Long-Term Care Financing

Although not considered a major supporter of long-term care services, Medicare, the universal health insurance program for most older adults and a subgroup of younger people with disabilities, pays a substantial part of skilled nursing facility and home health care bills. The Medicare nursing home benefit is limited to one hundred days, post-hospitalization, for individuals who need continued skilled nursing care and/or skilled rehabilitation. Home health visits are limited to persons who need skilled nursing care on a part-time or intermittent basis. In 1998, 10 percent of total Medicare spending was attributed to nursing facility and home health care. Between 1990 and 1998, Medicare spending for care in skilled nursing facilities increased more than 500 percent and spending for home health care increased 250 percent.

In the mid-1990s, Congress began to express concern about the growth in spending on home health care and about evidence that, due to liberal interpretations of definition and scope of service, Medicare was providing more long-term, nonskilled personal care than the program was intended to provide. There was also anecdotal and case-study evidence that providers participating in Medicaid home care programs were being encouraged by states to help their clients become eligible for Medicare home health benefits in order to reduce state costs for long-term care. Congress responded to these concerns by enacting provisions in the Balanced Budget Act of 1997 that significantly reduced payments to home health agencies, that cracked down on fraud and abuse, and that attempted to return the program to its post-acute care roots. Several studies indicate that this legislation has been successful in reducing the number of visits and the duration of the home care episode, but the impact on elderly consumers' access to care and on quality outcomes is uncertain.