Bullet: New LTC Research
and What It Means for You
Wednesday, November 29, 2006
LTC Comment: One
new report shows a sharp decline in nursing home utilization, but
another confirms 7% of Medicaid beneficiaries who use LTC account for
52% of the program's costs. What
does this mean for LTCi, reverse mortgages and the Medicaid safety net?
Answers after the ***news.***
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LTC BULLET: NEW
LTC RESEARCH AND WHAT IT MEANS FOR YOU
LTC Comment: In
the past week or so, two new studies have appeared that shed some very
interesting light on America's long-term care service delivery and
On the one hand, nursing home utilization by people
over the age of 65 has plummeted. For
more on that, see http://www.lewin.com/
where you'll find The Lewin Group's new study and a webcast by its
author, Lisa Alecxih, describing her findings followed by a panel
discussion. For a quick
overview, go to the UPI article at http://www.upi.com/HealthBusiness/view.php?StoryID=20061121-044652-2717r.
Bottom line, according to the UPI piece:
study showed that, since 1999, the number of people aged 65 and older in
nursing homes dropped more than 8 percent from 1.44 million to 1.32
million, but more dramatically, nursing-home use among the 'oldest old'
fell by a full two-thirds, from 21.1 percent in 1985 to 13.9 percent in
2004. Without this shift away from nursing-home care -- which was the
only long-term-care option 20 years ago -- and toward community-based
care, nearly 2 million seniors would be living in nursing homes today.
But instead, the nursing-home population is dropping towards half that
number, or 1.32 million residents as of 2004."
Wow, great news!
Fewer elderly people dying slowly in nursing homes and more
octogenarians living longer, happier lives in their own homes and
But now, juxtapose this upbeat trend and
prognostication with findings from another new study.
This one's published by the Kaiser Commission on Medicaid and the
Uninsured and available at http://www.kff.org/medicaid/7576.cfm.
Here are the highlights:
long-term care users accounted for 7% of the Medicaid population in 2002
but over half (52%) of total Medicaid spending. . . .
of elderly Medicaid enrollees used long-term care services, but they
accounted for 86% of all Medicaid spending on the elderly. . . .
percent of beneficiaries classified as disabled used long-term care
services, but they accounted for 58% of all Medicaid spending on the
eligibles [Medicaid recipients who also receive Medicare benefits]
accounted for two-thirds of Medicaid enrollees who used long-term
services and a similar share of spending. . . ."
Let me see if I have this right.
The good news is that fewer people reside in nursing homes.
The bad news is that LTC is the monster that ate Medicaid.
how come everyone's so happy about the decline in nursing home
utilization when long-term care in general is a huge part of Medicaid
already and likely to grow exponentially in the decades ahead?
answer is that most academics and government (state and federal) policy
makers think home and community-based long-term care is cheaper to
provide than nursing home care. So,
they figure, no matter how big the LTC problem is in the future, at
least it's smaller than it would have been if we were still warehousing
all the elderly in expensive nursing homes.
Medicaid should be able to provide more long-term care to more
people at the same or lower cost. At
least, that's what they think.
let's analyze this situation based on the hard lessons learned by the
private long-term care insurance industry over the past twenty years.
LTCi was mostly nursing home insurance, policy holders were loath to
file claims. Who wants to
go to a nursing home?
LTCi expanded to include among its benefits home care, assisted living,
adult day care, respite care, case management, etc., etc., the whole
claims dynamic changed. Now
everyone with a policy wants to collect all the LTC benefits they can
legitimately claim and more if they can get away with it.
More claims from more insureds, higher costs, rising premiums,
tougher sales, lower profits, a flat or declining market, and companies
exiting the business. Sound
makes the advocates of government-financed long-term care think their
experience will be any different? Certainly,
Medicaid converts from funding primarily nursing home care to primarily
home and community-based care, the welfare program--already a huge drain
on state and federal budgets--will undergo the same consequences as the
private LTCi industry.
wit, demand for Medicaid will increase when the program offers services
people want instead of nursing home care.
Medicaid estate planning will grow if it gets people home and
community-based care, and even in some states, Medicaid payments for
relatives to provide the care. Demand
for private LTC insurance and reverse mortgages--the two major private
financing alternatives for long-term care--will decline.
Why pay premiums or use your home equity if government will
provide the services previously only available to private payers?
Either Medicaid program costs will explode or long lines will
form of eligibles waiting for access to services.
Neither eventuality will please consumers or voters.
both public and private financing of long-term care are heading toward a
total meltdown. And it's
all so completely unnecessary. The
solution is obvious and easy. Well,
it's easy practically speaking if not politically.
solution is to target Medicaid-financed long-term care to people truly
in need. Stop using
Medicaid as inheritance insurance for baby-boomer heirs.
Tighten up the eligibility rules; shut down Medicaid estate
planning; enforce liens and estate recoveries.
Then take some of the savings from these measures and use them to
educate and incentivize people to purchase long-term care insurance and
to use home equity conversion.
these things and, within a decade, the long-term care financing crisis
will be resolved. Extra
private LTC financing will save the public safety net.
The elderly will get better care in the most appropriate settings
whether they pay privately or depend on public assistance.
LTC providers will thrive. Wall
Street will again offer the debt and equity capital to build, operate
and maintain the huge infrastructure we will need someday to care for
can be done. But it will
take more insight and will than most academics and public policy makers
bring to these issues and questions today.
In time, of course, demographics and fiscal reality will force
their hands. If they stay
on the present course, Medicaid and Medicare will collapse, private
insurance and reverse mortgages will explode in popularity among those
who can afford them, but the poor will suffer tremendously.
It's up to us who see what's coming to sound the warning and urge responsible changes in policy. But we're in a race against the clock and the clock's winning.