LTC Bullet: Can Long-Term Care
Friday, February 21, 2014
LTC Comment: How vulnerable is our current and likely future long-term
care system to the ravages of aging demographics, unfunded entitlement
liabilities, bad economic policies, and a growing entitlement mentality?
LTC BULLET: CAN LONG-TERM CARE SURVIVE?
LTC Comment: We welcome your comments on the following draft article, on
the findings it summarizes, and on the reports it references. My thanks
to Bob Helms of the American Enterprise Institute for his helpful
“Can Long-Term Care Survive?”
Stephen A. Moses
The question policy makers and analysts usually ask is “How shall we pay
for long-term care?” It stumps them every time. Last year’s Long-Term
Commission punted on the question. The only hint of consensus is that
public and private funding must combine somehow. But how?
Maybe it’s time we ask a more basic question: Can Long-Term Care
Survive? If we don’t find a way to pay for it, what is the likelihood our
current non-system of service delivery and financing can endure the coming
age wave? If we can muddle through, all right. But what if prospects are
dim? Then how to finance LTC takes on far greater urgency.
America’s dominantly Medicaid-financed, nursing-home-based long-term care
system is in turmoil. State Medicaid programs struggle to constrain LTC
expenditures by expanding managed care and rebalancing from institutional
to home care. But total Medicaid LTC costs continue to rise and private
LTC financing continues to decline. Few people save, invest or insure to
pay for their own long-term care.
What if those trends persist? Can long-term care survive in its current
or likely future form? The answer depends on how the USA and each state
copes with the daunting problems of aging demographics, Medicaid funding,
economic growth and social policy. It bodes poorly that we already have
too many sick elderly people dependent on inadequately funded public
programs without the means to pay for their own care.
The Index of Long-Term Care Vulnerability
How can we measure the prospects for future success or failure? The
Center for Long-Term Care Reform developed an “Index of Long-Term Care
Vulnerability” as a tool to help answer that question. The Index
incorporates seven key metrics to which the analyst ascribes weights. The
Index, an Excel worksheet, automatically calculates maximum points for
each metric out of a total possible of 1000. The analyst then scores each
sub-factor under the metrics using links to data sources provided in the
Here’s how we ranked the key metrics followed by the results we obtained
for the United States and three states.
1. How many older people are coming in the next few decades? (5%, 50
2. How sick will they be? (5%, 50 points)
3. How viable is Medicaid as a long-term care payer? (15%, 150 points)
4. How reliable is federal revenue on which Medicaid mostly depends?
(20%, 200 points)
5. How reliable is state revenue on which Medicaid secondarily depends?
(20%, 200 points)
6. How much private-pay revenue is available to relieve LTC financing
Medicaid? (15%, 150 points)
7. How strong is dependency on public programs (i.e.,
the entitlement mentality)? (20%, 200 points)
You may assign different weights for each metric and different scores for
each sub-factor. Our objective with the Index was not to provide an
indisputable conclusion but rather to ask “Can LTC Survive?,” to lay out
some key issues that go into answering that question, and to provide links
to sources of data that shed light on the crucial factors and sub-factors
So far, we have applied the Index of Long-Term Care Vulnerability to the
United States and to the states of Virginia, Georgia and New Jersey. In
the following reports, you can find our analysis, a completed Index for
each of those states with footnotes to the data sources used, and a blank
Index that you can experiment with by filling it out yourself.
“The Index of Long-Term Care Vulnerability: A Case Study in Virginia”
was published in November 2013 by the
Thomas Jefferson Institute for Public Policy and the Center for
Long-Term Care Reform. It is posted on their websites
“The Index of Long-Term Care Vulnerability: A Case Study in Georgia”
was published in December 2013 by the
Georgia Public Policy Foundation and the Center for Long-Term Care
Reform. It is posted on their websites
“The Index of Long-Term Care Vulnerability: A Case Study in New Jersey”
was published in January 2014 by the
Common Sense Institute of New Jersey and the Center for Long-Term Care
Reform. It is posted on their websites
The results are not encouraging. We concluded that the United
States—scoring only 529 out of a possible 1000 points—has little more than
a 50/50 chance to sustain its long-term care system through the aging of
the baby boom generation. Virginia’s prospects (501 points) and Georgia’s
(455 points) are only slightly worse, but New Jersey’s situation (338
points) is nearly hopeless with a two-thirds probability the state’s LTC
system will fail.
How did we reach these conclusions? You will need to consult the
individual state reports and their vulnerability indices for a full
explanation. But in a nutshell, here’s how we scored each of the key
Factor #1—How many older people are coming in the next few decades?
The key metric for aging demographics is how many people over age 85—the
population cohort most likely to need long-term care—there will be in the
future. We applied a weight of 5% for a possible 50 points out of 1000
total. For the USA, 2% of the population was over 85 in 2012 with an
increase of 69% expected by 2032 and 224% by 2050. Providing long-term
care to this rapidly increasing group is a formidable challenge so we
assigned only one-third of the possible points, 17 to the USA. Virginia
begins with a smaller proportion over 85 (1.7%) but its old-old (85 plus)
cohort grows even faster through 2032 (101%) and 2050 (307%). We gave
Virginia 14 points. Georgia is comparable to Virginia. It starts at only
1.4% in 2012, but increases 121% and 375% through 2032 and 2050,
respectively. Georgia got 14 points also. New Jersey begins with a
higher percentage of old-old than the USA (2.2%), but its expected
increase is somewhat less, 58% through 2032 and 206% through 2050. So 14
points for New Jersey too. All three states face similar vulnerability
for aging demographics, just slightly more vulnerable than the USA as a
whole. Hence slightly fewer points.
Factor #2—How sick will they be?
We applied a weight of 5% (50 points) and ranked the USA and all three
states based on their percentage of people age 65-plus with disabilities
including self-care difficulty, cognitive difficulty, any disability, and
nursing facility residents with dementia. Consult the state reports for
scoring details. The totals were USA, 22; VA, 27; GA, 14; and NJ, 26. In
other words, Virginia and New Jersey’s aged populations are somewhat
healthier than the USA average, but Georgia’s elderly are markedly
Factor #3: How viable is Medicaid as a long-term care payer?
Medicaid is now and will remain for the foreseeable future the principal
payer for long-term care throughout the United States. The program’s
sustainability is critical to long-term care financing. We applied a
weight of 15% to this factor with 150 potential points. To measure
Medicaid’s sustainability in future decades, we considered (1) the percent
of budget devoted to Medicaid, (2) the percent of LTC spending for aged
and disabled recipients, (3) the increase in nursing home spending over
time, (4) the increase in Home and Community-Based Services (HCBS)
spending over time, (5) HCBS spending as a percentage of LTC spending, (6)
Federal Medical Assistance Percentage (FMAP), (7) Affordable Care Act (ACA)
Medicaid expansion or not, (8) LTC eligibility strictness, (9) Skilled
Nursing Facility (SNF) reimbursement shortfall, (10) Medicaid SNF
reimbursement rate compared to private-pay rate, (11) dual eligibles
vulnerability, (12) rebalancing vulnerability, and (13) managed care
vulnerability. Refer to the respective worksheets for detailed scoring.
Totals are USA, 97; VA, 81; GA, 114; NJ, 68.
Factor #4: How reliable is federal revenue on which Medicaid mostly
Without federal matching funds averaging 57% of their total Medicaid
expenditures, state Medicaid programs would collapse. We assigned a
weight of 20% to this factor, 200 possible points. Sub-factors considered
were (1) total Medicaid spending, (2) five year increase in spending, (3)
federal and state shares of Medicaid costs, (4) dependency on “provider
taxes,” (5) Social Security unfunded liability, (6) Medicare unfunded
liability, and (7) federal debt. Refer to the respective worksheets for
detailed scoring. Totals are USA, 89; VA, 70; GA, 71; NJ, 64.
Factor #5: How reliable is state revenue on which Medicaid secondarily
States can only draw down federal Medicaid matching funds by putting up
revenue of their own. Therefore a healthy economy is critical to the
sustainability of long-term care programs. We assigned a weight of 20% to
this factor, 200 total possible points. Sub-factors considered were (1)
ALEC-Laffer State Economic Competitive Index, (2) Forbes
Best States for Business and Careers, (3) Cato’s “Fiscal Policy Report
Card,” (4) Mercatus Center’s “Freedom in the 50 States,” (5) Tax
Foundation’s “State and Local Tax Burdens,” and (6) State Health Facts
State Budget Shortfalls. Refer to the respective worksheets for
detailed scoring. Totals are USA, 160; VA, 156; GA, 139; NJ, 55.
Factor #6: How much private-pay revenue is available to relieve LTC
financing pressure on Medicaid?
If public financing falters, long-term care viability will depend on
private resources such as savings and home equity. We assigned a weight
of 15 to this factor, 150 possible points. Sub-factors are (1) asset
spend down potential, (2) Medicaid estate recoveries, (3) home equity
conversion potential, and (4) private long-term care insurance. Refer to
the respective worksheets for detailed scoring. Totals are USA, 77; VA,
69; GA, 47; NJ, 49.
Factor #7: How strong is dependency on public programs (i.e.,
the entitlement mentality)?
To the extent citizens have come to expect government to provide their
long-term care, service delivery and financing are more vulnerable than
when people expect to take personal responsibility for funding their own
care. We assigned a weight of 20% or 200 points to this factor.
Sub-factors include (1) percentage of births financed by Medicaid, (2)
Food Stamp participation rate, (3) the degree by which welfare proceeds
exceed the minimum wage, (4) the degree to which Social Security
Disability Insurance replaces work, (5) unfunded pension liabilities, (6)
nursing facility residents dependent on Medicaid, and (7) Medicaid
recipients with prepaid burial plans that avoid spend down requirements.
Refer to the respective worksheets for detailed scoring. Totals are USA,
67; VA, 84; GA, 56; NJ, 62.
What is the bottom line?
Be scared. Be very scared about the future of long-term care financing
and services wherever you live in the USA. By our reckoning, the USA and
two of the states we reviewed in detail (Virginia and Georgia) have only
one chance in two of surviving the age wave with their LTC programs
intact. New Jersey’s prospects are even worse, about one in three.
What might a long-term care system failure look like? Exploding public
expenditures for long-term services and supports. Long-term care expenses
crowding out other critical government priorities such as education,
highways, and law enforcement. More municipalities and then states
declaring bankruptcy. Nursing homes and home health agencies closing due
to cuts in federal and state funding. Caregiver shortages caused by
inadequate wages. Plummeting quality of paid care. Excessive strain on
family and friends forced to provide even more free care than they do
now. Loss of personal savings and home equity as Medicaid and Medicare
spend less on home care and skilled nursing home care. Concomitant
reduction in retirement income and acute health care security as more
personal wealth goes into funding long-term care. Development of a
two-tier long-term care system; best for the affluent and worst for the
If you see many of these outcomes starting to happen already, you might
want to ask this next question and see if the Index of Long-Term Care
Vulnerability can help you answer it.
Can long-term care survive in my state?
How would your state score on the Index of Long-Term Care Vulnerability?
The Center for Long-Term Care Reform can review the key factors, calculate
the metrics, and give you an answer. To discuss that possibility contact
Center president Stephen Moses at 425-891-3640 or
But feel free to use the Index of Long-Term Care Vulnerability to compute
your own estimate of your state’s LTC prospects. A lot depends of course
on how you analyze the current condition of long-term care in your state,
what weights you place on each of the major metrics in the Index, and how
you score each of the sub-factors. Those choices will determine the
result and your conclusion may be very different from the one we would
So try the Index of Long-Term Care Vulnerability yourself. See what you
conclude. And please let us know your results. We’ll use your findings
to improve the current beta version of the Index.
Steve Moses is president of the Center for Long-Term Care Reform (www.centerltc.com).
Reach him at