LTC Bullet:  LTC Wake-Up Call

Friday, August 7, 2015

Seattle—

LTC Comment:  What can aging demographics tell us about likely future Medicaid LTC expenditures?  Answers after the ***news.***

*** 2016 ILTCI CONFERENCE:  The 16th Annual Intercompany LTCI Conference will convene at The Grand Hyatt in San Antonio, Texas March 13th to 16^th, 2016.  Mark your calendars and be there if you can.  Professional meetings don’t get any better than this one.  In case you’re considering sponsoring or exhibiting, conference organizers report “Please review the Promotional Opportunity Guide, Application and Exhibit Hall rules.  The conference is offering substantial discounts for signing up by Monday, September 14^th.”  You can find an “Exhibitor & Sponsor Application” and “Exhibitor & Sponsor Options” at these links.***

*** PHYLLIS SHELTON REPORTS on her 5th webinar covering “My Favorite Linked Benefit Products and How Not to Sell Them” here.  Get the details on this session and consider subscribing to her series of webinars at the bottom of the link. ***

*** CLTCR Premium Membership  --  Center for Long-Term Care Reform premium members receive our full suite of individual membership benefits including:  our LTC Bullets and E-Alerts; access to our Members-Only Zone website and Almanac of Long-Term Care; subscription to our Clipping Service; and email/phone access to Steve Moses for 24-hour turnaround queries.  Our Premium Membership is designed to give you a competitive advantage in your long-term care profession. Your increased knowledge of the critical issues and challenges we face in the field of long-term care service delivery and financing equals improved professional success for you and better LTC services for your clients and for those who have no choice but to rely on scarce public resources.  Premium Membership is $250 per year, paid up front or monthly by automatically recurring credit card payments.  Contact Damon at 206-283-7036 / damon@centerltc.com to start your Premium Membership immediately or go directly to our secure online subscription page and sign up for as little as $21 per month. ***

LTC BULLET:  LTC WAKE-UP CALL

LTC Comment:  Recent LTC Bullets have focused on academics’ and policy-makers’ complacency about unusually small health and long-term care expenditure increases over the past few years.  See LTC Bullet:  Cassandra’s Quandary (7/17/15) and LTC Bullet:  Pandora Meets Rosy Scenario in CMS Projections (8/1/15).

Everyone seems to agree that the recent moderate medical inflation will not continue indefinitely.  But few people in a position to do something about it appear to be taking full cognizance of the potential risk and cost.  Just as consumers are enabled to be in denial about long-term care because government has indemnified them against most catastrophic LTC costs over the years, so public officials and too many of the experts who advise them have allowed mild health and LTC inflation recently to dull their level of concern about the future.

Let’s get specific.  I’m working on a study of Medicaid and long-term care financing in New Hampshire.  The Granite State is interesting on this topic for many reasons.  It has a lot of old people already and its over-65 and over-85 cohorts are growing faster than they are in most other states.  New Hampshire is also suffering from a “birth dearth” with declining rates of child-bearing and in-migration suggesting a future shortage of workers, including LTC caregivers.  As elsewhere, Medicaid strains the state budget already despite notoriously low reimbursement rates for providers.  And, of course, being the first-in-the-nation presidential primary state, New Hampshire offers a unique opportunity to push hard questions about Medicaid and LTC financing into the faces of an unusually large number of presidential candidates this year.

So, given New Hampshire’s vulnerability to LTC risk and cost, why aren’t thought-leaders and decision-makers in the “live free or die state” more concerned?  I think a decade of relatively tame Medicaid LTC expenditure increases has desensitized them.  For example, from 2005 to 2014 New Hampshire’s Medicaid long-term care expenditures for the elderly in . . .

• Nursing Homes only increased from $174,491,000 to $192,854,000 or 10.5%.

• Home Nursing Services (Choices for Independence Waiver) increased more rapidly from $26,086,000 to $43,512,000 or 66.8%, but these services help recipients stay out of a nursing home and in their own homes at less cost, so they’re presumed to explain the low inflation in nursing home expenditures.

• Likewise Mid-Level Care (Choices for Independence Waiver, AKA residential care or assisted living) grew from $1,497,000 to $9,327,000 or 523.0%, but again this increase is considered to be in lieu of higher institutional costs.

• Medical Services to support home care declined from $50,536,000 to $36,052,000, a 28.7% decrease, but they have leveled out around $36,000.

• Total Medicaid LTC expenditures for the elderly increased from $252,610,000 in 2005 to $281,745,000 in 2014, an increase of only 11.5% over a ten-year period!

Together, these LTC expenditure data convey a message that rebalancing from institutional to home and community-based care is working to keep overall cost increases moderate.  For the sake of argument, let’s assume that this is true and that over time nursing home costs will continue to increase only slowly while increases in home care costs will moderate some, other factors remaining equal.  Should that give us peace of mind about the future?

No!  Because other factors will decidedly not remain the same.  For now, never mind the potential inflation in the market price of all levels of long-term care services.  Set aside any concerns about the financial viability of Medicaid or the risk of another national economic downturn.  Let’s look only at the predictable growth of the elderly population in New Hampshire.  This is not speculation.  Most of the baby boomers in the state who will need long-term care in the future are already there.  Of course, some will move out but demographers predict the future holds more, many more, not fewer aged people in New Hampshire.  What’s the potential impact?

We draw on AARP’s “Across the States—2012” publication for these estimates of aging in New Hampshire.[1]  The “Appendix” below lays out more details.  But here are the highlights . . .

Nursing Homes

• Nursing homes cost New Hampshire Medicaid $145 per state resident; $979 per resident over age 65; and $6,888 per resident over age 85 for a total of $192,854,000 in 2014

• Taking into account only growth in the aging population, nursing homes will cost New Hampshire Medicaid . . .

  • $364,171,000 in 2032, an 88.8% increase and $392,980,000 in 2050, a 103.8% increase based on age 65-plus growth from 197,000 in 2012 to 372,000 in 2032 and 401,000 in 2050

  • $344,382,000 in 2032, a 78.6% increase and $716,560,000 in 2050, a 271.6% increase based on age 85-plus growth from 28,000 in 2012 to 50,000 in 2032 and 104,000 in 2050

Home Nursing Services (Choices for Independence Waiver)

• Home Nursing Services cost New Hampshire Medicaid $32.79 per state resident; $221 per resident over age 65; and $1,554 per resident over age 85 for a total of $43,512,000 in 2014

• Taking into account only growth in the aging population, home nursing services  will cost New Hampshire Medicaid . . .

  • $82,163,640 in 2032 and $88,568,870 in 2050 based on age 65-plus growth

  • $77,700,000 in 2032 and $161,616,000 in 2050 based on age 85-plus growth

Mid-Level Care (Choices for Independence Waiver)

• Mid-Level Care (assisted living) costs New Hampshire Medicaid $7.03 per state resident; $47.35 per resident over age 65; and $333.11 per resident over age 85 for a total of $9,327,000 in 2014.

• Taking into account only growth in the aging population, mid-level care will cost New Hampshire Medicaid . . .

  • $17,612,406 in 2032 and $18,987,350 in 2050 based on age 65-plus growth

  • $16,655,357 in 2032 and $34,643,440 in 2050 based on age 85-plus growth 

Medical Services

• Medical Services for home care recipients cost New Hampshire Medicaid $27.17 per state resident; $183.00 per resident over age 65; and $1,287.57 per resident over age 85 for a total of $36,052,000 in 2014.

• Taking into account only growth in the aging population, medical services will cost New Hampshire Medicaid . . .

  • $68,076,000 in 2032 and $73,383,000 in 2050 based on age 65-plus growth

  • $64,378,571 in 2032 and $133,907,280 in 2050 based on age 85-plus growth

Total Medicaid Long-Term Care for the Elderly

• Nursing homes plus home nursing plus mid-level plus medical services:  $281,745,000 as of 2014

• Taking into account only growth in the aging population, total long-term care for the elderly will cost New Hampshire Medicaid . . .

  • $531,934,560 in 2032 and $574,196,310 in 2050 based on age 65-plus growth

  • $503,196,570 in 2032 and $1,046,964,420 based on age 85-plus growth

LTC Comment:  It is interesting to note how the estimate of growth in expenditures through 2032 is higher based on age 65+ population growth than it is based on age 85+ population growth.  Even more remarkable is that costs would increase only slightly between 2032 and 2050 based on growth in the 65+ population (from $532 million to $574 million) whereas they skyrocket (from $503 million in 2032 to over $1 billion) based on growth in the 85+ population.  That’s true because the age 85+ population growth is expected to accelerate considerably between 2032 and 2050 growing from 3.2 percent of the population to 5.9 percent.  But in the same period, the percentage of the population aged 65+ decreases from 8.0 percent to 7.4 percent.  For the same reason, and because 85 is the age at which the incidence of dementia begins to spike causing the highest long-term care expenses, the growth in the 85-plus population is probably the better factor to consider in estimating likely future costs.

Bottom line, the take away from this analysis is that other things being equal New Hampshire’s Medicaid long-term care expenditures may nearly quadruple over the next 35 years to more than one billion dollars based on nothing other than highly predictable increases in the “old-old” (85+) population.

Ceteris Non Paribus

Unfortunately, other things are never equal.  Much more than aging demographics goes into reasonably predicting future Medicaid LTC expenditures.  In our report titled “Apply the LTC Vulnerability Index to Your State:  The New Hampshire Example,” we identified six additional critical factors:

• Morbidity or how sick future aged cohorts will be

• Medicaid viability as a long-term care payer

• Reliability of federal revenue to fund Medicaid LTC

• Reliability of state revenue to fund Medicaid LTC

• Potential of currently untapped private LTC payment sources

• Deleterious impact of growing dependency on public programs (Entitlement Mentality)

Our forthcoming report on Medicaid and long-term care financing in New Hampshire will expand on all of these factors and integrate them into a reasonable prognostication of what the state can expect to happen going forward.  We’ll also have some recommendations for state and federal policy changes to correct the dangerous course New Hampshire and the country are pursuing currently.  So, stay tuned.

Appendix[2]

New Hampshire population:  1,326,813[3]

Nursing Homes

From 2005 to 2014:  Nursing homes $174,491,000 to $192,854,000 or 10.5% increase.  As of 2014:  $145.35 per state resident;

$978.95 per 197,000 age 65+ in 2012; 372,000 age 65+ in 2032 without inflation = $364,171,000 or 88.8% increase; 401,000 age 65+ in 2050 without inflation = $392,980,000 or 103.8% increase;

$6,887.64 per 28,000 age 85+ in 2012; 50,000 85+ in 2032 without inflation = $344,382,000 or 78.6% increase; 104,000 85+ in 2050 without inflation = $716,560,000 or 271.6% increase

Home Nursing Services

From 2005 to 2014:  Home Nursing Services $26,086,000 to $43,512,000 or 66.8% increase.  As of 2014:  $32.79 per state resident;

$220.87 per 197,000 age 65+ in 2012; 372,000 age 65+ in 2032 without inflation = $82,163,640 or 88.8% increase; 401,000 age 65+ in 2050 without inflation = $88,568,870 or 103.6% increase;

$1,554 per 28,000 age 85+ in 2012; 50,000 age 85+ in 2032 without inflation = $77,700,000 or 78.6%; 104,000 age 85+ in 2050 without inflation = $161,616,000 or 271.4% increase

Mid-Level Care

From 2005 to 2014:  Mid-Level Care $1,497,000 to $ 9,327,000 or 523.0% increase.  As of 2014:  $7.03 per state resident;

$47.35 per 197,000 age 65+ in 2012; 372,000 age 65+ in 2032 without inflation = $17,612,406 or 88.8% increase; 401,000 age 65+ in 2050 without inflation = $18,987,350 or 103.6% increase;

$333.11 per 28,000 age 85+ in 2012; 50,000 age 85+ in 2032 without inflation = $16,655.357 or 78.6%; 104,000 age 85+ in 2050 without inflation = $34,643,440 or 271.4% increase

Medical Services

From 2005 to 2014:  Medical Services $50,536,000 to $36,052,000 or 28.7% decrease, but has leveled out around $36,000.  As of 2014:  $27.17 per state resident;

$183.00 per 197,000 age 65+ in 2012; 372,000 age 65+ in 2032 without inflation = $68,076,000 or 88.8% increase; 401,000 age 65+ in 2050 without inflation = $73,383,000 or 103.6% increase;

$1,287.57 per 28,000 age 85+ in 2012; 50,000 age 85+ in 2032 without inflation = $64,378,571 or 78.6%; 104,000 age 85+ in 2050 without inflation = $133,907,280 or 271.4% increase