The Role of Medicare's Inpatient Cost-Sharing in Medicaid Entry

To isolate the effect of greater inpatient cost-sharing on Medicaid entry among Medicare beneficiaries.

Medicare administrative data (years 2007-2010) were linked to nursing home assessments and area-level socioeconomic indicators.

Medicare beneficiaries who are readmitted to a hospital must pay an additional deductible ($1,100 in 2010) if their readmission occurs more than 59 days following discharge. In a regression discontinuity analysis, we take advantage of this Medicare benefit feature to test whether beneficiaries with greater cost-sharing have higher rates of Medicaid enrollment.

We identified 221,248 Medicare beneficiaries with an initial hospital stay and a readmission 53-59 days later (no deductible) or 60-66 days later (charged a deductible).

Among beneficiaries in low-socioeconomic areas with two hospitalizations, those readmitted 60-66 days after discharge were 21 percent more likely to join Medicaid compared with those readmitted 53-59 days following their initial hospitalization (absolute difference in adjusted risk of Medicaid entry: 3.7 percent vs. 3.1 percent, p = .01).

Increasing Medicare cost-sharing requirements may promote Medicaid enrollment among low-income beneficiaries. Potential savings from an increased cost-sharing in the Medicare program may be offset by increased Medicaid participation.