LTC Bullet:  New Tool to Analyze LTC Spending Data

Friday, April 3, 2015

Seattle—

LTC Comment:  If you’re a data junkie, don’t read today’s LTC Bullet until you have plenty of free time to play with this great new analytical tool, after the ***news.***

*** AGENT REVIEW live:  Corporation for LTC Certification founder Harley Gordon and “3 in 4 Need More” marketing star Jonas Roeser have launched a new venture.  Check it (and them) out on YouTube here and here.  We wish these long-time staunch supporters of the Center all the best for a successful enterprise. ***

*** JESSE SLOME, AALTCI and the National Underwriter Life & Health Network have announced their plans to produce a free live online broadcast from the 2015 National Long Term Care Solutions Sales Summit on October 27, 2015 in Washington, DC.  Underwriting the venture are four major LTC insurance carriers:  Genworth, Transamerica, Nationwide and John Hancock.  Pre-registration for the live broadcast is required.  For information and to sign up, go to www.InsuranceExpos.com. ***

*** HAPPY BIRTHDAY TO THE CENTER:  The Center for Long-Term Care Reform turned 17 years old on April 1.  No foolin’. ***

 

LTC BULLET:  NEW TOOL TO ANALYZE LTC SPENDING DATA

LTC Comment:  The Kaiser Family Foundation just published “New Interactive Tool Allows Users to Explore Trends in US Health Spending and Share Custom-Made Charts.”  Check out a tutorial on their new “Health Spending Explorer” here.  Find a .pdf defining each of the type-of-expenditure and source-of-fund categories used in the new tool here.  Now, open the Health Spending Explorer and let’s play.

Nursing Home Expenditures Analyzed

Say we want to know what’s happened to the cost of nursing home care since 1960.  Choose the service type “Nursing Care.”  Pick “All Sources of Funds.”  Select a “Custom Range” of 1960 to 2013.  Specify “U.S. $ Billions—Inflation Adjusted.”  Voila!  You have a graph and a chart showing nursing home expenditures year by year in 2013 dollars from $5 billion in 1960 to $155.8 billion in 2013 (a 31-fold increase compared to an 8-fold increase from currency inflation alone).

OK, cool, but who exactly is putting up the bucks to pay for nursing home care?  Click on “Trends by Source of Funds.”  Pick Health Insurance, Medicaid, Medicare, Private Health Insurance and Out­-of-Pocket under “Source of Funds.”  Change your “Custom Range” to 1970 through 2013, because Medicaid and Medicare were only ramping up between 1965 and 1970.  Bingo.  You have a new graph and chart showing the contribution of each of these funding sources to the cost of nursing home care.

A couple things jump right out at you.  Total health insurance—including Medicaid, Medicare and Private Health Insurance—has exploded from $5 billion in 1970 to $98.5 in 2013 (20-fold).  What about the components of total health insurance?  Medicaid jumped from $4.5B to $46.9B (ten-fold); Medicare from $.69B to $34.6B (50-fold); and Private Health Insurance from $.04B to $12.6B (315-fold!).  But what happened to Out-of-Pocket expenditures in this period?  They increased from $9.6B to $45.8B (only 5-fold).  Obviously public and private insurance has gobbled up most of the cost of nursing home care over the past four decades.

Nuances the Data Don’t Show

Unfortunately, these numbers don’t tell us everything we need to know to understand what’s been happening with nursing home funding.  For example, what the National Health Expenditure data refer to as “out-of-pocket” expenditures actually includes contributions to their cost of care by people already on Medicaid.  Much of that amount is their income from Social Security—not asset spend down. 

Why does this matter?  Once someone is on Medicaid, the nursing home provider receives Medicaid’s dismally low reimbursement rate even if the resident’s bill is paid entirely from his or her Social Security benefits without the state or federal Medicaid program contributing anything.  Roughly half of the so-called out-of-pocket expenditures come from this source.  Given Social Security’s huge ($25 trillion) unfunded liabilities and long-term fiscal vulnerability, relying so heavily on this source to fund nursing home care creates serious, and not-commonly-recognized financial risk for LTC funders and providers.

Home Health Care Expenditures Analyzed

All right, but these days everyone knows the future of custodial long-term care lies with home and community-based services, not with nursing homes.  So, let’s use the new data analysis tool to examine home care expenditures.

Here we need to look at two different categories:

Home Health:  “Covers medical care provided in the home by freestanding home health agencies (HHAs). Medical equipment sales or rentals not billed through HHAs and non-medical types of home care (e.g., Meals on Wheels, choreworker services, friendly visits, or other custodial services) are excluded.”

Other Health and Residential:  “This category includes spending for Medicaid home and community based waivers, care provided in residential care facilities, ambulance services, school health and worksite health care. Generally these programs provide payments for services in non-traditional settings such as community centers, senior citizens centers, schools, and military field stations.”

Let’s start with Home Health.  Total health insurance coverage for home health increased from $.40B in 1970 to $70.9B in 2013 (177-fold).  Considering the components of health insurance:  Medicaid increased from $.o7B to $29.1B (416-fold); Medicare, from $.28B to $34.4B (123-fold); Private Health Insurance, from $.03B to $6.3B (210-fold).  So, what happened to out-of-pocket expenditures for home health care between 1970 and 2013?  Up from $.10B to $6.4B (64-fold).  Once again public and private insurance increased far more than out of pocket costs for home health care:  177-fold compared to 64-fold.  This matters because it shows that consumers are far less at risk for home care expenditures now than they were in 1970.  Inasmuch as consumers only insure for real risk, this explains why private insurance plays such a small role in financing home health care compared to public health insurance (Medicaid and Medicare).  The more government pays for, the less risk consumers take responsibility for insuring against.

Now consider Other Health and Residential services.

Total health insurance coverage for Other Health and Residential increased from $1.4B in 1970 to $98.7B in 2013 (71-fold).  Considering the components of health insurance for Other Health and Residential services:  Medicaid increased from $.65B to $82.6B (127-fold); Medicare, from $.09B to $5.1B (57-fold); Private Health Insurance, from $.32B to $6.6B (21-fold).  So, what happened to out-of-pocket expenditures for Other Health and Residential services between 1970 and 2013?  Up from $.80B to $7.7B (only 10-fold).  Once again public and private insurance increased far more than out of pocket costs for home health care:  71-fold compared to 10-fold.  This matters because it shows that consumers are far less at risk for Other Health and Residential services expenditures now than they were in 1970.  Inasmuch as consumers only insure for real risk, this explains why private insurance plays such a small role in financing Other Health and Residential services compared to public health insurance (Medicaid and Medicare).  The more government pays for, the less risk consumers take responsibility for insuring against.

Are There Savings from Rebalancing?

Supposedly home care costs much less than institutional long-term care.  That seems to make sense intuitively.  Researchers love to quote daily home care costs at a fraction of assisted living or nursing home expenditures per day.  But the issue is more complicated.

At $20 per hour, home care is cheaper than nursing home care, $212 per day, until it isn’t—that threshold comes at 11 hours per day.  Who takes care of Mom overnight?

Another consideration is the economy of scale that comes from treating larger numbers of residents in one institutional location.

How about the cost of ensuring care quality?  It’s much less expensive to send a team of quality-control reviewers into a nursing home or assisted living facility than to mobilize them to visit dozens of small board and care homes or private residences. 

Research shows that home care delays, but does not necessarily replace institutional long-term care.  Money apparently saved by deinstitutionalizing able-bodied elderly may be spent, and then some more, on nursing home care later on.

Research indicates that people want to receive their care at home and that they thrive when they do.  At home, they tend to live longer and die slower.  That’s a good thing, but it does not save money.

So what does the new data analyzer tell us about the overall cost of long-term care after a decade of intense efforts to rebalance from institutional to home and community-based care?

Medicaid inflation-adjusted Nursing Care expenditures only increased from $46.3B in 2003 to $46.9B in 2013.  Wow!  Success, right?

Not so fast.  Medicaid’s Home Health expenditures rose from $14.1B to $29.1B (106%) and Medicaid’s expenditures for Other Health and Residential services jumped from $52.7B to $82.6B (57%).

Overall, between 2003 and 2013, total Medicaid long-term care expenditures increased from $113.1B to $158.6B (40%).  That’s half the pace between 1993 ($51.4B) and 2003 ($92.3B) or 80%, but hardly the dramatic reduction in total expenditures anticipated by the advocates of rebalancing.

Conclusion

Our analysis is the same for Nursing Care, Home Health and Other Health and Residential expenditures.  Heavy intercession by public payers has crowded out both private out-of-pocket expenditures and private health insurance funding for all long-term care services.  The result is a fiscal disaster waiting to happen.

Social Security benefits of Medicaid recipients fund half the out-of-pocket expenditures for long-term care, but Social Security faces a $25 trillion infinite-horizon unfunded liability.  Who will make up the difference if Social Security defaults?

Medicare is a heavy contributor to all forms of long-term care.  Its relatively generous reimbursement levels help LTC providers make up for impecunious Medicaid reimbursements that are less than the cost of providing the care.  But Medicare faces a $43 trillion unfunded liability.

No one knows what Medicaid’s unfunded liability is.  Yet, we’re working on that.  But abundant peer-reviewed research verifies that easy access to Medicaid-financed long-term care after the insurable event has occurred benefits the affluent as much as the poor and diminishes the market for private long-term care insurance.

Put all these factors together, which is easier than ever to do thanks to the new analytical tool we’ve highlighted today, and you get a miserable prognosis for long-term care financing and service delivery.  Just as the bulging baby boom generation approaches the need.