Bullet: So What If the
Government Pays for Most LTC?, 2005 Data Update
Thursday, January 11, 2007
LTC Comment: Heads
up! We're about to explain
why long-term care insurance sales have disappointed, why people don't
"use their homes to stay at home" and why LTC providers who
depend on public financing are at risk.
After the really big ***news.***
*** NEW MEMBERS-ONLY FEATURE. Medicaid "spousal impoverishment" numbers change
every year with inflation. Do
you have the latest figures for 2007?
How about every change in the numbers since 1991?
The CSRA (community spouse resource allowance) that was $66,480
in 1991 is $101,640 today. The
"income cap" that was $1,221 in 1991 is $1,869 today. If you're a dues-paying member of the Center for Long-Term
Care Reform or affiliated with a corporate member of the Center, all
these numbers are at your fingertips.
Check 'em out at http://www.centerltc.com/members/medicaid_and_medicare_key_numbers.htm.
*** MEDICARE DATA.
Or how about the Medicare Part B premium? It was $36.60 in 1993, but it's $93.50 today.
And that's only if you don't have a high income!
This year, for the first time, higher income people have to pay a
higher Part B premium, as much as $161.40 per month.
So long social insurance. Hello
Medicare welfarization. (See
LTC E-Alert #6-098: Medicare
is Welfare Now Too, Wednesday, October 4, 2006, http://www.centerltc.com/members/e-alerts/ltc_ea6-098.htm.)
For all the Medicare deductible and co-insurance numbers from
1993 to 2007, go to http://www.centerltc.com/members/medicaid_and_medicare_key_numbers.htm.
*** YOU AIN'T SEEN NOTHIN' YET. Next week we'll launch "The Almanac of Long-Term
Care." This new
members-only feature will help you home in quickly and efficiently on
whatever LTC data or analysis you need whenever you need it.
Within topic areas like "Aging Demographics,"
"Long-Term Care Insurance," "Caregiving," and many
others, you'll find data summaries, article abstracts, hyperlinks to
sources, and internal links to relevant LTC Bullets and E-Alerts
that provide perspective and critical analysis.
The LTC Almanac will grow and change daily as we add new
information and incorporate more and more historical data and sources.
We hope you love the Almanac, but it's for members only! ***
*** NOT YET A MEMBER?
No worries. Contact
Damon at 206-283-7036 or firstname.lastname@example.org
or join online at http://www.centerltc.com/support/index.htm.
Do it now while individual memberships are only $150 per year or
$12.50 per month. Soon
we'll offer premium memberships at a higher cost (probably $240 per year
or $20 per month). Then,
only premium members will have access to The Zone, including "The
Almanac of Long-Term Care." In
the meantime, current members will automatically become premium members
until their annual renewal. So
take advantage of this one-time opportunity to become a premium member
of the Center for Long-Term Care Reform at the current rate for regular
membership. Renew your
current membership at the current rate for as many years as you like and
lock in your premium membership for that whole time!
More details will be coming soon on CLTCR premium memberships
including new premium-member features designed to help you become the
"go-to" person for long-term care in your locality. ***
LTC BULLET: SO
WHAT IF THE GOVERNMENT PAYS FOR MOST LTC?, 2005 DATA UPDATE
LTC Comment: Once
a year around this time the Centers for Medicare and Medicaid Services
(CMS) report health care expenditure data for the latest year of record.
Recently, CMS posted 2005 statistics on its website at http://www.cms.hhs.gov/NationalHealthExpendData/downloads/tables.pdf.
The current issue of Health
Affairs (Vol. 26, Issue 1, pps. 142-153) contains a summary and
analysis of the new data titled "National
Health Spending in 2005: The
Slowdown Continues." Registered
subscribers to Health Affairs can
access the full text of the article online at http://content.healthaffairs.org/cgi/content/abstract/26/1/142.
is our annual analysis of the new nursing home and home health care
"So What If the Government Pays for Most LTC?,
2005 Data Update"
Ever wonder why LTC insurance sales and market
penetration are so discouraging? Or
why reverse mortgages are rarely used to pay for long-term care? Or why LTC service providers are always struggling to survive
financially and still provide quality care?
America spent $121.9 billion on nursing home care
in 2005. The percentage of
nursing home costs paid by Medicaid and Medicare has gone up over the
past 35 years (from 26.8% in 1970 to 59.6% in 2005, up 32.8 % of the
total) while out-of-pocket costs have declined (from 52.0% in 1970 to
26.5% in 2005, down 25.5% of the total).
So what? The
consumer's liability for nursing home costs has declined almost by half
in the past three and a half decades, while the share paid by Medicaid
and Medicare has more than doubled.
No wonder people are not as eager to buy LTC
insurance as insurers would like them to be!
No wonder they don't use home equity for LTC when Medicaid
exempts the home. No wonder
nursing homes are struggling financially--their dependency on stingy
government reimbursements is increasing while their more profitable
private payers are disappearing.
Unfortunately, these problems are even worse than
the preceding data suggest. Over
half of the so-called "out-of-pocket" costs reported by CMS
are really just contributions toward their cost of care by people
already covered by Medicaid! These
are not out-of-pocket costs in terms of ASSET spend down, but rather
only INCOME, most of which comes from Social Security benefits, another
government program. Thus,
although Medicaid pays less than half the cost of nursing home care
(43.9% of the dollars in 2005), it covers two-thirds of all nursing home
residents. Because people
in nursing homes on Medicaid tend to be long-stayers, Medicaid pays
something toward nearly 80 percent of all patient days.
So what? Medicaid
pays in full or subsidizes four-fifths of all nursing home patient days.
If it pays even one dollar per month (with the rest contributed
from the recipient's income), the nursing home receives Medicaid's
dismally low reimbursement rate.
No wonder the public is not as worried about
nursing home costs as LTC insurers think they should be. No wonder nursing homes are facing insolvency all around the
United States when so much of their revenue comes from Medicaid, often
at reimbursement rates less than the cost of providing the care.
Don't be fooled by the 7.5% of nursing home costs
that CMS reports as having been paid by "private health
insurance" in 2005. They
derive that number by subtracting all the known costs from 100% and
reporting the remainder as private insurance.
No one knows how much private health insurance really pays toward
nursing home care, because most long-term care insurance pays
beneficiaries, not nursing homes. Thus,
a large proportion of insurance payments for nursing home care gets
reported as if it were "out-of-pocket" payments because
private payers write the checks to the nursing home but are reimbursed
by their LTC insurance policies. This
fact further inflates the out-of-pocket figure artificially.
How does all this affect assisted living
facilities? ALFs are 90%
private pay and they cost an average of $35,616 per year (Source:
MetLife survey at http://www.metlife.com/WPSAssets/19759823911162238386V1F2006AssistedLivingStudy.pdf). Many people who could afford assisted living by spending down
their illiquid wealth, especially home equity, choose instead to take
advantage of Medicaid nursing home benefits.
Medicaid exempts one home and all contiguous property (up to
$500,000 or $750,000 depending on the state), plus one business, and one
automobile of unlimited value, plus many other non-countable assets, not
to mention sophisticated asset sheltering and divestment techniques
marketed by Medicaid planning attorneys.
Income rarely interferes with Medicaid nursing home eligibility
unless such income far exceeds the cost of private nursing home care.
So what? For
most people, Medicaid nursing home benefits are easy to obtain without
spending down assets significantly and Medicaid's income contribution
requirement is usually much less expensive than paying the full cost of
No wonder ALFs are struggling to attract enough
private payers to be profitable. No
wonder people are not as eager to buy LTC insurance as insurers would
like them to be.
The situation with home health care financing is
very similar to nursing home financing.
According to CMS, America spent $47.5 billion on home health care
in 2005. Medicare (37.7%)
and Medicaid (32.6%) paid 70.3% of this total and private insurance paid
12.2%. Only 10.7% of home
health care costs were paid out of pocket.
The remainder came from several small public and private
financing sources. Data
So what? Less
than one out of every nine dollars spent on home health care comes out
of the pockets of patients and a large portion of that comes from the
income (not assets) of people already on Medicaid.
No wonder the public does not feel the sense of
urgency about this risk that long-term care insurers think they should.
line, people only buy insurance against real financial risk.
As long as they can ignore the risk, avoid the premiums, and get
government to pay for their long-term care when and if such care is
needed, they will remain in "denial" about the need for LTC
insurance. As long as
Medicaid and Medicare are paying for a huge proportion of all nursing
home and home health care costs while out-of-pocket expenditures remain
only nominal, nursing homes and home health agencies will remain starved
for financial oxygen.
solution is simple. Target
Medicaid financing of long-term care to the needy and use the savings to
fund education and tax incentives to encourage the public to plan early
to be able to pay privately for long-term care.
For ideas and recommendations on how to implement this solution,
especially "The Realist's Guide to Medicaid and Long-Term
Care" at http://www.centerltc.org/realistsguide.pdf
year in the Deficit Reduction Act, Congress took some small steps toward
addressing these problems. A
cap was placed on Medicaid's home equity exemption and several of the
more egregious Medicaid planning abuses were ended.
But much more remains to be done.
With the Age Wave starting to crest and threatening to crash over
the next three decades, we can only hope it isn't too late already.
Stephen A. Moses is president of the Center for Long-Term Care Reform in Seattle, Washington. The Center's mission is to ensure quality long-term care for all Americans. Steve Moses writes, speaks and consults throughout the United States on long-term care policy. He is the author of the study "Aging America's Achilles' Heel: Medicaid Long-Term Care," published by the Cato Institute (www.cato.org). Learn more at www.centerltc.com or email email@example.com.