Moving from Medicaid to Medicare May Mean Better Care

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

The conventional wisdom on these major programs is that Medicaid, which pays less for physicians’ services, provides lower-quality medical care than Medicare. But research is scant on whether that’s the case and where the Medicaid coverage might fall short.

A new study focused on an older population with a high need for care found that total government spending on each Medicare patient is $2,100 more than the spending on each Medicaid patient – or an additional 13 percent.

Harvard University and World Bank researchers used federal data to track two groups of low-income individuals with disabilities over time, starting at age 63. The first are workers on Medicaid who automatically qualify for Medicare as their primary insurer at 65. The health insurance mix does not change for the second group. Prior to 63, they received Medicare and Medicaid as part of their federal disability benefits and that dual coverage continues when they hit 65.

The increase in total spending for the patients who transition from Medicaid to Medicare grows to $3,550 when they are compared with people who have a specific type of Medicaid coverage: managed care plans, which control costs by limiting their networks of physicians.

A second analysis confirmed that Medicare’s higher costs are, in fact, being driven by the program’s higher reimbursement rates for physicians and not by the use of more medical services.

Although the quantity of medical care did not change, adding Medicare as the primary insurer at 65 translates to big differences in the types of care patients receive. For example, emergency room visits decline 40 percent after they move over to Medicare and physician office visits increase 10 percent, which “could be indicative of improved quality and health outcomes,” the researchers concluded.

One possible explanation for the increase in outpatient visits is that more primary care doctors accept Medicare than Medicaid. That may, in turn, be why the researchers found that each hospitalization of Medicare patients costs less, even though more in total is being spent on their overall care. The lower hospital costs indicate that lower-intensity care is required for Medicare patients, who have received more attention and preventive care from their primary care doctors.

Medicare’s higher spending on each patient “does appear to translate into improved access to care and potentially also quality,” the researchers conclude.

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

The research reported herein was performed pursuant to a grant from the U.S. Social Security Administration (SSA) funded as part of the Retirement and Disability Research Consortium. The opinions and conclusions expressed are solely those of the authors and do not represent the opinions or policy of SSA or any agency of the Federal Government. Neither the United States Government nor any agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of the contents of this report. Reference herein to any specific commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply endorsement, recommendation or favoring by the United States Government or any agency thereof.