Is Being Home Good for Your Health? Outcomes of Medicaid Home‐ and Community‐Based Long‐Term Care Relative to Nursing Home Care

Research ObjectiveExpanding home‐ and community‐based services (HCBS) as an alternative to nursing home care has become a priority for many state Medicaid programs. Whereas low‐income people with long‐term care needs used to have little choice but to move to a nursing home if they needed extensive assistance funded by Medicaid, now more than half of all Medicaid long‐term care funding goes to HCBS, with substantial variation by state and county. This shift in policy was motivated by widespread consumer preferences to avoid institutionalization and the hope that HCBS would save Medicaid money relative to nursing home care.However, these dramatic policy changes are being made on the basis of surprisingly little evidence about the outcomes of HCBS. HCBS inevitably involves a lower intensity of care than nursing home care and shifts some of the burden of care to untrained caregivers. Recent descriptive evidence shows higher hospitalization rates among HCBS users than nursing home residents, but descriptive correlations may suffer from selection bias. Our study provides the first plausibly causal national estimates of health outcomes for recipients of Medicaid HCBS relative to nursing home care and explores possible mechanisms for the effect.Study DesignWe use 2005 and 2012 Medicaid Analytic Extract (MAX) data set, a national compilation of Medicaid claims, in a longitudinal instrumental variables framework. We combine the MAX data with Medicare claims to identify hospital admissions, our main outcome variable, and with state and county data on the percent of individuals receiving HCBS versus nursing home care. To address the endogeneity of HCBS receipt, we instrument for it using the county percentage of nonelderly long‐term care users who receive HCBS. The percentage of nonelderly users is highly predictive of HCBS use for an elderly beneficiary, but because the instrument was derived from a separate population, the exclusion restriction is unlikely to be violated.Population StudiedOlder adults (65+) dually enrolled in Medicaid and Medicare. We also examine heterogeneity of the effects by race/ethnicity and the presence of dementia.Principal FindingsHCBS users have 13 percentage‐point higher annual rates of hospitalization than their nursing home counterparts when selection bias is addressed, with an even larger difference among those with dementia. These differences exist within as well as across counties, ruling out differences in state policy or county‐lev