Health care spending
Elias Tsapelas

The United States’ population is getting older, and that’s a troubling sign for Missouri’s Medicaid program. Next year’s Medicaid budget is expected to be the largest ever for the state—consuming nearly 40% of all government spending—and the elderly population makes up a significant portion of the expected costs. As life expectancy has increased over the past few decades, so too has the cost of care for elderly individuals. But what does that mean for Missouri, a state already struggling with growing Medicaid costs?

Every day, 10,000 baby boomers in the United States (individuals born between 1944 and 1964) reach retirement age, and a new study estimates that 75% of them will need nursing home care at some point. The majority of Missourians reaching retirement age do not currently qualify for Medicaid, but with nursing home costs in Missouri averaging more than $5,000 per month, the longer individuals reside in such facilities, the more likely they are to become eligible for Medicaid. In fact, Medicaid pays the highest share of nursing facility costs in the country, totaling 65% of all expenditures at Missouri’s nursing facilities in 2016.

So what should Missouri do to prepare? For starters, policymakers should reform the state’s Medicaid program. Medicaid is an enormously expensive program with very little evidence showing it actually improves health outcomes for participants. One way to provide better services at a lower cost would be to change the payment model for various services to ensure it is incentivizing desired outcomes. Reforming the way Missouri pays for long-term care would be a good place to start.

Missouri’s nursing home reimbursement rates are per diems based on each facility’s historic costs, which includes construction expenses, and are not adjusted according to the level of care each resident needs. Rather than base payments off the quality or quantity of care delivered, the size of the per diem nursing homes receive is simply based on the number of patients they have. This discourages nursing homes from moving patients out of their facilities and into more appropriate and less restrictive environments. As a result, Missouri spends a lot of money on nursing home patients who could receive the care they need in a different environment and at a lower cost to taxpayers.

Missouri’s seniors should have access to the best possible care, in the most appropriate setting, and, for those who need government assistance, at the best possible price for the state’s taxpayers. Though there is no magic bullet that could fix Missouri’s Medicaid program, increasing the value received from each provided service would be a welcomed change.


About the Author

Elias - Web
Elias Tsapelas
Senior Analyst

Elias Tsapelas earned his Master of Arts in Economics from the University of Missouri in 2016. His research interests include economic development, health policy, and budget-related issues.