 LTC Bullet: So What If the Government Pays for Most LTC, 2022 Data Update Friday, January 5, 2024 Seattle-- LTC Comment: Heads up! We're about to explain why long-term care insurance sales have disappointed, why people don't "use their homes to stay at home" and why LTC providers who depend on public financing are at risk. Details after the ***news.***
*** VIRTUAL LTC EVENT on January 9, 2024: Register now for this timely, provocative discussion sponsored by the Paragon Health Institute. Steve Moses will present findings from two Paragon papers: “Long-Term Care: The Problem” and “Long-Term Care: The Solution.” Responding will be Richard W. Johnson, Senior Fellow and Director of the Program on Retirement Policy at the Urban Institute and Mark J. Warshawsky, Senior Fellow at the American Enterprise Institute and Former Deputy Commissioner for Retirement and Disability Policy at the Social Security Administration. Ken Dychtwald, Ph.D., Founder and CEO of Age Wave will moderate the discussion and Q&A. Brian C. Blase, Ph.D., President of Paragon Health Institute hosts and oversees the event. Please forward today’s LTC Bullet and this invitation to everyone you think might be interested. Thanks. See you on the Zoom screen January 9. *** *** ILTCI KEYNOTER announced: Maria C. Carrillo, Ph.D., Chief Science Officer of the Alzheimer's Association, will deliver the keynote address at the 2024 Inter-Company Long-Term Care Insurance Conference in San Diego. Register now for the March 17-20, 2024 meeting at the Town and Country Resort. Early bird registration discounts end January 18, so act soon to save $100. ***
LTC BULLET: SO WHAT IF THE GOVERNMENT PAYS FOR MOST LTC, 2022 DATA UPDATE LTC Comment: Once a year around this time the Centers for Medicare and Medicaid Services (CMS) report health care expenditure data for the latest year of record. Recently, CMS posted 2022 statistics on its website here. Click on this link NHE Tables (ZIP) to download the tables, unzip them, and then click on the data tables of interest, Tables 13, 14 and 15 for our purposes here. Health Affairs has published a summary and analysis of this new data titled “National Health Care Spending In 2022: Growth Similar To Prepandemic Rates." The article is “open access” so available free here. Unfortunately, the Health Affairs article has little to say about long-term care, so read on to get that story. Following is our annual analysis of the latest long-term care expenditure data. Note that we added Table 13, “Other Health, Residential, and Personal Care Expenditures,” to our analysis this year. We focused only on nursing home* and home health expenditures before. Heads Up: This may be the most important LTC Bullet we publish all year. It is the twenty-second in a row we’ve done annually to analyze the federal government’s enormous, and we argue, often detrimental, impact on long-term care financing. If you'd like to see the earlier versions, go here and search for “So What if the Government Pays.” You’ll find our yearly analyses of the data going all the way back to "So What If the Government Pays for Most LTC, 2002 Data Update." ------------------ "So What If the Government Pays for
Most LTC, 2022 Data Update" Ever wonder why LTC insurance sales and market penetration are so discouraging? Or why reverse mortgages are rarely used to pay for long-term care? Or why LTC service providers are always struggling to survive financially and still provide quality care? Read on. Nursing Homes America spent $191.3 billion on nursing facilities and continuing care retirement communities in 2022, a 5.6% increase compared to 2021. The percentage of these costs paid by Medicaid and Medicare has gone up over the past half century (from 26.8% in 1970 to 52.7% in 2022, up 25.9 % of the total) while out-of-pocket costs have declined in the same period (from 49.2% in 1970 to 25.2% in 2022, down 24.0% of the total). Source: Table 15: Nursing Care Facilities and Continuing Care Retirement Communities Expenditures; Levels, Percent Change, and Percent Distribution, by Source of Funds: Selected Calendar Years 1970-2022. So What? Consumers' liability for nursing home and CCRC costs has declined by over half, down 51.2% in the past five decades while the share paid by Medicaid and Medicare has nearly doubled, up 96.6%. No wonder people are not as eager to buy LTC insurance as they would be if they were more at risk for the cost of their care! No wonder they don't use home equity for LTC when Medicaid exempts at least $713,000 and in some states up to $1,071,000 of home equity (as of 1/1/24). No wonder nursing homes struggle financially—their dependency on parsimonious government reimbursements is increasing while their more profitable private payers are disappearing. Unfortunately, these problems are even worse than the preceding data suggest. Over half of the so-called "out-of-pocket" costs reported by CMS are really just contributions toward their cost of care by people already covered by Medicaid. These are not out-of-pocket costs in terms of ASSET spend down, but rather only INCOME, most of which comes from Social Security benefits, another financially struggling government program. Thus, although Medicaid pays less than one-third of the cost of nursing home (and CCRC) care (30.6% of the dollars in 2022), it covers nearly two-thirds (65.1%) of all nursing home patient days. So What? Medicaid pays in full or subsidizes nearly two-thirds of all nursing home patient days. Even if Medicaid pays nothing, with the entire amount due contributed from the recipient's income, the nursing home receives Medicaid's dismally low reimbursement rate. No wonder the public is not as worried about nursing home costs as they would be if they were more at risk for the cost of their care. No wonder nursing homes risk insolvency when so much of their revenue comes from Medicaid, often at reimbursement rates less than the cost of providing the care. “Medicaid, the primary payer for nursing homes, covers more than 60 percent of all nursing home residents and approximately 50 percent of costs for long term care services. Medicaid reimbursements, on the other hand, only cover 70 to 80 percent of the actual cost of care.” (Source: AHCA/NCAL, “Financial Challenges Continue To Affect Nursing Homes, Emphasizing Need For Higher Medicaid Reimbursement Rates,” October 14, 2020) Private Health Insurance Don't be fooled by the 9.5% of nursing home costs that CMS reports as having been paid by "private health insurance" in 2022. That category does not include private long-term care insurance. (See category definitions here.) No one knows how much LTC insurance pays toward nursing home care, because many LTCI policies pay beneficiaries who then pay the providers. Thus, a large proportion of insurance payments for nursing home care gets reported as if it were "out-of-pocket" payments. This fact further inflates the out-of-pocket figure artificially. Assisted Living How does all this affect assisted living facilities? According to the Genworth Cost of Care Survey for 2021, ALFs cost an average of $54,000 per year, up 4.7% from 2020. Although assisted living facilities remain mostly private pay, “61% of ALFs are Medicaid certified” and only “a small minority of state Medicaid programs do not cover services in assisted living.” (Find these quotes under the source’s “Finance” tab.) Over time assisted living facilities have followed nursing homes down the primrose path of accepting more and more revenue from Medicaid. Many people who could afford assisted living by spending down their illiquid wealth, especially home equity, choose instead to take advantage of Medicaid nursing home benefits. Medicaid exempts one home and all contiguous property (up to $713,000 or $1,071,000 depending on the state), plus—in unlimited dollar amounts—one business, one automobile, prepaid burials, term life insurance, personal belongings and Individual Retirement Accounts not to mention wealth protected by sophisticated asset sheltering and divestment techniques marketed by Medicaid planning attorneys. Income rarely interferes with Medicaid nursing home eligibility unless such income exceeds the cost of private nursing home care. So What? For most people, Medicaid nursing home benefits are easy to obtain without spending down assets significantly and Medicaid's income contribution requirement is usually much less expensive than paying the full cost of assisted living. No wonder ALFs are struggling to attract enough private payers to be profitable. No wonder people are not as eager to buy LTC insurance as they would be if they were more at risk for the cost of their care. This problem has been radically exacerbated in recent years because more and more state Medicaid programs are paying for assisted living as well as nursing home care, which makes Medicaid eligibility more desirable than ever. Home Health Care The situation with home health care financing is very similar to nursing home financing. According to CMS, America spent $132.9 billion on home health care in 2022, 6.0% more than in 2021 ($125.4). Medicare (35.8%) and Medicaid (35.3%) paid 71.1% of this total and private health insurance (not LTC insurance) paid 14.0%. Only 11.6% of home health care costs were paid out of pocket. The remainder came from several small public and private financing sources. Data source: Table 14: Home Health Care Services Expenditures; Levels, Percent Change, and Percent Distribution, by Source of Funds: Selected Calendar Years 1970-2022. So What? Only one out of every nine dollars spent on home health care comes out of the pockets of patients and a large portion of that comes from the income (not assets) of people already on Medicaid. No wonder the public does not feel the sense of urgency about this risk that they would if they were more personally at risk for the cost of their care. Other Health, Residential, and Personal Care This category includes a lot of long-term care spending that is not encompassed by the nursing home and home health NHE categories, such as Medicaid home and community based waivers and care provided in residential care facilities. The trends are very similar. Americans spent $246.5 billion on these services in 2022, up 9.7% from $224.7 in 2021. Medicare (1.7%) and Medicaid (60.6%) paid 62.3% of that total; private health insurance and other third parties contributed 34.5%; out-of-pocket expenditures amounted to only 3.2%. Data Source: Table 13: Other Health, Residential, and Personal Care Services Expenditures: Levels, Percent Change, and Percent Distribution, by Source of Funds: Selected Calendar Years 1970-2022 So what? Only one dollar out of $29 spent on these important LTC services comes from a private payer. No wonder the public feels so little sense of worry about planning, saving, investing or insuring for long-term care. Summary:
Across all three kinds of LTC services out-of-pocket expenditures account for only $1 in $8 spent. Half of this spending comes from income of people already on Medicaid. Thus only 6.25%, or $1 in $16, could have come from spend down of savings. Bottom line, people only buy insurance against real financial risk. As long as they can ignore the risk, avoid the premiums, and get government to pay for their long-term care when and if such care is needed, they will remain in denial about the need for LTC insurance. As long as Medicaid and Medicare are paying for a huge proportion of all nursing home and home health care costs while out-of-pocket expenditures remain only nominal, nursing homes and home health agencies will remain starved for financial oxygen. The solution is simple. Target Medicaid financing of long-term care to the needy and use the savings to fund education and tax incentives to encourage the public to plan early to be able to pay privately for long-term care. For ideas and recommendations on how to implement this solution, see www.centerltc.com. Note especially: “Long-Term Care: The Solution” (2023) with the Paragon Health Institute at https://paragoninstitute.org/research-paper-page-moses-ltc-solution-20231002/ “Long-Term Care: The Problem” (2022) with the Paragon Health Institute at https://paragoninstitute.org/long-term-care-the-problem/ “Medicaid and Long-Term Care” (2020) at http://www.centerltc.com/pubs/Medicaid_and_Long-Term_Care.pdf “How to Fix Long-Term Care Financing” (2017), at http://www.centerltc.com/pubs/How-To-Fix-Long-Term-Care-Financing.pdf In the Deficit Reduction Act of 2005, Congress took some significant steps toward addressing these problems. A cap was placed for the first time on Medicaid's home equity exemption and several of the more egregious Medicaid planning abuses were ended. But much more remains to be done. With the Age Wave cresting and threatening to crash over the next two decades, we can only hope it isn't too late already. * 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. Stephen A. Moses is president of the Center for Long-Term Care Reform in Seattle, Washington. The Center's mission is to ensure quality long-term care for all Americans. Steve Moses writes, speaks and consults throughout the United States on long-term care policy. Learn more at www.centerltc.com or email smoses@centerltc.com. |