Using a Semi-Markov Model to Estimate Medicaid Cost Savings due to Minnesota's Return to Community Initiative

To provide an estimate and level of uncertainty for Medicaid cost savings due to Minnesota's Return to Community Initiative (RTCI).

Medicaid cost savings are estimated using a semi-Markov model and simulation approach.

RTCI is a statewide program that assists private paying nursing home residents with discharge to the community. When originally proposed, it was expected that the program would reduce state Medicaid expenditures, primarily through the shifting of residents from nursing homes to a less costly community setting. In prior analysis, we estimated that approximately 1 in 9 residents targeted for transition by the program would not have returned to the community without the RTCI. Accurate cost savings estimates require consideration of complex resident care trajectories, that is, nursing home readmissions, use of assisted living and community-based services, and mortality.

Data were from 30,234 private pay nursing home residents admitted during 2011, primarily for post-acute stays, to 378 facilities in Minnesota, and followed for 4 years postadmission for outcomes and time to event. Resident characteristics were taken from the Minimum Data Set (MDS) admission assessment. We modeled variability in care trajectories with a semi-Markov formulation. Transition probabilities were estimated using Multinomial regression. Time to event was modeled using the best-fitting, positive, right-skewed distribution for each path. The simulation was run (1000 times) with and without the RTCI impact to estimate change in Medicaid days in various settings.

Program savings was estimated at $4.1 million per year of effort over a 4-year accumulation period.

The RTCI produced a modest Medicaid cost savings in excess of the annual program budget of $3.5 million. Findings from the semi-Markov model and simulation increase our understanding of care transitions between nursing home, community, Medicaid status, and mortality.