State Cost-Containment Initiatives for Long-Term Care Services for Older People

Publication Date: May 2000

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Health

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Abstract:

Although the rate of growth for Medicaid long-term care expenditures for the elderly has slowed in recent years, spending on these services still represents a substantial proportion of total Medicaid expenditures. The aging of the population guarantees greater future need for long-term care. Consequently, state policymakers have sought to reduce the rate of growth in these expenditures through a variety of strategies.

One approach is for states to create more effective and efficient financing and delivery systems by developing home and community-based services and by integrating acute and long-term care services through the use of managed care. Although some of the recent emphasis on community-based care is surely based on consumer preference, a major impetus for this reform is the promise of cost-savings - an outcome about which research has been equivocal. Two relatively new areas of policy development involve consumer-directed home care and nonmedical residential facilities.

Almost all states are looking to managed care and the integration of acute and long-term care services as a potential way to reduce the rate of increase in expenditures. Progress on these initiatives has been slow, in part because Medicaid and, often, Medicare, waivers are needed for their implementation. Also, the mixed experience with Medicaid and Medicare managed care for a less complicated population has resulted in a relatively cautious approach to integrated managed care programs for the frail older population.

A second strategy to reduce state expenditures is to substitute private, Medicaid, and Medicare financing for state funding. States have sought to promote private long-term care insurance as a way to reduce Medicaid long-term care expenditures by enacting tax incentives, offering private long-term care insurance to state employees, and establishing public/private partnerships. These initiatives have not increased the number of people with private long-term care insurance significantly. Although almost all states believe that "Medicaid estate planning" is a problem, it is a major concern in only a few states. While increasing federal contributions through Medicare and Medicaid maximization are being used effectively by some states, these strategies simply shift costs to the federal government.

In the short run, if faced with an economic downturn, states are likely to rely on more traditional strategies to reduce spending, such as cutting reimbursement rates and controlling nursing home supply. Many states are using certificate of need restrictions or moratoria on new nursing home construction to limit the supply of services, and, therefore, utilization. With the repeal of the Boren amendment in the Balanced Budget Act of 1997, states have much greater legal freedom to impose rate cuts on nursing homes. However, so far, relatively few states have done so, reflecting good economic times and the political power of the nursing home industry.