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How to Reduce Medi-Cal Expenditures and
Improve Long-Term Care I. The National Problem Medicaid (Medi-Cal in California) is a means-tested public assistance program, i.e. welfare. Yet Medicaid is the principal funding source for long-term care (LTC) throughout the United States, not only for the poor, but for most Americans. Although LTC users are only seven percent of the Medicaid population, they account for more than half of the program's costs nationally. The only way Medicaid can survive as a long-term care safety net for the poor is if more prosperous people plan responsibly and pay privately for their own long-term care. But Medicaid crowds out most private LTC financing alternatives such as home equity conversion and insurance. The trend toward greater and greater dependency on welfare-financed nursing home care is reversible. It will be reversed by responsible public policy or by default as costs skyrocket and public resources dwindle with the aging of the baby boom. II. The State Problem California spent $31 billion on Medi-Cal in 2007 of which $7.5 billion or 24.2% were LTC expenditures for older people and adults with physical disabilities, an increase of 58% since 2002. California's age 85 plus population, the cohort most likely to require LTC, was 585,000 or 1.6% in 2007, but is expected to be 1,159,000 and 2.5% in 2030, a 98% increase. Medi-Cal is the primary payer for 65% of the state's nursing home residents. Another 13% rely primarily on Medicare. Medicaid and Medicare also pay for most home health care, 75% nationally. Our best estimate is that only 6% to 9% of California's 50+ citizens own LTC insurance. Very few use home equity to fund LTC. Thus, financing Medi-Cal LTC is a large and growing strain on California's budget. Private LTC financing is minimal and shows few signs of increasing. Demographic and fiscal pressures will exacerbate these problems. Yet federal law and regulations inhibit some effective corrective actions California might take--such as tightening loose eligibility rules--and encourage other initiatives--such as "rebalancing" from institutional to home care--which may increase utilization and costs. III. Substantive Proposal California can reduce its annual Medi-Cal budget by an amount equal to 10% of current nursing home expenditures for aged and disabled recipients or $365,700,000 per year within five years. We propose to conduct a study of LTC financing in California that shows why such savings are possible and how to achieve them while improving access to quality LTC for everyone in the state. Toward that end, we will . . .
We propose to work with a representative of the Pacific Research Institute and/or the State Medi-Cal program to identify interviewees and schedule appointments. We will visit California for one week to conduct the onsite research and interviews. We will conduct other necessary research online. IV. Business Proposal Deliverables, within six weeks of project approval, will include (1) a comprehensive report (approx. 25 pages) that explains the problem of LTC financing and recommends solutions to achieve savings of at least 10% of California's Medi-Cal nursing home budget per annum; (2) one or more newspaper op-eds, and (3) an article suitable for publication in the Pacific Research Institute's journal. Stephen Moses (link to professional bio) will conduct all of the research and interviews for this project. He has conducted many similar studies over the years. Examples of his project reports are at http://www.centerltc.com/reports.htm. Respectfully submitted March 22, 2010 by Stephen A. Moses President
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