LTC Bullet: LTC Data Manipulation

Friday, August 30, 2024 

Seattle—

LTC Comment: “Statistics don’t lie, but liars use statistics.” We explain after the ***news.***

*** 2024 LTC SURVEY. The current July/August issue of Broker World contains the 2024 Milliman Long Term Care Insurance Survey. This annual compilation of findings authored by Claude Thau, Nicole Gaspar and Chris Giese is the 26^th consecutive review of stand-alone long-term care insurance published by the magazine. Check it out here. If you don’t already subscribe, definitely do so here. ***

*** ILTCI ’25, the Inter-Company Long-Term Care Insurance Conference, to be held March 9-12, 2025 in Philadelphia, has announced that Exhibitor & Sponsor Applications for ILTCI 2025 are Now Available! (With Early Bird Pricing) Get the Exhibitor & Sponsor Prospectus and the Exhibitor & Sponsor Form now. We’ll keep you posted as more information about the big industry conference becomes available. ***

*** SO WHAT IF THE GOVERNMENT PAYS FOR MOST LTC, 2022 DATA UPDATE: Read this latest of our 20-year annual series as context for today’s LTC Bullet. ***
 

LTC BULLET: LTC DATA MANIPULATION

LTC Comment: National Health Expenditure data on long-term care (LTC) spending seem straight forward. Three NHE tables cover expenditures for Nursing Facilities and Continuing Care Retirement Communities (CCRCs) (Table 15), Home Health Care Services (Table 14) and Other Health, Residential and Personal Care Services (Table 13). Endnotes 1, 2, and 3 below describe those categories, respectively. The following table includes all these spending sources. They cover the LTC waterfront, but they need some adjustments according to KFF (Kaiser Family Foundation).

For example, in “10 Things About Long-Term Services and Supports (LTSS),” published July 8, 2024, KFF explains that it “excludes spending from certain payers.” These excluded sources include “$94 billion in Medicare spending, most of which is post-acute care, but some of which is home health spending that might be considered LTSS.” Also “excluded is spending from private insurance [$52.7 billion] because much of those expenditures are for rehabilitation and not LTSS.” Private long-term care insurance is excluded “in most cases” because it “reimburses people for the expenses they pay out-of-pocket and would be classified as out-of-pocket spending in the NHE data.”

Backing out those sources has the effect of reducing total LTC spending in 2022 from the $571 billion NHE total in the table to KFF’s $415 billion. Let’s ask two questions. First, is there a rationale for leaving those sources in the total instead of excluding them? Yes. Take Medicare’s $94 billion for example. Of course Medicare doesn’t pay for LTC, but it is critical to America’s LTC financing system. LTC providers are heavily dependent on Medicaid which pays them 70 percent of private-pay rates and often less than the cost of providing the care. They survive financially only because Medicare pays more generously for a much smaller number of sub-acute and rehab patients. Remove Medicare’s $94 billion and the whole financing system collapses. To see the complete LTC financing picture accurately, Medicare must be included.

What about private insurance, including LTC insurance? True, some health insurance benefits, such as major medical coverage, go for rehabilitation, not LTC. But as in the case of Medicare, those payments help sustain a rickety LTC service delivery system, so they should not be excluded. For private LTC insurance specifically, isn’t it interesting that it gets lumped in the “out-of-pocket” bucket. Why might that be? That brings us to our second question.

Why do analysts and policymakers define LTC spending in some ways and not in others? What effect do the exclusions just described have on the big picture of LTC spending? Backing out Medicare and private insurance raises Medicaid’s contribution to total LTC costs from 44.6 percent in the table to the 61 percent KFF reports. It increases out-of-pocket spending from 12.5 percent in the table to KFF’s 17 percent. In other words, these exclusions make Medicaid and out-of-pocket expenditures appear much higher. Giving that impression supports a specific policy agenda, what I’ve called the LTC Narrative. Specifically, that narrative is that LTC costs are impoverishing people all across America and driving up Medicaid expenditures excessively which is why we need a new, compulsory, payroll-funded LTC entitlement program.

KFF isn’t the only group pushing that agenda by tinkering with the data. In 2011, the Centers for Medicare and Medicaid Services (CMS) changed the definition of NHE categories to combine CCRCs with nursing homes. That created an apples/oranges problem. Nursing homes rely mostly on Medicaid and have few private payers. CCRC’s include mostly private payers for independent and assisted living. They have fewer nursing home residents and very little Medicaid. So this definitional change had the effect of dropping Medicaid’s share of spending for the category from over 40 percent in 2008 to under one-third (32.8 percent) in 2009. Back then, cutting costs was a priority. Likewise, this change drove out-of-pocket expenditures up to over one-quarter, below what they would be for CCRCs but far above what they would be for nursing homes. Making out-of-pocket expenditures look high supports the narrative of widespread catastrophic spend down and the demand for more government funding and regulation.

The table below gives a more accurate rendering of the LTC financing landscape. It shows that when we leave in the funding sources KFF excludes, out-of-pocket costs clock in at only 12.5 percent. But that figure still overstates the impact of out-of-pocket LTC funding. Half of it is spend down of income, mostly from Medicaid recipients’ Social Security benefits. Only half, or about six percent, could come from savings. The vast majority of all LTC financing comes from third-party payors, mostly government. Out-of-pocket costs are nominal despite the widespread belief that Medicaid requires impoverishment and families across the country are being devastated by LTC costs. That lie is the real reason most people don’t think about or plan for LTC and end up on public assistance. It is no reason to compound the error of relying too heavily on government funding and regulation by adding more of the same with a big new entitlement program.

There is much more to this story. To understand what is really wrong with LTC and what needs to be done to fix it, read the Paragon Health Institute’s “Long-Term Care: The Problem” and “Long-Term Care: The Solution,” watch this “virtual LTC event” featuring age wave visionary Ken Dychtwald and leading LTC researchers and check out “Medicaid's $100+ Billion Leak.”

Source: National Health Expenditures*   

* Note that CMS changed the definition of National Health Expenditure Accounts (NHEA) categories in 2011, adding for example Continuing Care Retirement Communities (CCRCs) to Nursing Care Facilities. This change had the effect of reducing Medicaid's reported contribution to the cost of nursing home care from over 40% in 2008 to under one-third (32.8%) in 2009. CMS also created a new category called "Other Third Party Payers" (7.1%) which includes "worksite health care, other private revenues, Indian Health Service, workers' compensation, general assistance, maternal and child health, vocational rehabilitation, other federal programs, Substance Abuse and Mental Health Services Administration, other state and local programs, and school health." For definitions of all NHEA categories, see http://www.cms.gov/NationalHealthExpendData/downloads/quickref.pdf.