By Harley Tabak, President & CEO
Many people are wondering what impact the election results will have not solely on health care in general, but long term care in particular. It is a subject with which many American families are familiar, and which significantly more will confront in the future.
Now that the election is over, the decisions made in Washington, D.C. about a “grand bargain” to control the growth of federal spending will primarily focus on Medicaid, Medicare, and Social Security – the three big entitlement programs – which currently make up 50% of total federal spending. Underlying the concern about the escalating costs of these programs is a fundamental change going on in the make-up of our population.
There are many more elderly living in the U.S. than ever before, and a high percentage of them have one or more chronic diseases and/or disabilities such as stroke, congestive heart failure, chronic obstructive pulmonary disease, multiple sclerosis, Parkinson’s Disease, arthritis, asthma, Alzheimer’s Disease, diabetes, many others. Additionally, a rapidly increasing number of people younger than 65 are being diagnosed with chronic diseases and disabilities, putting additional strains on the long term care delivery system.
Medicine has advanced to the point that we expect to survive most acute illnesses. Our health care delivery system is overburdened now with those who survive hospitalizations. Many are left struggling to manage chronic diseases in a maze of government funded programs which financially cannot be continued without putting us in further debt, unless significant changes are made.
While President Obama’s re-election ensures that the Affordable Care Act (ACA) will be implemented, nothing remaining in this legislation directly addresses long term care. The ACA originally contained a provision called CLASS (Community Living Assistance Services and Supports) to create a voluntary, government-sponsored long term care insurance program. This program was eliminated when government actuaries determined that it was not financially feasible.
One important aspect of the ACA that will affect nursing homes is the inducements to states to expand Medicaid coverage for working-age households. Some states, like Georgia, are unlikely to accept additional federal money to expand Medicaid to the younger, uninsured populations because after three years of full payment from the federal government, at least 10 percent of the cost must be paid by the state thereafter. At this level of match, expanding Medicaid would cost Georgia an additional $4.5 billion in expenditures over the next ten years.
According to a recent report from the National Governors Association, Medicaid currently constitutes the single largest share of state budgets – 24 percent. On average, nursing home care accounts for nearly one-third of this amount. So, if states expand Medicaid coverage for the younger population, it is likely that more significant cuts would be applied to the Medicaid population receiving long term care in nursing homes, and for elderly requiring care in the community.
Many Americans incorrectly believe their potential long term nursing home costs will be covered by Medicare. In fact, Medicare pays only 25% of nursing home costs, and only for short-term rehabilitation after a hospital stay. Medicaid accounts for 43% of total nursing home revenue. The balance is paid privately through individuals’ personal assets, and a small percentage through commercial insurance. Additionally, Medicare and Medicaid do not cover the cost of assisted living facilities, often considered an entry point to long term care.
Neither political party has offered detailed plans on how it would reduce spending for Medicare and Medicaid other than reducing payments to facilities providing care. Alternatives such as increasing the eligibility age for Medicare recipients, reducing benefits, and raising taxes are politically unpopular. Since long term care providers receive over two-thirds of their revenue from Medicaid and Medicare, reductions in payments from either the federal or state governments could have a profound effect on access to care, and potentially to the quality of care.
Governor Romney proposed the idea of Medicaid “block grants” which would have permitted greater decision making authority to states to experiment with new ideas to provide care more efficiently and effectively. This approach is unlikely to go anywhere with the President’s re-election.
President Obama’s administration at the Centers for Medicare and Medicaid Services (CMS) is likely to continue experimenting with innovative ideas to reduce costs while maintaining or improving quality outcomes. One such development is Accountable Care Organizations (ACOs). ACOs are groups of doctors, hospitals, and other health care providers, who come together voluntarily to give high quality care to the Medicare patients they serve. ACOs are intended to provide coordinated care which ensures that patients, especially the chronically ill, get the right care at the right time, thereby avoiding unnecessary duplication of services (such as hospital re-admissions) and preventing medical errors.
It is uncertain whether innovations like this will save Medicare and Medicaid enough money to keep these programs financially sustainable at current growth levels. Given the urgent need to reduce federal spending, it is likely that a combination of payment cuts to providers, tax increases, and eligibility reductions will be necessary to keep Medicare and Medicaid viable for the future.
Long term care – indeed all of health care – could undergo dramatic changes in the future, as our elected leaders confront the challenge of paying for a rapidly growing elderly and chronically ill population. Currently, access to nursing homes and physicians has been curtailed in many communities due to the low government payment levels given to medical providers. If additional reductions are made in these programs, this problem will be exacerbated.
The election has not determined what our future long term health care delivery system will look like, but it has set the stage for whom will be making these difficult decisions. The outcome of these deliberations will affect all of us.
At The William Breman Jewish Home, we have been preparing for these changes to our funding structure. We are fortunate our community supports our annual fundraising efforts, which enable us to care for families regardless of their ability to pay. Our Board of Directors and staff have been innovative in finding opportunities to create additional revenue streams that offer added value to our community without overburdening our families or compromising the quality of care we provide our residents. These additional lines of business will provide even more solutions for the ever increasing number of families with aging loved ones.
Harley Tabak is Chief Executive Officer of The William Breman Jewish Home.