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Originally written by Deanna Okrent, Alliance for Health Reform. Updated April 2010 by Deanna Okrent. This chapter was made possible by the Robert Wood Johnson Foundation. 

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FAST FACTS

• Two-thirds of people age 65 today will need some long-term care in their lifetimes.¹
• Of the 10 million Americans who need assistance with daily activities, 1.7 million live in the nation’s 16,000 nursing homes and approximately 520,000 live in assisted living facilities.²
• Fourteen percent of Americans age 85 or older live in nursing homes.³
• A total of $207 billion was spent on long-term care in the U.S. in 2005.⁴
• Of total long-term care spending, Medicaid spending accounts for 49 percent, Medicare accounts for 20 percent, out-of-pocket spending equals 18 percent and private health and long-term care insurance makes up 7 percent.⁵
• There are 52 million unpaid caregivers who contribute an estimated $375 billion in value to the U.S. economy. ⁶
• The Community Living Assistance Services and Supports (CLASS) Act, enacted in the health reform law of 2010, establishes a new voluntary long-term care insurance program that will be federally administered.⁷

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BACKGROUND

”Long-term care” (LTC) generally brings to mind images of nursing homes and older people living in them who can no longer care for themselves. In truth, long-term care comes in many different forms and is provided in many different settings.

It is institutional care. It is assisted living. It is also home- and community-based services, including home health care, adult day care, home delivered meals and other services authorized under Title III of the Older Americans Act.⁸ (See chart, “Numbers of People Receiving Home and Community-Based Services, 2006.”)

These services are financed by Medicaid, Medicare, private long-term care insurance, private out-of-pocket spending and appropriations under the Older Americans Act. (Despite what many Americans believe, Medicare is not a major payer for LTC, as discussed later.)

Yet the majority of long-term care services aren’t paid for at all. They are provided by 52 million unpaid caregivers -- primarily family members and friends of those needing LTC. Their services, if paid for, would have cost an estimated $375 billion in 2007 – almost double what the federal government spent that year on Medicaid.^{9 10}

LTC serves both people who are over the age of 65 and people under that age (for example, see chart, “Nursing Home Residents by Age & Gender”).

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Cost and Financing of Long-term Care

In 2008, the average annual cost of a private room in a nursing home was more than $76,000.¹¹ The average cost for an assisted living facility in 2007 was $35,628.¹² (See Glossary for the differences between the two.) These costs vary widely from region to region and are highest in the Northeast. ¹³ Costs also vary by certification status, size and type of ownership of the facility.

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Medicaid

Medicaid is a public health insurance program funded by federal and state governments. (See Chapter 8, “Medicaid,” for more.) Medicaid is a major payer for long-term care because federal law requires that Medicaid programs in every state must provide nursing home care and home health care for the qualified poor.

Medicaid accounts for almost half of national long-term care spending.¹⁴ (See chart, “Financing of Long-Term Care, 2005.”) Of that amount, most is for institutional care, though spending for non-institutional care is growing and reached 37 percent of Medicaid’s share of LTC spending in 2005.¹⁵ Though over half of those who use Medicaid long-term care services are over 65, a third (34 percent) are disabled children and adults under 65. ¹⁶

Beyond the basic federal requirements, Medicaid LTC benefits vary from state to state. Home and community-based services (HCBS) are provided under Medicaid waivers in all states but the programs serve limited populations, and vary greatly in scope from state to state. (See Glossary for details about Medicaid waivers.)

Since 2007, under a provision of the Deficit Reduction Act (DRA) of 2005, waivers are no longer required for some home and community-based services, such as case management, homemaker/home health aide services, personal care services, adult day health, and habilitation services.

The health reform law of 2010 (The Patient Protection and Affordable Care Act , orPPACA) contains provisions that may shift more care to home and community-based services in the future. It establishes additional optional HCBS benefits that states may offer under Medicaid and provides financial incentives to states to expand existing HCBS programs.¹⁷

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Medicare

Though many people think that Medicare covers long-term care, in reality it provides only limited coverage of nursing home stays and home health care. Eligibility is based on, and follows, a hospital stay of at least three days. Medicare covers short-term stays in skilled nursing facilities – full coverage for 20 days, partial coverage for up to 80 additional days. This spending, plus spending for home health benefits for eligible Medicare beneficiaries, accounts for 20 percent of long-term care expenditures.¹⁸

Private Long-Term Care Insurance

A relatively small number of people purchase long-term care insurance – approximately 7 million policies were in force in 2005. ¹⁹ Although it seems entirely logical to minimize the risk of impoverishment from the high cost of long-term care, long-term care insurance has not had broad market appeal.

Younger people don’t yet recognize the need for long-term care insurance, although the cost of it for them is low. When people are closer to the age when they might need long-term care, many cannot afford the then-high priced insurance premiums.

The Robert Wood Johnson Foundation, in 1987, initiated an experimental program called the Program to Promote Long-Term Care Insurance. Also referred to as the Partnership Program, it involves a public-private partnership between Medicaid and private insurance. Those buying long-term care insurance can protect a portion of their assets that otherwise would count against them were they to apply to Medicaid to cover their long-term care expenses. (See the Alliance for Health Reform issue brief on this topic at www.allhealth.org under “Resources.”)

The Partnership Program began as a demonstration project in four states and is now available for replication in all states. Twenty-nine states had implemented Partnership Programs as of June 2009 and many others are in the process of implementing these programs. ²⁰ All told, long-term care insurance pays for approximately 7 percent of national long-term care spending.²¹

The Community Living Assistance Services and Supports (CLASS) Act, enacted in the health reform law, establishes a new voluntary long-term care insurance program that will be federally administered. Individuals will be automatically enrolled if their employers agree to participate and premiums will be paid through payroll deductions unless an individual opts out. ²² Though this feature makes participation easy, the program is not projected to make an immediate, sizable difference in the insurance rolls. Many details of the new program have yet to be determined by the Secretary of Health and Human Services.

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Out-of-Pocket Spending

For people without insurance, including those who do not qualify for Medicare or Medicaid benefits, long-term care costs are paid out-of-pocket. This includes payment for nursing home care, assisted living and home health care. The average annual cost of home care by one industry estimate is close to $44,000.²³ Out-of-pocket spending accounts for 18 percent of national spending for long-term care.²⁴

The CLASS Act would provide qualified enrollees a cash benefit to help with these expenses.

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LIKELY POLICY DEBATES

Financing

As noted, Medicaid serves as the nation’s safety net for individuals with long-term care needs. Many individuals who initially pay for nursing home care out of pocket become impoverished by the high cost of care and later qualify for Medicaid. Can Medicaid continue to fund the largest share of long-term care? Will state budgets hold up under the strain? Will the provisions in PPACA alter the ratio of institutional care to home and community based services and if so, what effect might this have on nursing homes?

Policymakers also wonder how to support family caregiving and other informal caregivers. When family members stay home from work or leave their jobs to care for loved ones, this takes an economic toll on them and on society. How could governments reduce the strain?

Perhaps long-term care insurance can play a greater role. How can we increase its appeal and thereby its market share? Are consumer protections needed to allay fears that the insurance policies of today will cover the needs of tomorrow? Will new products be marketed to supplement the voluntary long-term care insurance program in the CLASS Act?Many states are experimenting with programs that reduce the need for nursing home placements. ²⁵ Such programs require that people needing long-term care be able to live in the most integrated setting appropriate. One innovative effort, Vermont’s “global budgeting,”²⁶ allows Medicaid funds to be spent on whichever service is most appropriate for persons found to be eligible for long-term care. Global budgets do not separate funding for nursing homes or home and community-based services into different “silos.” Will the financial incentives in PPACA encourage the expansion of these and other innovative programs?

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Workforce

Throughout the health care arena there is a workforce shortage²⁷ and this is dramatically so for direct care workers in long-term care.^{28 29} Studies have shown that quality of care is directly related to nurse staffing ratios, ³⁰ yet in very few states does the average staffing ratio meet the minimum standard recommended by each state. Questions abound on how to increase recruitment, retention and job satisfaction of direct care workers. The biggest question is: Will the workforce supply be ready to meet the baby boomer demand?

Certified nursing assistants (CNAs), who make up the majority of direct care providers in most facilities (see chart, “Distribution of Direct Care Workers”), currently get minimal training, benefits and opportunity for advancement. PPACA establishes a three-year initiative to strengthen the direct care workforce. It will fund state demonstration projects that train personal or home care aides in 10 core competencies. These projects will be evaluated on job skills mastery, job satisfaction, and beneficiary and family satisfaction with services. ³¹

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Quality of Care and Resident-directed Care and Services

In 2007, nearly 17 percent of nursing homes inspected by state regulators were cited for serious deficiencies.³² Some say the inspection system is broken. ³³ Others say quality of care is the issue, and that nursing home ownership is a contributing factor³⁴ (with most of the criticism lodged against certain for-profit chains). PPACA provisions require disclosure of ownership and governance.³⁵

Medicaid reimbursement and other historical factors have long fostered a bias toward institutional long-term care. In addition to the PPACA provisions mentioned above, some new models of care are being demonstrated across the country.

Among these is the Green House® model, which provides person-centered long-term care in small home-like settings as an alternative to larger, institution-like nursing homes. (For more, see the Alliance issue brief “ Changing the Nursing Home Culture.”)

Studies have shown improved resident and caregiver satisfaction at these types of facilities.³⁶ But the question remains: Are current long-term care providers sufficiently motivated to make the necessary structural changes in older facilities that would be required to create a more individualized, home-like environment? Can they afford to do so?

In a 2008 survey of long-term care opinion leaders,³⁷ 84 percent felt that long-term care should be rebalanced away from traditional nursing homes and toward home- and community-based services. Some 61 percent were in favor of expanding consumer-directed programs such as “Cash and Counseling,” a way for those needing long-term care to direct expenditures made on their behalf. (Read more about Cash and Counseling at www.cashandcounseling.org/about.) PPACA provisions referenced earlier will provide financial incentives to states to expand HCBS options.

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Disparities

A 2007 study showed a relationship between racial segregation and quality disparities in U.S. nursing homes. ³⁸ The study found that blacks were more likely to live in poor quality nursing homes than whites. Blacks were almost three times as likely to live in a nursing home housing predominantly Medicaid residents. The study offered policy recommendations including Medicaid payment reform that would close the gap between Medicaid per diem rates and those paid by private payers.

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TIPS FOR REPORTERS

• It is a common misperception that Medicare covers long-term care. It is not well understood that the Medicare “long-term care” benefit is limited to 100 days of skilled care and that it must follow a hospital stay of three days or more. The Center for Medicare Advocacy has information about skilled nursing facility (SNF) care, therapy care, rehab care, and other Medicare issues on its web site,www.medicareadvocacy.org. You can also learn about Medicare benefits at www.cms.gov.
• There is often confusion between Medicare and Medicaid. It is not well understood that Medicaid covers long-term care for qualified individuals and that it is a means-tested benefit. Most publicly funded long-term care is financed by Medicaid.
• Gifts to family members or others within the five-year period prior to applying for Medicaid count as assets of the potential beneficiary for purposes of determining Medicaid eligibility. The period in which such gifts are counted as assets is known as the “look-back period.” The “look-back period” for Medicaid changed from three years to five years in February 2006. It is commonly asserted that individuals divest themselves of assets in order to qualify for Medicaid and be eligible for long-term care coverage. However, studies have found little evidence of this phenomenon.³⁹
• The movement to resident-centered care or person-centered care is often linked with the Green House® movement. (NCB Capital Impact, with support from the Robert Wood Johnson Foundation, is pursuing the development of Green Houses across the country. Click here for more information about this replication initiative.) However, resident-centered care can and should occur in all long-term care facilities, not only ones of a particular architectural design. This movement has many shapes and forms depending on developments on the local and state level and subject to state and federal regulations. A good resource for information about this movement is www.pioneernetwork.net. The movement is also known as “culture change.”
• Many long-term care facilities require residents to sign admissions agreements with mandatory arbitration clauses. There have been successful cases challenging the legality of such clauses. However, it is still a common occurrence. It is also common to request that a family member accept financial responsibility for their loved one in the facility. Family members are not required to accept such responsibility but often don’t realize what they have signed until much later down the road.  

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STORY IDEAS

• Long-term care workforce – Is your state conducting a training demonstration for certified nurse assistants(CNAs)? Are there tangible results in lower turnover rates and higher job satisfaction?
• Long-term care workforce and immigration — What would be the effects of proposed federal immigration reforms? Will tighter restrictions increase the workforce shortage?
• Long-term care costs and the economic downturn — How are state Medicaid budgets faring in the face of an economic downturn? What will happen to the long-term care safety net for the poor? Will families be able to continue their out-of-pocket spending for long-term care? Will Medicaid enrollment swell?
• Facility residents’ costs of care are paid for by a variety of sources such as out-of-pocket, private long-term care insurance and Medicaid. The mix of residents by payer source often varies by location of the facility. Is the economic downturn having an effect on the payer source mix of facilities in your community? Will private-pay facilities have to take in more Medicaid residents to fill their beds? Might we see more facility closures due to the economic recession?
• Are innovative models of care gaining market share? How is the Green House® project progressing? Has the economic downturn slowed progress toward changing institutional models of care into more home-like settings?
• Are current HCBSs sufficient to meet the increased demand? Will new models develop? Will they be public-private partnerships or depend solely on Medicaid funding? Will some traditional nursing facilities face diminishing occupancy rates and be forced to close their doors?
• Are baby boomers changing the face of long-term care? Are they requesting/demanding different services, benefits for themselves than their parents demanded? Are more institutions offering email and Internet access to their residents? Will baby boomers find innovative solutions to aging at home? Will this speed the movement away from the current institutional bias? Are baby boomers more aware of “residents’ rights?” For information about residents’ rights contact the National Long-term Care Ombudsman Resource Center. They have an information-packed website at www.ltcombudsman.org.
• Health reform –Can cost containment efforts be effective without encompassing the share spent by Medicaid and Medicare on long-term care? What effect will the CLASS Act have on the long-term care insurance market?

EXPERTS AND WEBSITES

ENDNOTES

¹ AARP Public Policy Institute (2007). “Long-Term Care Trends.” ( http://www.aarp.org/research/longtermcare/trends/fs27r_ltc.html).

² CDC/NCHS. “National Nursing Home Survey.” Table 1. Number of nursing homes, beds, current residents, and discharges. ( http://www.cdc.gov/nchs/nnhs.htm).

³ AARP Public Policy Institute (2007). “Fact Sheet: Nursing Homes.” (http://www.aarp.org/ppi).

⁴ Long-Term Care Financing Project. Georgetown University (2007). “Fact Sheet: National Spending for Long-Term Care.” February. ( http://ltc.georgetown.edu/pdfs/whopays2006.pdf).

⁵ Long-Term Care Financing Project. Georgetown University (2007). “Fact Sheet: National Spending for Long-Term Care.” February. ( http://ltc.georgetown.edu/pdfs/whopays2006.pdf).

⁶ AARP Public Policy Institute (2008). “Valuing the Invaluable: The Economic Value of Family Caregiving, 2008 Update.” November, p. 1. ( http://assets.aarp.org/rgcenter/il/i13_caregiving.pdf).

⁷ Justice, Diane (2010). “Long Term Services and Supports and Chronic Care Coordination: Policy Advances Enacted by the Patient Protection and Affordable Care Act.” National Academy for State Health Policy. ( http://www.nashp.org/sites/default/files/LongTermServ%20Final.pdf).

⁸ National Health Policy Forum (2008). “The Basics: Older Americans Act of 1965.” April 21. ( www.adrc-tae.org/tiki-download_file.php?fileId=27289). For information on the 2006 amendments to the Older Americans Act, go to www.aoa.gov/oaa2006/Main_Site/oaa/oaa.aspx.

⁹ AARP Public Policy Institute (2008). “Valuing the Invaluable: The Economic Value of Family Caregiving, 2008 Update.” November, p. 1. ( http://assets.aarp.org/rgcenter/il/i13_caregiving.pdf)

¹⁰ U.S. Office of Management and Budget (2008). “Analytical Perspectives, Budget of the United States, Fiscal Year 2009.” Table 20-4, p. 334. ( www.whitehouse.gov/omb/budget/fy2009/pdf/apers/dimensions.pdf).

¹¹ Genworth Financial (2008). “Long Term Care Survey: Future Trends in Long Term Care from Genworth Financial.” ( www.genworth.com).

¹² AARP. “State-by-State Long-term Health Care Costs.” ( www.aarp.org/family/caregiving/articles/state-by-state_long-term.html ).

¹³ AARP. “State-by-State Long-term Health Care Costs.” ( www.aarp.org/family/caregiving/articles/state-by-state_long-term.html ).

¹⁴ Long-Term Care Financing Project (2007). “Fact Sheet: National Spending for Long-Term Care.” February. Georgetown University. ( http://ltc.georgetown.edu/pdfs/whopays2006.pdf).

¹⁵ Long-Term Care Financing Project (2007). “Fact Sheet: National Spending for Long-Term Care.” February. Georgetown University. ( http://ltc.georgetown.edu/pdfs/whopays2006.pdf).

¹⁶ Kaiser Commission on Medicaid and the Uninsured (2007). “Long-term Services and Supports: The Future Role and Challenges for Medicaid.” September. (www.kff.org/medicaid/7671.cfm).

¹⁷ Justice, Diane (2010). “Long Term Services and Supports and Chronic Care Coordination: Policy Advances Enacted by the Patient Protection and Affordable Care Act.” National Academy for State Health Policy. ( http://www.nashp.org/sites/default/files/LongTermServ%20Final.pdf).

¹⁸ Long-Term Care Financing Project (2007). “Fact Sheet: National Spending for Long-Term Care.” February. Georgetown University ( http://ltc.georgetown.edu/pdfs/whopays2006.pdf).

¹⁹ AARP Public Policy Institute (2007). “Fact Sheet: Long-Term Care Insurance.” ( http://www.aarp.org/research/health/privinsurance/fs7r_ltc.html).

²⁰ National Clearinghouse for Long-Term Care Information. “Paying for Long-Term Care.” (www.longtermcare.gov ).

²¹ AARP Public Policy Institute (2007). “Fact Sheet: Long-Term Care Insurance.” ( http://www.aarp.org/research/health/privinsurance/fs7r_ltc.html)

²² Justice, Diane (2010). “Long Term Services and Supports and Chronic Care Coordination: Policy Advances Enacted by the Patient Protection and Affordable Care Act.” National Academy for State Health Policy. ( http://www.nashp.org/sites/default/files/LongTermServ%20Final.pdf).

²³ Genworth Financial (2008). “Long Term Care Survey: Future Trends in Long Term Care from Genworth Financial.”

²⁴ Long-Term Care Financing Project (2007). “Fact Sheet: National Spending for Long-Term Care.” February. Georgetown University ( http://ltc.georgetown.edu/pdfs/whopays2006.pdf).

²⁵ Kitchener, Martin; Willmott, Micky; Wong, Alice; Harrington, Charlene (2006). “Home and Community-Based Services: Medicaid Research and Demonstration Waivers.” UCSF National Center for Personal Assistance Services. ( http://www.pascenter.org/demo_waivers/demoWaiverReport_2006.php).

²⁶ Kaiser Commission on Medicaid and the Uninsured (2006). “Medicaid Facts: The Vermont Choices for Care Long-Term Care Plan.”( http://www.kff.org/medicaid/upload/7540.pdf).

²⁷ The National Academies News Release (2008). “Health Care Work Force Too Small, Unprepared For Aging Baby Boomers; Higher Pay, More Training, And Changes In Care Delivery Needed To Avert Crisis.” ( http://www8.nationalacademies.org/onpinews/newsitem.aspx?RecordID=12089 ).

²⁸ National Center for Health Workforce Analysis, HRSA (2004). “Nursing Aides, Home Health Aides, and Related Health Care Occupations – National and Local Workforce Shortages and Associated Data Needs.” ( http://newsroom.hrsa.gov/NewsBriefs/2004/healthcareaides.htm).

²⁹ National Clearinghouse on the Direct-Care Workforce (2005). “Results of the 2005 National Survey of State Initiatives on the Long-Term Care Direct-Care Workforce.” September 2005. ( http://www.directcareclearinghouse.org/l_art_det.jsp?res_id=184110).

³⁰ Zhang, Ning Jackie et al. (2006). “Minimum Nurse Staffing Ratios for Nursing Homes.” Nursing Economics. May 2006.

³¹ Justice, Diane (2010). “Long Term Services and Supports and Chronic Care Coordination: Policy Advances Enacted by the Patient Protection and Affordable Care Act.” National Academy for State Health Policy. ( http://www.nashp.org/sites/default/files/LongTermServ%20Final.pdf).

³² OIG Memorandum report (2008). “Trends in Nursing Home Deficiencies and Complaints.” OEI-02-08-00140. ( http://www.oig.hhs.gov/oei/reports/oei-02-08-00140.pdf).

³³ U.S. News and World Report (2008). “GAO Faults State Nursing Home Inspections.” May 2008. ( http://www.usnews.com/articles/news/national/2008/05/15/gao-faults-state-nursing-home-inspections.html ).

³⁴ OIG Memorandum report (2008). “Trends in Nursing Home Deficiencies and Complaints.” OEI-02-08-00140. ( http://www.oig.hhs.gov/oei/reports/oei-02-08-00140.pdf).

³⁵ Healthcare Finance News (2008). “Legislation would increase transparency, penalties for nursing homes.” February 2008.

³⁶ Kane, R.A; Lum, T.Y.; Cutler, L.J. et al. (2007). “Resident Outcomes in Small-House Nursing Homes: A Longitudinal Evaluation of the Initial Green House Program.” Journal of the American Geriatrics Society, 55(6):832-39. ( www.tlc4ltc.org/news_greenhouse_study.html).

³⁷ Miller, Edward Alan; et al. (2005). “The Commonwealth Fund Long-Term Care Opinion Leader Survey: Top-Level Findings.”

³⁸ Health Affairs News Release (2007). “New Study: In many U.S. Cities, Blacks More Likely Than Whites to Live in Poor Quality Nursing Homes.”

³⁹ GAO (2007). “Medicaid Long-Term Care: Few Transferred Assets before Applying for Nursing Home Coverage.” ( http://www.gao.gov/new.items/d07280.pdf).

²⁴ Long-Term Care Financing Project (2007). “Fact Sheet: National Spending for Long-Term Care.” February. Georgetown University ( http://ltc.georgetown.edu/pdfs/whopays2006.pdf).