Scale Medicare per-enrollee spending to enrollees outside nursing homes

changelog.d/medicare-noninstitutional-spending.fixed.md

@@ -0,0 +1 @@
+Scale Medicare spending per enrollee to enrollees who do not live in nursing homes in medicare_gross_cost, medicare_cost, cbo_medicare_benefit and qmb_cost_sharing, since the survey data exclude nursing home residents.

policyengine_us/parameters/calibration/gov/hhs/medicare/noninstitutionalized_spending_ratio.yaml

@@ -0,0 +1,51 @@
+description: PolicyEngine multiplies Medicare spending per enrollee by this ratio of Medicare spending per enrollee who is not a long-stay nursing home resident to Medicare spending per enrollee, because the household survey data exclude people living in nursing homes.
+metadata:
+  unit: /1
+  period: year
+  label: Medicare noninstitutionalized spending ratio
+  reference:
+  # Medicare spending per enrollee (per_capita_cost) averages over every
+  # enrollee, including nursing home residents, whom the Current Population
+  # Survey does not sample. In 2022, among beneficiaries in fee-for-service
+  # Medicare, annual Part A and Part B program spending averaged $31,200 for
+  # long-stay nursing home residents and about $11,300 for other
+  # beneficiaries (June 2025, file page 9), and long-stay residents were 1.7
+  # percent of beneficiaries (October 2024, file page 5; 1.7 percent again in
+  # 2023, June 2025, file page 8). A long-stay resident had been in a nursing
+  # home for more than 90 days in at least one month of the year. So spending
+  # per other beneficiary relative to spending per beneficiary is
+  # 1 / (1 + 0.017 * (31_200 / 11_300 - 1)) = 0.971.
+  #
+  # The ratio is measured for fee-for-service Parts A and B and applied to
+  # all Medicare spending per enrollee, including Medicare Advantage, Part D
+  # and administration. With fee-for-service enrollment shares instead (62
+  # percent of long-stay residents, 53 percent of others, July 2023, file
+  # page 13) it is 0.966; pricing Medicare Advantage at the long-stay
+  # residents' risk score ratio (2.12 / 1.01, October 2024, file page 5) gives
+  # about 0.975. The long-stay share was 2.6 percent in 2013 (June 2025, file
+  # page 8), but relative spending is published for 2022 only, so the 2022
+  # ratio applies to every year from 2013, the first year of per_capita_cost.
+  #
+  # The Current Population Survey has never sampled institutional group
+  # quarters such as nursing homes. The Medicare Current Beneficiary Survey's
+  # long-term care facilities also include assisted living, retirement homes
+  # and personal care homes, which are not institutional group quarters;
+  # excluding all of their residents gives a larger gap (community residents'
+  # benefit payments per capita were 0.91 to 0.93 of the average in
+  # 2006-2013, Table 4.1 over Table 1.1).
+  - title: Medicare Payment Advisory Commission, Report to the Congress, June 2025, Chapter 5, Medicare beneficiaries in nursing homes
+    href: https://www.medpac.gov/wp-content/uploads/2025/06/Jun25_Ch5_MedPAC_Report_To_Congress_SEC.pdf#page=9
+  - title: Medicare Payment Advisory Commission, Medicare beneficiaries in nursing homes, October 2024 public meeting
+    href: https://www.medpac.gov/wp-content/uploads/2023/10/Beneficiaries-in-Nursing-Homes-MedPAC-Oct-2024-SEC.pdf#page=5
+  - title: U.S. Bureau of Labor Statistics, Handbook of Methods, Current Population Survey, Design
+    href: https://www.bls.gov/opub/hom/cps/design.htm
+  - title: Centers for Medicare and Medicaid Services, Characteristics and Perceptions of the Medicare Population, 2013, Table 4.1
+    href: https://www.cms.gov/research-statistics-data-and-systems/research/mcbs/downloads/2013_characteristics_and_perceptions.zip
+  # CBO likewise removes institutionalized enrollees' benefits before
+  # assigning Medicare's average cost to survey respondents (file page 46),
+  # with the institutional share held at its 2012 level from 2013 (file page
+  # 52).
+  - title: Congressional Budget Office, Working Paper 2018-07, How CBO Adjusts for Survey Underreporting of Transfer Income in Its Distributional Analyses
+    href: https://www.cbo.gov/system/files/2018-07/54234-workingpaper.pdf#page=46
+values:
+  2013-01-01: 0.971

policyengine_us/tests/core/test_cbo_medicare_benefit_series.py

@@ -3,10 +3,12 @@
 CBO counts Medicare in household income at the government's average cost
 per enrollee, net of premiums paid by enrollees, and counts the Part D
 low-income subsidy separately. ``cbo_medicare_benefit`` takes CMS Medicare
-spending per enrollee (``calibration.gov.hhs.medicare.per_capita_cost``) and
-subtracts four series under ``calibration.gov.hhs.medicare``, each an
-aggregate from the 2026 Medicare Trustees Report over Table V.B3's total
-enrollment (people with Part A and/or Part B):
+spending per enrollee (``calibration.gov.hhs.medicare.per_capita_cost``) less
+the low-income subsidy, scales it to enrollees outside nursing homes
+(``noninstitutionalized_spending_ratio``), and subtracts the premium series.
+All four series under ``calibration.gov.hhs.medicare`` are aggregates from
+the 2026 Medicare Trustees Report over Table V.B3's total enrollment (people
+with Part A and/or Part B):
 
 - ``premium_income_per_enrollee.part_a``: Table III.B4 premiums from
   voluntary enrollees.
@@ -34,8 +36,10 @@
    standard premium times Part B enrollment plus Table V.E3's aggregate
    income-related premiums reproduces it within 0.5 percent, while the
    standard premium alone falls more than 5 percent short.
-5. Bounds: every series is positive, and net Medicare spending per enrollee
-   stays between 0 and gross spending, in every year from 2015 to 2200.
+5. Bounds: every series is positive, and net Medicare spending per enrollee,
+   (spending - low-income subsidy) x the noninstitutionalized ratio -
+   premiums, stays between 0 and scaled gross spending, in every year from
+   2015 to 2200.
 6. Extension: from 2036 to 2100 each series grows with Medicare spending
    per enrollee, so each keeps its 2035 share of spending; later years hold
    the 2100 value.
@@ -57,6 +61,7 @@
     "lis": f"{MEDICARE}.part_d_low_income_subsidy_per_enrollee",
 }
 SPENDING = f"{MEDICARE}.per_capita_cost"
+RATIO = f"{MEDICARE}.noninstitutionalized_spending_ratio"
 FIRST_YEAR, LAST_PROJECTED_YEAR, END_YEAR = 2015, 2035, 2100
 YEARS = range(FIRST_YEAR, LAST_PROJECTED_YEAR + 1)
 
@@ -193,9 +198,11 @@ def test_part_b_premium_income_includes_income_related_premiums():
 
 @given(st.integers(FIRST_YEAR, END_YEAR + 100))
 def test_series_are_positive_and_net_spending_is_between_zero_and_gross(year):
-    deductions = sum(_value(series, year) for series in SERIES)
+    ratio = _read(RATIO, f"{year}-01-01")
+    premiums = sum(_value(series, year) for series in SERIES if series != "lis")
+    net = (_spending(year) - _value("lis", year)) * ratio - premiums
     assert all(_value(series, year) > 0 for series in SERIES)
-    assert 0 < _spending(year) - deductions < _spending(year)
+    assert 0 < net < _spending(year) * ratio
 
 
 @pytest.mark.parametrize("series", SERIES)

policyengine_us/tests/core/test_medicare_cost_part_d_premium.py

@@ -1,9 +1,10 @@
 """The expected Part D premium that ``medicare_cost`` subtracts.
 
 CMS Medicare spending per enrollee (``calibration.gov.hhs.medicare.
-per_capita_cost``) covers Parts A through D, gross of the premiums that
-finance it. No variable records Part D enrollment, so ``medicare_cost``
-subtracts an expected Part D premium:
+per_capita_cost``, scaled by ``noninstitutionalized_spending_ratio`` to
+enrollees outside nursing homes) covers Parts A through D, gross of the
+premiums that finance it. No variable records Part D enrollment, so
+``medicare_cost`` subtracts an expected Part D premium:
 
     enrollment_share x (premiums_per_enrollee + Part D IRMAA)
 
@@ -35,7 +36,7 @@
    the Trustees' five-year enrollment points the share holds the earlier one.
 6. Consumer (Hypothesis, differential): ``medicare_cost`` equals a reference
    implementation, max(gross - Part A - Part B - share x (premium + IRMAA),
-   0), for any year and premiums; it lies in [0, ``medicare_gross_cost``],
+   0) with gross = per_capita_cost x the ratio, for any year and premiums; it lies in [0, ``medicare_gross_cost``],
    which does not change with the Part D premium; and it does not rise with
    the person's Part D IRMAA.
 """
@@ -226,7 +227,10 @@ def _enrollee(year, part_a, part_b, irmaa):
 
 
 def _reference_medicare_cost(year, part_a, part_b, irmaa):
-    gross = _read("calibration.gov.hhs.medicare.per_capita_cost", f"{year}-01-01")
+    date = f"{year}-01-01"
+    gross = _read("calibration.gov.hhs.medicare.per_capita_cost", date) * _read(
+        "calibration.gov.hhs.medicare.noninstitutionalized_spending_ratio", date
+    )
     part_d = _share(year) * (_premium(year) + irmaa)
     return max(gross - part_a - part_b - part_d, 0)