LTC Reform Saves Taxpayers Money

United Senior Action and our allies in the Indiana Home Care Task Force urged both former Governors O’Bannon and Kernan for eight years to reform Indiana’s long term care system; to create a full array of options for elderly and disabled Hoosiers who need long term care, and to ensure that those options are available; to stop forcing Hoosiers into nursing homes.

But this is not just our idea. Oregon made this change in the early 1980’s. Many other states have followed, including Washington and Colorado.

In 1996, the Lewin Group, a national health care consulting firm, in association with AARP, did a study of the results of long term care reform in Oregon, Washington, and Colorado.

Key findings of their study included:

Due to their long term care reform efforts, Oregon, Washington and Colorado served considerably fewer people in nursing homes, served considerably more people in home and community care, and saved taxpayers a lot of money.

USA executive director Michelle Niemier commented, “Tragically, after 8 years of inaction by the our state administration, Indiana is enjoying none of these benefits. Elderly and disabled Hoosiers are still being forced into nursing homes, and taxpayers are still paying far too much for too much poor quality and undesirable care in nursing homes.”

Below are excerpts from the Lewin / AARP study:

Background

The growing availability of home and community-based care (HCBC) under the Medicaid program is transforming the nature of formal long-term care services in the United States. HCBC services permit many persons with disabilities to receive care in their homes or other residential settings rather than in nursing homes. In the past, a lack of alternatives forced persons with disabilities to choose between relying on their family and friends or institutional placement. Now, many individuals: (1) receive formal services at home that support them or their informal caregivers; or (2) move to supportive housing, such as adult foster homes or assisted living facilities.

Home and community-based care typically costs less than nursing facility care on a per-person basis. As a result, proponents of publicly funded HCBC services claim that care in the community is more cost effective for states than institutional care.

Principal Findings

Colorado, Oregon, and Washington have transformed their long-term care systems for persons with disabilities so that home and community-based care now plays a significant role in each system. However, the extent to which each state relied upon home and community-based care varied significantly, with Oregon serving 75 percent of its publicly financed long-term care clients in the community compared to 58 percent for Washington and 44 percent for Colorado.

The number of people receiving Medicaid-funded nursing facility care in these states grew at a much slower rate than in the rest of the nation from the inception of Medicaid home and community-based waiver programs in the early 1980s to 1994. The number of people in nursing homes as a proportion of the population age 75 and above in three states decreased faster than the average for the rest of the nation. Total annual Medicaid spending on nursing facilities also increased at a slower rate in the study states than nationally after controlling for growth of the age 75-and-older population.

Comparing projected with actual cost, The Lewin Group estimates that the states appeared to save substantial amounts in Medicaid funding by decreasing nursing facility use, presumably through more efficient use of home and community-based care. In 1994, Colorado served 21 percent fewer people in nursing homes than that the study projected, given the growth of its population age 75 and above, while Oregon served 39 percent fewer people and Washington, 18 percent. These states increased the number of people they served in the community at a faster rate than the rate of growth in the number of adults under age 65 with disabilities and in the population age 75 and above.

In 1994, the three states saved between 9 percent and 23 of the amount that the study projected the states would have spent that year for long-term care, depending on whether the study made adjustments for national trends in nursing home use and in the level of impairment of nursing home residents. In the study’s most stringent analysis, which accounted for the preceding factors and other factors such as home health care spending and supplemental income payments, Washington had the lowest savings. Still, the state was projected to have saved over $1 million dollars in 1994.

Conclusions

Colorado, Oregon, and Washington appear to have made home and community-based care a cost-effective alternative to nursing facility care in the following ways:

• The states target home and community-based care to a seriously impaired population.
• The states keep per-person spending on HCBC low by using government funds only after exploiting all other resources and keeping payments to providers low.
• The states screen all or most people applying for Medicaid-funded nursing facility care to determine if they can remain in the community.