Health Care Reform (5): Shifting more long-term care away from institutions

This is the fifth in an ongoing series of posts examining the new federal health care reform law. Our previous posts have explored the “cliff effect”; the  impact on state budgets; the Temporary High Risk Pool; and tax credits for small businesses. For full information on health care reform, the Henry J. Kaiser Family Foundation website is excellent. If you have thoughts on health care reform, we encourage you to contribute a comment or a guest blog.

While most of the attention and passion in the health care reform debate  has focused on insurance coverage for acute medical care, the Affordable Care Act includes several provisions that could provide important new choices and opportunities for the large and growing segment of the population that is in need of long-term care services and supports.

Over 10 million Americans – or almost one out of twenty adults – need long-term services and supports to assist with daily living activities, such as dressing, eating and toileting, preparing food, and medication management. While 58 percent of those with long-term care needs are age 65 and over, the population includes people of all ages, including, for example, children with intellectual disabilities, young adults with serious mental illness, and disabled veterans. The aging of the baby boom generation ensures that the population with long term care needs will grow rapidly over the coming decades.

The cost of long-term care is one of the great challenges facing governments and families alike. According to the Kaiser Family Foundation, nearly $176 billion was spent on long-term care services in 2006. Medicaid is the single-largest payer of long-term care services, covering 40 percent of the costs, followed by Medicare (23 percent), out-of-pocket spending (22 percent), and private insurance (9 percent). Medicaid expenditures on long-term care services totaled $109 billion in 2006, having more than doubled since 1995.  Since states are responsible for a significant share of Medicaid expenditures, policy choices regarding the provision of long-term care services matter greatly for state budgets.

For decades, the primary debate over long-term care has focused on where individuals needing care are served – in nursing homes or in their homes and communities.  The Medicaid program has long been seen as having a strong “institutional bias”. As the Kaiser Commission on Medicaid and the Uninsured explains:

Access to community-based alternatives to institutional care has historically been limited under Medicaid. All states are required to provide institutional services, but they are generally not required to provide home and community-based services. Since states most often provide home and community-based services as optional benefits or through waivers, funding and eligibility has been limited. Consequently, despite the substantial growth in home and community-based care, many states have waiting lists for services.

Medicaid’s “institutional bias” is problematic in two main respects. First, surveys consistently find that an overwhelming majority of people want to receive long-term care in their own homes as a way to preserve independence and retain choice and control over everyday decisions. Secondly, institutional care is considerably more expensive than home- and community-based care for individuals with similar levels of disabilities and needs.

As a recent Kaiser Family Foundation brief notes:

Over the past three decades, policy makers have responded to consumer preferences for alternatives to institutional care by expanding Medicaid HCBS [Home and Community-Based Services], yet the majority (59 percent) of Medicaid long-term services spending still goes towards institutional services.

An AARP study found that Oklahoma has made important progress in recent years in expanding home and community-based services, yet still spent 75 percent of its long-term care dollars in FY ’06  for seniors and adults with physical disabilities on nursing homes.  According to the Oklahoma Health Care Authority’s Annual Report, Medicaid paid for $676 million of institutional long-term care (nursing facilities and ICF-MR) in FY ’09 compared to $480 million for Home and Community-Based waivers.

The new national health care law, the Affordable Care Act, builds on earlier initiatives aimed at “rebalancing” the provision of long-term care by strengthening the incentives and opportunities for states to expand access to Medicaid home and community-based services programs.  (A related initiative included in the health care law,  the CLASS Act, encourages more Americans to purchase their own long-term care insurance. This program  will be discussed in a separate post).  The law includes several programs and initiatives, spelled out in this KFF Focus on Health Reform Brief, which for the most part offer states the carrot of an enhanced federal matching rate (FMAP) to adopt measures that would provide more services and direct more long-term care dollars to home and community-based services.  In particular, under the Community First Choice Option, states that provide statewide home and community-based attendant supports and services to individuals with incomes up to 150 percent of poverty who require an institutional level of care will receive an enhanced federal matching rate of an additional six percentage points.

Local advocates for seniors and persons with disabilities I have spoken with are enthusiastic about these new opportunities but are concerned that in the state’s current fiscal climate, Oklahoma will be unwilling to commit the state funds needed to qualify for the additional federal dollars. The Oklahoma Health Care Authority indicated to me that they want to take advantage of as many opportunities as possible, but with other pressing priorities on their plate, they have not yet looked at the long-term care component of the Affordable Care Act and do not know in which direction they will go.

The Affordable Care Act seems to provide the right incentives to help more people get the care they need while remaining in their homes and with their families. It will now be up to state policymakers to move quickly and purposefully to make sure that these opportunities are not missed.