Nearly 1 in 6 nursing home residents in the United States were admitted on Medicare or private benefits, but end up enrolling in Medicaid during their stay after exhausting their financial assets.
That's according to a new study published in JAMA Network Open. The findings, based on a national sample of nearly 200,000 traditional Medicare beneficiaries, highlight the economic burden that long-term care places on older adults and their families and highlight growing concerns about the sustainability of Medicaid funding.
“This finding raises concerns about both the risk of high medical costs pushing individuals into poverty and the long-term financial sustainability of the Medicaid program,” the study authors wrote.
Who is reducing spending and at what pace?
The cohort study followed 191,416 people who entered a nursing home for the first time in 2018 and were covered by traditional Medicare. The study followed residents for up to five years, ending in 2022, using the Minimum Data Set, Master Summary Beneficiary, and Medicare Provider Analysis and Review Records.
Key results suggest that 33.9% of residents were already enrolled in Medicaid at the time of hospitalization or immediately after SNF coverage ended.
Meanwhile, about two-thirds of residents entered the country without Medicaid, and 16.4% of them exhausted their assets during their stay, typically enrolling after about six months. Overspending was more common among long-term residents, blacks, Hispanics, Native Americans, and younger residents.
Additionally, the average time it took to reduce spending was 6.1 months.
Importantly, the likelihood of decreased spending increased with length of stay. After four years in a nursing home, 61.8% of residents who started out on private pay transitioned to Medicaid.
The researchers excluded patients whose first 100 days of stay were fully covered by Medicare skilled nursing facility (SNF) benefits and instead focused on residents who stayed longer or were not eligible for SNF coverage.
Burdens on families and Medicaid
The study adds the latest evidence to a long-standing problem with long-term care funding: the reality that many families must deplete their personal savings to qualify for Medicaid, the main payer for nursing home care in the United States.
According to the study, annual costs for long-term services and supports (LTSS) can range from $24,700 to $288,288, exceeding the reported median income and savings for seniors ($36,000) and can easily deplete most seniors' savings accounts.
Eligibility for Medicaid is determined primarily by an individual's financial situation. This means people must “spend” their assets to meet their state's minimum Medicaid requirements. The spousal poverty rule protects spouses who do not require nursing home level care and choose to remain in the community from having to give up all their assets.
Reducing Medicaid spending in community settings has long been the preferred method for older adults and their families, but the authors noted that the rise of private paid living and other community options over the past 30 years has had a dramatic impact on the rate of spending reductions.
“People who once invested their savings in nursing home care may now deplete their assets in the assisted living sector and move into a nursing home with Medicaid or similar status,” the study said.
The study did not examine whether families were protecting their assets from the spending reduction process. The authors referenced previous research showing that such wealth transfers are rare and small-scale.
Racial and age disparities in spending cuts
The study also revealed significant disparities by race, age, and marital status, depending on length of stay. Black residents were 10 to 17 percentage points more likely to spend than white residents. Hispanic and Native American residents were 8 to 15 percentage points more likely to spend than white residents.
Additionally, those aged 65 and older who entered a nursing home were 4 to 47 percentage points more likely to spend less than those under 65.
Additionally, women and those who were widowed, separated, or divorced were 3 to 14 percentage points more likely to exhaust resources during their stay.
“These differences likely reflect pre-existing racial and ethnic disparities in wealth,” the authors write in their study.
The authors acknowledge some limitations to the study, including that the data was limited to traditional Medicare beneficiaries rather than Medicare Advantage beneficiaries. The study also did not capture private long-term care insurance coverage or economic activity prior to hospitalization.
The study notes that while the COVID-19 pandemic has focused attention on LTSS policy and funding, there has been little research on the rate of spending decline over the past 20 years. The study's authors called for further research to better understand spending-cutting practices and for policymakers to consider new options to ease the financial burden on families and nursing home residents. The authors also called for policies that maintain Medicaid's financial stability.
The study was led by Gabriela Aboulafia, Amanda Chen, and David Grabowski.
