Medicaid Lesser-of Rules and Disparities in Skilled Nursing Facility Quality

Importance Individuals dually eligible for Medicare and Medicaid have historically faced barriers to accessing high-quality skilled nursing facilities (SNFs) for postacute care. One factor potentially contributing to this disparity is that dually eligible individuals yield lower margins than Medicare-only beneficiaries due to the widespread adoption of lesser-of rules by state Medicaid programs; these rules allow states to provide little to no reimbursement for Medicare coinsurance among these patients. Objective To examine the association of lesser-of rules with disparities in access to high-quality SNFs between dually eligible and Medicare-only beneficiaries. Design, Setting, and Participants This cross-sectional study included discharges from a hospital to an SNF financed by traditional Medicare in the US from January 1, 2018, to December 31, 2022. Discharges of individuals already residing in an SNF before hospitalization were excluded. Data were analyzed between July 1 and December 22, 2025. Exposure States’ lesser-of vs full coinsurance payment policy for dually eligible individuals. Main Outcomes and Measures Primary outcomes were admitting SNF dependence level on Medicaid long-term care reimbursement, a proxy for facility resources, and admitting SNF 5-star rating. Adjusted mean differences between dually eligible and non–dually eligible patients were calculated and compared across lesser-of and full-payment states via regressions of each outcome on the interaction between patient dual eligibility and state lesser-of status. Results The sample included 5 126 814 SNF discharges (mean [SD] patient age, 79.7 [10.6] years; 60% female). In lesser-of states, SNFs that admitted dually eligible individuals demonstrated higher Medicaid dependence compared with facilities admitting Medicare-only beneficiaries (β [SE], 8.51 [0.03] percentage points [pp]; P < .001), a metric that was 43% smaller in full-payment states (β [SE], −3.63 [0.07] pp; P < .001). For dually eligible individuals in lesser-of states, admittance to high-quality SNFs was lower compared with Medicare-only beneficiaries (β [SE], 9.42 [0.07] pp; P < .001), a metric lower by 54% in full-payment states (β [SE], −5.04 [0.16] pp; P < .001). Conclusions and Relevance This cross-sectional study found that disparities in access to higher-quality SNFs between dually eligible and Medicare-only beneficiaries were larger when states used lesser-of rules for determining Medicare coinsurance reimbursements. Our findings underscore the need for policies that address states’ Medicare spending without shifting costs to health care organizations serving the vulnerable dually eligible population.