Wednesday, April 2, 2025
4/2/2025
Aligning incentives across Medicaid and Medicare for nursing home residents with AD/ADRD - Project Summary Over one million people live in U.S. nursing homes, two-thirds of whom have Alzheimer’s disease and related dementias (AD/ADRD) and one-quarter of whom are dually eligible for Medicaid and Medicare. Dual-eligible residents with AD/ADRD often receive low-quality nursing home care at high costs, due in part to the conflicting financial incentives created by Medicaid and Medicare. Nursing homes rely on generous Medicare payments for short skilled nursing home stays. At the same time, nursing homes care predominantly for Medicaid-funded long-stay residents, stays for which Medicaid payment often does not cover the costs. This creates conflicting incentives for nursing homes and fragmented care for dual-eligible residents. This includes high rates of potentially avoidable hospitalizations as nursing homes shift the high costs of caring for a sicker resident to a Medicare-paid hospitalization. It also causes nursing home residents to cycle between the nursing home and hospital, increasing the use of Medicare-covered skilled nursing home stays on return to the nursing home, which may be unnecessary and costly to Medicare. One potential solution to these conflicting incentives is for states to increase Medicaid per-diem rates, which would decrease the Medicaid-Medicare payment differential. This would better align incentives for nursing homes to provide higher-acuity care for residents rather than transferring them to the hospital. It would also eliminate the incentive to provide Medicare-funded skilled care due only to the higher profitability of these stays, rather than the potential clinical benefit to residents. Another potential solution is to use globally capitated payments for nursing home stays, which hold nursing homes financially accountable for spending. A prominent example of this is Medicare-established institutional special needs plans (I-SNPs) for dual-eligible nursing home residents. I-SNPs are specialized Medicare Advantage plans that bear risk for all Medicare-covered spending for nursing home residents and as a result, may incentivize nursing homes to invest in capabilities to better manage high-acuity residents in the nursing home rather than in the hospital, allowing nursing homes to higher-intensity skilled care without a preceding hospitalization. Despite the promise of these approaches and urgent need to decrease fragmentation, little is known about how to reform nursing home payment to accomplish this. This is particularly important for individuals with AD/ADRD given their large numbers in nursing homes, high likelihood of being dually enrolled in Medicare and Medicaid, the high costs of care, and poor outcomes from unnecessary and burdensome transitions of care. Our overall objective is to examine ways to align the historically misaligned incentives created by the Medicare and Medicaid programs in nursing homes and, in doing so, substantively improve care for residents with AD/ADRD. These results will provide critical and rigorous evidence on how to integrate Medicaid- and Medicare-funded care for dual-eligible nursing home residents with AD/ADRD and improve outcomes. These results will inform current policy debates and future directions of ongoing integration efforts.
HHS’ Tracking Accountability in Government Grants System (TAGGS) website provides access to detailed descriptions of grants, loans, aggregated direct payments and other types of financial assistance awarded by the HHS Operating Divisions (OPDIVs) and the Office of the Secretary Staff Divisions (STAFFDIVs).