Health Reform WK-EDGE Medicaid to play an important role in paying for long-term care services in the U.S. as costs and users rise
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Wednesday, August 22, 2018

Medicaid to play an important role in paying for long-term care services in the U.S. as costs and users rise

By Robert B. Barnett Jr., J.D.

Asked to examine the role long-term services and supports (LTSS) play in Medicaid and Medicaid’s role within the larger LTSS industry, HHS’s Office of the Assistant Secretary for Planning and Evaluation (ASPE) has identified three themes emerging: (1) changing demographics will increase demand for LTSS and raise expenditures, (2) LTSS is an integral part of the Medicaid program, and (3) Medicaid plays a major role in financing LTSS. In addition, although financing and delivery systems have historically favored institutional settings for delivery of LTSS, government policies and advocacy efforts have caused a shift toward greater home and community-based services use, which has significant implication for Medicaid because, although Medicaid covers LTSS, Medicare and standard private health insurance policies generally do not (ASPE Report, August 8, 2018).

Changing demographics. While the U.S. population grows from 319 million in 2014 to 380 million in 2040, the elderly population is expected to grow from 48 million to 83 million. The sheer bulk of the Baby Boom population is to blame, but so is increased longevity among Americans. Because disability is highly related to age, as the elderly population grows, so will the disabled population. The percentage of the population with dementia or Alzheimer’s disease (the most common cause of dementia) will also increase. Based on some modeling, the number of Americans age 65 or older with Health Insurance Portability and Accountability Act (HIPAA) (P.L. 104-191) level disabilities (a relatively severe level of disability) will grow from 6.3 million in 2015 to 15.7 million in 2065. The average person turning 65 in 2015 can expect to live another 20.9 years and incur $138,000 in LTSS costs.

Role of LTSS in Medicaid. Medicaid eligibility depends primarily, of course, on income and assets. Multiple pathways, however, exist to becoming eligible for Medicaid, including low-income families, qualified pregnant women and children, older people, and people with blindness and disabilities. In general, except for eligibility provided through the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) expansions and demonstration projects, non-disabled individuals under 65 are not eligible for Medicaid unless they are caring for a dependent child. As of September 2016, 32 states have chosen to expand Medicaid under the ACA. While the ACA expanded coverage for certain individuals, the expanded population is not eligible for Medicaid LTSS. In 2015, 76 million people were enrolled in Medicaid, with 6 million aged enrollees and 10 million blind or disabled enrollees. Those numbers are expected to increase by 2026 to 86 million, 8 million, and 11 million. Furthermore, although the proportion of the Medicaid population who are aged and disabled beneficiaries who might use LTSS is small, those two populations (aged and disabled) account for a disproportionate share of Medicaid spending. For example, while the aged account for only 8 percent of the enrollment population in 2015, they accounted for 16 percent of expenditures. While the disabled account for 15 percent of the population, they accounted for 40 percent of Medicaid spending.

Similarly, LTSS users represent about 5.9 percent of the Medicaid population but they represent 41.8 percent of the spending. Furthermore, because of ACA expansion, among other factors, the LTSS population is becoming a smaller proportion of total Medicare expenditures, with LTSS as a share of total Medicaid expenditures dropping from 38 percent in 1995 to 32 percent in 2014. However, total LTSS pending is increasing. The biggest cause of that increase has been in home and community-based services. Expenditures for institutional settings has slowed over the past decade.

The scope of Medicaid coverage for LTSS varies by state. The demographics among states also varies. For example, adults aged 65 and older range from 4 percent of the Medicaid enrollment population in Utah to 18 percent of Medicaid enrollment in Maine. Expenditures for LTSS services vary as well, from a low of $267 million in Wyoming to a high of $22 billion in New York. Generally, the states with the most restrictive coverage and eligibility requirements had the highest proportion of their Medicaid program accounted for by LTSS. As for future projections, LTSS spending is expected to increase steadily over the next 10 years, but more slowly than the rest of Medicaid.

Role of Medicaid in LTSS. Medicaid pays for about 51 percent of the total LTSS-related payments each year. Private spending accounts for another 27 percent, with the remainder paid by a combination of Medicare and other public programs. Medicare covers short-term post-acute care but it does not cover LTSS over an extended time. Furthermore, because only about 11 percent of the age 40-70 populations has long-term care insurance, Medicaid plays a huge role in LTSS financing. LTSS generally consist of the following three settings: (1) nursing homes, (2) home care, and (3) residential facilities. The Medicaid share of nurse home care is particularly high, with an estimated 63 percent of users relying on Medicaid. In addition, Medicaid beneficiaries make up 54 percent of users of adult day care service centers, 15 percent of users of residential care communities, and 9 percent of home health agencies.

Historically, Medicaid LLTS funding was primarily for institutional care. Today, a shift is underway to home and community-based services. In 2013, for the first time ever, Medicare’s home and community-based services expenditures surpassed institutional care expenditures. The trend is expected to continue. Through Medicaid, the LTSS delivery system has introduced more managed care options, which should improve care coordination, improve access to home and community-based services, and save money.

Conclusion. LTSS expenditures will continue to grow in the coming years, with expenditures shifting away from institutional care and towards home and community-based services. Medicaid will continue to play an important role in paying for those services. Furthermore, given Medicaid’s outsize role in paying for LTSS, any changes to the Medicaid program would have a potentially huge impact on the LTSS industry.

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