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Features for Senior Citizens
Options to Broaden Role of Medicare in Long-Term
Care Explored in Georgetown U. Study
By Ellen O’Brien, Health Policy Institute,
Georgetown University
 Feb.
18, 2007 - Medicare has contributed substantially to the wellbeing of
the nation’s elderly and people with disabilities. Over the past four
decades, Medicare has helped to improve the health of its beneficiaries
and assure their financial wellbeing. But Medicare also has significant
gaps. Key among them is the fact that Medicare does not pay for
long-term care.
Medicare pays for nursing home and home care
services, but Medicare is designed to pay for the treatment of acute,
short-term illness. These services are available only to beneficiaries
who need skilled nursing care or therapies, and are often time-limited.
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At the same time, nearly a third of the Medicare
population has some physical or cognitive limitation that makes it
difficult for them to perform certain activities of daily living, such
as getting dressed, moving around the home, and using the bathroom.1
Medicaid is available to provide assistance to some Medicare
beneficiaries who are poor, or who cannot afford the high cost of
long-term care services, but most long-term care is a family
responsibility.
Individuals and families provide a substantial
amount of unpaid care and pay for care out of personal resources.
Long-term care accounts for the single largest out-of-pocket expense of
Medicare beneficiaries.2
Medicare’s Coverage of Post-Acute Services
 Medicare
pays for most of the medical care costs of people who need long-term
care, and it makes sizable payments to long-term care service providers—
home health agencies and nursing homes. Medicare spent $32.8 billion on
home health care and skilled nursing facility (SNF) services in 2005,
accounting for 10% of program spending (see Figure 1).3
However, Medicare’s coverage of home care and
nursing home care is very limited. Medicare pays for 100 days of nursing
home care for beneficiaries with a prior hospital stay who need skilled
nursing care or rehabilitative therapy. Medicare pays the full costs of
care for the first 20 days of a nursing home stay; after that,
beneficiaries make a substantial copayment of $124 per day in 2007.
As a result of these limits, SNF stays tend to be
short, lasting an average of 25 days.4 Similarly, Medicare covers home
health care, but limits services to people with skilled care needs. To
be eligible for home health services, beneficiaries must be “homebound,”
need “intermittent” skilled nursing or therapy services, and be under
the care of a physician who prescribes their plan of care.
Home health aide services (assistance with
dressing, transferring, toileting, and other activities of daily living)
are provided, but people who have no skilled care needs—who require
assistance with daily activities only—are not eligible to receive home
health care.
Medicare’s home health benefit is more open-ended
than its SNF benefit: eligibility for home care is not tied to a recent
hospitalization, there is no limit on the number of days of care or the
number of home care visits a beneficiary may receive, nor is there any
beneficiary cost-sharing. About 6 percent of Medicare beneficiaries used
home health services in 2004, receiving, on average, 31 home health
visits.5
Ups and Downs in Medicare’s Home Health Benefit
Medicare spending on home health care has been
marked by significant ups and downs in recent years.
The benefit provided increasing levels of service
to people with chronic conditions for several years in the early 1990s
before being cut back in the latter part of the decade.
In 1989, a U.S. Supreme Court decision led to a
reinterpretation of the eligibility guidelines for Medicare home health
care, and contributed to rapid growth in the number of beneficiaries
receiving home health and the amount of service each beneficiary
received. Between 1989 and 1997, the proportion of beneficiaries
receiving home health care more than doubled, rising from 5.1% to 10.8%,
and the number of visits increased from an average of 31 visits per user
in 1989 to 79 visits per user in 1997.6 A substantial amount of the
growth was attributable to people receiving more than 200 visits per
year.
Expenditures over this period grew at a 25%
average annual rate.
With increasing concern that Medicare’s home health
benefit had evolved into a long-term, personal care benefit, several
policy changes were made in the 1997 Balanced Budget Act to rein in this
growth. Changes in both eligibility criteria and payment method led to a
sharp reduction in home health care use and spending.
The share of Medicare beneficiaries receiving home
health care services dropped to 7.1% in 2001, with sharp declines in the
proportion of beneficiaries using home health care for extended periods
of time. Between 1997 and 2001, mean visits per home health care user
declined from 79 to 32 visits per year, and expenditures fell by half,
dropping from $17.9 billion to $8.7 billion. Spending has increased
somewhat since 2001, rising to $11.2 billion in 2004.7
Medicare and National Spending on Long-Term Care
Medicare spending represents a significant share of
all spending on long-term care. According to one recent estimate,
Medicare spent $42.2 billion on home care and nursing home care,
representing roughly 20 percent of national spending on long-term care
in 2005 (see Figure 2). Individuals and families contributed a roughly
comparable amount ($37.4 billion), while Medicaid spending accounted for
nearly half of what the nation spent on long-term care, with
expenditures of $101.1 billion.8 Medicare spending accounted for more
than a quarter of spending on home care, and about 17 percent of all
nursing home spending. [Figure 2]
Medicaid’s Role as a Supplement to Medicare
Some low-income Medicare beneficiaries receive
assistance with long-term care costs through the means-tested Medicaid
program. About 7.2 million Medicare beneficiaries are also enrolled in
Medicaid (dual eligibles), though not all of them receive assistance
with long-term care. In 2002, Medicaid spent more than $66 billion on
long-term care services for nearly 2.3 million dual eligibles. Most of
that spending ($50 billion) was for care provided in nursing homes and
other facilities; roughly $16 billion was for home and community-based
care. Medicare beneficiaries who use long-term care services are a
high-cost population in Medicaid, representing just 4 percent of the
Medicaid population, but accounting for 30 percent of Medicaid
spending.9
Options to Broaden the Role of Medicare in
Long-Term Care
Medicare could be modified to play a larger role in
financing long-term care. Options include federalizing long-term care
costs for dual eligibles and adding a personal care benefit to Medicare.
• Federalizing long-term care costs for dual
eligibles. One option for expanding Medicare’s role, and relieving
burdens on states, would be for the federal government to pay the full
cost of Medicaid long-term care services for Medicare beneficiaries.
Long-term care assistance would remain meanstested,
but the federal government would pay the full cost rather than the
current federal matching rate (which varies across states from 50% to
77%).
Along with full federal financing, uniform
eligibility and coverage rules would eliminate much of the variation in
access to services that characterizes Medicaid today.
• Adding a personal care benefit to Medicare. Other
policy reforms could be designed to deliver modest benefits to a broader
population. For example, Medicare’s home care benefit could be expanded
to include a modest personal care benefit, designed to provide
assistance to individuals who need help with daily activities but who do
not have skilled care needs and are thus ineligible for Medicare’s
current home health benefit. Adding a new benefit to Medicare (or
revising the home health benefit) would increase costs, but eligibility
criteria could be designed to limit services to beneficiaries with
significant needs for assistance.
Editor's Notes:
The Georgetown University Long-Term Care Financing
Project pursues analysis designed to stimulate public policy discussion
about current long-term care financing and ways to improve it. The
project issupported by a grant from the Robert Wood Johnson Foundation.
Ellen O’Brien wrote this Fact Sheet.
Health Policy Institute • Georgetown University
Box 571444 • Washington, DC 20057-1485 • (202) 687-0880 •
hpi.georgetown.edu
>>
Full report in pdf, click here
Notes
1.
Centers for Medicare and Medicaid Services, Program Information on
Medicare, Medicaid, and SCHIP, June 2002 edition, Section III.B.2,
p. 4.
(http://www.cms.hhs.gov/TheChartSeries/downloads/sec3b_p.pdf).
2. In
1999, spending on long-term care accounted for 41% of direct out-ofpocket
spending, spending on prescription drugs for 21%. Medicare cost sharing
accounted for 27%. See CMS, Program Information on Medicare,
Medicaid, and SCHIP, June 2002 edition, Section III.B.5, p. 8.
(http://www.
cms.hhs.gov/TheChartSeries/downloads/sec3b_p.pdf).
3.
MedPAC, Data Book, June 2006, Section 1, p. 9. (http://medpac.gov/
publications/congressional_reports/Jun06DataBookSec1.pdf).
4.
MedPAC, Data Book: Healthcare spending and the Medicare Programs,
June 2005, p. 156.
5.
Medicare Utilization Statistics for Part A are available at:
(http://www.
cms.hhs.gov/MedicareFeeforSvcPartsAB/02_MedicareUtilizationforPartA.
asp#TopOfPage).
6.
CMS Data Compendium. November 2003. Medicare Use of Selected Types
of Long-Term Care, 1982-2001. (http://www.cms.hhs.gov/ DataCompendium/02_2003_Data_Compendium.asp#TopOfPage).
7.
MedPAC, Data Book, June 2006, p. 134. (http://medpac.gov/ publications/congressional_reports/Jun06DataBookSec9.pdf).
8.
Harriet L. Komisar and Lee Shirey Thompson, National Spending for
Long- Term Care, Fact Sheet, Georgetown University Long-Term Care
Financing Project, February 2007.
9.
Anna Sommers, Mindy Cohen and Molly O’Malley, Medicaid’s Long-Term
Care Beneficiaries: An Analysis of Spending Patterns, Kaiser
Commission on Medicaid and the Uninsured, November 2006. (http://kff.org/medicaid/
upload/7576.pdf).
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