Taking a Closer Look at Elderly Medicaid Recipients

The structure of the US healthcare system continues to change and grow with the implementation of the Affordable Care Act. However, two programs remain its pillars: Medicare and Medicaid. Medicaid is generally intended for low-income individuals or those with limited resources, while Medicare provides insurance to those 65 and older. A recent study by Margherita Borella, Mariacristina De Nardi, and Eric French finds that, in 2010, 6.3 million individuals over the age of 65 received Medicaid, with an average benefit of $11,620.

Medicaid costs are shared by the federal and state governments, and represent a large share of their respective budgets. In 2014, the total price tag reached $475 billion. States’ costs vary, but they contribute anywhere between 24 and 49 percent of the total cost. Medicaid is a last resort option for the elderly, available only after Medicare and any private insurance have paid their legal obligation. In contrast, almost all seniors are eligible for Medicare. While Medicaid is considered a “last resort” for covering the healthcare costs of the elderly, in 2009, the authors report that Medicaid spent $74 billion on beneficiaries over 65. Understanding how elderly individuals rely on Medicaid could be key to implementing changes that protect the fiscal longevity of both programs.

Using data from the University of Michigan’s longitudinal Health and Retirement Survey (HRS), Borella and her team analyzed data for individuals born before 1924 to decipher what portion of the population receives Medicaid in old age. The authors split their data several ways, looking at the permanent income, age, and coupling status for those in the sample. The authors included permanent income as a “summary measurement of lifetime income at retirement” because it does not change with age or demographics.

The authors find that there is a large discrepancy among single beneficiaries, based on income bracket. 30 percent of individuals over the age of 76 and in the lowest income bracket received Medicaid, while less than three percent of those in the highest income bracket received Medicaid. However, as the population sample studied ages, this discrepancy fades: Every additional year of life increases the probability of receiving Medicaid by 0.2 percentage points. This implies that even those in the top income bracket become Medicaid dependent should they live long enough. Relatedly, self-reported health corresponds with income. Of those aged 76 or older and in the lowest income bracket, 46 percent reported poor health compared to only 21 percent of those in the highest bracket, revealing that there may be some relationship between quality of health and income earlier in life.

One measure of assessing health quality is through collecting data on the activities of daily living (ADLs), such as bathing, eating, dressing, walking across a room, and getting out of bed. Researchers find that, after 75 years of age, the likelihood of having two or more ADL difficulties increases the probability of receiving Medicaid by 6.6 percent. Though not entirely surprising, the researchers complicate this finding by explaining that couples are less likely to be dependent on Medicaid, less likely to have the same ADL challenges, and less likely to have experienced a nursing home stay. This implies that, to some extent, couples can help each other through health challenges in ways that are impossible for widowed or single beneficiaries to do. Interestingly, individuals who began the study as couples but became single or widowed before the study’s culmination soon transitioned into mirroring the outcomes of those who had been single over the long term.

However, for many, nursing home stays are inevitable, and indeed nursing home payments accounted for 62 percent of Medicaid transfers in 2009. Given the high cost of nursing home payments, it may be advantageous for some states to explore preemptive health measures that delay ADL difficulties. Preemptive health measures could include more care management and better education about long-term, high-cost diseases like diabetes.

As people begin to live longer, it is likely that more individuals will become reliant on Medicaid, and the fraction of elderly Medicaid beneficiaries will continue to grow. Given the large portion of the budget consumed by Medicaid, it is in both federal and state governments’ interests to gain a greater understanding of the elderly Medicaid population and to address these growing costs.

Article Source: Borella, Margherita, Mariacristina De Nardi, and Eric French. “Rich, Poor, Singles, and Couples. Who Receives Medicaid in Old Age, and Why?” The National Bureau of Economic Research, No. 21873 (2016).

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