Chapter 6: Special Topic: Utilization and Expenditures by Detailed Type of Service Medicaid Analytic Extract (MAX) Chartbook

6. Special Topic: Utilization and Expenditures by Detailed Type of Service

States cover a range of medical services in Medicaid. As discussed in Chapter 1, these include both mandatory services that state Medicaid programs are required to cover under federal law as well as optional services that vary significantly across states. Detailed analysis of Medicaid FFS service use and expenditures by type of service is possible using the MAX data system.²⁹ In this chapter, we summarize Medicaid service utilization and costs in 2002 by detailed type of service for all full-benefit FFS enrollees and for the subgroup of FFS duals.

In prior chapters, Medicaid services were categorized into inpatient care, institutional long-term care, prescription drugs, and other services generally following the four types of claim files available in MAX. These data can be used to identify services in much more detail using provider codes, service codes, and other fields available in claims records. Additionally, MAX claims contain a type-of-service (TOS) code for the 30 service categories shown in Table 6.1. Information about utilization and FFS expenditures incurred during the year for each of the 30 services is included for each enrollee in the MAX person summary file. In this chapter, we provide an overview of utilization and expenditures by these detailed type of service categories, focusing on services grouped within the long-term care and other services categories. (Inpatient and prescription drugs form their own service categories and were presented in chapters 2 and 3.)

Table 6.1

Type-of-Service (TOS) Codes in MAX 2002, by File Type

Type of Service	File Type	TOS Code
Inpatient hospital	IP	01
Mental hospital services for the aged	LT	02
Inpatient psychiatric facility services for individuals under age 21	LT	04
Intermediate care facility services for the mentally retarded (ICF/MR)	LT	05
Nursing facility services	LT	07
Prescription drugs	RX	16
Physician services	OT	08
Dental care	OT	09
Other practitioner services	OT	10
Outpatient hospital	OT	11
Clinic	OT	12
Home health	OT	13
Lab and X-ray	OT	15
Other services*	OT	19
Sterilizations*	OT	24
Abortions*	OT	25
Transportation	OT	26
Personal care services	OT	30
Targeted case management	OT	31
Rehabilitation	OT	33
Physical therapy, occupational therapy, speech, or hearing services	OT	34
Hospice benefits	OT	35
Nurse midwife services	OT	36
Nurse practitioner services	OT	37
Private duty nursing	OT	38

*Claims of this service type may also appear in file types other than OT.

IP = inpatient file; LT = institutional long-term care file; OT = other file; RX = prescription drug file.

It is important to note that type of service information presented in this chartbook reflects full-benefit FFS enrollees and their FFS utilization only. As discussed in Chapter 2, FFS enrollees exclude two important groups: enrollees receiving only restricted Medicaid benefits in 2002 and people ever enrolled in HMOs/HIOs in 2002. FFS expenditures exclude any capitated payments for PHP and PCCM plans in which FFS enrollees may be enrolled.

Figure 6.1 shows that the expenditures presented in this chapter reflect 75 percent ($156 billion) of all expenditures among full-benefit enrollees and almost all expenditures for FFS enrollees (the $3 billion in capitation payments for PHP and PCCM enrollment among FFS enrollees is excluded).

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Because there is significant variation across states in managed care enrollment, the statistics presented in this chapter represent a differential share of total expenditures in each state. In appendix tables for this chapter (tables A6.1 through A6.16), we identify states in which over 50 and 75 percent of the Medicaid population is enrolled in comprehensive managed care (HMO or HIO). Please refer to Chapters 3 and 4 for additional managed care enrollment detail by type of plan by state.

Observed differences in utilization and expenditures between states may also be due to differences in the structure of states' Medicaid programs and reimbursement rates, demographic composition, enrollment in PHPs, or other utilization or cost-driving factors. Such differences must be taken into account when interpreting the national and state-level utilization and expenditure measures presented in this and other chapters of the chartbook.

Most Expensive and Most Utilized Services Among Medicaid FFS Enrollees

Nationally, FFS expenditures for FFS enrollees cost over $156 billion in 2002. The top ten most costly services (of the 30 service types) accounted for more than 80 percent of these expenditures. Nursing facility services contributed most ($37.5 billion) to this population's FFS costs in 2002, followed by prescription drugs ($26.5 billion), inpatient hospital use ($21.4 billion), and ICFs/MR ($10.1 billion) (Figure 6.2).

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High cost services may reflect frequently used services, high-cost services, or both. Prescription drugs and physician services—among the five most costly services for Medicaid—were used by a majority of FFS enrollees (66.0 and 59.0 percent, respectively) (Figure 6.3). On the other hand, two other expensive services—nursing facilities and ICF/MRs—were used by only a small percentage (5.1 and 0.4 percent, respectively) of Medicaid FFS enrollees.

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The subset of FFS enrollees who were dually enrolled in Medicare and Medicaid incurred a total of $81.6 billion in FFS Medicaid expenditures and accounted for more than half of the FFS expenditures of all FFS enrollees. Over $33 billion was spent on nursing facility services for duals (Figure 6.4), accounting for 89 percent of all FFS nursing home expenditures in 2002. Other high cost services for duals included prescription drugs ($15.0 billion) and ICFs/MR ($6.2 billion).

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Because duals are comprised of aged and disabled enrollees, they were more likely than other enrollees to use most Medicaid services. Twenty-one percent of FFS duals used nursing facility services in 2002 (Figure 6.5), compared with only 5.1 percent among all FFS enrollees. Only a handful of services—typically those covered by Medicare for duals, such as inpatient and outpatient psychiatric, clinic, dental, and lab and X-ray—were used more often by non-duals than duals in 2002 (see appendix tables A6.1 through A6.16).

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Composition of FFS Expenditures

To examine the composition of FFS expenditures, we aggregate the 30 service types into six larger classes. Three of the classes generally correspond to three types of claims files:

• Institutional long-term care (ILTC): all long-term care services in the LT claims files, including psychiatric services for individuals under age 21 and services provided in nursing facilities, intermediate care facilities for the mentally retarded, and mental hospitals for the aged. Institutional long-term care may include an array of bundled services such as physical therapy and oxygen.

• Inpatient hospital: inpatient hospital services; may include some bundled services such as lab tests or prescription drugs filled during a stay.

• Prescription drugs: all Medicaid prescriptions filled, except those bundled with inpatient, nursing home, or other services.

We classify all other services into three classes:

• Community long-term care: residential care, home health, personal care services, adult day care, and hospice care.³⁰

• Physician and other ambulatory services: physician, outpatient hospital, clinic, dental, other practitioners, physical therapy or occupational therapy (PT/OT), rehabilitation, and psychiatric services.

• Lab, X-ray, supplies, and other wraparound services: lab and X-ray, durable medical equipment (DME), transportation, targeted case management, and other services.

Of these six service classes, institutional long-term care contributed the most to FFS Medicaid expenditures among all FFS enrollees (31.4 percent) and among FFS enrollees who were dually enrolled in both Medicare and Medicaid at some point during 2002 (48.8 percent) (Figure 6.6).

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Institutional long-term care expenditures were substantially greater than community-based long-term care expenditures. Among all FFS enrollees, community long-term care services accounted for 10.4 percent ($16.3 billion) of FFS costs, compared with 31.4 percent ($49.1 billion) for institutional long-term care. However, unlike nursing facility services, most community long-term care services are covered at state option.³¹

Among the subgroup of FFS duals, almost 49 percent of FFS expenditures ($39.8 billion) were for institutional long-term care, compared with 13.3 percent ($10.9 billion) for community-based services. Because Medicare covers many acute care services for duals, it is expected that long-term care and other non-acute care costs would account for a larger portion of expenditures than inpatient care among FFS duals.

Of importance, long-term care service costs for duals were large in both percentage and absolute value. FFS duals' use of institutional and community long-term care accounted for more than 77.6 percent of all FFS long-term care costs incurred by Medicaid FFS enrollees.

The combined totals for institutional and community-based long-term care services accounted for 41.8 percent of all FFS enrollee costs and 62.2 percent of such costs among the subgroup of duals. Because the combined long-term care services represented a substantial portion of Medicaid FFS expenditures for this population, they are explored in more detail below.

Prescription drugs, inpatient hospital, and outpatient services were also large cost drivers among Medicaid FFS enrollees in 2002. Because Medicare is first payer for outpatient and inpatient hospital services, these services made up a smaller percentage of overall expenditure among dual FFS enrollees.

Below, we present long-term care utilization and expenditure information by type of service for all FFS enrollees and only supplementary information for FFS duals. See Chapter 5 and appendix tables A6.9 through A6.12 for more detail about FFS long-term care utilization and costs among FFS duals.

Institutional and Community Long-Term Care Services by Type of Service

Nursing facilities were the biggest driver of long-term care costs and accounted for 57.4 percent ($37.5 of $65.4 billion dollars) of all FFS long-term care expenditures for FFS enrollees in 2002 (Figure 6.7). Among duals, nursing facility services accounted for 65.7 percent ($33.3 of $50.7 billion dollars) of FFS long-term care expenditures (data not shown). Other services that represented a high percentage of long-term care costs for all FFS enrollees were ICFs/MR (15.4 percent), residential care (9.9 percent), and personal care services (5.7 percent).

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Long-term care services were used by only a small percentage of Medicaid FFS enrollees. Nursing facility services were the most utilized long-term care service (5.1 percent), followed by home health (2.4 percent), residential care (1.7 percent), and personal care (1.4 percent) (Figure 6.8). Among FFS duals, utilization of long-term care services was more common: 21.0 percent used nursing facilities; the percentages using personal care, residential care, and home health were 4.8, 4.7 and 4.7, respectively (data not shown).

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ICF/MR was by far the highest cost service per user; average Medicaid expenditures were $93,967 per enrollee who received services in an ICF/MR in 2002 (Figure 6.9). Other services with high annual per-user costs included nursing facility services ($26,002), inpatient psychiatric care for those under age 21 ($21,518), and mental hospitals for the aged ($17,086).

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Among states with any ICF/MR utilization, average expenditures per user varied greatly, ranging from $29,537 in Hawaii to $238,553 in New York (Figure 6.10). States with higher expenditures for ICFs/MR tended to have less frequent use of the service among enrollees. Four of the top five states in per-user ICF/MR costs had a lower than average percent of enrollees using ICFs/MR, whereas all of the bottom five states had above-average utilization of this service.

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Because FFS duals make up a majority of long-term care users, the composition of their long-term care costs and per-user expenditures was similar to those of all FFS enrollees.

Physician and Other Ambulatory Services

Physician and other ambulatory services accounted for 15.8 percent of FFS expenditures among FFS enrollees and were the third most costly category of service after long-term care and prescription drugs.³²

Physician services were both the largest contributor to physician and other ambulatory service expenditures ($6.6 billion) and the most utilized such service by Medicaid FFS enrollees (59 percent) (figures 6.11 and 6.12). Other key cost drivers were psychiatric services ($5.2 billion), outpatient hospital services ($5.2 billion), clinic services ($3.3 billion), and rehabilitation services ($1.8 billion).

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In comparison to other ambulatory services, costs per user were highest for rehabilitation services. Rehabilitation services were used by only 2.1 percent of Medicaid FFS enrollees but represented 7.4 percent of their physician and other ambulatory service expenditures. Figure 6.13 shows that expenditures for rehabilitation services were $3,089 per user in 2002, compared to $1,594 and $725 for psychiatric and PT/OT services, respectively.

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Additional summary information about FFS ambulatory and professional service use and expenditures in 2002 can be found in appendix tables A6.5 and A6.6 for all FFS enrollees and in tables A6.13 and A6.14 for FFS duals.

The results presented in this chapter and associated appendix tables represent only a small sample of the types of possible analyses that could be conducted with the MAX type-of-service data. MAX data can be used to investigate program cost-drivers in greater depth. They can also be used to examine how changing patterns of utilization and expenditures are influenced by changing population demographics, state policies, and/or Medicaid coverage rules.

Notes:

²⁹ MAX contains extensive Medicaid FFS utilization and payment information and monthly premium but limited utilization information from Medicaid managed care plans. See Chapter 1 for more detail about the availability of managed care information in MAX.

³⁰ Some community long-term care services may be not be included in the community long-term care service class: psychiatric residential care may be classified with psychiatric services under physician and other professional services; community long-term care provided under 1915(c) or 1915(d) waivers may be unclassified and grouped with "other services"; and transportation, targeted case management, and durable medical equipment—sometimes used for long-term care—are not included.

³¹ Because some community long-term care services are excluded from the community long-term care class, estimated expenditure measures may significantly understate total Medicaid community long-term care costs.

³² Claims for physician services include separately billed physician services provided in inpatient settings.

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