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Long-Term and Related Care
GLOSSARY
Adult day care Mainly
nonmedical, daytime supervision and arranged social interaction
for seniors; typically paid for with personal funds. May enable
some seniors to reside at home by allowing the caregiver—e.g.,
spouse or child—to work while the senior is in a supervised
environment. Facilities must be approved by the state, but state
licensure is not required.
Adult foster care Care
provided in facilities that offer transitional or long-term living
for people aged 18 and older who need supervision, personal, and
other basic care. Residents may be aged, mentally ill, developmentally
disabled, and/or physically challenged, but they do not require
continuous nursing care. Supplemental Security Income often offsets/covers
residents' costs. State licensure is required.
Assisted/independent living
A residential arrangement for seniors who can live independently;
may be government subsidized or unsubsidized; out-of-pocket rent
is based on the person's income. Housekeeping and limited medical
services are available. State licensure is not required.
Basic care Supervision
and assistance with the needs of daily living that can be provided
by nonlicensed personnel.
Cost shifting In
the LTC context, shifting payment for care from the public to the
private sector.
Home health care Medical
and personal care, homemaker and chore services (e.g., heavy cleaning,
yard work), meals, and transportation provided to homebound by nurses,
other health professionals, or home-health aides; may be covered
in part or in total by Medicaid, Medicare, or private insurance.
Homes for the aged Facilities
that provide custodial/personal care for individuals aged 60 and
older and not capable of living independently; for residents, it
is similar to living in their own home except that they reside in
a group setting. Supplemental Security Income often offsets/covers
the cost of such care. State licensure is not required.
Hospice Offers palliative
care, including pain management, to terminally ill patients. Some
hospice care is covered by Medicare and Medicaid. Hospice providers
are state licensed.
Managed care A broad
term for any comprehensive approach to health care delivery that
(1) coordinates patient care so as to ensure the appropriate use
of services and (2) routinely monitors and measures health providers'
performance so as to control cost and maintain or improve the quality
of care. Under capitated managed care, a fixed amount per beneficiary
is paid to the health insurance carrier.
Medicaid The federal/state
program that pays for many health care services for low-income people
who qualify, including children, pregnant women, and the elderly.
Medicare The federal
program that pays for many health care services for people who are
(1) blind and/or have a long-term disability or (2) aged 65 and
older.
MIChoice The state
program (with some federal funding) that provides participants with
resources (e.g., homemaker services, home-delivered meals, transportation)
that make it possible for them to stay in their own residence.
Nursing home (basic) A
facility providing regular medical, nursing, social, and rehabilitation
services, in addition to room and board, for people who cannot live
independently; provides basic medical services short of 24-hour
skilled nursing care and must meet state licensure requirements.
Most residents qualify for Medicaid.
Nursing home (skilled) A
facility providing intensive, around-the-clock nursing care and
supervision; registered nurses, licensed practical nurses, and nurse
aides provide services under the guidance of the patient's physician.
Medical nursing care is provided as well as restorative, physical,
occupational, and other therapy. About one-third of patients pay
from private funds; the remainder receive Medicaid and/or Medicare
benefits. Facilities must be licensed by the state.
Respite care In-home
service, provided through a community-based program, that gives
intermittent care to people in their residence; its purpose is to
relieve the primary caregiver of responsibility for periods ranging
from a few hours to a few weeks. Services may range from simply
being present to providing the complex care needed by someone on
life-support equipment.
Skilled care Care
that requires licensed nursing personnel.
Subacute care Features
services more intensive than those provided in skilled nursing facilities
but less intensive than acute care (hospitalization); provides treatment
for specific, complex medical conditions immediately after or instead
of hospitalization. Facility must be licensed by the state.
Supplemental Security Income (SSI)
Federal assistance program for people aged 65 and older
and meeting certain asset and income requirements; SSI also assists
the blind or extremely visually impaired and those who suffer from
a physical or mental disability.
BACKGROUND
[APRIL 1, 2002] Long-term care (LTC) covers a range
of medical and/or social services for people who have disabilities
or chronic care needs. It may refer to nursing-home care or to other
types of care listed in the glossary, and its importance is growing
because
- Americans are living longer;
- people aged 85 and over comprise the fastest-growing
segment of the population; and
- the oldest of the “babyboomers” are
aged 55 and will begin to use LTC services in this decade.
In 2000 there were more than one million Michiganians
aged 65 and older, and more than 90 percent of those who require
LTC in a given year are in this group. The U.S. Bureau of the Census
projects that by 2020 this group will number nearly 1.7 million,
and half will spend time in a nursing home. The financial implications
of the future demand for LTC are staggering.
- In 2001 the average annual cost per resident for
nursing home care in Michigan was $54,000; assuming 3.3 percent
annual inflation, the cost in 2020 will be $97,000.
- Home-health care is considerably less expensive
than nursing home care but still averages $12,500 annually; annual
inflation of 3.3 percent brings the cost in 2020 to $22,500.
- Michigan Medicaid spending for LTC in 2001 totaled
about $1 billion; 3.3 percent annual inflation brings the bill
in 2020 to $1.9 billion (this projection does not take into account
the burgeoning growth of the LTC age group).
- Nationwide, in 2000, LTC nursing home spending
from all sources (state, federal, public, private) was $92 billion;
the Congressional Budget Office estimates that LTC will grow nationally
by 2.6 percent annually and in 2020 the figure will reach $207
billion (again, the growth in the LTC age group is not calculated
into the projection).
From 1995 to 2000, nationwide Medicaid LTC spending
for the 65-and-older age group increased an average of 4 percent
annually, more than the general rate of inflation. Although the
growth rate has slowed recently, it still presents a major problem
for policymakers and consumers who must find a way to continue paying
for LTC. Assuming a 3.3 percent annual inflation rate, a nursing
home that costs $150/day now will cost $268/day in 20 years.
Today Medicaid and out-of-pocket spending are the
primary financing sources for LTC for the elderly in the United
States (see the exhibit). Although Medicare
picks up almost 10 percent of total LTC costs, its coverage is limited:
Medicare pays for care provided by skilled medical personnel for
certain medical conditions (referred to as skilled care)
but only for 100 days (the full amount for the first 20 days and
all but $101.50 for days 21–100); it does not cover helping
a person to perform activities of daily living (custodial
care). After Medicare coverage is exhausted, nursing-facility care
may be covered by Medicaid—if the patient's income is sufficiently
low—which picks up 48 percent of the nation's LTC costs. Patients
and their families pay for 27 percent, usually from savings, pensions,
and annuities; private health insurance pays for 12 percent; and
other public funds cover the remainder.
If LTC costs continue to climb at the current rate,
it is unlikely that Medicaid and Medicare will be able to pick up
the portion of costs that they traditionally have. Policymakers
at the state and federal levels are exploring strategies to reduce
LTC expenditures for the elderly while improving the quality of
care provided.
DISCUSSION
Long-term care costs are increasing principally because
- the nation's elderly population is burgeoning;
- far more women—traditionally, the elderly's
primary caretakers—are employed now than in the past and,
therefore, are unavailable to provide informal long-term care
for their loved ones; and
- neither public policy nor LTC industry practices
have been able to keep pace with changing demand.
There are no practical ways to affect the consequences
of the first two causes, so debate on reducing the system's expense
focuses mainly on public policy changes and industry reform. There
are two generally accepted strategies that policymakers may use
to control spending: (1) shifting the cost, i.e., offsetting government
expenditures by increasing private contributions and (2) reforming
the delivery system so as to provide care less expensively.
Cost Shifting
The debate about generating additional private resources
to offset LTC costs traditionally absorbed by Medicaid and Medicare—and
thus by state and federal government—revolves primarily around
- encouraging people to carry private long-term care
insurance;
- more strictly enforcing the asset-related provisions
of the laws governing Medicaid; and
- reducing Medicaid eligibility, reimbursement, and
services.
Long-Term Care Insurance
Currently, only 6–7 percent of the elderly have
private LTC insurance. States are trying to encourage people to
purchase such policies so as to enable them to pay for their own
LTC rather than relying on government programs. Pending federal
legislation would allow LTC-insurance purchasers to deduct from
their income tax the total cost of the premiums. Analysts say, however,
that this is unlikely to provide enough tax relief to encourage
people to buy the insurance.
Many people do not purchase LTC insurance because
of the cost: $400 to $5,000 a year, depending on the insured's age,
health, and the policy's benefits. Studies find that only 10–20
percent of the elderly can afford it. Moreover, even with LTC coverage,
individuals may have out-of-pocket costs not covered by their insurance;
for example, a policy may cover $120/day in a nursing home, but
if the cost is $160, the resident is liable for the remaining $40.
Michigan P.A. 4 of 2001 requires LTC insurance carriers to define
and provide policyholders with a detailed coverage explanation.
Asset Enforcement
A second way to increase nongovernment payment for
LTC is to enforce Medicaid-related asset transfer/recovery provisions.
There is evidence that many people, to become eligible for Medicaid
benefits, purposefully divest their assets. The purpose of such
transfers—so-called Medicaid estate planning—is to appear
poor on paper while preserving private wealth for one's heirs. Although
Congress repeatedly has legislated against such practices, many
point out that the prohibitions are easy to circumvent and the practice
of Medicaid estate planning has surged in recent years.
Another asset-related concern for government-funded
LTC is estate recovery. According to the U.S. Department of Health
and Human Services, only about one-half of one percent of Medicaid
nursing home expenditures are recovered each year, despite a federal
law requiring states to recover them from the estate of deceased
program beneficiaries. Michigan has not yet instituted such a program.
The Michigan Department of Community Health contends that it cannot
implement a recovery program without legislation, and the legislature
has not acted for a number of reasons. First, it has not been determined
how much such a program will cost or recover, although an earlier
(FY 1994–95) recovery estimate was about $4 million. Second,
the success of recovery attempts elsewhere has been limited. For
example, Colorado's program has yet, after four years, even to recover
the cost of running the program. To date, the federal government
has not imposed penalties for noncompliance.
Reducing Program Scope
If government does not succeed in substantially increasing
private LTC contributions by encouraging the purchase of private
insurance and/or discouraging private asset transfer, it will have
to consider more traditional cost-shifting options (which also will
result in individuals having to pay more out-of-pocket). These include
- cutting the rates at which LTC facilities are reimbursed
for their services (since 1997 states have almost complete freedom
in setting nursing-home payment rates);
- raising eligibility standards for government-funded
LTC services (e.g., setting more stringent income standards for
people who wish to have Medicaid pay for nursing home care); and
- limiting the extent to which long-term care services
are covered.
Effect of Cost Shifting
Although many applaud personal accountability and
responsibility when it comes to long-term care, others argue that
cost shifting harms those who most need the government's support—the
frail elderly and their families. This view is leading policymakers
at all government levels to find ways not just to shift LTC costs
but to reduce them without sacrificing quality.
System Reform
The second general strategy for controlling LTC costs
is to reorganize the delivery system to make it more efficient.
Many states, including Michigan, are seeking to accomplish such
reform by
- integrating acute (hospital) and long-term care
systems under the managed-care umbrella;
- creating a managed-care system that encompasses
LTC only; and/or
- offering more home- and community-based services.
Managed Care
People who need LTC services often encounter a fragmented
financing and delivery system: Private insurance and Medicare mainly
finance acute care; Medicaid mainly finances LTC. This separation
of financial responsibility creates an incentive for the federal
and state governments to shift costs to one another. It also results
in a breakdown of coordination in service delivery.
Policymakers increasingly are looking at capitated
managed-care—an arrangement whereby a single, state-administered
payment is made, on a per-patient basis, to a managed-care organization
(e.g., health maintenance organization) to pay for an enrollee's
care. For such a system to incorporate LTC and function smoothly,
many policymakers argue that monies from Medicaid (the principal
payer for LTC) and Medicare (the principal payer for most other
health costs for seniors) must be combined.
Various states have applied for a federal waiver to
create a capitated managed-care system that incorporates LTC and
combines Medicaid and Medicare funds to pay for it; Minnesota and
Wisconsin have received approval. Michigan has not applied for a
waiver, instead choosing to focus on integrating health-care financing
and delivery only for Medicaid services.
Home- and Community-Based Services
Managed LTC is evolving slowly, but there are alternatives
that may result in LTC savings. One is to expand home- and community-based
services for older adults, and Michigan has received federal approval
to do so.
In 1992 the Health Care Financing Administration (now
the Centers for Medicare and Medicaid Services) approved Michigan's
Home and Community Based Services for the Elderly and Disabled,
and in 1998 it became available statewide. The program gives recipients
access to personal care, homemaker services, home-delivered meals,
transportation, help with chores, respite care, counseling, personal
emergency response, home modifications, equipment aids, adult daycare,
training, durable medical equipment, medical supplies, and private-duty
nursing. The expansion is part of Michigan's MIChoice initiative,
which is meant to provide participants with resources (e.g., homemaker
services, home-delivered meals, transportation) that make it possible
for them to stay in their own residence.
Many policy experts believe that home health care
actually will increase LTC expenses. The reason is the so-called
woodwork effect: Many people will forgo LTC if the only choice is
a nursing home but will use it if home-care services are an option.
Thus, providing broad-based home care could increase demand for
LTC services, resulting in expenses that exceed any cost savings
stemming from reducing the demand for nursing home care.
Quality Control
Although expense is the major issue surrounding LTC,
policymakers and industry officials also struggle with improving
LTC quality. According to a 2000 survey conducted by the Health
Care Association of Michigan (HCAM, an association of for-profit
nursing homes), 89 percent of respondents reported being satisfied
with the services they or their loved ones receive in a Michigan
nursing home. The association reports that nationally, on average,
there were 8.3 citations per facility in 2000 for violations of
the quality regulations that were implemented in 1995. Michigan
averaged 2.4 citations per facility, well below the national average.
In 2001 Michigan officials investigated 1,704 complaints
and reports of poor care. Many LTC providers argue that many deficiencies
found in Michigan facilities may not necessarily be due to inadequate
staff and administrative practices but rather to the regulation
system, which they say is extreme: It encompasses a zero-tolerance
policy toward mistakes or errors—even those that have little
to do with patient care. LTC providers also complain that the system
is based on subjective opinion and is vulnerable to surveyor bias.
Critics of the LTC system argue that enforcement is
not strict enough, and they say that serious violators go undetected
and unpunished. They contend that the few facilities that do provide
poor care (most of the violations involve only 45–50 of the
state's 437 nursing homes) do not receive nearly enough regulatory
attention.
In recent years two programs to improve LTC care in
Michigan have been implemented.
- Resident Protection Initiative This
program identifies homes that need accelerated review and, in
some cases, such intervention as directed in-services or a clinical
or administrative advisor to assist in complying with regulations.
The Michigan Department of Consumer and Industry Services (MDCIS)
has received national attention for this effort.
- Governor's Quality Care Awards This
program recognizes outstanding Michigan care providers who go
the extra mile in creating a safe, healthy, and nurturing environment
for the elderly.
The MDCIS also provides facility licensure status
and inspection reports on its Web site, and this helps consumers
and their families to choose an LTC option that will give good care—in
terms of cost and quality—to the patient. In addition,
measures are pending to (1) require administrators to give residents
a monthly itemized bill for services rendered (SB 574), (2) create
a consumer rating index for nursing homes and require that residents
be surveyed annually as to their satisfaction with the facility
(SB 572), and (3) allow electronic monitoring of nursing home residents
(SB 1120 and HB 5603).
Conclusion
Given the growing need for and expense of LTC services
both in Michigan and nationwide, LTC reform is inevitable. Policymakers
are exploring numerous options to make LTC affordable both for individuals
and government. Most believe that success best can be achieved through
both cost shifting and system reform. The challenge is to determine
the optimal degree to which both should be pursued. Debate on this
matter is heated, but regardless of any disagreement among policymakers,
most agree that the goal is to develop a system that ensures the
availability of affordable, high-quality long-term care.
See also Aging; Consumer Protection; Domestic
Violence; Health Care Costs and Managed Care.
FOR ADDITIONAL INFORMATION
American Association of Retired Persons
309 North Washington Square, Suite 110
Lansing, MI 48933
(517) 482-2772
(517) 482-2794 FAX
www.aarp.org
Citizens for Better Care
4750 Woodward Avenue, Suite 410
Detroit, MI 48201
(800) 833-9548
(313) 832-7407 FAX
www.cbcmi.org
Division of Health Facilities and Services
Bureau of Health Systems
Michigan Department of Consumer and Industry Services
G. Mennen Williams Building, 5th Floor
P.O. Box 30664
Lansing, MI 48909
(517) 241-2626
(517) 241-1981 FAX
www.michigan.gov/cis
Health Care Association of Michigan
P.O. Box 80050
Lansing, MI 48908
(517) 627-1561
(517) 627-3016 FAX
www.hcam.org
Michigan Association of Homes and Services for the
Aging
6512 Centurion Drive, Suite 380
Lansing, MI 48917
(517) 323-3687
(517) 323-4569 FAX
Michigan Hospice and Palliative Care Organization
6015 West St. Joseph Highway, Suite 104
Lansing, MI 48917
(800) 536-6300
(517) 886-6667
(517) 886-6737 FAX
www.mihospice.org
Office of Services to the Aging
Michigan Department of Community Health
611 West Ottawa Street, 3d Floor
P.O. Box 30676
Lansing, MI 48909
(517) 373-8230
(517) 373-4092 FAX
www.miseniors.net
CONTENT CURRENT AS OF APRIL 1,
2002
© 2002 Public
Sector Consultants, Inc.
Sponsored by the Michigan Nonprofit Association and the Council
of Michigan Foundations
www.michiganinbrief.org
 
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