LTC Bullet:  LTC in the USA:  Who Provides to Whom and Who Pays?

Friday, March 6, 2015


LTC Comment:  Data on long-term care providers has been very limited heretofore, especially for newer caregiving venues such as assisted living facilities and adult day care centers.  That’s changing.  Details after the ***news.***

*** LTC CLIPPING of the week:

3/5/2015, “A Portrait of Old Age in America in the Pre-Medicare Era,” by Eliza Berman, Time

Quote:  “When LIFE set out to do a four-part series on aging in America in 1959, the magazine’s agenda was abundantly clear. ‘The problem of old age,’ the introduction read, ‘has never been so vast or the solutions so inadequate.’ There were five times as many elderly Americans as there had been at the turn of the century, and 60 percent of them had an annual income of less than $1,000. Medicare was still two presidents away, and people who couldn’t live with their families or on their own were often sent to state institutions where, the story read, they ‘lie in bed or sit beside it, imprisoned by helplessness, waiting to die, yet clinging to lives of crushing emptiness.’

LTC Comment:  Long-term care, aka long-term services and supports, has come a long way, but still has a long way to go.  Click on the picture in this article to scroll through all 18. ***

*** LTC CLIPPINGS.  A very special way to team up with the Center for LTC Reform is by becoming a Premium Member and receiving a subscription to our LTC Clippings service.  National LTCI and home equity conversion expert Barbara Franklin renewed her Premium membership yesterday saying “The check is in the mail!  The clipping service definitely keeps us on the forefront of LTC knowledge.  We could not function without it.”  Find out why.  Contact Damon at 206-283-7036 or, join the Center, and/or upgrade to a Premium membership with LTC Clippings. ***

*** CENTER APPEAL:  Your Center for Long-Term Care Reform is a membership organization.  We depend on your membership contributions to carry on our public policy research and advocacy efforts.  If you get value from our LTC Bullets and LTC E-Alerts, please remember our publications are only the tip of the iceberg of our efforts to promote rational LTC financing policy and responsible LTC planning.  Check out the complete range of our individual and corporate “Membership Levels and Benefits” here.  With the political winds more at our backs now and the need to reform long-term care financing more desperate than ever before, now’s the time to join forces with us at the Center.  We’ve changed federal law for the better twice and we can do it again with your help. ***


LTC Comment:  A wealth of new data on paid long-term care providers is coming available thanks to the “National Study of Long-Term Care Providers.”  On February 24, 2015, two researchers associated with the study presented some of its major findings to the Long-Term Care Discussion Group in Washington, DC.  We’ll touch on a few of the highlights below, but you can find their PowerPoint presentation, including links to the new reports, data briefs, and state data web tables here.


1.  About 58,500 paid, regulated long-term care services providers served about 8 million people.

  • 4,800 adult day services centers had 273,200 participants enrolled on a typical day

  • 12,200 home health agencies served over 4.7 million patients annually

  • 3,700 hospices served over 1.2 million patients annually

  • 15,700 nursing homes served almost 1.4 million residents on a typical day

  • 22,200 residential care communities housed 713,300 residents on a typical day

2.  The South has the largest percentage of adult day services centers (32.4%), home health agencies (48.3%), hospices (42.4%) and nursing homes (34.5%), but the West has the most residential care communities (36.4%).

3.  Nearly all home health agencies, hospices and nursing homes (98%+) employ full time RNs, but only 59.2% of adult day centers and 46.3% of residential care communities do.

4.  Adult day centers serve the highest percentage of users under age 65 (36.5%), whereas hospices (46.8%), nursing homes (42.3%) and residential care communities (50.5%) serve the most users over age 85.

5.  The U.S. population is 80% non-Hispanic whites and the vast majority of users in all provider types except adult day centers are non-Hispanic whites (75%+).  Adult day center users are 47.3% non-Hispanic whites, 20.2% Hispanic, 16.8% non-Hispanic Blacks, and 15.7% non-Hispanic Other.

6.  Nearly half (48.5%) of nursing home residents have diagnoses of Alzheimer’s Disease and an equal number have diagnoses of depression.  The comparable numbers for residential care communities are 39.6% and 24.8%, respectively.

7.  The percentage of residential care residents whose LTC in the past 30 days was paid by Medicaid participation in 2012 was 17%, varying from 0% in Louisiana to 47% in Oregon.

8.  The percentage of adult day participants whose LTC in the past 30 days was paid by Medicaid participation in 2012 was 55%, varying from 10% in Utah to 100% in Massachusetts.

LTC Comment:  By far the most stunning finding in this new data is the expansion of Medicaid to pay for 17% of residential care residents (including board and care homes, assisted living and CCRCs) and 55% of adult day participants.  This is a scary trend as I explained in a 2004 article for Assisted Living magazine titled "The Sirens' Call, The Primrose Path, and Assisted Living."  What I said then is truer than ever now:

Be careful what you wish for . . . you may get it! That's good advice for the assisted living industry, which is sorely tempted today by the sirens' call of Medicaid funding.


When Medicaid started paying for nursing home care in 1966, reimbursement was generous and regulation was light. As costs rose, however, Medicaid officials clamped down. First, they capped bed supply with certificates of need. Then, they restricted reimbursement levels. With price and supply artificially controlled, demand skyrocketed and nursing facilities filled to 95% of capacity with mostly Medicaid residents. Providers quickly learned that when you're losing money on every customer, you can't make up for it in volume!


Gradually, the nursing home industry became a virtual public utility. Care quality suffered as Medicaid eligibility bracket creep undercut private-pay census. The government responded with increasingly onerous regulations and inspections. The plaintiff's bar piled on, extracting huge and ever-increasing court settlements. Liability insurance premiums skyrocketed leading to a dearth of affordable coverage. The end result is that we have today a welfare-financed, nursing-home-based long-term care system in the wealthiest country in the world where no one wants to be institutionalized.


In a nutshell, as an industry leader told me once, "Medicaid demands Ritz Carlton care for Motel 6 rates while imposing a regulatory Jihad." The assisted living industry should keep that in mind before accepting more Medicaid money.


There is a simple, cost-free solution to this dilemma. If Medicaid required seniors to use the $1.8 trillion of home equity they own [nearly double that today] before qualifying for public assistance, fewer people would end up on public assistance. The program could then afford to pay market rates for a wider continuum of care, including assisted living.


With reverse mortgages supplementing seniors' income, more of them could afford assisted living without help from Medicaid. More people would buy private long-term care insurance to protect their legacies. Medicaid could get back to its basic business of providing a safety net for the genuinely needy.


And the assisted living industry could avoid learning firsthand the bitter lesson: "Who pays the piper, calls the tune."

That’s my story and I’m sticking to it.  In 1970, five years after Medicaid started paying for long-term care, private pay was still 49.5% of nursing home revenues.  Medicaid paid only 23.3% and Medicare, a mere 3.5%.  In 2013, 43 years later, Medicaid covered 30.1% of nursing home costs; Medicare paid 22.2%; and private-pay had dropped to 29.4%, of which half was spend-through of Social Security benefits contributed by people already on Medicaid.  In other words, Medicaid’s low reimbursement rates, less than the cost of providing the care, now afflict nearly half of nursing home revenues.  And Medicare, on which nursing homes depend to make up some of their losses on Medicaid, is perennially on the budgetary chopping block.  See “LTC Bullet:  So What If the Government Pays for Most LTC?, 2013 Data Update.”

Instead of stanching the hemorrhage of Medicaid LTC financing by targeting the public assistance program to the needy and attracting private payers back into the LTC system, the government has tried instead to save money by rebalancing from institutional care to home and community-based care.  Under the mistaken assumption that home care is less expensive than institutional care, Medicaid has gradually evolved from mostly nursing home care to roughly half and half home and community-based care.  More and more, as the data above show, Medicaid is covering residential care facilities and adult day centers.  As its LTC costs continue to explode, Medicaid will keep doing what it has always done.  It constricts the private market for long-term care services and financing by providing inferior care choices after care is already needed and it’s too late for people to save, invest or insure.

To understand how all the pieces of LTC financing policy fit together, have a look at our “How to Fix Long-Term Care,” six briefing papers that explain how we got into the LTC mess we’re in, why Medicaid pays for most long-term care not just for the poor but for the middle class and affluent too, how rebalancing from institutional to home care inevitably increases LTC costs, a strategy to save Medicaid $30 billion per year while improving LTC access and quality, and how to shift the burden of LTC financing from Medicaid and Medicare to four under-utilized alternative sources of private LTC funding

Fit those pieces together and the puzzle picture of how to fix long-term care comes into clear focus.