Moving from Medicaid to Medicare May Mean Better Care – Center for Retirement Research

Medicare accounts for more than 10 percent of government spending. Medicaid, which covers 90 million low-income workers and people with disabilities, has the largest enrollment of any government insurance program.

The conventional wisdom in these large programs is that Medicaid, which pays less for physician services, provides lower quality medical care than Medicare. But there is little research on whether that is the case and when Medicaid coverage may be shorter.

A new study focusing on elderly people with high care needs found that the government’s total cost per Medicare patient is $2,100 more than the cost per Medicaid patient — or 13 percent more.

Researchers from Harvard University and the World Bank used federal data to track two groups of low-income people with disabilities over time, starting at age 63. The first are Medicaid workers who automatically qualify for Medicare as their primary insurance at age 65. The mix of health insurance does not change in the second group. Before age 63, they receive Medicare and Medicaid as part of their federal disability benefits and dual coverage continues when they reach 65.

The increase in total costs for patients who switch from Medicaid to Medicare increases to $3,550 compared to people who have a specific type of Medicaid coverage: managed care plans, which control costs by reducing their physician networks.

A second analysis confirmed that the high cost of Medicare is, in fact, driven by the high level of reimbursement of the physician system and not by the use of additional medical services.

Although the amount of medical care has not changed, adding Medicare as the main insurance at 65 translates into a big difference in the types of care patients receive. For example, emergency room visits decreased 40 percent after moving to Medicare and physician office visits increased 10 percent, “which may indicate improved quality and health outcomes,” the researchers concluded.

One possible explanation for the increase in outpatient visits is that more primary care physicians accept Medicare rather than Medicaid. That may be why researchers found that hospitalizations for Medicare patients cost less, even though more of the total is spent on their general care. Lower hospital costs indicate that lower care is needed for Medicare patients, who have received more attention and preventive care from their primary care physicians.

Higher Medicare spending per patient “appears to translate into improved access to care and potentially quality,” the researchers concluded.

Reading this learn by Timothy Layton, Nicole Maestas, Daniel Prinz, Mark Shepard, and Boris Vabson, see “Medicaid vs Medicare: Evidence from the Medicaid to Medicare Transition at 65.”

The research reported here was conducted in accordance with a grant from the US Social Security Administration (SSA) funded as part of the Retirement and Disability Research Consortium. The views and conclusions expressed are solely those of the authors and do not necessarily represent the views or policy of SSA or any agency of the Federal Government. Neither the United States government nor any of its agencies, nor any of its employees, makes any warranty, express or implied, or assumes any legal responsibility or liability for the accuracy, completeness, or usefulness of the contents of this report. Reference herein to any particular commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not imply endorsement, recommendation or favor by the United States Government or any agency thereof.