GAO Long Term Care Study
Medicaid, the joint federal-state health-financing program for low-income individuals, continues to be the largest funding source for long-term care. Medicaid provides coverage for poor persons and for many individuals who have become nearly impoverished by “spending down” their assets to cover the high costs of their long-term care. For example, many elderly persons become eligible for Medicaid as a result of depleting their assets to pay for nursing home care that Medicare does not cover. In 2003, Medicaid paid 48 percent (about $87 billion) of total long-term care expenditures. States share responsibility with the federal government for Medicaid, paying on average approximately 43 percent of total Medicaid costs in fiscal year 2002.5 Eligibility for Medicaid-covered long-term care services varies widely among states.
Spending also varies across states—for example, in fiscal year 2000, Medicaid per capita long-term care expenditures ranged from $73 per year in Nevada to $680 per year in New York. For the national average, about 57 percent of Medicaid long-term care spending in 2002 was for the elderly. In 2003, nursing home expenditures dominated Medicaid long-term care expenditures, accounting for about 47 percent of its long-term care spending. Home care expenditures make up a growing share of Medicaid long-term care spending as many states use the flexibility available within the Medicaid program to provide long-term care services in home- and community-based settings.6 From 2000 through 2003, home and personal care expenditures grew at an average annual rate of 15.9 percent compared with 4.0 percent for nursing facility spending. Expenditures for Medicaid home- and community-based services for long-term care almost doubled from 1998 to 2003—from about $10 billion to about $19 billion.
Other significant long-term care financing sources include:
• Individuals’ out-of-pocket payments, the second largest source of long-term care expenditures, accounted for 20 percent (about $38 billion) of total expenditures in 2003. The vast majority (82 percent) of these payments were used for nursing home care.
• Medicare spending accounted for 18 percent (about $33 billion) of total long-term care expenditures in 2003. While Medicare primarily covers acute care, it also pays for limited stays in post-acute skilled nursing care facilities and home health care.
• Private insurance, which includes both traditional health insurance and long term care insurance,7 accounted for 9 percent (about $16 billion) of long-term care expenditures in 2003.
6Through Medicaid home- and community-based services, states cover a wide variety of nonmedical and social services and supports that allow people to remain in the community. These services include personal care, personal call devices, homemakers’ assistance, chore assistance, adult day health care, and other services that are demonstrated as cost-effective and necessary to avoid institutionalization. In their home- and community-based services programs, however, states often limit eligibility or the scope of services in order to control costs.
7Private long-term care insurance commonly includes policies that provide coverage for at least 12 months of necessary services—as demonstrated by an inability to perform a certain number of activities of daily living—provided in settings other than acute-care hospital units.
Source: GAO analysis of 2003 data from the Centers for Medicare & Medicaid Services and The MEDSTAT Group. Public payersOut of pocketPrivate insuranceOther privateOther publicMedicareMedicaid
5The federal share of Medicaid funding varies by state and is based on a state’s per capita income in relation to the national per capita income. By statute, the federal share of Medicaid expenditures across individual states may range from 50 to 83 percent. 42 U.S.C. § 1396 d (b) (2000).