The effects of Medicaid policy changes on adults' service use patterns in Kentucky and Idaho

In 2006, Idaho and Kentucky became two of the first states to implement changes to their Medicaid programs under authority granted by the 2005 Deficit Reduction Act (DRA). The DRA granted new flexibility in the design of state Medicaid programs, including a state plan amendment (SPA) option for changes that previously would have required a waiver. This paper uses state Medicaid administrative data to analyze the impact of Medicaid policy changes implemented in these states through a series of SPAs in 2006 and 2007.

Changes in utilization are examined for multiple services, including physician, dental, and ER visits, inpatient stays, and prescriptions, among non-elderly adult Medicaid recipients following changes in cost sharing, reimbursement, service delivery, and covered services. Where possible, enrollees not affected by the changes served as a comparison group.

While relatively few adults in Idaho received a wellness exam after such coverage was added, the adoption of managed care for dental services was associated with increased receipt of dental care, including preventive care. The new limits on brand name prescriptions in Kentucky were associated with a reduction in the proportion of enrollees with two or more monthly name brand prescriptions while the small copayments introduced did not appear to have a dramatic impact.

We find that changes in financial incentives on both the supply-side (such as reimbursement increases) and the demand-side (i.e., benefit changes) alone may not be enough to generate the desired levels of preventive care, especially among those with chronic health conditions.