STATE MEDICAID PROGRAM POLICY DECISIONS AND MEDICAL SERVICE EXPENDITURES FOR ELDERLY CASH GRANT ELIGIBLES: AN EMPIRICAL ANALYSIS (FINANCE, UTILIZATION)

Since its beginning in 1965, the jointly (federal and state) financed Medicaid program has realized continuous cost escalation. Just as the expenditure problem has come to be viewed with increasing alarm, so has concern over taxpayer and beneficiary (in)equity in Medicaid emerged as a major policy issue. Medicaid statutory benefit packages and provider payment levels vary widely across states and are reflective of the efforts of state Medicaid policy makers to address the related problems of cost containment and equity in the Medicaid program. This thesis explicates these two policy issues and utilizes correlation and multiple regression techniques to analyze a 1979 Medicaid expenditure data base. It attempts to determine the relative impact of underlying actuarial characteristics and policy decisions on across-state variation in Medicaid expenditures per elderly recipient of Supplemental Security Income.; The results of the empirical analysis show that, given the significant effects of actuarial determinants, the decisions of state Medicaid policy makers (as operationalized in the analysis) do, as a group, have an effect on Medicaid expenditures for elderly cash grant eligibles. The thesis also regresses four measures of service use (inpatient hospital care, nursing home care, physician visits, and miscellaneous services) on the set of actuarial and decision variables. In this way, the expenditure effect of each individual policy decision is tracked through its effect on utilization. As the literature suggests, policy decisions do not always affect expenditures in an intuitively obvious fashion. For example, the number of optional services offered to eligibles by a state Medicaid program is shown to be inversely related to expenditures per elderly cash grant eligible. The analysis also illustrates that small changes in model specification can yield substantially divergent results.; In a practical sense, the thesis results suggest that institution of a national, full benefit (and, therefore, equitable) Medicaid program would have a modest impact on expenditures for elderly eligibles. Also, the results show that states tend to choose between liberal benefit packages and liberal provider payment levels. This result suggests that future research is needed that examines the political determinants of state Medicaid policy decisions.