DataBrief: Did you know… DataBrief Series ● February 2011 ● No. 13 Sources of Long- Term Care Spending Of the $264 billion that the United States spent on long-term care in 2008, 60% was paid for by Medicaid and Medicare?

Long-term care (LTC) includes services and supports provided to individuals with functional and cognitive impairments in the home, community, and institutions. Between 2006 and 2008, U.S. spending on LTC increased from $232 billion to $264 billion, a 3.2% growth per year after adjusting for inflation. 1 Medicaid is the nation’s primary payer of LTC, covering home- and community- based services (HCBS) and long-term nursing home stays for low-income individuals with limited assets. Medicare accounts for roughly one-fifth of the nation’s spending on LTC. It covers up to 100 days of rehabilitation services in a nursing home after a hospitalization and some home health care for homebound beneficiaries. Individuals who do not meet asset eligibility criteria to qualify for Medicaid but have LTC needs not covered by Medicare will finance services either through private insurance or, more commonly, through out-of-pocket payments. A large portion of LTC is also provided by family members and/or friends. Nearly 44 million Americans over the age of 18 – or about 1 in 5 – were caregivers to individuals over age Sources of Long-Term Care Spending Page 2 DataBrief (2011) ● No Avalere analysis of the 2008 CMS National Health Expenditures data; the National Investment Center for the Seniors Housing and Care Industry MAP Data and Analysis Service data; and data from Burwell, B., Sredl, K., and Eiken, S. “Medicaid expenditures for LTC services, ” 2 “Caregiving in the U.S. A Focused Look at Those Caring for the 50+.” National Alliance for Caregiving in Collaboration with AARP. November 2009.

60% of long-term care is publicly financed through Medicare and Medicaid. DataBrief (2011) ● No. 13 Page Sources of Payment for Long-Term Care by Payor (Total Payments = $264 billion)* * Numbers do not sum to 100% due to rounding. ** Private insurance payments include Medigap insurance as well as long-term care insurance. *** Other sources include the Veterans’ Administration, individual state programs and private philanthropy.

About the data: Analytics powered by Avalere Health LLC A Clear Policy Connection In 2008, the United States spent approximately $264 billion on long- term care services, not including the substantial investment from unpaid family and friend caregivers. The current system provides individuals with few options to protect themselves against the high costs of LTC. Most people pay for LTC out of their personal savings until they are poor enough to qualify for Medicaid. The Medicaid program devotes over a third of its budget to LTC services 1, offers limited choices other than institutional care, and faces spending constraints as states grapple with budget crises. Vulnerable elders rely heavily on unpaid family support or go without needed care. Estimates suggest the cost of informal caregiving is even greater than the government’s investment, at over $375 billion per year. As policy makers consider long-term care financing reform, they must take into account the burden long-term care places on states and on families and devise policies that will assist unpaid caregivers and reduce individuals’ dependence on Medicaid as their primary source of long-term care services. The facts in this DataBrief come from the 2008 CMS National Health Expenditures data, which contain information on Medicare spending and from the National Investment Center for the Seniors Housing and Care Industry (NIC) MAP Data and Analysis Service. These NIC data include estimates of the spending on assisted living, dementia care, and board and care homes. The analysis also uses 2008 data from “Medicaid expenditures for LTC services, ”, a report produced by Brian Burwell et al. on Medicaid expenditures for LTC services. This analysis does not include informal caregiving costs, valued to be $375 billion in 2007 in the study by Houser, Ari et al. “Valuing the Invaluable: The Economic Value of Family Caregiving, 2008 Update.” AARP Public Policy Institute, November DataBrief (2011) ● No. 13 Page 4 1 State Health Facts. “Medicaid Spending by Service, FY 2008.” Kaiser Family Foundation.