The Changing Medical and Long-Term Care Expenditures of People Who Transition from Institutional Care to Home- and Community-Based Services

The Money Follows the Person (MFP) demonstration grant program helps long-term residents of institutions move back to the community. This report aims to answer several questions about the expenditures (medical care and long-term services and supports [LTSS] expenditures) of people who transition from institutional care to community-based LTSS. We first determine the extent to which total expenditures change after someone transitions to community living. Next, we decompose the change in expenditures by assessing how the mix of expenditures for LTSS changes after the transition and how medical care expenditures change. The study also determines whether the MFP demonstration can be associated with any of the changes in expenditures observed. To do this, MFP participants are compared to similar Medicaid beneficiaries who experienced the same transition but did not participate in the MFP program.

An initial analysis of expenditures finds evidence that total Medicaid and Medicare expenditures decline, sometimes substantially, during the first 12 months after someone transitions from institutional care to home and community-based services (HCBS). The post-transition total expenditures of MFP participants are similar to or greater than those of a matched sample of others who transition without the benefit of MFP. For people with physical disabilities or mental illness, MFP participation is associated with increased post-transition total expenditures, but there is no association between MFP participation and post-transition total expenditures for older adults or people with intellectual disabilities. For everyone who transitions, expenditures for LTSS shift from institutional care to HCBS as expected. After the transition, MFP participants have greater average HCBS expenditures compared to other transitioners with similar characteristics, which reflects the additional services MFP programs provide. However, MFP participants typically have lower post-transition Medicaid and Medicare medical care expenditures. Thus, MFP participants’ higher HCBS expenditures are partially offset by the higher medical expenditures other transitioners experience. This evidence suggests that MFP programs may be effective at helping many participants avoid acute care episodes that could lead to a return to institutional care.