LTC Bullet:  CMS Health Expenditure Data Mask LTC Cost Growth

Friday, September 5, 2014


LTC Comment:  CMS actuaries’ estimates of health expenditures for 2013-2023 downplay the big story, snowballing LTC costs, after the ***news.***[omitted]



LTC Comment:  Once a year actuaries at the Centers for Medicare and Medicaid Services (CMS) estimate health expenditures for the coming decade.  Each year they publish an article summarizing their findings in the journal Health Affairs.  The latest version of this annual tradition was published this week:  “National Health Expenditure Projections, 2013-23: Faster Growth Expected With Expanded Coverage And Improving Economy.”  It’s available here but the journal is gated so you may only be able to access the “abstract” without a subscription.

As usual, media sources favoring the politicians currently in charge of government health policy interpreted the new data generously.  Kaiser Health News (KHN), for example, said “National health spending will increase modestly over the next decade, propelled in part by the gradual rebound of the U.S. economy and the growing ranks of Americans who became insured under the health law, government actuaries projected Wednesday.”  Yeah, right.  Thank goodness our economy is booming and ObamaCare has been a grand success. 

What if the ballooning federal debt, spending and monetary bubble bursts plummeting the economy into deep recession?  What if the Affordable Care Act delivers less than ideological wishful thinkers hope?  We get nothing from CMS or KHN on those very likely scenarios.  But some of what the CMS actuaries do report is worrisome enough.  For example:

Quote:  “Because health spending is projected to grow 1.1 percentage points faster than the average economic growth during 2013–23, the health share of the gross domestic product is expected to rise from 17.2 percent in 2012 to 19.3 percent in 2023.”  (p. 1)

LTC Comment:  19.3%! and we’re still only at the beginning of the Age Wave.  The first boomers, born in 1946, will be only 77 years old in 2023.  They won’t reach the age of greatest health and long-term care expenses (85+) for another eight years.

Quote:  “By 2023 federal, state, and local government financing is projected to account for 48 percent of national health expenditures, up from 44 percent in 2012, and to reach a total of $2.5 trillion . . .. Increases in the federal government’s share are mostly the result of expanded Medicaid eligibility, Marketplace [sic] premium and cost-sharing subsidies, and a growing gap between dedicated Medicare financing and program outlays.” (p. 9)  [Emphasis added]

LTC Comment:  With government sources picking up more health care costs and private sources responsible for less, the ominous long-term trends continue—growing entitlement mentality, moral hazard, and private sector crowd out.  These trends are even more pronounced in long-term care than in health expenditures generally, but this article almost completely ignores long-term care.  Its only explicit mention of LTC: 

Medicaid enrollment growth is expected to decelerate and stabilize at roughly 1 percent per year after 2016. Medicaid spending growth is expected to slow less rapidly, to an average of about 6.6 percent in 2017–23. This is a result of the use of expensive long-term care services by elderly and disabled Medicaid beneficiaries. (p. 7)  [Emphasis added]

The CMS actuaries focus instead on hospital services; physician and clinical services; and prescription drugs, giving each of these categories a dedicated section in the article.  Between 2013 and 2023, they are expected to increase by 78%, 75% and 77%, respectively.  Cumulatively the increase would be 77%.

But the three categories of expenditures related to long-term care—other health, residential, and personal care; home health care; and nursing care facilities and continuing care retirement communities—are expected to increase by 83%, 99%, and 74%, respectively.  Cumulatively their increase would be 83%, 6% more than the acute care services targeted in the article.  Yet the LTC categories get no special attention.  You have to search the “exhibits” to find their numbers listed in detailed tables.

Bottom line, long-term care expenses are already growing faster than expenditures for acute care services.  LTC cost growth will accelerate rapidly after 2023.  Spending for acute care services related to advanced aging will also skyrocket soon after the narrow 2013-2023 window.  CMS and its allies in the media are still fighting the last war.  By focusing only on the next decade and by largely ignoring the impact of long-term care, they disguise the biggest threat to health care costs in the future.