Medicaid and Long-Term Care

By Gleckman, Howard | Policy & Practice, June 2007 | Go to article overview

Medicaid and Long-Term Care


Gleckman, Howard, Policy & Practice


How Will Rising Costs Affect Services for an Aging Population?

By mid-century, the nation will be spending more on Medicaid, the joint state/federal health program for the poor, than it currently spends on national defense. Much of this projected growth will be generated by the rapidly expanding demand for long-term care due to an aging population. Therefore, both states and the federal government are exploring ways to restrain the program's growth, but no initiatives to date have significantly slowed the trend.

What is Long-Term Care?

Today, about 10 million Americans need long-term care. In contrast to acute medical care, which is usually intended to help a patient recover from an injury or illness, long-term care is aimed at assisting those with long-term chronic illnesses in managing their daily lives in relative comfort and security. Such assistance may include help with eating, bathing or toileting, cooking, or visits to an adult day-care center.

While medical care is usually delivered in a doctor's office or hospital, longterm care is often provided at home or in an institutional setting such as a nursing home or assisted living facility. More than 80 percent of those receiving longterm care do so at home. Most long-term care is provided by an unpaid family member or friend. Care at home may also be supplemented by a professional health aide or personal assistant.

Long-term care needs are often very different for two distinct groups: the elderly and the disabled. The aged who require long-term care are typically widows in their 80s who live alone, have little income, and may be suffering from dementia or other mental impairment. Nearly 70 percent of those who are 65 today will require some long-term care before they die. They will need care for an average of three years, and one in five will require this assistance for five years or more.

The non-elderly disabled may have been born with a physical or mental disability, or suffered traumatic injury in their young adulthood. Thanks to advances in medical technology, these people-who once would have died at a young age-now live many years. Their families are often in severe financial distress. Unlike many elderly, they have had little opportunity to build up retirement savings or home equity, and may have spent much of their savings paying for acute medical care. For example, the lifetime cost for a 25-year-old who suffers a major spinal cord injury is nearly $3 million.

Other forms of long-term care are also very expensive-with average annual costs of about $34,000 for home care services and more than $75,000 for a private room in a nursing home. These costs far exceed the financial resources of most families. Those who impoverish themselves paying for these services are likely to turn to the government to help finance their long-term care costs.

The program they most often turn to is Medicaid, which has become the nation's principal source of payments for professional long-term care services for the elderly and disabled (see Figure 1). In 2005, Medicaid paid $101 billion for long-term care, nearly half of the total national spending on these services. Individuals paid 18 percent of these costs out of pocket. Medicare, the federal health program for seniors, paid 20 percent. Private long-term care insurance covered only 7 percent of costs.

Medicaid and the Costs Of Long-Term Care

Total Medicaid costs have grown rapidly in the past three decades, rising from 0.7 percent of GDP in 1975 to 2.1 percent in 2003 (see Figure 2). This growth has been driven both by an increasing number of beneficiaries and higher costs per beneficiary. For example, the number of disabled in Medicaid more than tripled between 1975 and 2003-from 2.5 million to 7.7 million (see Figure 3a). And the cost for each elderly and disabled beneficiary roughly quadrupled (see Figure 3b).

Reflecting the high per beneficiary costs for seniors and the disabled, almost 70 percent of Medicaid's benefits go to these two groups (see Figure 4) even though they comprise only about 25 percent of Medicaid enrollees. …

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