Dedicated to ensuring quality long-term care for all Americans
Briefing Paper #4:
Is Rebalancing a Panacea?
Briefing Paper #1 in this series on "The History of Long-Term Care Financing" explained how Medicaid's bias toward funding nursing home care crowded out a privately financed home and community-based services (HCBS) market. Since the 1980s Medicaid has gradually moved away from financing nursing home care toward paying for more HCBS. Will this change save money and improve the program as advocates of rebalancing insist? Or could it cost more and potentially harm access and quality? What are the downside risks?
Institutional Bias Gives Way
The federal Medicaid LTC program started in 1965. To win industry support, the new program originally paid exclusively and generously for nursing home care. But exploding costs and declining quality led in time to calls for Medicaid to "deinstitutionalize" or "rebalance" LTC benefits.
The Omnibus Budget Reconciliation Act of 1981 authorized HCBS waivers which allowed state Medicaid programs to fund home care with restrictions. For example, states couldn't spend more for HCBS than they would have spent for nursing home care.
The Supreme Court's 1999 "Olmstead" decision held that people with disabilities have the right to live at home or in the community if they are able and do not prefer nursing home care. Olmstead encouraged states to provide more HCBS within reasonable budget limitations.
Major initiatives during the George W. Bush Administration expanded opportunities for state Medicaid programs to cover HCBS. The Deficit Reduction Act of 2005 and the Affordable Care Act of 2010 (health reform) added options and funding to encourage rebalancing to HCBS.
The Argument for Rebalancing
The argument in favor of HCBS, made strenuously by many academic and policy experts, is that taking care of frail or chronically ill elders in their homes is much cheaper than in a nursing home. Therefore, rebalancing from skilled nursing facility (SNF) services to HCBS should save the state and federal Medicaid programs money while giving people more of what they want (home care) and less of what they would rather avoid (nursing home care). But is that true?
When compared to an elderly population for whom traditionally available care is offered, recipients of expanded community-based services do not use significantly fewer days of nursing home care.
An increasingly large number of studies, including the results of a national channeling demonstration program, have shown that non-institutional services typically do not substitute for nursing home care, but, rather, represent additional services most often to new populations.
Although community-based LTC programs proved beneficial to both clients and informal caregivers in the LTC demonstrations, they did not prove budget neutral or cost effective.
The Channeling demonstration . . . found that, while community-care models were often welcome by recipients and their caregivers, they led to overall increases in public spending for long-term care.
The primary argument for the cost savings potential of home care rests on a comparison of the average per person Medicaid expenditures for people in the community and in nursing homes. The average annual Medicaid expenditures for home care for older people and adults with physical disabilities ($8,355 in 2004) per person are dramatically less than average annual Medicaid expenditures ($27,650 in 2004) per person for nursing home care. This comparison, however, is incomplete because it does not address differences in disability levels, use of acute care services, and the exclusion of housing and room and board costs from home care expenditures. Thus, it is not strictly an 'apples to apples' comparison.
For Medicaid to afford quality HCBS for all recipients it must have fewer recipients. By tightening eligibility, closing eligibility loopholes, preventing Medicaid planning, and enforcing estate recovery, the program can do a better job for fewer genuinely needy eligibles. When middle class and affluent people understand their savings and home equity are at risk for LTC, they will avoid Medicaid dependency by paying privately from savings, home equity conversion and private insurance. These points are developed more fully in Briefing Paper #5 on Dual Eligibles and Briefing Paper #6 on Private LTC Financing Alternatives.
General Accounting Office, "The Elderly Should Benefit From Expanded
Home Health Care But Increasing Those Services Will Not Insure Cost
Reductions" (Dec. 7, 1982) p. 43,
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