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SECTION I BACKGROUND AND STUDY RATIONALE Future Growth in Long-Term Care Needs The Elderly The nation faces dramatic growth in the numbers of elderly persons who are dependent upon others for help in one or more of their everyday living activities because of disabling chronic illnesses. (See Exhibit A-1 and A-2 for a more detailed description of the projected needs of future cohorts of elderly for the long-term care services.) · Between 1980 and 2000, the total Ue S ~ population is projected to grow 18 percent and the number of functionally dependent elderly is likely to increase by 57 percent to a total of about 9 million.* The functionally dependent population aged 75 and over is likely to grow to 6.5 million, an 80 percent increase from 1980; their needs for long-term care are more extensive and intensive than those of persons aged 65-74. · In the longer range, between the years 2000 and 2040, when the post World War II "baby-boom" generations turn 65, the estimated growth in the elderly's long-term care needs will be even more disproportionate to total population growth. Although the total U.S. population is projected to grow by 20 percent between those years, the number of functionally dependent elderly could increase by 90 percent to over 17 million. Those age 75 and over would account for most of that estimated increase, expanding by about 7.6 million, or 116 percent, during that time. *Throughout this report, the statistics presented concerning long-term care are approximate estimates. Technically, the estimates should be expressed in ranges, rather than discrete numbers, because of uncertainty about actual current numbers and about the future forecasts. However, for ease of comprehension, point estimates are used; unless otherwise indicated, they are believed to reflect reasonably sound general orders of magnitude. 3
The Population Under Age 65 In addition to the functionally dependent elderly, it is estimated that at least as many, and probably more, persons under the age of 65 have similar needs for assistance in everyday activities. These people either have experienced an early onset of a chronic disabling disease, are chronically mentally ill, are physically disabled from other causes such as accidents, or are developmentally disabled, including mental retardation. Most of these persons need help for a longer period (some over their lifetimes) than those whose dependencies begin after the age of 65. (See Exhibits A-1 and B-1 for more information on the numbers of functionally dependent nonelderly and on problems in the current system of long-term care affecting these groups.) · In 1980, about 2.8 million developmentally disabled persons required the assistance of others in everyday living, as well as specialized services related to their disabilities. · In 1980, approximately half of the 1.7 million seriously disabled chronically mentally ill were living in community settings. The inadequacy of care for the chronically mentally ill has been brought to the public's attention in association with the very visible problems of the homeless. It is estimated that 30 to 40 percent of the nation's homeless have a history of mental illness. But the homeless mentally ill represent only a small portion of the larger, less visible population of chronically mentally ill individuals lacking access to the services that could help them live more successfully and productively in the community. · A conservative estimate of "other disabled" functionally dependent adults (ages 21-64) in 1980 was approximately one million. The presumption is that these are largely individuals physically disabled by early onset of a chronic illness or physically impaired from accidents or other causes. · National data on the current number of persons in these functionally dependent groups are incomplete, and estimates based on available data are quite variable. However, even using very conservative estimates of the current numbers of such persons and increasing this total only by the rate of growth in the general population (18 percent by the year 2000), the nonaged functionally dependent would account for at least 40 percent of all national long-term care needs in the year 2000. The Composite Picture Between 1980 and 2000, when the U.S. population is projected to grow 18 percent, the nation's long-term care needs are projected to increase by 38 percent to a total of 15 million persons. Between 2000 and 2040, when the population is projected to increase by 20 percent, the number of people of all ages needing extensive long-term care may increase by as much as 60 percent to 23.5 million people. 4
Although the overall growth in needs for both time periods will be caused primarily by increases in the numbers of functionally dependent elderly, national policies intended to meet the needs of this group also can have significant implications for meeting the functional dependency needs of those under the age of 65. A substantial amount of the long-term care services for persons in each of the functionally dependent population groupings of all ages is provided in common settings, particularly nursing homes, and financed from common sources, particularly Medicaid. Long-Term Care Costs Annual Costs and Personal Income About one in five of those who live to be 65 years of age will spend time in a nursing home or require intensive home health care services before they die. ~ The average annual cost of nursing home care currently exceeds $20,000 nationally; the average length of stay is about two years. Intensive home health care, such as that associated with advanced Alzheimer's disease, has been estimated to cost in excess of $13,000 annually (exclusive of food, clothing, shelter and other everyday living costs not associated with the disease).2 · The median annual income of all persons in the U.S. over 65 in 1982 was $8,790; for married couples it was $15,130, for nonmarried persons $5,880. Almost two-thirds received more than half their income from Social Security programs; more than one-fourth received over go percent of their income from Social Security programs.3 It is immediately apparent that for at least half of the population age 65 and over, paying for nursing home or intensive home care with personal income represents a catastrophic financial event. Even if all of their income was dedicated to those costs, it would cover only about three months of the costs of nursing home care for a nonmarried person, and about nine months of care for a married couple member before impoverishment, if they had no other assets available for those payments. Likewise, intensive home care of a spouse would consume the entire annual income of about half of the married elderly population. · It has been estimated that about 50 percent of the nursing home residents whose costs~now are being borne by Medicaid--the federal- state financed, state-administered, "means-tested" program for providing health care services to low-income persons--initially were private-pay patients. These people "spent-down" their personal financial resources in directly paying for their nursing home costs before becoming eligible for Medicaid coverage.4 5
Misconceptions About Insurance Coverage of Costs The general perception is that nursing home costs, as well as other long-term care costs, are covered by Medicare and/or private health insurance, such as "Medi-gap" supplemental insurance, for those age 65 and over. · In a recent survey of its membership, the American Association of Retired Persons found that, of those members who anticipated a need for long-term care before they died, about four out of five believed that all or a substantial part of the costs for such care would be covered by Medicare or private insurance.5 · The facts are that Medicare and private insurance together provide only very limited coverage of the costs of long-term care services. For example, total Medicare expenditures for nursing home costs in 1983 were $0.5 billion, about 1.9 percent of national expenditures for nursing homes; private insurance paid $0.3 billion, about one percent. During that same year, Medicare expenditures for home health care services were about $1.3 billion, roughly three percent of all Medicare expenditures, even though this has been a rapidly increasing expenditure category since about 1980.6 National Long-Term Care Expenditures7 National expenditures for care of the elderly will continue to grow, even if no changes are made in long-term care financing. Federal outlays for health care for the elderly under current arrangements are expected to increase from 2.3 percent of GNP in 1980, to 4.0 percent in 2000, and to 5.4 percent in 2020. Nursing Home Expenditures In 1983, national expenditures for nursing homes totaled more than $28 billion, about 8.S percent of all national health expenditures. About half of the cost was paid directly out-of-pocket from personal financial resources. About 47 percent was financed by Medicaid; the remaining 3 percent was financed by Medicare or private insurance. ~ Medicaid long-term care expenditures of all types (but primarily nursing home care) grew from less than 40 percent of all Medicaid expenditures in 1973 to about 48 percent in 1983. O Medicaid nursing home expenditures grew about 400 percent between 1973 and 1983, to $14 billion, four times the increase in per capita gross national product. Although this rate of growth is expected to decrease, Medicaid nursing home expenditures are still expected to grow by about 80 percent by 1990 to nearly $25 billion. · The average annual rate of growth in national expenditures for nursing home care between 1973 and 1983, about 16 percent, was higher than the average annual growth in all national health expenditures, 13.1 percent, and greater than average annual growth rate in the gross 6
national product, 9.6 percent. Continued differential growth rates are projected to the year 2000. Noninstitutional Care Expenditures Although 1.3 million people currently receive care in institutional settings, it is estimated that another 6 million are similarly impaired but residing in the community where they are being cared for by family and friends. The estimated value of informal care currently being provided ranges from $7 to $16 billion a year. Formal community-based and in-home long-term care services, such as transportation, home-health, homemaker/chore, and meal preparation services are provided nationally under Title XX of the Social Security Act and Title III of the Older Americans Act (OAA), as well as under Medicare and Medicaid. Title XX is a federal population-based block grant program to the states for social services primarily provided for low-income persons. Services under the Older Americans Act are extended to all persons age 60 and over without regard to income. · Total public expenditures in 1983 for community-based and in-home services totaled nearly $5 billion: $1.3 billion under Medicare, $0.6 billion under Medicaid, $2.7 billion under Title XX, and $0.3 billion under OAA. · It is unclear what proportion of Title XX and OAA funding was expended for long-term care services. However, even generously assuming that half of the funds were used for long-term care services, only 15 percent of all public long-term care expenditures in 1983 was for services to noninstitutionalized, functionally dependent persons. Financing Long-Term Care Individual patients and their families, not insurer or public programs, bear primary responsibility for financing long-term care. Fifty percent of national expenditures for nursing home care is now financed out of pocket from patients' current personal income or asset conversion. In contrast, less than 10 percent of hospital expenditures come directly from patients. Over 90 percent of hospital expenses are paid through public and private insurance mechanisms. Although personal annual income of the elderly from private pensions and assets is projected to increase in the future, most of this population will remain unable to absorb catastrophic long-term care costs. Of particular concern is the projected large number of nonmarried (widowed, divorced, never married) women who either may not have private pension incomes or may have only minimal incomes.9 · In the judgment of the committee that prepared this study plan, the encouragement of personal savings sufficient to cover catastrophic long-term care costs would be extremely inefficient. Most families 7
would have to forgo consumption and investment in their children to save for something that might never occur. ~ · Federal budget deficits have created strong pressure to contain future increases in expenditures in all federally financed domestic programs. The federal share of Medicaid expenditures for nursing home care dropped from about 57 percent in 1975 to 54 percent in 1983.1° · In many states, Medicaid expenditures represent the second largest annual budget item, second only to education, and they are one of the fastest growing components. In funding Medicaid, states face considerable pressure because of cyclical variations in their tax revenues and requirements to balance budgets annually. The proportion of Medicaid expenditures allocated to long-term care varied significantly among the states in 1983 from a low of 23 percent in California to a high of 70 percent in New Hampshire.ll Availability, Appropriateness, and Quality of Long-Term Care In most communities, nursing homes are the only available long-term care alternative for persons who require more assistance in everyday living activities than can be provided directly in their homes by their immediate families or friends. Also, nursing homes generally are the only alternative available for placement of hospital-discharged patients who, after an acute care episode, may require relatively long periods (several weeks or months) of skilled rehabilitative or convalescent care.12 · In all but a few states, occupancy rates in nursing homes average well over 90 percent and in most states the demand for nursing home beds exceeds the supply, as evidenced by long waiting lists and long waits for placement. However, availability and utilization of nursing home beds vary widely among the states. In 1980, the national average of beds per 1,000 elderly was 54, but the range among states was from 22 to 94. In the 10 states with the highest ratio, 92 percent of the very old, very dependent were in nursing homes compared with 54 percent in the 10 lowest ratio states. · Quality of care and quality of life in nursing homes varies widely around the country, with many very good homes operating with competent, caring staff who provide health and support services in a conscientious and sensitive manner and where the dignity, privacy and other psychosocial needs of the residents are respected. However, although nationwide objective comparative data are not available, professional experts conclude that poor homes outnumber good homes and that generally the quality of care in many nursing homes is only marginally acceptable. The quality of home care is also an issue of widespread concern, and is even more difficult to monitor than nursing home care.13 In those communities in which community-based and in-home service programs are available, functionally dependent persons with multiple long-term care needs frequently experience distressing difficulties in 8
obtaining and using those services. Many are not aware of the services that are available, do not know if they are eligible for the services, and may lack transportation to different locations to obtain the care. In many communities, health programs and other types of support are fragmented and frequently neither are adequately coordinated with primary and acute health care. The result is critical problems in timeliness and continuity of care for the functionally dependent. Exhibits B-1 and B-2.) (See · A major obstacle to obtaining services and reimbursement to which the elderly are entitled is the multiplicity and complexity of forces and other procedures engendered by a fragmented and uncoordinated system. New programs or reforms in existing programs must have simplification and uniformity of forms and procedures as a primary goal. _9_