The impact of Medicare copayments for skilled nursing facilities on length of stay, outcomes, and costs

OBJECTIVE: To investigate the impact of Medicare's skilled nursing facility (SNF) copayment policy, with a large increase in the daily copayment rate on the 20th day of a benefit period, on length of stay, patient outcomes, and costs. DATA SOURCES AND STUDY SETTING: Retrospective cohort study from 2012 to 2016 using Medicare claims and SNF assessment data, including SNF admissions for Medicare fee‐for‐service beneficiaries. STUDY DESIGN: We first estimate how changes in Medicare's SNF copayment on the 21st day of a patient's benefit period affect length of SNF stay. We then use benefit day on admission as an instrumental variable to estimate the impact of SNF length of stay related to the copayment policy on readmission and Medicare payment. PRINCIPAL FINDINGS: From 2012 to 2016, we examined 291 134 SNF admissions. Higher benefit day on SNF admission was strongly associated with shorter SNF stays. A 1‐day shorter SNF stay was associated with higher readmission rate within 30 days of hospital discharge (1.5 percentage points; 95% CI 1.4‐1.6, P < .001) and within 30 days of SNF discharge (0.9 percentage points; 95% CI 0.8‐1.0), lower total Medicare payment for the 90‐day episode after hospital discharge ($396; 95% CI 361‐431, P < .001), but $179 higher payment for the 90 days after SNF discharge (95% CI 149‐210, P < .001), offsetting the lower payment for the shorter index SNF stay. CONCLUSIONS: Medicare's SNF copayment policy is associated with shorter lengths of stay and worse patient outcomes, suggesting the copayment policy has unintended and negative effects on patient outcomes.