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Long-Term Care Financing

Financing Trends

A number of initiatives at the federal, state, and provider levels seek to use public funds creatively to provide an array of services to older adults with chronic disabilities. One major trend is the integration of acute and long-term care funding streams to allow for better management of care across the service spectrum. The most ubiquitous example of this activity is the Program of All-Inclusive Care for the Elderly (PACE), a managed care approach to providing long-term care for disabled older adults who are eligible for Medicaid and are nursing home certifiable. Participating providers receive a lump-sum payment for each elderly beneficiary that integrates Medicare and Medicaid reimbursement to allow maximum flexibility in meeting the primary care and long-term care needs of the consumer. Additional distinguishing features of this program include: (1) provider assumption of financial risk in caring for the older adult within the monthly capitation payment; (2) integrated service delivery, with adult day care as the focal point; (3) care management through the use of interdisciplinary care teams, from physicians to the van driver; and (4) a vigorous attempt to keep individuals in community care and out of nursing homes. The Balanced Budget Act of 1997 made PACE a permanent Medicare category, and there are ongoing efforts by providers and some states to expand the number of sites across the country. The potential for this model, however, to address the financial as well as the delivery concerns of millions of older adults who need long-term care will remain limited unless policymakers and providers figure out how to expand the scale and scope of the program in an efficient manner.

Motivated by escalating Medicaid budgets and growing numbers of elderly and younger disabled enrollees, many states have expressed interest in the integration of acute and long-term care. They are particularly concerned about their dual eligible population—individuals eligible for both Medicaid and Medicare—who account for about 17 percent of the states' Medicaid enrollees and 35 percent of program expenditures. By the late 1990s, nineteen states, most notably Arizona, Maine, Minnesota, Texas, and Wisconsin, had some type of integration initiative. The Robert Wood Johnson Foundation and the Centers for Medicare & Medicaid Services are sponsoring evaluations of these programs and demonstrations in other states, but results will not be available for some time. Meanwhile, the rhetoric of integration will continue, as policy-makers, providers, and researchers struggle to implement the details.

Consumer direction in home and community-based care is another trend that is slowly emerging as a financing option for older adults. This concept originated in the independent living movement of younger people with physical disabilities and the self-determination movement of people with mental retardation and developmental disabilities. Both of these movements opposed institutionalization and demanded more consumer control over services. Consumer direction emphasizes privacy, autonomy, and the right to manage one's own risk. Aside from leveling the playing field between institutional and home and community-based care, a growing number of policymakers see it as a potential way to save money through more efficient allocation of resources and through flexibility in how, where, and by whom care is delivered. Policy options range from consumer involvement in planning and decision-making to the ultimate in consumer direction—providing cash benefits to beneficiaries and/or their families and letting them purchase their own services and supports.

Most of the consumer direction programs have been implemented at the state level, through Medicaid waiver authority and state-funded personal-assistance service programs. The Cash and Counseling Demonstration and Evaluation, a five-year program jointly funded by the U.S. Department of Health and Human Services and the Robert Wood Johnson Foundation in 1997, is testing the efficacy of cashing out the Medicaid home and community-based waiver benefit in Arkansas, Florida, and New Jersey. A randomly-assigned group of beneficiaries is receiving a cash benefit that is a slightly discounted monetary equivalent of a package of personal care services provided by an agency to a control group of beneficiaries. A rigorous evaluation is under way to assess the impact on elderly and younger consumers and on state coffers. Special attention is focused on how individuals spend the dollars and the extent to which this option might compromise quality.

U.S. policymakers have been comfortable with cash benefits for certain subpopulations, such as veterans and workers with disabilities. Over the past five years, several federal legislators and the current and previous presidents have included within large tax bills which were never passed a three thousand dollar, nonrefundable tax credit for people needing long-term care or for family members caring for them. This proposal would provide consumer-directed benefits, that is, a cash refund. Policymakers have been less supportive of direct payments to allegedly "undeserving" individuals who receive public benefits due to their financially disadvantaged status. Concerns about misuse of dollars as well as potential liability for unforeseen mishaps, such as abuse of elderly clients by privately hired workers or deaths of older adults because of insufficient or inappropriate service delivery, have impeded the growth of this trend in the United States.

Additional topics

Medicine EncyclopediaAging Healthy - Part 3Long-Term Care Financing - Informal Care, Medicaid, State And Local Funding, Medicare, Private Long-term Care Insurance