The Role of Long-Term Care in Health Reform

by Dennis G. Smith

Testimony

Testimony before Committee on Finance
United States Senate
Delivered March 25, 2009

My name is Dennis Smith. I am a Senior Research Fellow in Health Care Reform at The Heritage Foundation. The views I express in this testimony are my own, and should not be construed as representing any official position of The Heritage Foundation.

Long-term care is an important but all too often overlooked component of health care reform. The great challenges we face because of population changes between now and 2030 are well known and will require bold solutions. As the Committee's statement points out, "... Medicaid continues to be overwhelmed as the sole solution for long-term care ...".[1] All too often, Medicaid is called upon to fill missing pieces. Yet the federal government and the states are facing the reality that Medicaid in its current form is unaffordable and unsustainable.

About one-third of Medicaid spending, or about $100 billion in FY 2007 went to long-term care.[2] Over the next 10 years, Medicaid long-term care spending is projected to grow at an average rate of 8.6 percent per year.[3] At this rate, Medicaid will spend a cumulative total of $1.7 trillion on long-term care between 2008 and 2017. Within Medicaid, there has been some shift in where long-term care dollars are spent. In FY 2000, 72 percent of Medicaid long-term care expenditures went to institutional care and just 28 percent to community based services.[4] The overall distribution of FY 2007 expenditures had changed to 58 percent institutional and 42 percent community-based.[5]

The Committee has asked the panel to address four questions which should help lead to the formulation of policies to create a system that is adequately prepared to meet the challenges of the 21^st century. I will address them, however, in a different order as the policy decisions should lead sequentially from one to the next, ending with the financing question. From past experience, the financing is where consensus tends to fall apart. If you start with financing, chances are good that enthusiasm will wane before you discuss the policies of change. If agreement on policy can be reached, financing should follow.

How would better long-term care coverage affect overall health care access, quality and costs? .....

The Role of Long-Term Care in Health Reform

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