Dual eligibiles—persons enrolled in both Medicare and Medicaid—are among the highest cost beneficiaries of publicly funded medical care. They are currently served through a fragmented delivery system in which health care providers have conflicting incentives and incomplete information, which may result in cost-shifting between payers and increased costs. This policy brief focuses on implications of care transitions between hospital and nursing facility settings, in the context of a nursing facility benefit currently fragmented between Medicare and Medicaid. We document the cost shifting from Medicaid to Medicare resulting from rehospitalization of dual eligible nursing facility residents, and the net increase in costs from these events. We also explore the feasibility of developing processes to identify dual eligibles who may be at high risk of hospital readmission, nursing facilities with persistently low hospital readmission rates who may exemplify best practices, and nursing facilities with persistently high hospital readmission rates that may be appropriate to engage in quality improvement efforts. We find that: 1) Medicare-paid nursing facility utilization has increased while Medicaid-paid nursing facility utilization has declined for dual eligibles in Washington State, 2) hospitalizations frequently restart Medicare payments for nursing facility stays, and 3) identifying dual beneficiaries at high risk of hospital readmission and nursing facilities with persistently low or high hospital readmission rates appears feasible.
