Effect of PACE on Costs, Nursing Home Admissions, and Mortality: 2006-2011. NOTES


  1. Medicare-only beneficiaries can enroll in PACE and pay the Medicaid capitation out of pocket. Also, Medicaid-only beneficiaries can be permitted by states to enroll in PACE, but the states would then have to pay a higher capitation rate for them (MedPAC 2012). With about 90 percent of all PACE enrollees being dually eligible (Mathematica Policy Research analysis for MACPAC 2012), the occurrence of Medicare-only or Medicaid-only beneficiaries enrolling in PACE is relatively rare. The analysis in this paper, therefore, is restricted to PACE enrollees who are dually eligible.

  2. PACE plans have the flexibility to allocate the combined pool of Medicare and Medicaid capitation payments across all health care services.In contrast, for dual eligible Special Needs Plans (SNPs), Medicare and Medicaid capitation payments cover separate services as specified in the governing contract with Medicare and Medicaid respectively. So, the Medicare and Medicaid capitation payments form separate funding pools and cover separate services for SNPs, while for PACE the capitation payments go into a single pool to cover any health care service.

  3. Without the benefit of primary data collection, we are unable to confirm if the groups are comparable with respect to their functional and cognitive status or degree of informal support. Had information on certain beneficiary characteristics been available, especially those that are likely to be key determinants of enrolling in PACE or HCBS waiver services as well as of NH entry (e.g., functional and cognitive status prior to enrollment), we could have used a richer set of variables for matching the treatment and comparison group members at baseline.

  4. At least two other studies have examined the effect of PACE on expenditures, but neither study established baseline equivalence between the treatment group (PACE) and the comparison group (individuals who expressed interest in PACE and had a home visit but did not enroll). White (1998) found that PACE enrollees had lower Medicare expenditures; White, Abel, and Kider (2000) reported that PACE enrollees had lower Medicare expenditures, higher Medicaid expenditures, and higher total expenditures. Apart from methodological limitations, the findings from both these studies are somewhat outdated. In a more recent study looking at South Carolina only, Wieland et al. (2012) found Medicaid expenditures to be lower for PACE enrollees than their comparison group counterparts consisting of both waiver enrollees and NH entrants. However, this study suffers from significant limitations including lack of baseline equivalence, limited one-year followup of costs, and data from a single state.

  5. The Medicare managed care program changed its name from Medicare+ Choice to Medicare Advantage in 2008.

  6. The Medicare Payment Advisory Commission reports that Medicare capitation payments for PACE enrollees exceed FFS payments for comparable Medicare beneficiaries by 17 percent, on average (MedPAC 2012). While the Affordable Care Act revised the county benchmarks for the Medicare Advantage payment system, PACE providers are still paid on the pre-Affordable Care Act benchmarks, which are on average 17 percent higher than FFS in the counties where PACE providers operate. Although the inclusion of dementia in the risk adjustment model for PACE enrollees and the use of a frailty adjuster could improve the accuracy of these calculations, additional analyses by MedPAC revealed that the risk adjustment model together with the frailty adjustor leads to an over-prediction of costs for certain PACE enrollees by more than 17 percent and for some others by less than 17 percent. As such, 17 percent was a reasonable estimate by which aggregate Medicare spending on PACE enrollees could likely exceed spending on comparable FFS beneficiaries.

  7. As explained in greater detail below, our outcome measures for use of nursing facility services are based on the Minimum Dataset (MDS) Timeline File, and could include some nursing facility stays that begin with the use of SNF services versus starting with a long-term NH stay itself. Note that PACE enrollees are in managed care, and therefore, do not have Medicare and Medicaid claims, that is, their use of nursing facility services is not observed in Medicare or Medicaid claims data.

  8. We kept waiver enrollees and NH entrants in our study sample as long as they were enrolled in FFS Medicaid and Medicare. Those enrolled in a medical or comprehensive managed care plan, or in a long-term care managed care plan, or in PACE, were excluded from followup.

  9. However, we also use a separate matched comparison group composed of HCBS waiver enrollees alone in order to examine all outcomes--expenditures, mortality, and especially NH utilization.

  10. For NH entrants we required the duration of the first stay to be at least 21 days to reduce the possibility of including entrants to skilled nursing facilities (SNFs) as opposed to long-term NH entrants in the study sample. Since Medicare covers the first 20 days of a SNF stay without requiring any copayment, beneficiaries are likely to transition out of SNF around that 20-day mark, switching in some cases to a long-term NH stay. Although this strategy is not perfect, and beneficiaries could switch from SNF to long-term NH even after the first 20 days, our strategy of requiring the first stay to be at least 21 days tries to minimize the possibility of the NH entrant sample being primarily composed of beneficiaries who started out as SNF entrants.

  11. The value of "M" or MDS on the daily flag in the Timeline file denotes NH residence on a particular day. This value is assigned based on records of detailed assessment in the Long-Term Care Minimum Data Set (LTC-MDS). The LTC-MDS contains comprehensive assessment information for all residents (regardless of payer) of long-term care facilities that are certified to participate in Medicare or Medicaid. In contrast, the Timeline file only provides information on whether a Medicare beneficiary was in a NH, or in other acute or post-acute care facilities (hospital, SNF, home health), or in the community on each day of a calendar year, based on records of service from the LTC-MDS, the Home Health Outcomes and Assessment Information Set, and from Medicare FFS claims. The Timeline file is a simplified version of the Residential History File (created by Vince Mor and others at Brown University).

  12. We calculated the sample attrition rate for surviving PACE enrollees by using information on enrollees who were alive but had missing Medicare capitation payments for PACE. Attrition (other than deaths) from the comparison sample occurred when sample members enrolled in managed care plans (resulting in loss of claims data needed for the study). Based on these calculations, about 15 percent of PACE enrollees had disenrolled by the end of three years of followup, and about 9 percent of matched comparison group members had enrolled in managed care by three years after sample entry, and were therefore, lost to followup.

  13. For instance, sample members entering by December 2007 will have a minimum of 48 months of followup, with mortality data available through 2011.

  14. Note that despite the restriction noted earlier to PACE sites with at least 250 enrollees, a few of the states included here have fewer sample members than that. This situation arises due to sample exclusions for factors such as being in FFS Medicare in the year prior to PACE enrollment, being age 66 or older at entry, and being enrolled in Medicaid within a month of entering PACE.

  15. Although neither of these variables was used in the propensity score matching model, we did run a sensitivity test using the second variable, where we excluded PACE and HCBS waiver enrollees with NH use in the prior 90 days, as well as PACE enrollees with prior HCBS use. The results from this sensitivity test are reported in Section III.B.1.

  16. Medicare expenditures are expected to be high in the first six months for the NH entrants in the matched comparison group, since many of them would be entering a NH using the Medicare SNF benefit and possibly remain on that benefit for the first 20 days of their NH stay.

  17. We do not present results for the 11th interval (months 61-66) after enrollment due to the small sample sizes in both the treatment and matched comparison groups, which make the mortality estimates unreliable for this interval.

  18. We do not present results for the seventh interval (months 37-42) after enrollment due to the small sample sizes in both the treatment and matched comparison groups, which make the estimates unreliable for that interval.

  19. Medicare capitation payments under PACE were significantly lower than predicted expenditures in the first six months after sample entry, when we used the matched comparison group comprised of both NH entrants and HCBS enrollees. This was due to the expected high Medicare expenditures in the first six months for the NH entrants in the matched comparison group many of whom would have entered a NH using the Medicare SNF benefit and possibly remained on that benefit for the first 20 days of their NH stay. These large and significant negative differences in Medicare expenditures during the first six months were no longer observed when we used the matched comparison group comprised of HCBS waiver enrollees alone.

  20. The higher-than-predicted Medicare payments for PACE in New York could be a consequence of the state linking NH payment rates to the industry's success in maximizing Medicare payments for nursing facility use, which was once common in states such as New York and Massachusetts (Wiener and Stevenson 1998). Under this strategy, for instance, NH and home care providers in New York were required to increase Medicare revenues by one percent (in aggregate) over base expenditures in 1995 and 1996 or face cuts in Medicaid payment. If this practice continued during the time period used to set Medicare capitation payment rates for 2006-2011, but did not persist during the 2006-2011followup period, the capitation rates for PACE enrollees in New York would be relatively high compared to projected FFS spending.

  21. Even with the matched comparison group of HCBS waiver enrollees alone, the results for New York differ from those for California and Massachusetts. Specifically, the Medicaid spending gap for New York ranges from significantly positive in the first year to significantly negative in later followup periods, while remaining positive and significant for both California and Massachusetts. Also, unlike the other two states, actual Medicare payments were significantly higher-than-predicted expenditures in New York in several intervals, using the HCBS-only comparison group.

  22. As mentioned above, about 15 percent of PACE enrollees had disenrolled by the end of three years of followup, and about 9 percent of matched comparison group members had enrolled in managed care by three years after sample entry, and were therefore, lost to followup.

  23. The denominator for the t-statistic is not symmetrical in n, because the variance of Ē is known, while the variance of y caret/overbar is yet to be determined.

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