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Lessons from variations in state Medicaid expenditures


  • Jane Sneddon Little


Because Medicaid is absorbing a large and growing share of government spending in every state, policymakers are under intense pressure to control the cost of this budget-breaking program. In search of clues concerning Medicaid cost containment, this article examines state data on per-recipient Medicaid spending by type of service. This effort suggests focusing on nursing homes, because per-recipient payments to these institutions are highly variable across states. Indeed, the article concludes that a key explanation for cross-state differences in per-recipient Medicaid expenses is the reimbursement rate for the nursing homes. ; The article then explores why nursing home reimbursement rates differ widely across states, when personal health care costs show more limited variation. It suggests that the industry’s costs may come to reflect the states’ reimbursement rates in an interactive cycle. The article recommends that regulators reexamine their nursing home reimbursement policies from the ground up. Finally, the article tries to draw lessons for the rest of the U.S. health care system. In particular, it suggests that the Medicaid dollar has lost its ability to serve as a standard of value; the U.S. health care dollar is in danger of following suit.

Suggested Citation

  • Jane Sneddon Little, 1992. "Lessons from variations in state Medicaid expenditures," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 43-66.
  • Handle: RePEc:fip:fedbne:y:1992:i:jan:p:43-66

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    References listed on IDEAS

    1. Rice, Dorothy P, 1989. "Health and Long-term Care for the Aged," American Economic Review, American Economic Association, vol. 79(2), pages 343-348, May.
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    Cited by:

    1. David M. Cutler & Louise Sheiner, 1994. "Policy Options for Long-Term Care," NBER Chapters,in: Studies in the Economics of Aging, pages 395-442 National Bureau of Economic Research, Inc.

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    Insurance; Health ; State finance ; Medical care; Cost of;


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