GAO Long Term Care Study
Medicaid, particularly as it involves financing long-term care. Long-term care includes an array of health, personal care, and supportive services provided to persons with physical or mental disabilities. It relies heavily on financing by public payers, especially Medicaid, and has significant implications for state budgets as well as the federal budget.
My remarks today will focus on (1) the pressure that entitlement spending for Medicare, Medicaid, and Social Security is expected to exert on the federal budget in coming decades; (2) how the aging of the baby boomers will increase the demand for long-term care services; and (3) how these trends will affect the current and future financing of long-term care services, particularly in federal and state budgets. I will also highlight several considerations for any possible reforms of long-term care financing. My comments are based on prior GAO work, particularly a 2002 testimony by the Comptroller General.2 We updated prior GAO work by including more recent data from GAO’s budget simulation model, the Centers for Medicare & Medicaid Services, and the U.S. Census Bureau as well as the literature. We conducted our work to update this earlier testimony from February through April 2005 in accordance with generally accepted government auditing standards.
In summary, it is clear that, taken together, Medicare, Medicaid, and Social Security represent an unsustainable burden on future generations. Increased demand for long-term care, which will be driven in part by the aging baby boom generation, will contribute further to federal and state budget burdens. Estimates suggest the number of disabled elderly who cannot perform basic activities of daily living without assistance may as much as double from 2000 through 2040. Current problems with the provision and financing of long-term care could be exacerbated by the swelling numbers of the baby-boom generation needing care. These problems include whether individuals with disabilities receive adequate services, the potential for families to face financially catastrophic long-term care costs, and the burdens and social costs that heavy reliance on unpaid care from family members and other informal caregivers create coupled with possibly fewer caregivers available in coming generations. Long-term care spending from all public and private sources, which was about $183 billion for persons of all ages in 2003, will increase dramatically in the coming decades as the baby boom generation ages. Spending on long-term care services just for the elderly is estimated to increase from 2000 by more than two-and-a-half times by 2040 and could nearly quadruple in constant dollars to $379 billion by 2050, according to some estimates. Without fundamental financing changes, Medicaid—which pays over one-third of long-term care expenditures for the elderly—can be expected to remain one of the largest funding sources, straining both federal and state governments.
In considering options for reforming long-term care financing in light of these anticipated demands for assistance and budgeting stresses, it is important to keep in mind that long-term care is not just about health care. It also comprises a variety of services an aged and/or disabled person requires to maintain quality of life—including housing, transportation, nutrition, and social support to help maintain independent living. Given the challenges in providing and paying for these myriad and growing needs, several considerations for shaping reform proposals include:
• determining societal responsibilities;
• considering the potential role of social insurance in financing;
• encouraging personal preparedness;
• recognizing the benefits, burdens, and costs of informal caregiving;
• assessing the balance of state and federal responsibilities to ensure adequate and equitable satisfaction of needs;
• adopting effective and efficient implementation and administration of reforms; and
• developing financially sustainable public commitments.
Long-term care includes many types of services needed when a person has a physical or mental disability. Individuals needing long-term care have varying degrees of difficulty in performing some activities of daily living without assistance, such as bathing, dressing, toileting, eating, and moving from one location to another. They may also have trouble with instrumental activities of daily living, which include such tasks as preparing food, housekeeping, and handling finances. They may have a mental impairment, such as Alzheimer’s disease, that necessitates assistance with tasks such as taking medications or supervision to avoid harming themselves or others. Although a chronic physical or mental disability may occur at any age, the older an individual becomes, the more likely a disability will develop or worsen.