Nursing Homes

The government's current expenditures for health care clearly favor nursing-facility care, which is costly—a conservative estimate put the cost of a nursing-home stay at $47,200 per year in 1999. Total nursing-facility care expenditures in 2000 were $92 billion, compared to $40 billion in 1988. The Congressional Budget Office (CBO) projects the nation's expenditures for long-term care services for the elderly will exceed $108 billion by the year 2010. The largest portion of these expenditures ($52 billion) will come from Medicaid; out-of-pocket expenditures will exceed $29.3 billion; Medicare will account for $16 billion; and private long-term providers will account for $11.2 billion. Medicare, which was designed to pay mostly for acute care or hospital costs, has historically paid for a very small portion of nursing facility care; this is expected to continue into the future, while long-term care insurance will likely play a more significant role. The growth in expenditures for nursing-facility care is projected to accelerate over this decade because of a number of factors, including rising provider costs in such areas as labor and liability rates. The CBO estimates that inflation-adjusted expenditures for long-term care for the elderly will grow annually by 2.6 percent between 2000 and 2040.

In 1997, average daily charges ranged from $136 for skilled care to $109 for intermediate care. For certified Medicaid beds, rates averaged $98, while Medicare rates were $216 per day. Across these rate categories, significant differences occurred based on such factors as ownership status and region of the country. For example, the rate for a skilled bed operated by a proprietary facility in 1997 was $139 per day, compared to $147 per day for a not-for-profit facility. The average daily rate for that same skilled bed in the northeast was $176, compared to a low of $115 in the South. Between 1990 and 2000, the desire of providers to fill a bed with a Medicare patient depended on the type and level of reimbursement and regulations. Currently, many providers are attracted to the Medicare program because of the relatively high reimbursement rates for these residents.