LTC Bullet: Medicaid LTC Data Insights
Friday, October 14, 2016
LTC Comment: What’s happening with Medicaid LTC financing and why it
matters after the ***news.*** [omitted]
LTC BULLET: MEDICAID LTC DATA INSIGHTS
LTC Comment: Truven Health Analytics’ annual report on Medicaid long-term care expenditures is the gold standard for data on that subject. Read the Executive Summary from this year’s report with our analysis interspersed of what it means for private LTC financing alternatives like LTC insurance and home equity conversion.
Following is the Executive Summary from Steve Eiken, Kate Sredl, Brian Burwell and Paul Saucier, “Medicaid Expenditures for Long-Term Services and Supports (LTSS) in FY 2014: Managed LTSS Reached 15 Percent of LTSS Spending” (Ann Arbor, MI: Truven Health Analytics, April 15, 2016). Read the full report here.
Truven: “Total federal and state Medicaid long-term services and supports (LTSS) spending was about $152 billion in federal fiscal year (FY) 2014, a 4.0 percent increase from $146 billion in FY 2013. Average annual growth in the most recent two years (FY 2013-2014) was 3.7 percent, greater than the 0.8 percent average annual growth the previous two years (FY 2011-2012). Recent spending growth remains below historical averages. From FY 1996 through FY 2010, expenditures increased by more than 5 percent per year.”
LTC Comment: The observation that Medicaid LTC expenditures have abated since the 15-year period from FY 1996 to FY 2010 is a little misleading. For example, the average U.S. GDP growth rate in that period was 4.6%, .4% less than the 5% growth rate in LTC expenditures. By comparison, the growth rate in LTC expenditures for FY 2013-2014 of 3.7%, is still just a little below the GDP growth rate of 4.2% for those years. So compared to the growth of the economy, the latest LTC expenditure rate of 3.7% is little different than the 1996-2010 rate of 5%. What matters much more is what’s likely to happen with the Medicaid LTC expenditure growth rate as the age wave crests, boomers start turning 85 (the critical threshold age for LTC) in 2031, and the Social Security/Medicare trust funds run out in the 2030s. Sometime between now and then, Medicaid will no longer be able to fund most custodial LTC and private financing alternatives like home equity conversion and private LTCI will become much bigger factors in the LTC marketplace. For more on what’s likely to happen, see our 2016 report Cassandra's Quandary: The Future of Long-Term Care.
Truven: “Expenditures for LTSS provided through managed care organizations grew more than overall Medicaid LTSS. Managed LTSS spending increased 55 percent in FY 2014, from $14.5 billion to $22.5 billion. Managed care accounted for 15 percent of LTSS spending in FY 2014. Because of ongoing challenges with collecting managed care data, not all managed care spending is included. As a result, the $22.5 billion figure is a conservative estimate. Starting in FY 2016, CMS requires states to identify an estimate of institutional and HCBS expenditures within Medicaid managed care, which will improve the availability of managed LTSS spending data.”
LTC Comment: The Obama Administration, including the Centers for Medicare and Medicaid Services, is pushing headlong into managed long-term care. They’re replacing traditional fee-for-service reimbursement with new, experimental financing schemes including bundled and value-based payments. Let’s hope for the best, but prepare for the worst. Unfortunately, every other time Medicaid has interfered with the LTC market, bad things (such as crowding out private home care and knee-capping LTC insurance) have happened. Most LTC will still be provided by nursing homes and home care companies, but now a new middle-man, the managed care company, will come between the payer (Medicaid) and the provider, which already stands between the patient and access to quality care. In every state where I’ve studied this development, LTC providers have complained vehemently that their already meager Medicaid reimbursements, often less than the cost of the care, will be further attenuated with dire consequences for care access and quality.
Truven: “The percentage of Medicaid LTSS attributable to HCBS continued to increase in Federal Fiscal Year (FY) 2014, one year after HCBS accounted for a majority of Medicaid expenditures for the first time. The percentage of total LTSS spent on home and community-based services (HCBS) increased from 51.3 percent in FY2013 to 53.1 percent in FY 2014. The shifting balance was caused by a 7.7 increase in HCBS spending, from $74.9 billion to $80.6 billion. Institutional service spending was flat, with only a 0.2 percent increase from $71.1 billion to $71.2 billion.”
LTC Comment: The good news is that nursing home expenditures have leveled off. The bad news is that HCBS expenditures are exploding. Academics and policy makers hope that over time HCBS will save money, but there is little reason to believe that. Despite the rapid transition of Medicaid financing from institutional to home-based care, aggregate LTC expenditures continue to rise worrisomely even before baby-boomers have reached the age of needing LTC.
Think about it. People want to avoid nursing homes, and they overwhelmingly prefer home care. So, as Medicaid pays for the more desirable care, more people will seek Medicaid LTC financing, including by means of Medicaid planning, i.e. artificial self-impoverishment. Without the economy of scale nursing homes provide, keeping costs down and ensuring at least minimal quality control (QC) will become far more difficult. Medicaid can’t send QC reviewers into every little adult care home as they can with nursing facilities.
Nevertheless, aging in place is highly preferable, even if it isn’t cost-effective compared to institutional care. We need to find a way to pay for HCBS even though they’re more expensive. Private LTC insurance has done that already; it pays many more claims for home care and assisted living than for nursing home care. That’s one of the reasons LTCI premiums are relatively high. Medicaid is trying to have its cake (HCBS) and eat it too (control costs). That won’t work.
Truven: “The percentage of LTSS expenditures for HCBS continued to vary across population groups. HCBS accounted for 75 percent of spending in programs targeting people with developmental disabilities, compared to 41 percent of expenditures for programs targeting other large population groups: older people or people with physical disabilities, and people with serious mental illness or serious emotional disturbance. HCBS spending for all three populations increased relative to institutional services in FY 2014, but the historical differences in HCBS spending across the groups remained.
LTC Comment: How interesting! The growth of Medicaid-financed HCBS is much higher (75%) for people with developmental disabilities than for the traditional aged, blind and disabled population adding in people with serious mental illness or serious emotional disturbance (41%). There must be something about the latter groups that makes providing for their LTC needs in the community more challenging even than providing home care for the developmentally disabled. Otherwise, state Medicaid programs would be further along in implementing the mandates of the 1999 Supreme Court Olmstead decision requiring more HCBS whenever feasible.
Truven: “New Medicaid State Plan authorities authorized in 2006 and 2010—Section 1915(i), Section 1915(j), Community First Choice (CFC), and Health Homes—continued to represent a small portion of HCBS spending (seven percent). Expenditures for these authorities decreased in FY 2014 because the March 2014 final regulations for CFC required some states to modify their CFC programs to comply with changes in the level of care eligibility standards. Spending for these new authorities is expected to increase in subsequent years as more states implement these important programs.”
LTC Comment: I’m not so sure “spending for these new authorities . . . [will] increase in subsequent years as more states implement these important programs.” Far more likely is that Medicaid funding of HCBS will hit a fiscal wall; that institutional services will continue and possibly grow again in comparison to HCBS; and that Medicaid will diminish in time from the dominant payer of LTC services to a lesser role. For my reasoning on why this is likely see LTC Bullet: How Fiscal and Monetary Malfeasance Will Ruin Long-Term Care.