States’ revenue seen falling behind Medicaid long-term-care costs
Posted on Sunday, October 5, 2008
Long-term-care costs for state Medicaid programs are expected to grow faster than overall health spending and states’ revenues in the next 20 years, according to a report by the health insurance industry. “States will have a difficult time paying for both Medicaid and other priority areas such as education, criminal justice and transportation,” Daniel I. Shostak, a co-author of the report, said in a call with reporters last week.
Nationwide, long-term expenses — such as for nursinghome and at-home care — paid by the states are expected to total $ 1. 6 trillion for the next 20 years, according to the report by America’s Health Insurance Plans, an association that represents about 1, 300 companies that provide health insurance coverage to more than 200 million Americans. Combined with federal Medicaid dollars, the amount is forecast at more than $ 3. 7 trillion. The numbers are in 2008 dollars.
On an inflation-adjusted basis, states’ spending on such care is expected to grow 4. 1 percent annually from 2008 through 2027, compared with 4. 3 percent between 1995 and 2007.
The authors did not project the growth of state revenues, but — based on historical patterns — expect they will be slower than the growth of longterm care costs.
For example, Arkansas ’ share of long-term care expenses paid by Medicaid rose an average of 5. 8 percent a year from 1995 to 2008, while overall state revenue grew by 4. 7 percent a year during that period, according to data provided by Shostak. Unlike other figures in the report, those were not adjusted for inflation.
Experts say the increasing number of baby boomers reaching retirement age and expensive new technologies are sending costs upward.
The report was written in anticipation of possible changes in health-care policy under a new Congress and president in 2009 and to inform people of possible strains on Medicaid, Karen Ignagni, president and chief executive officer of the insurance association, said in the call with reporters.
Medicaid is a program for low-income Americans funded by state and federal sources. The program pays about 49 percent of all long-term-care costs nationwide.
In Arkansas, the state provides 27 percent of Medicaid funding, while the rest is federal money.
Although it was designed for poor people, Medicaid has become the “de facto insurer for millions of middle-class Americans” who need long-term care, the report said.
“Many Americans underestimate their risk of needing long-term care, underestimate the cost of care and may erroneously believe they have longterm care coverage,” Ignagni said.
Medicare, the federal program that insures Americans age 65 and older and the disabled, does not cover extended long-term care.
Insurance companies have a self-interest in promoting private coverage, but Glen Mays, an associate professor at the University of Arkansas for Medical Sciences, said that buying long-term care insurance is appropriate for many people, and the sooner it is bought the cheaper it is.
Still, health insurance costs in general are rising.
Premiums for U. S. companies and their workers, policies which do not include long-term coverage, rose this year by 5 percent compared with last year, according to a survey released last month by the Kaiser Family Foundation, a nonprofit group based in Menlo Park, Calif.
On average, workers nationwide are spending $ 3, 354 this year for family premiums, up 2. 2 percent from $ 3, 281 last year, according to the foundation.
In most cases, a person’s assets must be no more than $ 2, 000 for them to qualify for Medicaid.
Mays said long-term insurance can give people more choices in where they receive care, because some providers don’t accept Medicaid. They also can limit the number of Medicaid patients they will accept.
Patients on Medicaid may not be able to say “I want to go to the nice facility that’s close to where my daughter lives,” he added.
The average cost for a year’s stay in a nursing home is $ 75, 000, the association said, and a 65-year-old American has a 70 percent chance of needing long-term care in his lifetime.
The share of long-term Medicaid expenses paid by Arkansas is forecast to grow 3. 4 percent a year.
Lack of access is among possible explanations of why that growth is slower than in other states, Mays said.
“In so many rural areas of the state, we have a low overall supply of nursing home beds and long-term care workers compared to other states,” he said.
America’s Health Insurance Plans expects Medicaid expenses for long-term care to grow fastest in Alaska, at 7 percent a year; California, at 6. 4 percent; and Arizona, at 5. 9 percent.
Slower growth in Arkansas, Mays said, also may be because Arkansas Medicaid is aggressive in using federal waivers allowing Medicaid money to be directed to “home and community based” types of longterm services in place of more expensive, institutional nursing home care.
Arkansas Department of Human Services spokesman Julie Munsell said the state this year began a “Choices in Living” counseling program through which patients referred by doctors to nursing homes must be told of options, including home care.
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