Rebalancing Medicaid Long Term Services and Supports: an Effective Health Policy Program?

In the United-States (US), a majority of states dedicate most of their Medicaid long-
term services and supports (LTSS) expenditures to institutional care spending, while a 
growing cohort of frail elders dramatically need home and community-based services 
(HCBS). Since the 1990’s, a key aspect of the US policy for disabled elders has been to shift 
state Medicaid expenditures from institutional care towards HCBS. In 2010, the ObamaCare 
enhanced that rebalancing effort with the Balancing Incentive Program (BIP), providing 
Federal-matching contributions to selected states that increase their investment in HCBS. 
Despite its growing importance, less is known about the impact of that rebalancing trend on 
elderly Medicaid beneficiaries’ care pathways. In this paper, we explore the impact of 
Medicaid expenditures rebalancing on their risks of nursing home admission. We find that if 
on average Medicaid beneficiaries have a higher risk of nursing home use, rebalancing 
efforts contribute to reduce that difference. Indeed, the differential of nursing home admission 
risks between Medicaid and non-Medicaid beneficiaries would decrease on average by 0.06% 
points per 10% increase in Medicaid LTSS expenditures rebalancing. This effect is 
extensively discussed by exploring four important questions: (1) Is the policy effective for all 
Medicaid beneficiaries? (2) What is the correct balance for Medicaid LTSS expenditures? (3) 
What is the potential impact of the BIP? (4) Would it be effective to define a Medicaid LTSS 
expenditures target? We conclude with three clear policy recommendations to further extend 
the US rebalancing program.