LTC Bullet:  Donor-Only Zone Sample -- The Data Base

February 20, 2002


*** Enrollment for the Center for Long-Term Care Financing's first LTC Graduate Seminar to be held March 4, 2002 in Chicago is closed.  We reached our limit of 12 confirmed attendees almost immediately.  If you would like to be considered as a standby in case of cancellations, please email  (See the announcement at for details on the class.)  Thanks for your outpouring of interest in the possibility of attending LTC Graduate Seminars in other parts of the country.  Watch for future announcements. *** 

Today's Bullet gives our general readership a peek at content usually available only on the Center for Long-Term Care Financing's donor-only zone.  What follows is an example of a feature we call "The LTC Data Base."  In the Data Base, we track new studies and reports and give you key data and statistics you need to know.  On Friday of this week, we'll offer you a sample of another donor-only-zone feature called "The LTC Reader."  Both the Data Base and the Reader already have five entries posted in The Zone.  We're adding two more entries to the Reader today.

The LTC Data Base, The LTC Reader, and our ongoing LTC Week in Review feature are only available to donor-only-zone Center contributors.  So, don't miss a single item as we post it.  To qualify, contribute $100 or more (annually) to the Center for Long-Term Care Financing (either online or by mail, instructions at; then email and give her your desired user name and password (up to 10 characters each.)  She will activate your gateway to The Zone usually within a day.  Zone In!

The Data Base #5:  New CMS Data on Nursing Home Expenditures is Misleading

Go to and check out the latest (2000) CMS (nee HCFA) data on nursing home expenditures. 

You'll find comparative annual data for 1980, 1988, 1990 and every year from 1993 to 2000 shown by source of payments, i.e. out-of-pocket, private insurance, Medicaid, Medicare, etc., and by total amount, per capita amount and percent distribution.

Here's why this data is misleading and, more importantly, why it is important for you to understand what it really means:

  1. Note that Medicaid paid only 48.1% of nursing home costs in 2000, up from 43.9% in 1990.  This would suggest that Medicaid's contribution to nursing home costs is relatively minor, under half.  The truth is, however, that Medicaid recipients must also contribute most of their income toward their cost of care on Medicaid.  Thus, nearly 70% of all nursing home residents are on Medicaid even though Medicaid itself pays less than half of nursing home costs.  Because Medicaid nursing home residents tend to be the longest stayers, nearly 80% of all nursing home patient days are paid, at least in part, by Medicaid.  The reason this is so critical is that if Medicaid pays even $1 of a resident's cost of care, the nursing home receives the notoriously low Medicaid reimbursement rate--80% of the private pay rate on average and often less than the cost of care.  BDO Seidman reports that Medicaid pays nursing $3 billion per year less than the cost of care nationally.  This accounts in part for the terrible financial situation America's nursing homes find themselves in today.
  1. Now consider that out-of-pocket (OOPs) nursing home costs as reported by CMS for 2000 are only 27.0%, down 28% from their level of 37.5% in 1990.  Clearly, the public's direct exposure to nursing home costs has plummeted in the past decade.  But the truth is much more dramatic than the statistics suggest.  Approximately half of the so-called "out-of-pocket" costs reported by CMS are really just "spend-through" of Social Security income of people who are already on Medicaid!*  This gives the lie to the conventional wisdom that people all across America are spending down into impoverishment to pay for nursing home care.
  1. What about Medicare?  We still see sales brochures that say Medicare pays for only 2% or 3% of nursing home expenses.  That has not been true for over a decade.  Medicare paid 10.3% of all nursing home costs in 2000, up from 3.2% in 1990, a 322% increase in only 10 years.
  1. Finally, private long-term care insurance, how much does it pay for nursing home care?  CMS reports that 8.1% of nursing home costs are paid by "private health insurance."  We frequently see this figure reported as the amount private LTCI pays for nursing homes.  That's not what the number means.  LTCI usually pays a beneficiary, not a nursing home.  No one knows how much LTCI benefits contribute toward nursing home costs, because there is no way to measure that amount.  The misleading figure reported by CMS is a derived number computed by subtracting all the known sources of nursing home finances from the total and assigning the remainder to "private health insurance."  In other words it is a pure guess.  The only hard data on private health insurance payments for nursing home care are for payments by major medical policies or Medicare supplemental insurance policies. 

What this all means is that, despite the misleading data reported by CMS, the reality is that the vast majority of all nursing home costs in the country are paid directly or indirectly by public programs (directly by Medicaid, Medicare, the Department of Veterans Affairs, etc. and indirectly by Social Security income of people on Medicaid) and the exposure to out-of-pocket expenditure of assets (not income) by the public is no more than 10% to 15% of total nursing home expenditures.

These facts go a long way toward explaining why the public is in denial about long-term care costs and why so few Americans plan early to save, invest or insure against this risk.

*  Nelda McCall, "Long Term Care:  Definition, Demand, Cost, and Financing," in Nelda McCall, editor, Who Will Pay for Long-Term Care, Health Administration Press, Chicago, Illinois, 2001, p. 19.

"The LTC Data Base" is a feature offered by the Center for Long-Term Care Financing to donors of $100 per year or more.  We'll track new studies and reports and give you key data and statistics you need to know.  We hope this new feature will help you attain and maintain a high level of  knowledge and competency.