What is Long Term Care? Kathleen King VP for Health Policy February 20, 2004

Definition of Long Term Care Care provided on a regular basis for three months or more that includes: Help with daily activities such as shopping, cooking, taking medications; Help with personal care tasks such as bathing or dressing; or Help with nursing care such as monitoring blood pressure or side effects of medications.

Long Term Care Care can be Provided At home by family members or paid staff; In an assisted living facility; or In a nursing home

Long Term Care as a Percentage of Personal Health Spending, 2002

Sources of Long Term Care Spending

Spending for Long Term Care Understated 65 percent of the elderly who need assistance with daily activity rely exclusively on friends and family Another 30 percent rely partially on informal care Economic value of unpaid care is about $200 billion a year

Americans with Long Term Care Needs

Demographics of the Baby Boom Generation In 2000, 13 percent of the population was over age 65 By 2030, 20 percent of the population will be over age 65

Life Expectancy is Increasing Compared to 1900, life expectancy for men age 65 in 1990 has increased by 4 years For women age 65 in 1900, life expectancy has increased 7 years for women age 65 in 1990 Since 1950, the mortality rate has declined nearly 1 percent a year

Family Patterns Are Changing In 1960, only 19 percent of elderly people lived alone By 1990, 31 percent of the elderly lived alone

Higher Divorce Rates By age 40, only 15 percent of those born between 1925 and 1934 had divorced For those born between 1945 and 1954, 31 percent of men and 34 percent of women had divorced

Lower Birth and Disability Rates In the late 1950s, women had an average of 3.5 children, compared to 1.8 in the late 1970s Since the mid 1980s, dependence rates among the elderly have declined between 1 and 2 percent a year

Lower Percentage of Elderly in Nursing Homes 5.4 percent of elderly lived in nursing homes in 1985, but only 4.6 percent in 1995 – an annual decline of.7 percent a year

Growth in Need for Long Term Care Services Olmstead Decision – shift in long term care settings from institutions to community settings Need for long term care services may increase between 2 and 4 times the current number

Lack of Understanding 31 percent of persons over age 45 said they had purchased ltc insurance in percent of persons ages said they had ltc insurance in 1998 Fact: Only 5.8 million ltc insurance policies in force in 2001

Lack of Understanding, Take 2 35 percent said Medicare is the primary source of payment for nursing home care In another survey, 30 percent said that Medicare pays the expenses of people with Alzheimer’s Disease

Lack of Understanding, Take 3 66 percent said the average annual cost of a nursing home is $25,000 in 2001 Fact: Average annual national cost of nursing home care is $57,000

Dissatisfaction with Current System Clear preference to remain in own home and avoid nursing homes 45 percent of baby boomers have unfavorable views of nursing homes 29 percent of seriously ill people said they would rather die than enter a nursing home

CBO’s Federal Fixes Reduce the Overall Federal Contribution Reduce Mandatory Benefits or Restrict Coverage Increase Costs Shared by Beneficiaries Encourage the Use of Lower-Cost Services

Dire State Fiscal Conditions, FY Since 2001, state revenues have fallen, Medicaid spending has increased, and Medicaid has been the target of budget cuts States reduced provider payments, restricted eligibility and benefits and increased co- payments

Federal Estimates of Medicaid Spending Growth 7.5 percent in 2003 (projected) 11.7 percent in percent in 2001 Enrollment growth slowed from 5.9 percent in 2002 to 3.9 percent in 2003

FY Fiscal Conditions Brighten Somewhat Congress provided $20 billion in temporary relief, through June 2004 Falloff in State revenues began to ease States estimate that total Medicaid spending growth will slow to 8.2 percent in 2004, compared to 11.9 percent from Still, 49 States and D.C. plan further cost containment this fiscal year

What About the Future of Long-Term Care? Not necessarily all doom and gloom Redefine dependency as those over age 75 Declining disability rates What happens to the economy?

Designing a Long-Term Care System for the Future Increase public recognition of long-term care as a problem Baby boom generation drives a different definition of the problem Redesign the accidental financing system to take some pressure off Medicaid, reallocate burden Consider separating housing from care needs Consider more housing options using tax incentives

Vision for the Future Consider other financing sources, including social insurance and private insurance Consider separating housing from care needs More housing options through tax incentives Focus on maintaining independence