State Variation in the Characteristics of Medicare-Medicaid Dual Enrollees: Implications for Risk Adjustment

Background: In its risk adjustment methods for Medicare payment programs, the Centers for Medicare and Medicaid Services (CMS) uses dual enrollment in Medicare and Medicaid to proxy for the social and clinical vulnerability of Medicare patients. Because Medicaid is a joint federal-state program, states have substantial discretion to set their own eligibility and enrollment rules in Medicaid. State variation in these rules may contribute to between-state differences in the characteristics of dually enrolled populations, which in turn may make existing risk adjustment methods less reliable.

Objective: To examine between-state differences in the socioeconomic and health characteristics of Medicare beneficiaries dually enrolled in Medicaid, focusing on characteristics that are typically not observable to or used by policy makers for risk adjustment.

Study design: Retrospective analyses of survey-reported measures of health and socioeconomic status (SES) among low-income Medicare beneficiaries (income ≤100% of the Federal Poverty Level [FPL]) and low-income dual Medicare-Medicaid enrollees in the 2010-2013 Medicare Current Beneficiary Survey (MCBS). We assessed population differences in individual health and SES measures and in indices of these measures, which we scaled to represent standard deviation differences in beneficiaries’ health and SES. We used hierarchical linear regression models with state random effects to estimate the between-state variation in the characteristics of low-income and dually enrolled beneficiaries, and linear regression models to compare the characteristics of dual enrollees in states with different Medicaid policies (categorizing states by aged, blind, disabled income eligibility limits for Medicaid and the availability and characteristics of Medically Needy programs, which offer a “spend-down” pathway to Medicaid eligibility). We adjusted these regression models for demographic and clinical risk factors observable in administrative Medicare data and typically used by CMS for risk adjustment.

Results: Between states, the burden of functional limitations and presence of hearing impairments and low education among low-income Medicare beneficiaries varied by 21.1%, 32.2%, and 11.4% of the national average, respectively. Among beneficiaries enrolled in Medicaid, the between-state standard deviation in functional limitations, hearing impairments, and low education was 19.0%, 26.9%, and 7.2% of the national mean. Dual enrollees in states providing Medicaid to higher-income individuals were in better health and had higher incomes on average (approximately $490 in annual income for a married couple in 2018). The average income of dual enrollees was also higher in states offering Medically Needy programs with relatively generous eligibility criteria.

Conclusions: We found substantial between-state differences in the characteristics of dual enrollees, reflecting differences in the characteristics of states’ low-income Medicare populations and variation in state policies that affect which Medicare beneficiaries can receive Medicaid. Payment models whose risk adjustment methods use dual enrollment in Medicare and Medicaid to proxy for poor socioeconomic and health status should account for this state-level heterogeneity to allow more reliable comparisons of risk-adjusted performance between states.