Long-Term Care: Trends in Public and Private Spending

Publication Date: April 2006

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Health

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Abstract:

Long-term care refers to a broad range of health and social services needed by individuals who lack the capacity for self-care due to a physical, cognitive, or mental disability or chronic condition resulting in functional impairment(s) for an extended period of time. The need for long-term care affects persons of all ages -- children born with disabling conditions such as mental retardation or cerebral palsy; workingage adults with inherited or acquired disabling conditions; and the elderly with chronic conditions or illnesses such as Alzheimer's disease or severe cardiovascular disease.

Spending on long-term care services is a significant component of health care spending in the United States. Of the $1.56 trillion spent on personal health care services in 2004, $194.3 billion (12.5%) was spent on long-term care services -- comparable in size to spending on prescription drugs. Long-term care expenditures include services in both institutional settings -- e.g., nursing homes and intermediate care facilities for individuals with mental retardation (ICFs/MR) -- and a wide range of home- and community-based services such as home health care services, personal care services, and adult day care.

The dominant payer in the U.S. for long-term care services is Medicaid, a means-tested program jointly funded by states and the federal government. In 2004, Medicaid paid for nearly one-half of all long-term care expenditures (49.3%), spending $95.7 billion. Medicare was the second-largest source of payment, funding about 19.2% of expenditures ($37.4 billion). Out-of-pocket spending was nearly as large, representing 19.0% of all expenditures ($36.9 billion). Other payers such as private insurers, and other public and private sources covered the remainder.

From 1990-2004, long-term care expenditures grew slightly faster than expenditures for all personal health care services; the average annual growth rates were 7.4% and 7.0%, respectively. Over this same time period, funding for longterm care has increasingly been paid by public sources, and has increasingly been spent on home- and community-based settings. In 1990, 22.0% of long-term care spending went toward home- and community-based services; this increased to 36.7% of spending in 2004. This trend has largely been driven by the increased spending within the Medicaid program toward these types of services.

This report will be updated as additional data become available.