Nearly one in six nursing home residents in the United States, who were admitted under Medicare or private pay, ended up enrolling in Medicaid during their stay after depleting their financial assets.
This is according to a new study published in JAMA Network Open. The findings, based on a national sample of nearly 200,000 traditional Medicare beneficiaries, underscore the financial burden long-term care places on older adults and their families and highlight growing concerns about the sustainability of Medicaid funding.
“This finding raises concerns both about individuals impoverishing themselves because of the high cost of care and the long-term financial sustainability of the Medicaid program,” the study authors wrote.
Who’s spending down – and how fast
The cohort study tracked 191,416 individuals who entered nursing homes for the first time in 2018 and were covered by traditional Medicare. The study followed residents for up to five years, concluding in 2022, using records from the Minimum Data Set, the Master Summary Beneficiary and the Medicare Provider Analysis and Review.
Key results suggest that 33.9% of residents were already Medicaid-enrolled at admission or just after SNF coverage ended.
Meanwhile, about two-thirds of residents entered without Medicaid, and 16.4% of them spent down their assets and enrolled during their stay, typically after about 6 months. Spend-down was more common with longer stays and among Black, Hispanic, Native American, and younger residents.
Moreover, the average time to spend-down was 6.1 months.
Importantly, the likelihood of spend-down increased with length of stay. After four years in a nursing home, 61.8% of residents who began as private-pay had transitioned to Medicaid.
Researchers excluded patients whose stays were entirely covered by Medicare’s skilled nursing facility (SNF) benefit during the first 100 days, focusing instead on residents who stayed longer-term or never qualified for SNF coverage.
A strain on families and Medicaid
The study adds updated evidence to a long-standing issue in long-term care financing: the reality that many families must exhaust personal savings to qualify for Medicaid, which is the primary payor for nursing home care in the United States.
According to the study, the annual cost of long-term services and supports (LTSS) can range from $24,700 to $288,288 – beyond the reported median income and savings of older adults ($36,000) and could easily drain most seniors’ savings accounts.
Medicaid eligibility depends primarily on a person’s financial status. This means that people must “spend down” their assets to meet their state’s minimum Medicaid requirements. Spousal impoverishment rules protect a spouse who does not need a nursing home level of care and chooses to remain in the community from having to give up all assets.
Medicaid spend down in the community setting has long been the preferred method for seniors and their families, however, the rise of private pay assisted living and other community options over the past 30 years has had dramatic implications for the spend down rate, the authors noted.
“Individuals who once spent their savings on nursing home care now may deplete their assets in the assisted living sector and then transition to a nursing home at or near Medicaid eligibility,” the study reads.
The study did not examine whether families are shielding assets from the spend down process. The authors did reference prior research showing such wealth transfers are rare and small.
Racial and age disparities in spend-down
The study also uncovered significant disparities by race, age, and marital status, depending on length of stay. Black residents were between 10 and 17 percentage points more likely to spend down than White residents; Hispanic and Native American residents were between 8 and 15 percentage points more likely to spend down than White residents.
And, those who entered a nursing home over age 65 were between 4 and 47 percentage points less likely to spend down compared to those under 65.
Moreover, women, and people who were widowed, separated, or divorced, were 3 to 14 percentage points more likely to deplete their resources during their stay.
“These differences likely reflect preexisting racial and ethnic disparities in wealth,” the authors wrote in the study.
The authors acknowledge several limitations of their research, including the data being restricted to traditional Medicare beneficiaries, and not those in Medicare Advantage. The study also did not capture private long-term care insurance coverage or pre-admission financial activity.
The study noted that the COVID-19 pandemic drew attention to LTSS policy and financing, but there has been little research into the spend down rate over the last 20 years. The study’s authors called for more research to foster a better understanding of the spend-down practices and for policymakers to consider new options that would alleviate the financial burden for families and nursing home residents. The authors also called for policies that would maintain the financial stability of Medicaid.
The study was led by Gabriella Aboulafia, Amanda Chen and David Grabowski.
