LTC Bullet:  A New Revolution in Long-Term Care Financing . . . by Government

Friday, November 6, 2015


LTC Comment:  Radical, disruptive changes in how government pays for long-term care are advancing rapidly.  Background after the ***news.*** [omitted]



LTC Comment:  Huge changes in how the government pays for post-acute and long-term care are under way, building steam, and about to revolutionize LTC service delivery.  “Bundling” and “prospective payment” are on every health care bureaucrat’s lips.  The system’s transformation to “managed care,” whereby state Medicaid programs turn over responsibility for providing and paying for LTC to the highest bidders, has long been sweeping the country.  We’ve touched on that development and its likely ramifications in earlier Center publications.  There will be more to come. 

The government’s latest move toward centralized control of the LTC market is even more significant.  The Centers for Medicare and Medicaid Services (CMS) is changing the focus of long-term care financing in both of the programs for which it is responsible from paying for services (volume) to paying for value (as measured by new, vague and complicated “quality” metrics).  The new system will put care managers and providers at far greater financial risk.  Only time will tell if this shake-up improves or damages the care patients actually receive.

I am learning more about the value-based payment revolution.  I’ll be attending and speaking at a conference focused on the subject next week.  I’ll report further thereafter.  But I am already very concerned.  My speech at the conference will place the transition to value-based payment by public programs into historical context.  I will show how the new policy relates to and builds on previous government interventions in the long-term care financing market.  I will speculate on the likely consequences of the new policy.

Today’s LTC Bullet is a summary and preview of what I intend to say at the conference next week. 


“The Future of Long-Term Care Seen Through the Prism of History”
Stephen A. Moses

How did it come to pass that government is the dominant payor for long-term care?  Why does the government now perceive a need to demand value from LTC providers rather than simply paying for services or not?  What trend does this latest government intervention in LTC service delivery and financing continue?  Where is this trend likely to lead?  These are the questions my presentation will attempt to answer.

I will recount the history of long-term care financing beginning with the passage of Medicare and Medicaid in 1965.  I will show how generous public financing in the early days caused institutional specialization, public dependency on Medicaid-financed nursing home care, and exploding expenditures.  I will explain how government tried to deal with rapid cost increases by (1) capping supply with “certificates of need,” (2) suppressing price with reimbursement caps, and (3) attacking the resultant excess demand by statutorily compelling higher quality (OBRA ’87) without extra funding.

I will show how each of these measures addressed the symptom of out-of-control costs instead of the cause—easy access to public financing of long-term care after care is already needed.  I’ll explain the net effect:  a public desensitized to the real risk and cost of long-term care; the lack of private markets for home care services or long-term care insurance; the gradual disappearance of private LTC payers; and the increasing dependency of long-term care providers on generous and growing Medicare LTC funding to counterbalance inadequate Medicaid reimbursements.

I’ll cover several related themes that evolved as this basic history unfolded.  I’ll trace the government’s efforts to discourage Medicaid LTC eligibility abuse as private payers awakened to the ease of getting Medicaid.  I’ll address the seeming panacea of replacing expensive Medicaid nursing home care with ostensibly cheaper home and community-based services.  I will show how Medicare (social insurance) is giving way to means-testing (welfarization) while Medicaid has become a defacto entitlement program lacking fair or effective spend down requirements.

Finally, I will tie all these strands together to show how the latest government demands on long-term care providers are a consistent continuation of its previous interventions in the LTC service delivery and financing market.  I will speculate on the likely future of that market in the context of the age wave (demographic challenges), profligate fiscal policy (debt and unfunded entitlement liabilities), and irresponsible monetary policy (artificially low interest rates that hide public programs’ insolvency).

I’ll close on a hopeful note with a prediction that better times are ahead after we endure and weather the perfect economic storm I fear is coming.