Long-term care (LTC) includes a wide variety of health and support services that are provided to the frail, the elderly, and individuals with chronic disease conditions and disabilities. LTC is largely personal, custodial, and unskilled care provided to those who cannot care for themselves for extended periods of time. The majority of those receiving LTC are the frail elderly who suffer from multiple chronic diseases. In the United States, about 60% of all individuals 65 years of age or older require at least some type of LTC services during their lifetime, and over 40% need care in a nursing home for some period of time. In 2006, there were 37.3 million people in the nation 65 years of age or older, or about one in every eight Americans. By 2030, the number is expected to grow to 71.5 million people, or about one in every five Americans. Although the family is the primary source of LTC, the increasing size of the nation's older population coupled with decreasing family size and high divorce rates will invariably increase the demand for paid LTC services.
The need for LTC services for people suffering from chronic disabilities is often estimated using the criteria of Activity of Daily Living (ADL) or the Limitations of the Instrumental Activities of Daily Living (IADL). The ADL criteria include bathing, dressing, getting in or out of bed, getting around inside, toileting, and eating; and the IADL criteria are light housework, laundry, meal preparation, grocery shopping, getting around outside, managing money, taking medications, and telephoning. According to the National Institute on Aging, in 2006, about 20% of all Medicare enrollees, including 5% who were institutionalized, had limitations in one or more ADLs. However, only about half of those individuals were estimated to be receiving personal care. The majority of those (65%) who received personal care obtained it from unpaid caregivers (i.e., spouse, adult children, other family members, and friends), about 26% received personal care from both unpaid and paid caregivers, and the remaining 8% received personal care from only paid caregivers.
The demand for paid LTC services is expected to increase sharply in the future because of the growth in the nation's older population. A simulation study conducted by the Urban Institute in 2007 estimates that between 2000 and 2040 the number of older adults with chronic disabilities in the nation will more than double, increasing from about 10 million to about 21 million individuals. Although the study projected an overall declining rate of old-age disability during the period, the total number of individuals with disabilities will more than double simply because of the enormous size of the older population by 2040. This trend is troubling because at the same time that it will be occurring, family size is likely to decline, and there will be rising divorce rates and an increase in female employment rates. As a result, the demand for paid LTC services is projected to increase sharply in the future. The study estimates that the number of old people receiving paid home care will increase from 2.2 million to 5.2 million and the number of older nursing home residents will increase from 1.2 million to 2.7 million individuals.
Meeting the projected need for LTC will be a daunting task for both the private and the public sectors, considering that LTC services for older adults already represent a substantial share of the nation's total healthcare spending. In 2005, nursing home and home health care accounted for slightly over 10% of national personal health expenditures, or about $169 billion. This amount does not include care provided by family or friends on an unpaid basis (often called “informal care”). It only includes the costs of care from paid providers.
The largest share, 48%, of the nation's LTC costs are paid for by Medicaid, a jointly funded state and federal program; state and local governments pay for 19%; and the private sector (through out-of-pocket and insurance premiums) pays 31% of the total LTC costs. However, the federal government pays for LTC through its portion of the Medicaid program and also through the Medicare program. These two sources pay for 50% of the nation's LTC costs, making the federal government the single largest payer for LTC.
Since the implementation of Medicare's hospital prospective payment system in 1983, which encouraged the nation's hospitals to shorten patient length of stays and discharge patients as quickly as possible, nursing homes have seen an increasing number of individuals requiring post-acute rehabilitation. Specifically, Medicare Part A will pay for their care at a skilled-nursing facility (SNF) only if the care occurs within 30 days of a hospitalization of 3 or more days and is certified as medically necessary. Covered services are similar to those for inpatient hospital stays but also include rehabilitation services and medical equipment. However, Medicare does not cover nursing facility care if the individual does not require skilled nursing or skilled rehabilitation services. Although the number of SNF days provided by Medicare is limited to 100 days per benefit period, the average length of stay in an SNF is usually less than 2 weeks. Under Medicare, no copayment is required for up to 20 days; a copayment is required for Days 21 to 100; and after 100 days, the individual pays the total cost.
While SNF care may be viewed as an extension of hospital inpatient care rather than true LTC, home health care has increasingly been transformed into a source of long-term personal assistance for Medicare beneficiaries, especially those with severe functional limitations and cognitive impairment. Both Medicare Part A and B cover part-time or intermittent skilled nursing care and home health aide services, and some therapies that are ordered by a physician and provided by a Medicare-certified home health agency. Specifically, Part A covers the first 100 visits following a 3-day hospital stay or an SNF stay, and Part B covers any visits thereafter. Home health care under Part A and B has no copayment and no deductible.
Medicare Part A covers hospice care for individuals with a terminal illness, generally individuals who are not expected to live more than 6 months. Although Medicare does not consider hospice care to be an LTC service, an increasing number of hospice patients are living well beyond 6 months, and hospices are becoming more like an LTC setting for those with terminal illnesses who are bed-stricken. Hospice services include drugs for symptom control and pain relief, medical and support services from a Medicare-approved hospice provider, and other services not otherwise covered by Medicare (e.g., grief counseling). Hospice care is usually provided in a patient's home (which may include a nursing home if that is where the patient lives) or a hospice care facility. However, Medicare does cover some short-term hospital and inpatient respite care provided to a hospice patient to allow the usual caregiver to rest.
Although the number of short stays has increased, the majority of nursing home residents require long-term custodial care. Most nursing home care is paid for by Medicaid and by the resident's own resources. According to the National Center for Health Statistics 2004 National Nursing Home Survey, Medicaid paid for at least some of their care for 65% of all nursing home residents, private/other sources paid for 22%, and Medicare paid for 13%.
During the past decade, a growing number of older individuals have opted to reside in community residential facilities, such as assisted living facilities, board and care, and continuing-care retirement communities, instead of being placed into nursing homes. Currently, an estimated 1 million individuals live in residential facilities, largely financed from their own resources. The public sector has taken note of this trend. States, which have been concerned about the increasing number of Medicaid residents in nursing homes, have started using Medicaid to fund those living at home and in the community through Home and Community-Based Service (HCBS) waiver programs. The primary purpose of such programs is to keep those at risk of being institutionalized in nursing homes at home or in the community. The program provides family members with supplementary services including adult day care services to help them continue to provide care. Some states are also trying to relocate nursing home residents back in the community. As a result of these and other changes, the percentage of total Medicaid spending on nursing homes was reduced to 44% in 2006, and the percentage of spending for home health and personal care increased to 41%.
Some Medicare enrollees also are Medicaid recipients, and they are called dual eligibles. For those who are dual eligibles, Medicare covers its set of medical services, while Medicaid pays for the individual's Medicare premiums and cost sharing, and-for those below certain income and asset thresholds-LTC services. The dual eligibles tend to be older, sicker, poorer, and they use more expensive medical services. The dual eligibles have an important impact on LTC spending. Since Medicare covers SNF care, some dual-eligible patients are discharged from hospitals to SNF for LTC services. After Medicare stops paying for their care, the dual eligibles rely on Medicaid to pay for their LTC services. In some cases, noninstitutional options may have been more appropriate, which may have provided better outcomes for the individual and lower costs for both Medicare and Medicaid. Efforts are now being made to better coordinate and integrate LTC services between Medicare and Medicaid.
Medicare and Medicaid are not ideal providers of LTC. For the most part, Medicare was designed to provide acute care not LTC, and the Medicaid program was designed to provide medical care to the deserving poor in certain limited categories, particularly women and children. Specifically, Medicare only pays for medically necessary SNF or home health care. While Medicare pays for about 18% of LTC, it only pays under specific circumstances. If the type of care needed does not meet Medicare's rules, it does not pay. In terms of Medicaid, individuals with assets and financial resources often do not qualify for Medicaid unless they use up their resources by paying for care and become poor. Furthermore, states apply strict preadmission screening to deter people from being institutionalized in nursing homes.
Because of the many problems associated with Medicare and Medicaid, most people who need LTC end up paying for some or all of their care using their own assets and financial resources. However, LTC is very expensive. For example, based on national averages for 2006, a semiprivate room in a nursing home costs $171 per day, a private room in a nursing home costs $194 per day, a stay in an assisted living facility (one-bedroom unit) costs $2,691 per month, the use of a home health aide service costs $25 per hour, the use of a homemaker service costs $17 per hour, and a stay in an adult day healthcare center costs $56 per day.
To pay the costs of LTC, some people purchase LTC insurance. Currently, about 10% of the nation's population purchase LTC insurance. The average annual premium costs for a policy purchased in 2005, across all age groups of buyers and all types of insurance policies, was just over $1,900. This represents a comprehensive policy (covering both nursing facilities and at-home care) that provides an average of 5.5 years worth of benefits, with a daily benefit payment of $143. Most policies purchased also included some form of automatic inflation protection.
Other insurance also pays for some limited LTC services. Most Medicare enrollees purchase a Medicare supplemental insurance plan, or Medigap insurance, which is sold by private health insurance companies to cover some of the “gaps” in expenses that are not covered by Medicare. In addition to covering some of the costs of Medicare's copayments and deductibles, some Medigap policies also provide additional benefits such as at-home recovery care.
A reverse mortgage may also be an option for some individuals who need LTC and expect to live in their current home for several years. A reverse mortgage is a special type of home equity loan, where home owners 62 years of age or older receive a loan against their home that does not have to be paid back as long as they live in their home. The home owner receives a lump-sum payment, a monthly payment, or a line of credit against the value of the home without selling it.
A number of federal acts are directly related to LTC. Some of the major acts include the Deficit Reduction Act of 2005, the Older Americans Act of 2001, the Millennium Health Care and Benefits Act of 1999, and the Balanced Budget Act of 1997. Each act is discussed below.
The Deficit Reduction Act of 2005 refined the eligibility requirement for state Medicaid recipients by tightening standards for citizenship and immigration documentation and by changing the rules concerning LTC eligibility. Specifically, the period for determining community spouse income and assets was lengthened from 36 to 60 months, individuals whose homes exceeded $500,000 in value were disqualified, and the states were required to impose partial months of ineligibility. The act also contained a provision allowing for the expansion of a National LTC Partnership program to all states. The goal of the program is to encourage individuals to purchase private LTC insurance. In the program, individuals who exhaust their LTC insurance benefits can retain a greater amount of their assets and still qualify for state Medicaid, without having to “spend down.” Specifically, purchasers would be allowed to keep a dollar of assets for every dollar they receive in benefits from the program. The ability to retain additional assets, yet still use Medicaid as a “safety net” if private coverage does not suffice, is an incentive for more individuals to purchase at least a moderate amount of private coverage.
The Older Americans Act of 2001 is one of the most significant laws affecting LTC. It changed the bias toward institutionalizing LTC. In passing the act, the U.S. Congress recognized the family's role in providing LTC. The act has the goal of retaining the family as caregivers of the elderly who desire to be cared for in the home. It provides funding, through state and local Aging Network agencies, to help families and older individuals remain independent within their communities. While there are no specific financial eligibility criteria for Older Americans Act services, they are generally targeted at low-income, frail seniors over age 60 and minority elders and seniors living in rural areas.
The Millennium Health Care and Benefits Act of 1999 expanded the Veterans Health Administration's (VHA) programs to increase access to nursing home care and other extended care services to veterans who do not have service-related disabilities but who are unable to pay the costs of necessary care. For those who qualify, the benefits can provide financial assistance for some LTC costs. Copayments may apply depending on the veteran's income level. The VHA also has a Housebound and Aid and Attendance Allowance Program that provides cash grants to eligible disabled veterans and surviving spouses in lieu of formally provided homemaker, personal-care, and other services needed for assistance in activities of daily living and other help at home.
Several provisions of the Balanced Budget Act of 1997 addressed the explosive growth of Medicare's home health care expenses in the early 1990s. Home health care, which in 1989 accounted for only 2.5% of all Medicare Part A expenditures, exceeded 15% of the total in 1996. To stem the growth, the act moved home health care to a prospective payment system, and it discouraged hospital ownership of home healthcare agencies. The act dramatically reduced Medicare's home health care expenditures and utilization; expenditures in the following 2 years after the act's passage declined by 52%, the percentage of Medicare beneficiaries receiving home health care services for the first time declined by about 20%, and the use among those who availed of these services declined by 39%.
The projected future growth in the nation's older population will seriously challenge both the private and the public sectors. With declining family size and high divorce rates, the need for paid LTC services will greatly increase in the future. Many future retirees will likely not have the necessary financial resources to afford the LTC they need. The future strain on the Medicare and Medicaid programs will be enormous. To address these issues, policymakers must develop new innovative ways of financing and providing LTC, which politicians will support and the general public will accept.
Chronic Care Model, Continuum of Care, Disability, Long-Term Care Costs in the United States, Medicaid, Medicare, Nursing Homes, Skilled-Nursing Facilities
American Society on Aging (ASA): http://www.asaging.org
National Clearinghouse for Long-Term Care Information: http://www.longtermcare.gov
National Council on Aging (NCOA): http://www.ncoa.org
National Institute on Aging (NIA): http://www.nia.nih.gov
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