One interesting discovery we made in the discussion of the various health care reform proposals is that many consumers don’t realize that a significant portion of Medicaid funds go to the 65+ population. While Medicare covers health care services for the 65+ population – hospitalizations, emergency rooms, pharmaceuticals, etc. – it is Medicaid that pays for long-term care for this population. That includes services for individuals with functional limitations needing assistance performing routine daily activities – as well as residential services including nursing homes, assisted living programs, and continuing retirement communities. I think this distinction is being lost in the current public debate.
Spending on long-term care in the U.S. in 2015 topped $282.9 billion. Medicaid is the primary payer for long-term services and supports (LTSS), at $158 billion, 56% of the total LTSS spending. Out-of-pocket spending by consumers accounts for the next largest proportion of spending at 17% or $48.9 billion, followed by Medicare at 12%, and private health insurance at 8%. For LTSS for the 65+ population, Medicaid spends an estimated $64 billion per year – 11.7% of total Medicaid spending.
Medicaid is the primary payer because Medicare does not cover these services. In fact, Medicare rules specifically prohibit payments for institutional care and for home-based services (although Medicare provides some limited therapeutic home health services). And, most insurance, Medicare supplemental plans, and employer-sponsored insurance do not cover LTSS as part of their benefit package.
In 2012, Medicaid expenditures for the 2.1 million enrollees over age 65 receiving institutional services or HCBS was $57 billion, averaging out to about $27,000 per user. Medicaid programs nationally spent $41 billion per year for persons using institutional LTSS, such as nursing homes ($37,239 per user), $6 billion for other state plan LTSS ($10,970 per user), and $10 billion for persons receiving waiver HCBS ($17,296 per user).
There is long-term care insurance (LTCI) available, but for a price. In 2014, the total number of individuals with LTCI coverage was 7.2 million with annual premiums of $2,772 (see The State of Long-Term Care Insurance: The Market, Challenges and Future Innovations). And, only a small proportion of consumers can afford to pay privately for long-term care. In 2016, the national median annual cost of a home health aide was $46,332, an assisted living facility $43,539, and a semi-private room at a nursing home was $82,125 (see Compare Long Term Care Costs Across the United States).
As legislators and policymakers plan the future of Medicaid, it is important to consider that 28.9% of the Medicaid budget pays for long-term care – and that 10.4% of Medicaid spending is for LTSS for consumers age 65+ and above. Because the Medicare and Medicaid funding streams are linked for the 65+ population, reductions in Medicaid LTSS spending would result in increased Medicare costs as more 65+ consumers are hospitalized due to lack of suitable home-based support services (see AHCA Would Affect Medicare, Too). Those effects of availability of supported housing and social supports on health care costs are well-documented.
For more on LTSS, join Nancy Thaler, Deputy Secretary for the Office of Developmental Programs, Pennsylvania Department of Human Services on September 27 at The 2017 OPEN MINDS Executive Leadership Retreat where she will give the plenary session, “The Future Of Long-Term Services & Supports: A New Business Model For A Medicaid Managed Care Market.”