhat by age, income, and source of supplemental coverage.

• While there is little variation in premiums among those ages 65 and over, premiums tend to be lower for beneficiaries under age 65 than among beneficiaries ages 65 and over, on average.  This is most likely related to the fact that a relatively large share of Medicare beneficiaries under age 65 is also covered by Medicaid and thus not liable for premiums.
• Average premiums are generally similar for beneficiaries with incomes above $20,000, but lower for beneficiaries with lower incomes, most likely due to three factors: 1) lower-income beneficiaries with Medicaid typically do not pay premiums; 2) lower-income beneficiaries with full Medicaid benefits have little need for supplemental coverage; and 3) lower-income beneficiaries without Medicaid may not be able to afford supplemental insurance.
• Among beneficiaries in traditional Medicare, those with a Medigap supplemental insurance policy pay more in premiums for this additional coverage, on average, than beneficiaries with employer-sponsored retiree health benefits ($2,166 vs $1,335, on average, in 2010).  Not surprisingly, premiums are considerably lower for beneficiaries with Medicaid and those with no supplemental coverage.

Analysis of ‘high out-of-pocket spenders’ finds a disproportionate share of certain groups, including older women, beneficiaries living in long-term care facilities, those with Alzheimer’s disease and ESRD, and beneficiaries who were hospitalized, in the top quartile and top decile of total out-of-pocket spending (including both services and premiums).  In 2010, one in four beneficiaries spent at least $5,244 out of pocket on medical and long-term care services and premiums (the top quartile), and one in ten spent at least $8,235 (the top decile).  Average total out-of-pocket spending among the top quartile—$11,530 in 2010—was more than twice as much as the average among all beneficiaries ($4,734), while among the top decile, it was four times as much ($19,236).

• Long-term care facility costs are a major component of spending for beneficiaries in the top quartile of total out-of-pocket spending, accounting for more than one-fourth of their average out-of-pocket spending in 2010; indeed, seven out of ten beneficiaries living in long-term care facilities are in the top quartile.  But it is not just long-term care facility spending that drives higher out-of-pocket costs; higher spending on medical providers and supplies, prescription drugs, and dental services also contribute to relatively high spending among those in the top quartile.
• Overall, four in ten women ages 85 and older are in the top quartile of total out-of-pocket spending on services and premiums, compared to only one-third of men ages 85 and older. These differences are attenuated but not eliminated when looking at out-of-pocket spending among community residents only.
• A disproportionate share of beneficiaries ages 85 and older are in both the top quartile and decile of total spending on services and premiums, compared to younger beneficiaries.  Nearly four in ten beneficiaries ages 85 and older are in the top quartile versus just over two in ten of those ages 65-74.
• More than four in ten beneficiaries with Alzheimer’s disease and ESRD were in the top quartile of total out-of-pocket spending in 2010, and nearly four in ten with Parkinson’s disease.
• Close to half of beneficiaries with two or more hospitalizations (45%) and more than half of those with an inpatient stay and a SNF stay (54%) were in the top quartile of total out-of-pocket spending in 2010.

Between 2000 and 2010, average total out-of-pocket spending among beneficiaries in traditional Medicare increased from $3,293 to $4,734, a 44 percent increase.

• During this period, total out-of-pocket costs increased at an average annual growth rate of 3.7 percent; the average annual growth rate between 2000 and 2010 was higher for premiums (5.8%) than for services (2.4%).
• Over these years, the average annual growth rate in out-of-pocket spending fluctuated, but trended down after 2006.  Total out-of-pocket spending among beneficiaries in traditional Medicare grew at an average annual rate of 5.0 percent between 2000 and 2006, but fell to 1.8 percent between 2006 and 2010.  This downward trend in the annual rate of growth in average total out-of-pocket spending also applies to both services and premiums.  Out-of-pocket spending on services increased at an average annual growth rate of 3.5 percent between 2000 and 2006, but this growth rate dropped to 0.9 percent between 2006 and 2010; for premiums, the average annual growth rate decreased from 7.6 percent between 2000 and 2006 to 3.2 percent between 2006 and 2010.

Implications

The typical person on Medicare in 2010 paid about $4,700 out of pocket in premiums, cost sharing for Medicare-covered benefits, and costs for services not covered by Medicare.  Even with financial protections provided by Medicare and supplemental insurance, some groups of Medicare beneficiaries incurred significantly higher out-of-pocket spending than others, which could pose challenges for those living on fixed or modest incomes.  Out-of-pocket spending tends to rise with age and number of chronic conditions and functional impairments, and is greater for beneficiaries with one or more hospitalizations, particularly those who receive post-acute care.

Efforts to prevent unnecessary hospitalizations and readmissions and improve the coordination of post-acute care could not only help to reduce Medicare spending but also help to reduce out-of-pocket spending among beneficiaries with the greatest needs.  Monitoring trends in out-of-pocket spending among people on Medicare in the coming years will be important in understanding whether such efforts are making a difference.

In 2010, Medicare beneficiaries spent $4,734 out of pocket, on average, including premiums for Medicare and other types of supplemental insurance and medical and long-term care services.  Premiums are a large share of average total out-of-pocket health care spending for all Medicare beneficiaries, accounting for 42 percent of spending.  Of the 58 percent of average total out-of-pocket spending on services, long-term facility costs are the largest component (18%), followed by medical providers/supplies (14%) and prescription drugs (11%)

1

.

Out-of-pocket spending rises with age among beneficiaries ages 65 and older and is higher for women than men, especially among those ages 85 and older; these differences are driven primarily by variation in average spending on medical and long-term care services, rather than in premium spending.  Total out-of-pocket spending on services and premiums was particularly high among beneficiaries ages 85 and older who spent, on average, twice the amount spent by beneficiaries ages 65 to 74 in 2010 ($8,191 vs. $4,020).  In 2010, average total out-of-pocket spending was higher for women than men ($5,036 vs. $4,363, respectively, in 2010), and this difference grew somewhat wider with age.  Women ages 85 and over spent an average of $8,574 while men ages 85 and over spent an average of $7,399—a difference of nearly $1,200.  This difference is primarily attributable to higher long-term care facility costs among older women

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and

Beneficiaries’ health status and chronic conditions also are significant drivers of out-of-pocket spending, primarily due to large differences in spending on health and long-term care services.  Not surprisingly, those beneficiaries with poorer self-reported health status spend more than those who rate themselves in better health.  In 2010, beneficiaries in poor health spent around $1,700 more out of pocket in total than those in excellent or very good health, on average

4

.  Those in poor health spent less on premiums than those in excellent health ($1,295 vs. $2,283, on average) but significantly more on medical and long-term care services ($4,505 vs. $1,774).  Average total out-of-pocket spending also rises with the number of functional impairments and chronic conditions beneficiaries have, and is especially high among those with three or more limitations in activities of daily living

The types of medical services beneficiaries use leads to large differences in average total out-of-pocket spending; in particular, being hospitalized and using post-acute skilled nursing facility services.  Being hospitalized leads to higher total out-of-pocket spending, on average, compared to those without an inpatient hospital stay

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.  In 2010, roughly one in five Medicare beneficiaries experienced an inpatient hospital stay; those with one inpatient stay had average total out-of-pocket spending more than 50 percent higher than those without a hospital stay ($6,458 vs. $4,202) and their spending on services was twice as high, on average ($4,475 vs. $2,199).  Those with two or more inpatient stays spent nearly twice as much in total as those without a hospital stay, on average ($8,053 vs. $4,202) and their average spending on services was nearly three times as much ($6,216 vs. $2,199).  Patients with a hospital readmission within 30 days in 2010 spent on average roughly $1,200 more on services than those with only one inpatient stay ($5,687 vs. $4,475, respectively), including higher spending for medical providers/supplies, inpatient services, and skilled nursing facility services

Among Medicare beneficiaries with an inpatient hospital stay, skilled nursing facility users spend substantially more out of pocket than others, on average, particularly long-term care facility residents.  Among beneficiaries who were hospitalized in 2010, those who received post-acute care in a SNF had significantly higher total out-of-pocket spending than those who were discharged without SNF care ($11,434 vs. $5,574, respectively, on average); their spending on medical and long-term care services was 2.5 times greater ($9,508 vs. $3,645); these average amounts were even larger for long-term care facility residents with an inpatient stay and post-acute SNF care

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.  For this group, out-of-pocket spending on SNF services among those with a hospital stay and SNF care averaged $4,258 in 2010, seven times greater than average SNF spending among community residents ($595)

Whether beneficiaries live in the community or in long-term care facilities produces significant differences in the average amount spent out of pocket on services and where those dollars go.  Community residents spent $1,858 out of pocket in 2010 on medical and long-term care services, on average, while long-term care facility residents spent $17,534 on average.  For the majority of Medicare beneficiaries who lived in the community in 2010, medical providers/supplies accounted for just over one-third of average out-of-pocket service spending ($647), followed by prescription drugs ($542) and dental services ($320)

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.  For the six percent of beneficiaries who were long-term care facility residents in 2010, the largest component of average out-of-pocket service spending was long-term care facility costs ($14,474)—which is not surprising, given the high cost of long-term care

The use of dental services and out-of-pocket spending on dental care varies among beneficiaries.  Although dental services are not covered by Medicare, people continue to need and use dental care as they age.  However, less than a quarter of those in poor health reported visiting a dentist in 2010, and they spent far less on dental care than beneficiaries in better health

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.  Average out-of-pocket spending on dental services was highest among beneficiaries in excellent health—a majority of whom (57%) visited a dentist in 2010—and five times higher than those in poor health ($538 vs. $111, respectively).

While premiums for Medicare and supplemental insurance are a significant component of total out-of-pocket spending by Medicare beneficiaries, our analysis shows less variation across different groups of beneficiaries in out-of-pocket costs for premiums than for services; premiums do vary, however, by age, income, and supplemental coverage.  Among beneficiaries ages 65 and older, there is little variation in premiums by age group, while beneficiaries under age 65 with disabilities pay lower premiums than older beneficiaries

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.  This is most likely related to the fact that a relatively large share of Medicare beneficiaries under age 65 is also covered by Medicaid and thus not liable for premiums.  Average premiums are generally similar for beneficiaries with incomes above $20,000, but lower for beneficiaries with lower incomes, most likely due to three factors: 1) lower-income beneficiaries with Medicaid typically do not pay premiums; 2) lower-income beneficiaries with full Medicaid benefits have little need for supplemental coverage; and 3) lower-income beneficiaries without Medicaid may not be able to afford supplemental insurance

Beneficiaries with Medigap supplemental policies pay higher premiums than those with employer-sponsored retiree health coverage, while those with Medicaid pay significantly lower premiums, on average.  In 2010, beneficiaries with Medigap supplemental insurance policies paid more in supplemental insurance premiums than beneficiaries with employer-sponsored retiree health insurance, on average ($2,166 and $1,335, respectively)

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.  Supplemental insurance premiums accounted for more than one-third of average total out-of-pocket spending by Medigap policyholders.  Medicare beneficiaries enrolled in Medicaid face lower out-of-pocket costs if they are full-year enrollees or community residents, and higher costs if they are part-year enrollees or long-term care facility residents

While the average person in traditional Medicare spent $4,734 out of pocket on medical and long-term care services and premiums in 2010, one-fourth of beneficiaries spent at least $5,244 out of pocket on services and premiums (the top quartile), and one in ten spent at least $8,235 (the top decile) that year

1

.  In 2010, total out-of-pocket spending among beneficiaries in the top quartile of spenders averaged $11,530, 2.7 times average spending by beneficiaries in the third quartile ($4,223) and more than 16 times that of beneficiaries in the bottom quartile ($712)

A greater share of some groups of beneficiaries than others are high out-of-pocket spenders.  Perhaps not surprisingly, this includes the vast majority of Medicare beneficiaries who live in long-term care facilities, 70 percent of whom are in the top quartile of out-of-pocket spending on services and premiums

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.  Overall, a greater share of older beneficiaries than younger beneficiaries are high out-of-pocket spenders, with more than one-third (38%) of beneficiaries ages 85 and older in the top quartile of total out-of-pocket spending

Among beneficiaries ages 85 and older, a greater share of women than men are high out-of-pocket spenders, with 41 percent of women ages 85 and older in the top quartile compared to 33 percent of older men

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.  These differences are attenuated but not eliminated when looking at out-of-pocket spending among community residents only; for example, 34 percent of women ages 85 and older living in the community are in the top quartile of total out-of-pocket spending compared to 31 percent of older men (data not shown).

Just as average total out-of-pocket spending increases with the number of functional limitations and chronic conditions, the share of beneficiaries who are high out-of-pocket spenders increases with the number of functional limitations and chronic conditions.  In 2010, 41 percent of beneficiaries with three or more limitations in activities of daily living (ADLs) were among the top quartile of spenders, compared to only 20 percent of those without any ADLs or IADLs

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.  Nearly one-third (32%) of beneficiaries with five or more chronic conditions were in the top quartile of spending, compared to one-fifth of those with one or two chronic conditions.  A greater share of beneficiaries with certain conditions are high out-of-pocket spenders; this includes more than four in ten beneficiaries with Alzheimer’s and end-stage renal disease (ESRD) in the top quartile of out-of-pocket spending, and roughly one-third of beneficiaries with certain other conditions.  At least one in five beneficiaries with Parkinson’s disease, Alzheimer’s disease, and ESRD are in the top decile of out-of-pocket spending

The share of Medicare beneficiaries in the top quartile and top decile of total out-of-pocket spending increases with the number of hospitalizations and skilled nursing facility (SNF) use.  More than one-third (38%) of beneficiaries with one inpatient hospital stay were in the top quartile of total out-of-pocket spending in 2010, while 45 percent of beneficiaries with two or more hospitalizations and over half (54%) of beneficiaries with an inpatient stay and a SNF stay were in the top quartile of total out-of-pocket spending (this latter group may include beneficiaries in the first two groups)

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.

Medicare beneficiaries’ average total out-of-pocket spending, including services and premiums, increased by nearly $1,500 between 2000 and 2010.  On average, beneficiaries in traditional Medicare spent $1,500 more (a 44 percent increase) on their total out-of-pocket costs (including services and premiums) in 2010 than in 2000 ($4,734 vs. $3,293, respectively)

1

.  Average out-of-pocket spending on medical and long-term care services increased by 27 percent between 2000 and 2010 (from $2,161 to $2,744), while average out-of-pocket spending on Medicare and other premiums increased by 76 percent (from $1,132 to $1,989).

Between 2000 and 2010, total out-of-pocket costs increased at an average annual growth rate of 3.7 percent; the average annual growth rate between 2000 and 2010 was higher for premiums (5.8%) than for services (2.4%)

2

 and

While average total out-of-pocket spending increased between 2000 and 2010, the annual rate of growth in spending trended downward after 2006.  The annual rate of growth in average total out-of-pocket spending fluctuated over the years between 2000 and 2010, but trended down in the latter part of the decade

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.  Total out-of-pocket spending among beneficiaries in traditional Medicare increased at an average annual rate of growth of 5.0 percent between 2000 and 2006, but this growth rate fell to 1.8 percent between 2006 and 2010.

This downward trend in the annual rate of growth in average total out-of-pocket spending also applies to both services and premiums.  Similar to the downward trend in the average annual growth rate for total out-of-pocket spending, we observed slower growth in the separate components of total out-of-pocket spending

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.  Out-of-pocket spending on services increased at an average annual growth rate of 3.5 percent between 2000 and 2006, but this growth rate dropped to 0.9 percent between 2006 and 2010; for premiums, the average annual growth rate decreased from 7.6 percent between 2000 and 2006 to 3.2 percent between 2006 and 2010.

Among all beneficiaries, average out-of-pocket spending on medical providers/supplies, dental services, and skilled nursing facility services increased more than average spending on other types of services between 2000 and 2010.

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However, the average annual rate of growth in out-of-pocket spending between 2000 and 2010 was more than three times greater for spending on skilled nursing facilities (17.1%) than the next fastest growing category of spending (inpatient hospital services; 5.2%)

Among users of services, average out-of-pocket spending for most types of services increased between 2000 and 2010.  In 2010, beneficiaries with a skilled nursing facility stay spent five times more on SNF services than those with a SNF stay in 2000 ($2,221 vs. $418, respectively, on average)

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.  The average number of days associated with SNF stays increased from 28 to 35 over the same period.³   Users of prescription drugs spent somewhat more out of pocket on prescription drugs in 2010 than in 2000, on average—increasing from $510 in 2000 to $580 in 2000, while the average number of prescription drug fills increased from 28 to 42 over these years.⁴   It is likely that the introduction of the Part D prescription drug benefit in 2006 and the shift toward greater use of generic drugs helped to moderate the average out-of-pocket spending increase among prescription drug users, as well as contributing to the growth in the number of prescription fills.

The analysis in this chartbook is based on data from the Centers for Medicare & Medicaid Services (CMS) Medicare Current Beneficiary Survey (MCBS) Cost and Use file, 2000-2010 (the most recent year available).  The MCBS is a survey of a nationally-representative sample of the Medicare population, including both aged and disabled enrollees who are living in the community as well as facility residents.  The Cost and Use file integrates survey information reported directly by beneficiaries with Medicare administrative data.  Survey-reported data includes the demographics of respondents, such as sex, age, race, living arrangements, income, health status, and physical functioning, the use and costs of health care services, and supplementary health insurance arrangements.  The survey also collects information on inpatient and outpatient hospital care, physician and other medical provider services, home health services, durable medical equipment, long-term and skilled nursing facility services, hospice services, dental services, and prescription drugs.  Survey-reported information is matched to and supplemented by administrative records and billing and claims-level data when possible.  Extensive efforts are made to verify the accuracy of survey reports and to reconcile discrepancies using administrative bill data to produce a more complete and reliable dataset.

At present, however, this reconciliation process is not possible for beneficiaries enrolled in Medicare Advantage plans, because Medicare Advantage plans were not required to report encounter data to CMS until recently.  Because the 2010 MCBS does not include reliable utilization and out-of-pocket spending data for beneficiaries in Medicare Advantage plans, to include this population would introduce significant bias associated with underreporting of events and spending for Medicare Advantage enrollees.  Therefore, our analysis excludes these beneficiaries, totaling 10.8 million or 22 percent of the 48.4 million Medicare beneficiaries represented in the 2010 MCBS.  Our analysis is limited to beneficiaries enrolled in traditional Medicare only, representing 78 percent of all Medicare beneficiaries in 2010.

Out-of-pocket spending for medical and long-term care services reported in the MCBS is not the same as beneficiary liability or the Medicare cost-sharing amount for services used.  Instead, out-of-pocket spending amounts are net of payments by any third-party payers, such as payments by Medicaid, Medigap, or employer-sponsored insurance.  Survey-reported out-of-pocket payments are those payments made by the beneficiary or their family, including direct cash payments or in the form of Social Security or Supplemental Security Income (SSI) checks to a nursing home.  Out-of-pocket spending on premiums is derived from administrative data on Medicare Part A and Part B premiums paid by each sample person along with survey-reported estimates of premium spending for other types of health insurance beneficiaries may have (including Medigap, employer-sponsored insurance, and other public and private sources).

To estimate total out-of-pocket spending per beneficiary in traditional Medicare, we calculate for each sample person aggregate estimates of out-of-pocket spending on both insurance premiums for Medicare Parts A and B and supplemental insurance coverage and medical and long-term care services reported in the MCBS.  These amounts are averaged across the entire sample of traditional Medicare beneficiaries and weighted to be representative of the traditional Medicare beneficiary population or specific subgroups of beneficiaries.  For analysis of high out-of-pocket spending, we divide total out-of-pocket spending by traditional Medicare beneficiaries into quartiles and deciles, and estimate the share of beneficiaries overall and by subgroup who have spending in the top quartile and top decile of total out-of-pocket spending.

The medical and long-term care services included in this analysis are:

• Dental services: Includes cleaning, x-rays, repair, purchase or repair of dentures, and orthodontic procedures.  The basic unit measuring use of these services is a single visit to the dentist, where a variety of services might be rendered.
• Home health:  Includes home health visits by professionals (nurses, doctors, social workers, therapists, and hospice workers) or friends (persons who do not live with the beneficiary, but help the beneficiary at home with personal care or other daily needs; these persons may be home health aides, homemakers, friends, neighbors or relatives).
• Inpatient hospital services: Includes inpatient hospital stays, including emergency room visits which result in an inpatient admission.  The basic unit measuring use of inpatient hospital services is a single admission.
• Long-term care facility services:  Includes individual long-term care facility events; a long-term care facility is defined as having three or more beds and providing long-term care services throughout the facility or in a separately identifiable unit.  Types of facilities participating in the survey include nursing homes, retirement homes, domiciliary or personal care facilities, distinct long-term units in a hospital complex, mental health facilities and centers, assisted and foster care homes, and institutions for the mentally retarded and developmentally disabled.  The basic unit measuring use of long-term care facility services is a “stay” in a nursing home or other long-term care facility.  Stays are measured in terms of days of residence in that facility.
• Medical providers/supplies:  Includes medical doctor and practitioner visits; diagnostic laboratory and radiology; medical and surgical services; and durable medical equipment and non-durable supplies, such as eyeglasses or contact lenses and hearing aids, orthopedic items such as canes, walkers, wheelchairs and corrective shoes, diabetic supplies, oxygen supplies and equipment.  Types of practitioners include chiropractors, podiatrists, audiologists and optometrists; mental health professionals such as psychiatrists, psychologists and clinical social workers; therapists such as physical therapists, speech therapists, occupational therapists, and intravenous and respiratory therapists; other medical practitioners such as nurses and paramedics; and other places offering medical care, such as clinics, neighborhood health centers, infirmaries and urgent care centers.  The basic unit measuring use of these services is a separate visit, procedure, service, or a supplied item for a survey reported event.
• Outpatient hospital services:  Includes outpatient visits to the outpatient department or outpatient clinic of a hospital, as well as emergency room visits that do not result in a hospital admission.  The basic unit measuring use of outpatient services is a separate visit to any part of the outpatient department for a survey-reported event.
• Prescription drugs:  Includes individual outpatient prescribed medicine events, including drugs provided to enrollees in Medicare Part D drug plans; excludes prescription medicines provided by the doctor or practitioner as samples and those provided in an inpatient setting.  The basic unit measuring use of prescription drugs is a single purchase of a single drug in a single container.
• Skilled nursing facility services:  Includes short-term institutional stays, such as skilled nursing home stays or rehabilitation hospital stays; excludes inpatient hospital admissions and long-term care facility stays.  The basic unit measuring use of these services is an admission.

There is one important limitation in the data related to home health care.  The home health use and payment records in the MCBS Cost and Use file are designed to represent events where medical care, as opposed to personal care and support, was furnished to the sample person.  This exclusion of personal care services and supports is deliberate, since the MCBS is intended to capture medical service use and spending of Medicare covered and non-covered services.  Therefore, any out-of-pocket spending on personal care and support delivered in the home or the value of unpaid personal care and support services is not included in the out-of-pocket spending estimate for home health services.  For some beneficiaries, this would produce a lower estimate of their total out-of-pocket spending for home-based care, but we are not able to estimate the magnitude of this effect.

1. Gretchen Jacobson, Jennifer Huang, Tricia Neuman, and Karen Smith, “Income and Assets of Medicare Beneficiaries, 2013-2030,” Kaiser Family Foundation, January 2014, https://modern.kff.org/medicare/issue-brief/income-and-assets-of-medicare-beneficiaries-2013-2030/. ↩︎
2. Juliette Cubanski, Christina Swoope, Anthony Damico, and Tricia Neuman, “Health Care on a Budget: The Financial Burden of Health Spending by Medicare Households,” Kaiser Family Foundation, January 2014, https://modern.kff.org/medicare/issue-brief/health-care-on-a-budget-the-financial-burden-of-health-spending-by-medicare-households/; Tricia Neuman, Juliette Cubanski, Jennifer Huang, and Anthony Damico, “How Much Skin in the Game is Enough? The Financial Burden of Health Spending for People on Medicare, Kaiser Family Foundation, May 2011, https://modern.kff.org/medicare/report/how-much-skin-in-the-game-is-enough-the-financial-burden-of-health-spending-for-people-on-medicare/; Tricia Neuman, Juliette Cubanski, and Anthony Damico, “Revisiting ‘Skin in the Game’ Among Medicare Beneficiaries,” February 2009, Kaiser Family Foundation, https://modern.kff.org/medicare/revisiting-skin-in-the-game-among-medicare/; Tricia Neuman, Juliette Cubanski, Katherine Desmond, and Tom Rice, “How Much Skin in the Game Do Medicare Beneficiaries Have? The Increasing Financial Burden of Health Care Spending, 1997-2003,” Health Affairs, November/December 2007, https://modern.kff.org/health-costs/issue-brief/how-much-skin-in-the-game-do-medicare-beneficiaries-have-the-increasing-financial-burden-of-health-care-spending-1997-2003/. ↩︎
3. Kaiser Family Foundation analysis of the Medicare Current Beneficiary Survey 2010 Cost & Use file. ↩︎
4. Kaiser Family Foundation analysis of the Medicare Current Beneficiary Survey 2010 Cost & Use file. ↩︎

Enrollment in the new state demonstrations to integrate care and align financing for beneficiaries dually eligible for Medicare and Medicaid is underway, and there is considerable interest in the demonstration evaluation plans among federal and state policymakers, beneficiaries, and other stakeholders.  The demonstrations are being implemented under new authority, Section 1115A of the Social Security Act, which was added by the Affordable Care Act and authorizes the Health and Human Services Secretary to expand the duration and scope of demonstration models, including nationwide, that are expected to reduce program spending without reducing care quality or improve patient care without increasing spending.  This issue brief describes the Centers for Medicare and Medicaid Services’ plan to evaluate the demonstrations, via its contract with RTI International.

• The evaluation will include both qualitative and quantitative methods.  Qualitative information will be based on site visits, including interviews with state staff; beneficiary focus groups; and stakeholder interviews.  Quantitative information will be based on implementation tracking data reported by states and analysis of claims, encounter, quality, utilization, and cost data.  Each state’s demonstration will have a comparison group of similar beneficiaries unaffected by the demonstration.  The evaluation will not include a beneficiary survey.
• The evaluation will profile each state’s care delivery system prior to the demonstration, identify key elements that the state’s demonstration intends to change, and measure the effects of any changes.  It will describe major demonstration design features in each state and compare those features across demonstration states.  Other areas of focus in the evaluation include beneficiary experience, utilization and access to care, quality of care, costs, subpopulations and health disparities.
• The evaluation results will be reported at regular intervals.  The evaluation plan calls for state-specific initial (based on the first six months of implementation), quarterly, annual, and final reports, as well as an aggregate final evaluation report.  While the law requires the evaluation results to be publicly available, the evaluation plan does not specify which of these reports will be released publicly or when.

The evaluation plan acknowledges that the analysis may be limited by the quality and availability of claims and encounter data.  As the evaluation progresses, it will be important for timely results and reports to be publicly available to promote broad discussion of the demonstrations’ successes and challenges.

Enrollment in the new state demonstrations to integrate care and align financing for beneficiaries dually eligible for Medicare and Medicaid is underway.¹   As of July 2014, beneficiaries in five states (California, Illinois, Massachusetts, Ohio, and Virginia) are participating in capitated demonstrations, to be followed by five more states (Michigan, New York, South Carolina, Texas, and Washington) in the coming months.   For the last year, beneficiaries have been enrolled in Washington’s a managed fee-for-service (FFS) model, with enrollment soon to be effective in another managed FFS demonstration in Colorado.The demonstrations are being implemented under new authority, Section 1115A of the Social Security Act, which was added by the Affordable Care Act.  Section 1115A requires the Health and Human Services Secretary to evaluate the demonstrations, and the Centers for Medicare and Medicaid Services (CMS) has contracted with RTI International to do so.  RTI will use qualitative and quantitative methods to evaluate the demonstrations overall as well as each state’s model.²    RTI’s work is in addition to any evaluations that individual states are undertaking.³ There is considerable interest in the demonstration evaluation plans among federal and state policymakers, beneficiaries, and other stakeholders.  The demonstrations will affect some of the most vulnerable beneficiaries, among the poorest and sickest covered by Medicare or Medicaid, while the predominant pre-existing service delivery models for this population typically involved little to no coordination between the two programs.  In addition, the Secretary is authorized to expand the duration and scope of tested models, including on a nationwide basis, that are expected to reduce program spending without reducing care quality or improve patient care without increasing spending.  This issue brief describes CMS’s plan to evaluate the demonstrations, via its contract with RTI, in the areas of implementation, beneficiary experience, utilization and access to care, quality of care, cost, and health disparities among subpopulations, including the specific research questions identified for each area.  Details about individual state demonstration evaluations are included to the extent available.⁴ 

 

Key Questions

1. What does the law require the Secretary’s evaluation of the demonstrations to include?

Section 1115A requires the demonstration evaluation to assess the quality of care provided, including patient level outcomes and “patient-centeredness” criteria, and changes in Medicare and Medicaid spending.⁵   The Secretary can require states and other entities participating in the demonstrations to collect and report information necessary for monitoring and evaluation purposes.⁶   Section 1115A also directs the Secretary, to the extent feasible and based on input from multi-stakeholder groups, to select measures reflecting national priorities for quality improvement and patient-centered care.⁷   Finally, the law requires that the evaluation results be publicly available “in a timely fashion.”⁸ 

2. Which research methods will RTI use to evaluate the demonstrations?

RTI will use a combination of qualitative and quantitative methods in its evaluation, including:

Site visits:  Two-person teams will make at least two site visits to each state.  The first site visit will be within six months of the beginning of demonstration enrollment.  RTI’s evaluation plan includes a site visit interview protocol for interviews with state demonstration staff.

Focus groups:  Four focus groups of eight to 10 people each will be conducted in each state. Focus group participants will include beneficiaries, family members and informal caregivers.  RTI and CMS will determine the timing for focus groups and decide whether to conduct any focus groups in languages other than English.  If there appears to be high initial rates of opt out or disenrollment in some states, RTI will consider conducting focus groups with beneficiaries who have made those choices to better understand their decisions.  The evaluation plan includes a preliminary focus group outline.

Stakeholder interviews:  Interviews will be conducted quarterly by phone or in-person during site visits.  There will be up to eight telephone interviews in each state within six months of demonstration implementation and up to eight in-person or telephone interviews in each state per demonstration year.  The evaluation plan includes an interview outline for one-hour, one-on-one interviews to assess beneficiary experience in the demonstrations.

Interview participants will include representatives from:

• beneficiary and advocacy groups;
• the state implementation council;
• the CMS-state joint contract management team, state officials, and key demonstration staff;
• health plans and  health or medical home providers;
• entities providing enrollment options counseling to beneficiaries; and
• the demonstration ombuds program.

State data reporting system:  RTI will collect approximately 130 data elements on an aggregate (not beneficiary) level as part of the evaluation.  The evaluation plan highlights complaints, grievances and appeals; disenrollment and opt out rates; information about waiting lists or lags in accessing services; and the rate of change in primary care provider assignment as data “of particular interest.”  There are three components to the data collection:

A. Model summary:  RTI will prepare a summary of each state’s demonstration, consisting of 21 static data elements, based on the state’s MOU with CMS..B. Implementation tracking data: States will report quarterly on 45 data elements, with the first quarter beginning on the day of implementation.  These data include progress indicators (numerical data reported in monthly increments) and tracking elements by design feature (yes/no responses and brief text descriptions about demonstration progress, successes, and challenges during the quarter)..1. Progress indicators include the number of beneficiaries eligible to participate in the demonstration; currently enrolled; passively enrolled; who opted out prior to enrollment; who voluntarily disenrolled; and whose enrollment ended (e.g., death, loss of eligibility).  They also include the demonstration service area; number of 3-way contracts with plans; new CMS initiatives that may affect dual eligible beneficiaries in the demonstration area; and the number of health or medical homes participating in the demonstration and number of enrollees these entities serve (if applicable)..2. Tracking elements include new state policies or procedures to improve service integration; changes in reporting requirements; training or capacity-building activities for plans and providers, including primary care; new policies or procedures regarding care coordination or electronic health records; new or expanded demonstration benefits; activities to increase beneficiary enrollment; major challenges or issues in implementation and solutions developed; activities to engage stakeholders, enrollees, families or advocates in policy development or oversight; tracking and receiving data from plans and providers on new quality indicators; changes in payment methodology for plans and providers; timing of state’s most recent Medicaid Statistical Information Systems (MSIS) submissions; whether plans experienced any problems submitting encounter data; and other successes related to the demonstration..C. Demonstration impact and outcomes:  RTI’s analysis of claims, encounter and assessment data on quality, utilization and cost measures will yield 40 to 50 numerical data fields, updated quarterly.  Sources will include MSIS and Medicare FFS claims data, Medicaid managed care organization (MCO) and Medicare Advantage plan encounter data, and the Nursing Home Minimum Data Set (MDS)..

3. How will the quantitative analysis in the evaluation be structured?

Comparison group:  RTI’s quantitative analysis for the evaluation will use an “intent-to-treat” approach, comparing beneficiaries eligible for each state’s demonstration with a similar population of beneficiaries who are unaffected by the demonstration.  All eligible beneficiaries will be included in the demonstration group, regardless of whether they actively participate.  The geographic area from which the comparison group will be drawn will be determined based on how it compares with the demonstration area in terms of population characteristics (e.g., age, income, race/ethnicity); market characteristics, such as provider supply; the size of the population meeting the demonstration’s eligibility criteria; Medicare and Medicaid spending per dual eligible beneficiary; the shares of long-term services and supports (LTSS) delivered in facility and community-based settings; and the extent of Medicare and Medicaid managed care penetration.

RTI will first consider whether it is possible to use an in-state comparison group for each state’s demonstration.  If a demonstration is statewide or if the excluded regions of a state are not representative of the areas included in the demonstration, the comparison group will be out-of-state or possibly a combination of in- and out-of-state beneficiaries.  Because all or most of their dual eligible population will be included in their demonstrations, Washington and, most likely, Massachusetts will have out-of-state comparison groups, while RTI will consider in-state comparison groups for Illinois, Ohio, and Virginia.  The comparison group geographic areas will be determined within the first year of demonstration implementation, while the comparison group members will be determined retrospectively at the end of each demonstration year.

Claims data:  RTI will analyze available Medicare and Medicaid data quarterly for selected quality, utilization, access to care, and cost measures and Nursing Home MDS data for facility admissions.  The analysis for each state’s demonstration and comparison groups will include a two year pre-demonstration baseline period and each demonstration year.  RTI’s evaluation plan notes that as of August 2013, about one-third of potential demonstration and comparison group states had not yet submitted MSIS data for the second quarter of FY2012, meaning that claims data lagged more than one year.  Ideally for RTI’s evaluation, MSIS data will be finalized within four to six months after the end of each quarter.

Encounter data:  RTI also notes the evaluation’s need for encounter data from Medicare Advantage plans, non-demonstration-related Medicaid MCOs, and demonstration health plans in areas such as patient diagnosis, service intensity (brief vs. comprehensive visits), type of visit (preventive vs. treatment), ancillary services, and facility changes.  Data also will be assessed for changes in coding patterns, given that capitated payments may be affected by coding intensity.  RTI notes that the quality of encounter data is not yet known, Medicare Advantage plans have up to one year from the service date to submit data, and Medicaid managed care data is expected to vary by state.  Consequently, the evaluation may be limited if data is incomplete or unavailable on a timely basis.

Beneficiary surveys:  RTI will not conduct beneficiary surveys as part of its evaluation; however, RTI asks that findings from any surveys fielded by states, CMS, or other entities be shared for inclusion in the evaluation.  Health plans in the demonstration must participate in the Medicare Health Outcomes Survey (HOS) and report Healthcare Effectiveness Data and Information Set (HEDIS) measures and the Medicare Consumer Assessment of Health Care Providers and Systems (CAHPS) survey.  In addition, CMS’s demonstration operations support contractor will administer a beneficiary CAHPS survey in the managed FFS states.  RTI notes that ideally all surveys would use a standard instrument and believes that the CAHPS instrument for assessing patient-centered medical homes seems most appropriate.

Research questions related to quantitative analysis:

• Which demonstration model (managed FFS or capitated) has achieved greater savings?
• Are there differences in key outcomes (e.g., quality, utilization, expenditure types) that can be attributed to the type of financial alignment model used?
• Do the effects achieved by alternative integrated care models occur equally fast?  Or, does one model (managed FFS or capitated) achieve gains more quickly than the other?
• Does the approach to enrollment (e.g., passive) affect access to care and costs?
• How does the relative degree of care management intensity and diversity across services affect outcomes?
• Do these effects vary across subgroups of beneficiaries?

4. What evaluation reports will RTI produce for CMS and on what timeframe?

RTI’s evaluation reports will include:

State-specific initial reports, which will be qualitative and based on the first six months of implementation;

Quarterly reports for CMS and states’ ongoing demonstration monitoring, with preliminary information on enrollment, disenrollment, quality, utilization, and cost measures;

Annual reports, which will include descriptive statistics for each state’s demonstration and comparison group with estimates for beneficiary experience, utilization, access to care, cost, and quality measures.  Changes in measures across years or subgroups within years will be noted (e.g., total costs (for Medicare and Medicaid separately), rates of primary and specialist care use, rates of avoidable hospitalizations and inappropriate readmissions, counts of hospital and nursing facility admissions and length of stay, rates of home and community-based services (HCBS) use, and mortality);

Final aggregate evaluation report, which will seek to determine the relative effectiveness of states’ demonstration design choices and study sources of variation at the state level; and

Final evaluation reports for each state, which will assess the demonstration’s overall impact on quality, utilization and cost measures relative to the comparison group.

While the law requires the evaluation results to be publicly available, the evaluation plan does not specify which of these reports will be released publicly.

5. How will demonstration implementation be evaluated?

RTI will profile each state’s care delivery system prior to the demonstration, identify key elements that the state’s demonstration intends to change, and measure the effects of any changes.  The evaluation will describe major demonstration design features in each state and compare those features across demonstration states.  The design features also will be used to identify demonstration characteristics associated with better outcomes in the quality, utilization, access to care, and cost analyses (described below).

The evaluation will examine how care coordination in the demonstration is structured, how prescriptive the state is in setting care coordination expectations in health plan contracts, how demonstration care coordination compares with that in other capitated programs serving other populations, and whether care coordination is person-centered.  If possible, the evaluation will categorize the intensity and scope of mandated care coordination functions across all demonstration states.  Information to evaluate demonstration implementation will be gathered from document review, stakeholder interviews, and state-reported data.

Demonstration Design Features to be examined:

• The demonstration’s integrated delivery system (e.g., primary care, including medical or health homes; LTSS; behavioral health; developmental disability services);
• Integrated delivery system supports (e.g., care team composition; use of health information technology at the state, provider, and plan level);
• Care coordination/case management (e.g., assessment, service planning, and care management stratification processes);
• Benefits and services (e.g., scope, new or enhanced);
• Enrollment and access to care (e.g., integrated enrollment and care access; provider accessibility standards; opt out, disenrollment, and auto-assignment policies);
• Beneficiary engagement and protections (e.g., state policies to integrate Medicare and Medicaid grievances and appeals, quality management systems); and
• Financing and payment elements (e.g., financing model, incentives, shared savings).

Research questions related to implementation:

• What are the primary features of each state demonstration and how do they differ from the state’s previous system available to the demonstration-eligible population?
• To what extent did each state implement the demonstration as proposed?
• Which states were able to fully implement their intended proposals?
• Were certain models more easily implemented than others?
• Were the demonstrations more easily implemented for certain subgroups?
• What factors contributed to successful implementation?
• What were the barriers to implementation?
• How have beneficiaries participated in the ongoing implementation and monitoring of the demonstrations?
• What strategies used or challenges encountered by each state can inform adaptation or replication by other states?

6. How will beneficiary experience be evaluated?

RTI’s evaluation of beneficiary experience in the demonstrations will include impact on quality of life, health outcomes, access to needed services, service integration and coordination across settings and delivery systems, provider choice, beneficiary rights and protections, and the delivery of person-centered care.  Data to evaluate beneficiary experience include beneficiary focus groups; stakeholder interviews; monitoring of beneficiary engagement activities, grievances and appeals, and feedback from demonstration ombuds programs; claims data analysis on key quality, utilization and access to care measures; and the results of any beneficiary surveys performed by states, CMS or other entities.  Focus groups and stakeholder interviews to assess beneficiary experience will include beneficiaries, relatives, and advocates but not service providers or anyone who oversees the demonstration.

Research questions related to beneficiary experience:

• What impact do these demonstrations have on beneficiary experience overall, by state, and for beneficiary subgroups?
• What factors influence the beneficiary enrollment decision?
• Do beneficiaries perceive improvements in their ability to find needed health services?
• Do beneficiaries perceive improvements in their choice of care options, including self-direction?
• Do beneficiaries perceive improvements in how care is delivered?
• Do beneficiaries perceive improvements in their personal health outcomes?
• Do beneficiaries perceive improvements in their quality of life?

7. How will utilization and access to care be evaluated?

RTI will analyze the pre-demonstration (two years prior to implementation) and annual utilization rates during the demonstration of Medicare and Medicaid-covered services in each state to determine the demonstration’s effects on type and level of service use, ranging along a continuum from facility-based to home-based care.  The evaluation also will calculate the average utilization rates for the pre-demonstration period and at the beginning, middle, and end of the demonstration.  Utilization rates for each state will be stratified by hierarchical condition categories scores or health status measures.  Nearly all utilization analyses will be conducted at the beneficiary level.

RTI also will analyze patterns of primary vs. specialty care use, hypothesizing that primary care physicians will provide an increasingly higher proportion of visits in the demonstration group relative to the comparison group over time, unless non-visit compensation is provided to physicians in the comparison group.  This analysis will account for the fact that specialists may provide primary care for people with chronic conditions.  RTI also will explore measures to assess fragmentation of care for behavioral health and LTSS.  RTI notes that the utilization and access to care analysis may be limited by potential problems with encounter data, lack of care coordination data, and incomplete behavioral health services data.

The evaluation of utilization and access to care in Massachusetts’ demonstration will include a focus on mental health and substance use disorder prevention and treatment services; community support services; and dental, vision, and non-medical transportation services, which the demonstration is expanding.

Research questions related to Utilization:

• What is the impact of the state demonstrations on utilization patterns during the course of the demonstration?
• What is the impact on hospital and nursing facility admission rates, potentially avoidable hospitalization utilization rates by setting, and LTSS utilization rates?  What is the impact of the demonstration on hospital and nursing facility length of stay?
• Do demonstrations change the balance between HCBS and nursing facility use, the types of enrollees who use these services, and utilization rates by type of HCBS such as personal care?  Do enrollees receive more HCBS as a result of the demonstrations?
• Is any impact short term (lasting for only one year prior to returning to pre-demonstration level, increasing over time, reaching a plateau after a year or two)?
• Does the observed impact vary by health condition or other beneficiary characteristics?
• Will case management or care coordination lead to lower hospital admission rates or, if admitted, shorter lengths of stay and shorter nursing facility and home health care episodes?
• Are demonstration group members using fewer inpatient services and more ambulatory services?
• Is the impact greater for more medically complex (multiple chronic condition), high cost (top 10%) enrollees?

Research questions related to Access to Care:

• Do demonstration participants experience increases in the mean number of primary care visits and increased visit rates by specialty type?
• Does acuity on admission to nursing facilities increase?  Do discharge rates back to the community from nursing facilities increase?  Is there an increase in the proportion of HCBS users self-directing care?
• Does the mental health outpatient utilization rate increase?  Does the outpatient substance use disorder service utilization rate increase?

8. How will quality of care be evaluated?

RTI’s evaluation will analyze a set of quality measures common to all demonstration states (listed below).⁹   Many are HEDIS measures that demonstration health plans must report, although similar reporting is not required in the comparison states, with the result that these data will not exist for beneficiaries outside of the demonstration.  In addition, state-specific quality measures will be finalized within six months of implementation.  The evaluation plan calls for rapid-cycle monitoring, although the timeliness of encounter data submission by health plans is not yet known.  RTI also will develop variables to control for observable differences between individual beneficiaries, both within the demonstration group and between the demonstration and comparison groups; at minimum, these will include demographic information, such as age, race, and sex.  The quality measures listed below will be supplemented with information about beneficiary quality of life, satisfaction, and access to care (described above) and any relevant available beneficiary survey information.

Evaluation Quality Measures:

• 30-day all-cause risk-standardized readmission rate
• Influenza immunization
• Pneumococcal vaccination for beneficiaries age 65 and older
• Ambulatory care sensitive condition admissions – overall composite
• Ambulatory care sensitive condition admissions – chronic composite
• Preventable emergency department visits
• Emergency department visits, excluding those resulting in inpatient admission or death
• Admissions with primary diagnosis of severe and persistent mental illness or substance use disorder
• Follow-up after hospitalization for mental illness
• Screening for clinical depression and follow-up
• Cardiac rehabilitation following hospitalization for cardiac event
• Percent of high-risk long-stay nursing facility residents with pressure ulcers
• Screening for fall risk
• Initiation and engagement of alcohol and other drug dependence treatment
• Adult body mass index assessment
• Annual monitoring for patients on persistent medications
• Antidepressant medication management
• Breast cancer screening
• Comprehensive diabetes care – selected components
• Controlling high blood pressure

9. How will cost be evaluated?

RTI’s evaluation will identify high-level cost measures that can be calculated for all states to monitor changes in cost over time.  RTI notes that the evaluation will use a regression-based approach to determine cost savings, which will provide information about how various factors relate to costs. ¹⁰   In the capitated models, costs will include per member per month rates, combined with costs for beneficiaries who opt out or disenroll.  RTI will measure pre-demonstration and annual spending on beneficiaries for both Medicare and Medicaid, although RTI anticipates that only Medicare costs may be available for most states in the first annual report.  In the capitated models, RTI anticipates that service-level spending will not be available from the encounter data reported by health plans so the utilization analysis described above will be the means to understand the demonstration’s impact by type of service.  In its annual reports, RTI will present costs for various subgroups of interest, such as demographic groups, LTSS users, beneficiaries with intellectual/developmental disabilities, those with end-stage renal disease, and those with chronic conditions such as diabetes, and will test for differences across demonstration years.  The final evaluation report will include cost impact analysis using comparison groups.  RTI notes that the availability and timeliness of encounter data will affect the cost analysis.

Research questions related to Cost:

• Do the demonstrations reduce costs?
• If so, how were the demonstrations able to reduce the costs of demonstration enrollees compared with the comparison group?
• How do the demonstrations differentially affect expenditures for beneficiaries at risk for having high costs?

10. How will subpopulations and health disparities be evaluated?

RTI will work with CMS to identify subpopulations to analyze in each state, based on whether the state’s demonstration is targeted to a particular population, the size of subpopulations participating in the demonstration and how they are distributed across states, and how subpopulations can be identified in data sets in the demonstration and comparison groups.  Possible subpopulation groups include racial and ethnic groups, people living in rural or inner-city areas, younger people with disabilities, people age 65 and older, people with serious and persistent mental illness, people with developmental disabilities, people with end-stage renal disease, people with multiple chronic conditions, LTSS users, and high-cost beneficiaries.  The evaluation will not analyze all subpopulations in every state.  Data sources for subpopulation analysis will include beneficiary focus groups and interviews with beneficiaries, state officials, and health plans with large subpopulations.  Questions will include whether health plans refer beneficiaries to community services such as the Supplemental Nutrition Assistance Program and senior centers; have established protocols for treating common medical and non-medical problems among subpopulations; and have procedures to address the needs of people with limited English proficiency; and which features stakeholders believe are most effective in these areas.

Subpopulations of focus in Massachusetts’ demonstration:   people with end-stage renal disease, those receiving behavioral health services, those with chronic physical conditions (estimated to be about 40% of the demonstration eligible population), and those receiving LTSS (including people with developmental disabilities in the community who are not receiving home and community-based wavier services).  Other potential subpopulations in Massachusetts include people in facilities, people with high activities of daily living needs living in the community, and people with high behavioral health needs living in the community.  RTI will compare characteristics of people who enroll in the demonstration with those who are eligible but do not enroll.

Subpopulations of Focus in Washington’s managed FFS demonstration:  eligible beneficiaries who receive different levels of health home services, ranging from no to intensive use.  Groups also will be divided based on amount of time enrolled in a health home.

Research questions related to Subpopulations and Health Disparities:

• How do the demonstrations, as implemented by the different states, address the unique needs of subpopulations?  Are there special initiatives designed to meet the needs of these populations (such as special care coordination efforts, new services for people with serious and persistent mental illness, nursing facility diversion programs)?  Do the demonstration states successfully implement what they proposed?  Do the models that focus on subpopulations work better than those that are designed for more general populations?
• Do the demonstrations reduce expenditures and improve beneficiary experience, quality of care, and health outcomes for subpopulations?  What is the effect on service use?
• Do the demonstrations reduce or eliminate undesirable disparities (such as between African Americans and whites) in access to care, beneficiary experience, health care utilization, expenditures, quality of care, and health outcomes?
• To the extent that the demonstrations have positive outcomes for subpopulations, what features of the demonstration account for these outcomes?

Examples of measures for people with behavioral health conditions:  outpatient services; HCBS; new long-term nursing facility admissions for people with serious and persistent mental illness; access to a full range of scheduled and urgent medical and behavioral health care and LTSS; beneficiary reports of improved quality of life as a result of access to a full range of services; beneficiary choice of medical, behavioral health and long-term care services and providers; beneficiary reports on life satisfaction; care coordination assessment processes that integrate medical, behavioral health and LTSS; hospitalizations for people with serious and persistent mental illness, outpatient visits after hospitalizations for mental illness, and the initiation and engagement of alcohol and other drug dependence treatment.

Examples of measures for nursing facility residents: admission rates, acute care utilization (physician visits, hospitalization, emergency room), and cost patterns for short and long-term stays; acuity level in new admissions to evaluate the extent to which the demonstrations are successfully maintaining frail beneficiaries in the community; and selected nursing facility quality measures.  Trends in admissions and quality will be monitored within demonstration and comparison states.

Looking Ahead

As enrollment continues in the financial alignment demonstrations, interest in how these models will be evaluated will remain high.  Federal and state policymakers, health plans, providers, beneficiaries, and other stakeholders will want to know whether and how the demonstrations are achieving their stated goals over the short and long-term.  CMS, through its contract with RTI, has set out its plans to evaluate the demonstrations in a number of areas, including implementation, beneficiary experience, utilization and access to care, quality of care, cost, and health disparities among subpopulations, at the aggregate and state levels.  While the law requires the evaluation results to be publicly available, the evaluation plan does not specify which of the various reports produced will be released publicly.  The evaluation plan also acknowledges that the analyses may be limited by the quality and timeliness of available claims and encounter data.  In addition, there may be areas of interest that the evaluation does not fully assess, such as states’, plans’, and providers’ efforts to make their services, policies, and practices accessible to beneficiaries with disabilities.  CMS’s release of its evaluation plans makes this information available so that stakeholders and the public can better understand how the demonstrations will be measured.  As the evaluation progresses, it will be important for timely results and reports to be publicly available to promote broad discussion of the demonstrations’ successes and challenges among stakeholders.

 

1. For more information about the demonstrations, see Kaiser Commission on Medicaid and the Uninsured, Financial and Administrative Alignment Demonstrations for Dual Eligible Beneficiaries Compared:  States with Memoranda of Understanding Approved by CMS (May 2014), available at https://modern.kff.org/medicaid/issue-brief/financial-alignment-demonstrations-for-dual-eligible-beneficiaries-compared/. ↩︎
2. See RTI International, Measurement, Monitoring, and Evaluation of State Demonstrations to Integration Care for Dual Eligible Individuals, Aggregate Evaluation Plan (Dec. 16, 2013), available at http://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/FinancialAlignmentInitiative/Evaluations.html. ↩︎
3. For example, Massachusetts has released preliminary findings from focus groups with beneficiaries who voluntarily enrolled in the demonstration and who opted out of the demonstration.  Mass. Executive Office of Health and Human Services, One Care Early Indicator Project Reports, available at http://www.mass.gov/eohhs/consumer/insurance/one-care/one-care-early-indicators-project-eip-reports.html. ↩︎
4. As of the writing of this issue brief, RTI’s state-specific evaluation plans are available online for Massachusetts (Dec. 23, 2013), Ohio (Jan. 3, 2014), Virginia (April 24, 2014), Illinois (April 28, 2014), and Washington’s managed FFS (May 13, 2014) and capitated (June 3, 2014) models.  See http://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/FinancialAlignmentInitiative/Evaluations.html.     ↩︎
5. ACA § 3021(a), adding 42 U.S.C. § 1315a(b)(4)(A). ↩︎
6. Id. adding 42 U.S.C. § 1315a(b)(4)(B). ↩︎
7. Id. adding 42 U.S.C. § 1315a(b)(4)(C). ↩︎
8. Id. adding 42 U.S.C. § 1315a(b)(4)(B). ↩︎
9. For more detail, see RTI International, Measurement, Monitoring, and Evaluation of State Demonstrations to Integration Care for Dual Eligible Individuals, Aggregate Evaluation Plan, Table 18, Quality measures for evaluation:  Detailed definitions, use and specifications (Dec. 16, 2013), available at http://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/FinancialAlignmentInitiative/Evaluations.html ↩︎
10. By contrast, an actuarial approach will be used to determine cost savings in managed FFS states, which can be calculated on a faster timeline to determine the performance payments to states after the end of each demonstration year. ↩︎

The Children’s Health Insurance Program (CHIP) was established in 1997 to provide coverage for uninsured children who are low-income but above the cut-off for Medicaid eligibility. In 2009, Congress reauthorized and extended federal funding for CHIP, and the Affordable Care Act (ACA) extended CHIP funding further, through FY 2015. If Congress does not act, federal funding for CHIP will expire a little over a year from now. Decisions about CHIP’s future will be consequential as more than 8 million low-income children were covered by CHIP at some point during 2012. CHIP and Medicaid combined cover more than 1 in every 3 children in the U.S. To help inform the debate about CHIP’s future, this brief reviews data and a large body of research about the impact of Medicaid and CHIP on low-income children. The evidence can be summarized as follows:

• Coverage: Medicaid and CHIP have significantly expanded health coverage among U.S. children and provided a coverage safety-net for children in working families during economic downturns. From 1997, when CHIP was enacted, to 2012, the uninsured rate for children fell by half, from 14% to 7%. Medicaid and CHIP have helped to reduce disparities in coverage that affect low-income children and children of color.

• Benefits and out-of pocket protection: Medicaid and CHIP cover expansive benefits for children, including dental care, which is often excluded from private health insurance. Of key importance for children with special health care needs, all CHIP programs cover physical, occupational, and speech and language therapies, often without limits. Both Medicaid and CHIP provide strong financial protection for low-income children and families. Out-of-pocket exposure is greater in subsidized Marketplace coverage.

• Access to care: Children with Medicaid and CHIP have much better access to primary and preventive care and fewer unmet health needs than uninsured children. They also have much better access to specialist and dental care. Further, children covered by Medicaid and CHIP fare as well as privately insured children on measures of primary and preventive care access. However, some research finds disparities between publicly and privately insured children in their access to specialist and dental care. Also, Medicaid and CHIP children visit the emergency department more than other children, which may be due, in part, to barriers to access to timely primary care, such as lack of available after-hours care. Most physicians who care for children participate in Medicaid and CHIP, but dentist participation is low.

• Outcomes: Evidence from some studies shows that Medicaid and CHIP expansions have a positive impact on health outcomes, including reductions in avoidable hospitalizations and child mortality, while other studies show no impact on health. In addition, there is evidence that improved health among children with Medicaid and CHIP translates into educational gains, with potentially positive implications for both individual economic well-being and overall economic productivity.

• Parents’ views:  Most low-income parents have positive impressions of Medicaid and CHIP. The parents of children enrolled in Medicaid or CHIP are more likely than low-income parents of children with job-based coverage to say they are very satisfied with the quality of care, the scope of benefits, and affordability.

Taken together, the evidence is strong that improving coverage through CHIP and Medicaid has contributed to meaningful gains in access to care and the quality of care for low-income children. Further, studies that find an impact of CHIP and Medicaid on children’s health show a positive impact, suggesting that the programs advance the end goal of coverage, better health.

Introduction

The Children’s Health Insurance Program (CHIP) was established with bipartisan Congressional support in 1997 to provide coverage for uninsured children who are low-income, but above the cut-off for Medicaid eligibility. The law gave states considerable flexibility to design their CHIP programs, and states’ use of this flexibility to build streamlined eligibility and enrollment systems, brand their programs, and invest in outreach, has also generated improvements in Medicaid in many states.

In 2009, Congress reauthorized CHIP and extended federal funding for the program. The Affordable Care Act (ACA) extended CHIP funding through FY 2015, and provided for a 23 percentage point increase in CHIP matching rates in FY2016-2019 if funding for the program is again extended. Absent Congressional action, federal funding for CHIP will expire a little over a year from now. Decisions about CHIP’s future funding will be consequential as more than 8 million low-income children were covered by CHIP at some point during 2012.¹  Altogether, CHIP and Medicaid combined now cover more than 1 in every 3 children in the U.S.² 

Data and a large body of research provide strong evidence that Medicaid and CHIP have increased health coverage among low-income children, and that children enrolled in the programs experience improved access to care, utilization, and financial protection.Medicaid and CHIP are also positively associated with the quality of care children receive, and parents value the programs. At the same time, gaps in access to dental care and specialty care point to needs to strengthen the programs. Finally, there is evidence that improved health among children with Medicaid and CHIP translates into gains in school performance and educational attainment over the longer term, with potentially positive implications for both individual economic well-being and productivity in the overall economy.

The evidence from most studies of public coverage for children reflects the effect of Medicaid and CHIP collectively. This is so because most state CHIP programs are either Medicaid expansions or combine a Medicaid expansion and a separate CHIP program, and children migrate between the two programs due to changes in family income; these factors make it difficult to isolate the impact of CHIP alone. However, studies of separate CHIP programs in selected states and the Congressionally-mandated CHIP evaluation issued in 2007 add evidence specific to the experience of children covered by CHIP.

As policy discussions concerning the future of CHIP gather momentum in the coming months, this brief reviews key data and findings about children’s coverage that can help inform the debate about CHIP’s future.

Key data and evidence from research

impact on health coverage of children

Medicaid and CHIP have significantly expanded health coverage among U.S. children and provided a coverage safety-net for children in working families during economic downturns. The programs now cover more than one-third of all children (37%) in the U.S.

• Together, the two programs have significantly reduced the uninsured rate among children. From 1997, when CHIP was enacted, to 2012, millions of uninsured children gained coverage, and the uninsured rate for children fell by half, from 14% to an historic low of 7%. The decline was concentrated among children below 200% of the federal poverty level – the group targeted by Medicaid and CHIP – whose uninsured rate dropped from 25% to 15% over this period.³  The decline was also sharper for Hispanic children, who are the most likely to be uninsured.
• Medicaid and CHIP have provided a coverage safety-net for children during economic recessions and slowdowns when families have lost employer-sponsored insurance. During the downturn in the early 2000’s, the uninsured rate fell for children while it rose significantly for nonelderly.⁴ During the more recent recession, too, gains in health coverage for children continued while nonelderly adults lost ground.⁵ 
• Participation in Medicaid and CHIP among eligible children averaged 87% nationwide in 2011, although the rate varied by state and by subgroups of children.⁶  Although retention rates vary by state as well, nationally, three-quarters of low-income children who remain eligible for CHIP stay enrolled in the program, similar to retention rates in the individual insurance market and Medicaid.⁷ 

Medicaid and CHIP play an especially large role for certain populations, including children of color and children with special health care needs.

• Medicaid and CHIP play an especially important coverage role for children of color, whose families are more likely be low-income compared to Whites. As such, the two programs have reduced racial/ethnic disparities in children’s coverage. CHIP and Medicaid cover more than half of Hispanic children (52%) and Black children (56%), compared to about one-quarter of White (26%) and Asian (25%) children.⁸ 
• Children with special health care needs are particularly reliant on Medicaid and CHIP. They are more likely than other children to be eligible for these programs, and Medicaid and CHIP cover services and supports often needed by these children that private insurance, which is designed for children with more routine needs, typically does not cover.⁹ 

scope of benefits and financial protection

Medicaid and CHIP programs cover expansive benefits for children.

• CHIP programs that are Medicaid expansions cover “Early and Periodic Screening, Diagnosis, and Treatment” (EPSDT) for children, a comprehensive benefit package that covers not only health services, but also developmental services, such as habilitation services that help children attain, maintain, or improve skills to maximize their function.
• A substantial number of separate CHIP programs cover EPSDT or EPSDT-like benefits. The other separate CHIP programs are modeled on mainstream, “benchmark” private insurance products, but include important additional benefits.¹⁰ 
  • All CHIP programs cover dental care, which is often excluded from private health insurance or must be purchased separately. Dental coverage matters because dental disease, which is the most common childhood disease, is preventable and untreated dental problems cause pain, school absence, and missed work among parents.¹¹ 
  • Nearly all separate CHIP programs cover annual eye exams and all cover glasses. Most cover annual hearing exams.
  • All separate CHIP programs cover outpatient and inpatient mental health services, without limits in most states.¹²  All also provide some level of outpatient substance abuse treatment services, and almost all cover inpatient substance abuse treatment.
  • Of special importance for children with special health care needs, all CHIP programs cover physical, occupational, and speech and language therapies, without limits in many states.

CHIP and Medicaid both provide strong financial protection for low-income children and families. Low-income children are more exposed to out-of-pocket costs in the subsidized plans offered through the Marketplaces.

• A study that modeled the effect on out-of-pocket and total medical spending for low-income children with Medicaid or CHIP if they were privately insured instead showed that their out-of-pocket costs over a full year (2005) would have risen from $42 to $314, and that total medical spending on their behalf would have risen 37%, from $909 to $1,247 per person.¹³ 
• A five-state GAO study comparing separate CHIP programs to the coverage that Qualified Health Plans were expected to offer in 2014 found that the benefits for children were generally comparable, but premiums, deductibles, cost-sharing were almost always lower in CHIP. Further, although the QHP benchmark plans capped out-of-pocket costs, the caps ranged widely and did not include premiums or, in some plans, deductibles or certain copays.¹⁴  In CHIP, total family out-of-pocket costs, including premiums, are limited to 5% of family income.
• A study that analyzed the differences between CHIP and QHPs in Arizona, where 14,000 children lost CHIP coverage on January 1, 2014, reached findings similar to the GAO’s and indicated that tighter benefit limits in QHPs compared to CHIP could leave low-income children with chronic health care needs particularly exposed to out-of-pocket costs that their families might be unable to afford.¹⁵ 

impact on children’s access to care and use of services

Children with Medicaid and CHIP have much better access to primary and preventive care and fewer unmet health needs than uninsured children. Moreover, they fare as well as privately insured children on these measures.

• A vast literature documents much greater access to care among children covered by Medicaid and CHIP relative to uninsured children.^{16  17  18  19} 
• A large and consistent body of evidence shows that, following enrollment in Medicaid or CHIP, children are more likely to have a usual source of care, visits to physicians and dentists, and use of preventive care, and less likely to have unmet needs for physician services, prescription drugs, and dental, specialty, and hospital care. In nine of ten studies cited in the Congressionally-mandated evaluation of CHIP, rates of unmet need were reduced by 50% or more. Evidence from some states indicates that increased access was accompanied by reduced emergency department use.^{20  21  22  23} 
• A study of the impact of CHIP in New York showed that pre-existing racial/ethnic disparities in access, unmet need, and continuity of care among children were virtually eliminated during the year following their enrollment in CHIP.²⁴ 
• Federal data show high performance in Medicaid and CHIP with respect to access to primary care. Across 43 states reporting in FY 2012, the median percentage of Medicaid/CHIP children with a visit to a primary care provider was 97%. Much smaller shares of children received all recommended well-child care and immunizations, however.²⁵  Notably, the data from FY 2011, which include comparative results for Medicaid/CHIP and privately insured children, show fairly comparable rates between the two groups on five of eight primary and preventive care measures, despite pronounced differences between the two groups’ demographic and socio-economic profiles.²⁶ 
• An analysis prepared for the Medicaid and CHIP Payment and Access Commission (MACPAC) likewise found that rates of access to and use of primary and preventive care among children with Medicaid/CHIP are comparable to the rates for privately insured children. About 95% of both groups have a usual source of care, although Medicaid/CHIP children are less likely than privately insured children to have a usual source with after-hours access. The vast majority of children in both insurance groups are usually or always able to get care that is needed right away and routine appointments, but somewhat fewer are usually or always able see a specialist when needed. When health and socio-demographic differences between Medicaid/CHIP and privately insured children are controlled, Medicaid/CHIP children are more likely to receive a well-child check-up.²⁷ 

Children with Medicaid and CHIP have much better access to specialist and dental care than uninsured children, but some research finds gaps in their access compared with privately insured children.

• Research on access to specialist care among children with Medicaid/CHIP has produced mixed findings.
  • The analysis for MACPAC just mentioned also shows that differences between Medicaid/CHIP and privately insured children in the receipt of specialist visits disappear when health and socio-demographic differences between the two groups are controlled.²⁸  Other research also shows that publicly insured children with needs for specialty care fare as well as privately insured children.²⁹ 
  • At the same time, evidence from “secret shopper” studies indicates that children with Medicaid/CHIP are much more likely than privately insured children to be denied appointments with specialists, and that they face longer waits when they do get appointments.^{30  31} 
  • A national survey of physicians conducted by the Government Accountability Office (GAO) indicates that physicians participating in Medicaid and CHIP are three times more likely to have difficulty referring Medicaid/CHIP children for specialty care, compared with privately insured children (84% vs 26%). For all children, physicians most often cited difficulty with referrals for mental health, dermatology, and neurology.³² 
• Children covered by Medicaid/CHIP have much higher rates of access to and use of dental care than uninsured children. Still, low rates of dentist participation in Medicaid/CHIP and low utilization of dental care among Medicaid/CHIP children are serious and persistent problems; notably, dental care rates among low-income privately insured children are comparably low.^{33  34  35} 
  • In 2011, the median rate of receipt of any preventive dental service among Medicaid/CHIP children was 44% across the 50 states and DC, and the median rate for receipt of at least one dental treatment service was 24%.³⁶  Dental care is the most frequently cited unmet need due to cost for all children. About 5% of Medicaid/CHIP children report an unmet dental need due to cost, compared to about 3% for children with ESI and 29% for uninsured children.³⁷ 
  • An analysis of 2009 data showed that per-user out-of-pocket dental costs were much higher for children with private dental coverage than for children with Medicaid/CHIP ($327 versus $53).³⁸ 
  • All state CHIP programs now report on the HHS core measure for preventive dental services, and CMS launched an Oral Health Initiative in 2010, setting goals for improvement and offering states technical assistance.

Medicaid and CHIP promote access to care for children with chronic and special health care needs.

• Access to care for children with special health care needs who are enrolled in CHIP is comparable to access for low-income children who are privately insured.³⁹ 
• Asthma, one of the most prevalent chronic conditions in children, has disproportionately adverse impacts on low-income and minority children. A before-after study of children with asthma who were newly enrolled in New York’s CHIP program found improvements in their access to asthma care and the quality of their asthma care. Asthma attacks and asthma-related emergency department visits and hospitalizations among the children fell markedly and three-quarters of parents reported that their child’s asthma was better or much better after one year in CHIP.⁴⁰  An Alabama study found similar effects, as well as cost savings, for children with asthma who were continuously enrolled in CHIP for three years.⁴¹ 
• Another New York study looking at the impact of CHIP enrollment on children with a broader set of physical and behavioral health conditions found improvements in access to care, continuity of care, and use of prescription drugs, as well as reduced unmet health care needs.⁴² 

Medicaid/CHIP children visit the emergency department more than other children, which may be due, in part, to barriers to access to timely primary care, such as lack of available after-hours care.

• Children with Medicaid/CHIP are more likely than both uninsured and privately insured children to make emergency department (ED) visits even when health and socio-demographic differences between the groups are controlled. In 2008, 28% of Medicaid/CHIP children had at least one ED visit, compared to 15% of uninsured children and 18% of children with private coverage, and Medicaid/CHIP children were also significantly more likely to have had multiple ED visits. Preliminary analysis suggested that barriers to access to primary care might have contributed to the higher ED use.⁴³ 

Most physicians who serve children participate in Medicaid and CHIP, but dentist participation in Medicaid/CHIP is low.

• The results from a GAO survey of physicians who serve children show that more than 80% of primary care physicians and about 70% of specialists participate in and provide care to children covered by Medicaid and CHIP. These physicians are generally more willing to accept new privately insured children than new publicly insured children, but they appear not to schedule appointments preferentially, as wait times for new appointments are generally the same for both groups of children. A large majority of physicians not participating in Medicaid and CHIP cite payment and billing issues, bureaucratic barriers, and referral difficulties as reasons.⁴⁴ 
• A 2010 GAO report on children’s oral health indicates that dentist participation in Medicaid and CHIP is low and that many dentists who do participate may limit the number of Medicaid or CHIP patients they will treat.⁴⁵ 

impact on children’s outcomes

Evidence about the impact of Medicaid and CHIP expansions on health status is mixed – some studies show a positive impact and some show no impact.

• One synthesis of the evidence on Medicaid and CHIP reviewed 12 studies that examined impacts on any of four outcome measures: perceived health status, restricted activity days, avoidable hospitalization, and child mortality.⁴⁶  Only one study of four showed an effect on perceived health status, and neither of two studies showed an effect on restricted activity days for children. However, of five studies looking at the impact of Medicaid or CHIP expansion on avoidable hospitalization and/or child mortality, all but one found a reduction in avoidable hospitalizations, and two of two showed a positive impact on child mortality. To illustrate:
  • A California study found reductions in hospitalizations for ambulatory care-sensitive conditions among children following CHIP implementation, suggesting that primary care access and quality for low-income children improved.⁴⁷  However, another study found no significant decline in avoidable hospitalization nationally during the early period of the Medicaid expansions,⁴⁸  and a third study (also of Medicaid expansion) found reduced avoidable hospitalizations only for children age 2 to 6.⁴⁹ 
  • A national study found that a 10 percentage point increase in Medicaid/CHIP eligibility (e.g., from 30% of children in a state in a particular age group to 40%) resulted in a roughly 3% decline in child mortality.⁵⁰ 
• An evaluation of Oregon’s Healthy Kids program found a significant increase in the share of parents who who reported that their child was in good general health and in stable health after 12 months of coverage in the program, compared to the before-enrollment baseline. There were no significant changes in these measures for children covered less than 12 months, suggesting the possibility that effects of coverage on health take more time to manifest. Nor was there significant change in health for uninsured children. The share of parents reporting that their child’s health was interfering with school or social activities did not change for any of the three groups.⁵¹ 

There is evidence that Medicaid and CHIP confer benefits beyond improved health for children.

• A state assessment of California’s CHIP program followed newly enrolled children who were in the poorest health over a two-year period and examined physical and psycho-social aspects of their health, including social, emotional, and school functioning. The parents of these children reported significant, sustained gains in their children’s ability to pay attention in class and keep up in school activities.⁵²  An evaluation of Kansas’ CHIP program found that children missed fewer days of school due to illness or injury after they were enrolled in the program for one year.⁵³ 
• A new study suggests that Medicaid expansions for young and school-age children in the 1980s and 1990s resulted in improvements in their long-run educational attainment. By extension, similar effects might be expected from CHIP.⁵⁴ 
  • A 10 percentage point increase in Medicaid eligibility for children reduced the high-school drop-out rate by about 5%, increased college enrollment by 1.1% to 1.5%, and increased the four-year college completion rate by 3% to 3.5%.
  • Showing that Medicaid eligibility during childhood translated into better health among teens, the researchers suggested that this effect is an important mechanism by which coverage affects children’s educational attainment.

parents’ views

Most low-income parents have positive impressions of Medicaid and CHIP.

• More than 8 in 10 low-income parents who do not currently have a child enrolled in Medicaid or CHIP say they would be interested in enrolling their child in the program if their child needed coverage.⁵⁵ 
• More than 90% of low-income parents with children enrolled in Medicaid or CHIP are somewhat (27%) or very (66%) satisfied with the coverage. The parents of Medicaid/CHIP-enrolled children are more likely than low-income parents of children with job-based coverage to say they are very satisfied with the quality of care, the range of covered services, and affordability.⁵⁶ 
• Parents of children enrolled in Medicaid and CHIP report that they are thankful for the programs, and that they have peace of mind knowing their children are covered.⁵⁷ 

Conclusion

CHIP has been an effective program, providing comprehensive coverage and financial protection to millions of American children and increasing their access to and use of recommended care. It has also helped to reduce disparities in health coverage and care that affect low-income children and children of color. These improvements in access and care appear to lay the foundation for gains in school performance and educational attainment, which, in turn, hold promise for children’s long-term health and economic well-being, and for economic productivity at the societal level. The evidence is strong that improving coverage through CHIP and Medicaid has contributed to meaningful gains in access to care and the quality of care for low-income children. Further, studies that find an impact of CHIP and Medicaid on children’s health show a positive impact, suggesting that the programs advance the end goal of coverage, better health.

1. https://modern.kff.org/other/state-indicator/annual-chip-enrollment/ ↩︎
2. Laura Snyder et al., Medicaid Enrollment Snapshot: December 2013, and Vernon Smith, Laura Snyder, and Robin Rudowitz, CHIP Enrollment Snapshot: December 2013 (Kaiser Commission on Medicaid and the Uninsured, Kaiser Family Foundation, June 2014), https://modern.kff.org/medicaid/issue-brief/medicaid-enrollment-snapshot-december-2013/ and https://modern.kff.org/medicaid/issue-brief/chip-enrollment-snapshot-december-2013/ ↩︎
3. Robin Rudowitz, Samantha Artiga, and Rachel Arguello, Children’s Health Coverage: Medicaid, CHIP and the ACA (Kaiser Commission on Medicaid and the Uninsured, Kaiser Family Foundation, March 2014), https://modern.kff.org/health-reform/issue-brief/childrens-health-coverage-medicaid-chip-and-the-aca/ ↩︎
4. Margo Rosenbach et al., National Evaluation of the State Children’s Health Insurance Program: A Decade of Expanding Coverage and Improving Access – Final Report (Mathematica Policy Research, Inc., for Centers for Medicare and Medicaid Services, September 2007), http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Reports/downloads/rosenbach9-19-07.pdf  ↩︎
5. Rudowitz et al., op.cit. and “Children’s Health Insurance Program (CHIP): Accomplishments, Challenges, and Policy Recommendations,” Pediatrics 133(3), January 2014, http://pediatrics.aappublications.org/content/133/3/e784.full.pdf+html?sid=a7870594-5581-44a9-a69a-fc79e724e8e0 ↩︎
6. Genevieve M. Kenney, Nathaniel Anderson, and Victoria Lynch, Medicaid/CHIP Participation Rates among Children: An Update (Urban Institute, September 2013), http://www.urban.org/research/publication/medicaidchip-participation-rates-among-children-update ↩︎
7. Rosenbach et al., op.cit. ↩︎
8. See Rudowitz et al., op.cit. (KCMU/Urban Institute analysis of 2013 ASEC Supplement to the CPS) ↩︎
9. Amy Davidoff, Alshadye Yemane, and Ian Hill, “Public Insurance Eligibility and Enrollment for Special Health Care Needs Children,” Health Care Financing Review 26(1), Fall 2004, https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/HealthCareFinancingReview/downloads/04fallpg119.pdf ↩︎
10. Benefits and Cost Sharing in Separate CHIP Programs (Georgetown University Institute for Health Policy, Center for Children and Families, May 2014), http://ccf.georgetown.edu/ccf-resources/benefits-and-cost-sharing-in-separate-chip-programs/ ↩︎
11. Julia Paradise, Children and Oral Health: Assessing Needs, Coverage, and Access (Kaiser Commission on Medicaid and the Uninsured, Kaiser Family Foundation, June 2012), https://modern.kff.org/disparities-policy/issue-brief/children-and-oral-health-assessing-needs-coverage/ ↩︎
12. Federal law now requires parity between mental and physical health benefits in CHIP programs that cover any mental health services. ↩︎
13. Leighton Ku and Matthew Broaddus, “Public and Private Health Insurance: Stacking up the Costs,” Health Affairs 27(4), 2008, http://content.healthaffairs.org/content/27/4/w318.full.pdf+html?sid=5e816db3-7247-4774-88b8-cfffbc7fb814 ↩︎
14. Children’s Health Insurance: Information on Coverage of Services, Costs to Consumers, and Access to Care in CHIP and Other Sources of Insurance (Government Accountability Office, November 2013), http://www.gao.gov/products/gao-14-40 ↩︎
15. Tricia Brooks, Martha Heberlein, and Joseph Fu, Dismantling CHIP in Arizona: How Losing KidsCare Impacts a Child’s Health Care Costs, (Center for Children and Families, Georgetown University Health Policy Institute, May 2014), http://ccf.georgetown.edu/ccf-resources/dismantling-chip-in-arizona-how-losing-kidscare-impacts-a-childs-health-care-costs/ ↩︎
16. Lisa Dubay and Genevieve Kenney, “Health Care Access and Use among Low-Income Children: Who Fares Best?” Health Affairs 20(1), January 2001, http://content.healthaffairs.org/content/20/1/112.full ↩︎
17. Embry Howell and Genevieve Kenney, “The Impact of the Medicaid/CHIP Expansions on Children: A Synthesis of the Evidence,” Medical Care Research and Review 69(4), August 2012, http://www.ncbi.nlm.nih.gov/pubmed/22451618 ↩︎
18. Thomas Selden and Julie Hudson, “Access to Care and Utilization among Children: Estimating the Effects of Public and Private Coverage,” Medical Care 44(5), May 2006, http://www.jstor.org/discover/10.2307/3768354?uid=3739584&uid=2&uid=4&uid=3739256&sid=21104273043357 ↩︎
19. Genevieve Kenney and Christine Coyer, National Findings on Access to Health Care and Service Use for Children Enrolled in Medicaid or CHIP  (MACPAC Contractor Report No. 1, March 2012), http://www.urban.org/research/publication/national-findings-access-health-care-and-service-use-children-enrolled-medicaid ↩︎
20. Howell and Kenney, op. cit. ↩︎
21. “CHIP Accomplishments, Challenges, and Policy Recommendations,” op.cit. ↩︎
22. Rosenbach et al., op. cit. ↩︎
23. Andrew Dick et al., “SCHIP’s Impact in Three States: How Do the Most Vulnerable Children Fare?” Health Affairs 23(5) Sept-Oct 2004, http://content.healthaffairs.org/content/23/5/63.full ↩︎
24. Laura Shone et al., “Reduction in Racial and Ethnic Disparities After Enrollment in the State Children’s Health Insurance Program,” Pediatrics 115(6), June 2005, http://pediatrics.aappublications.org/content/115/6/e697.long ↩︎
25. 2013 Annual Report on the Quality of Care for Children in Medicaid and CHIP (U.S. Department of Health and Human Services, September 2013), http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Quality-of-Care/Downloads/2013-Ann-Sec-Rept.pdf ↩︎
26. 2012 Annual Report on the Quality of Care for Children in Medicaid and CHIP (U.S. Department of Health and Human Services, December 2012), http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Quality-of-Care/Downloads/2012-Ann-Sec-Rept-ES.pdf ↩︎
27. Kenney and Coyer, op. cit. ↩︎
28. Ibid. ↩︎
29. Asheley Cockrell Skinner and Michelle Mayer, “Effects of Insurance Status on Children’s Access to Specialty Care: A Systematic Review of the Evidence,” BMC Health Services Research (7), 2007, http://www.biomedcentral.com/1472-6963/7/194%20?iframe=true&width=100%&height=100% ↩︎
30. Joanna Bisgaier and Karin Rhodes, “Auditing Access to Specialty Care for Children with Public Insurance,” New England Journal of Medicine 364(24), June 6, 2011, http://www.nejm.org/doi/full/10.1056/NEJMsa1013285 ↩︎
31. Joanna Bisgaier et al., “Disparities in Child Access to Emergency Care for Acute Oral Injury,” Pediatrics 127(6), June 2011, http://www.ncbi.nlm.nih.gov/pubmed/21606154 ↩︎
32. MEDICAID AND CHIP: Most Physicians Serve Covered Children but Have Difficulty Referring Them for Specialty Care (Government Accountability Office, June 2011), http://www.gao.gov/products/GAO-11-624 ↩︎
33. Hua Wang, Edward Norton, and R. Gary Rozier, “Effects of the State Children’s Health Insurance Program on Access to Dental Care and Use of Dental Services,” Health Services Research 42 (4), August 2007, http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1955282/ ↩︎
34. Paradise, op. cit. ↩︎
35. 2012 and 2013 Annual Report on Quality of Care for Children, op. cit. ↩︎
36. 2013 Annual Report on Quality, op. cit. ↩︎
37. Kenney and Coyer, op. cit. ↩︎
38. Paradise, op.cit. ↩︎
39. Hao Yu et al., “Role of SCHIP in Serving Children with Special Health Care Needs,” Health Care Financing Review 28(2), Winter 2006-2007, http://www.cms.gov/Research-Statistics-Data-and-Systems/Research/HealthCareFinancingReview/downloads/06-07Winpg53.pdf ↩︎
40. Szilagyi P et al., “Improved Asthma Care After Enrollment in the State Children’s Health Insurance Program in New York,” Pediatrics 117(2), February 2006, http://pediatrics.aappublications.org/content/117/2/486.long ↩︎
41. N. Menachemi et al., “The Impact of CHIP Coverage on Children with Asthma in Alabama,” Clinical Pediatrics 51(3), March 2012, http://www.ncbi.nlm.nih.gov/pubmed/21890839 ↩︎
42. Peter Szilagyi et al., “Improved Health Care Among Children with Special Health Care Needs After Enrollment in the State Children’s Health Insurance Program,” Ambulatory Pediatrics 7(1), January-February 2007, http://www.ncbi.nlm.nih.gov/pubmed/17261477 ↩︎
43. Kenney and Coyer, op.cit. ↩︎
44. Most Physicians Serve Covered Children, op. cit. ↩︎
45. ORAL HEALTH: Efforts Under Way to Improve Children’s Access to Dental Services, but Sustained Attention Needed to Address Ongoing Concerns (Government Accountability Office, November 2010), http://www.gao.gov/assets/320/312818.pdf ↩︎
46. Howell and Kenney, op.cit. ↩︎
47. D. Bermudez and L. Baker, “The Relationship between SCHIP Enrollment and Hospitalizations for Ambulatory Care Sensitive Conditions in California, Journal of Health Care for the Poor and Underserved 16(1), 2005, http://www.ncbi.nlm.nih.gov/pubmed/15741712 ↩︎
48. Leemore Dafny and Jonathan Gruber, “Public Insurance and Child Hospitalizations: Access and Efficiency Effects,” Journal of Public Economics 89, 2005, http://economics.mit.edu/files/6435 ↩︎
49. Robert Kaestner, Theodore Joyce, and Andrew Racine, “Medicaid Eligibility and the Incidence of Ambulatory Care Sensitive Hospitalizations for Children,” Social Science & Medicine 52, 2001, http://www.ncbi.nlm.nih.gov/pubmed/11144786 ↩︎
50. Embry Howell et al., “Declining Child Mortality and Continuing Racial Disparities in the Era of the Medicaid and SCHIP Insurance Coverage Expansions,” American Journal of Public Health 100(12), December 2010, http://ajph.aphapublications.org/doi/abs/10.2105/AJPH.2009.184622 ↩︎
51. Bill Wright and Heidi Allen, Healthy Kids Evaluation Study: Results from the 12-Month Follow-Up Survey (Office for Oregon Health Policy and Research, Oregon Health Authority, September 2012), http://www.oregon.gov/oha/OHPR/RSCH/docs/Uninsured/HealthyKids_EnrolleeStudy_Followup_Report.pdf ↩︎
52. The Healthy Families Program Health Status Assessment (PedsQLTM) – Final Report (California Managed Risk Medical Insurance Board, September 2004), http://www.mrmib.ca.gov/mrmib/HFP/PedsQL3.pdf ↩︎
53. Leighton Ku, Mark Lin, and Matt Broaddus, Chartbook: Improving Children’s Health – The Roles of Medicaid and SCHIP (Center on Budget and Policy Priorities, January 2007), http://www.cbpp.org/cms/index.cfm?fa=view&id=1296 ↩︎
54. Sarah Cohodes et al., The Effect of Child Health Insurance Access on Schooling: Evidence from Public Insurance Expansions (National Bureau of Economic Research, May 2014), http://www.nber.org/papers/w20178 ↩︎
55. Informing CHIP and Medicaid Outreach and Education – Topline Report: Key Findings from a National Survey of Low-Income Parents, (Centers for Medicare and Medicaid Services, November 2011), http://www.insurekidsnow.gov/professionals/chip-medicaid-survey-topline.pdf ↩︎
56. Parents’ View of CHIP and Medicaid: Snapshot of Findings from a Survey of Low-Income Parents, presentation by Michael Perry, Lake Research Partners, National Children’s Health Summit, November 2011, http://www.insurekidsnow.gov/professionals/events/2011_conference/2nd_national_children_s_health_insurance_summit_ opening_plenary_michael_perry.pdf.pdf ↩︎
57. Michael Perry and Julia Paradise, Enrolling Children in Medicaid and SCHIP: Insights from Focus Groups with Low-Income Parents (Kaiser Commission on Medicaid and the Uninsured, Kaiser Family Foundation, May 2007), https://modern.kff.org/wp-content/uploads/2013/01/7640.pdf ↩︎