Medicare Post-Acute Care Savings from Medicaid-Paid Long-Term Services and Supports

Medicare pays for post-acute care, including Medicare skilled nursing facility, inpatient rehabilitation, other inpatient, and home health services after a hospital stay. These post-acute care expenditures are the fastest-growing component of Medicare spending. Medicaid pays for Long-Term Services and Supports (LTSS), including in-home, residential, nursing home services. These services may reduce Medicare post-acute costs through two channels. First, long-term services and supports may substitute for Medicare post-acute care. Second, the need for post-acute care may be reduced due to beneficial health effects of long-term services and supports. We find that, after controlling for other factors, for each $1,000 dollars spent on Medicaid-paid LTSS in the year after an acute hospital stay, Medicare expenditures are reduced by: $208 for elders and $254 for adults receiving in-home personal care services, and $246 for elders and $126 for adults receiving community residential services (e.g., services in an adult family home or assisted living facility). Our findings suggest that LTSS services funded through WA Care Fund benefits are likely to generate substantial savings for Medicare.