Financing Long-Term Care in Nursing Facilities

Financing Long-Term Care in Nursing Facilities Long-term care in nursing facilities is very expensive and is paid for by both public and private payer sources. Long-term care is defined as services needed by a person when their ability to care for themselves has been diminished by an illness, aging process, or a disability. Most persons living in the U. S. at sometime or another will require some sort of long-term care whether it is given in a facility or at home. It is estimated that there are about 9. million Americans with long-term care needs, but this number is only expected to grow with the aging of the population and the growing numbers of persons on disability (Kaiser, 2007). The elderly population is expected to double by 2030, and the 85 and older population, the group most likely to have long-term care needs, are expected to quadruple by 2050 (Kaiser, 2007). According to the Kaiser Family Foundation, over $158 billion was spent on long-term care in 2004 and the average annual cost of nursing home care is $74,000.

The consistently rising cost of long-term care in nursing facilities is prompting lawmakers and healthcare professionals to come up with more innovative ways of financing the cost of long-term care. Medicaid, the program that I have learned about through many of my healthcare management courses is one of the ways that long-term care is financed and is the largest financer of long-term care. Other financers of long-term care at this time come from private pay, Medicare, and long-term care insurance.

Medicaid will cover the cost of a recipient in a nursing facility when he or she spends down there assets to the appropriate level to become eligible. Medicare will only cover the cost of a nursing home recipient up to a certain number of days and that is if they can be skilled for the services. The out-of-pocket comes from the individual or the individual’s family member, which is paid for by whatever financial income or investments the family utilizes.

The long-term care insurance covers the recipients stay in the nursing facility but very few individuals have such polices because they are very expensive. The reasons for rising cost of long-term care in nursing facilities are efficiency problems. For example, maintaining employees long-term and keeping turn over rates low to maintain and increase quality of care. Second is government reimbursement policies, Government programs such as Medicaid and Medicare are not keeping up with the rising cost of medical expenses.

A comprehensive analysis of nursing home studies concluded that Medicaid reimburses nursing homes less than other payers do (Rosko et. al. , 1995). Demand patterns are a third influence on rising cost in nursing facilities. There is a demand for more skilled and qualified workers and better equipment and services to improve the quality of life for nursing home residents. The final factor is the prevailing wage rate that firms in many industries respond to increases in wage rates by substituting more capital for labor ( Rosko et. al. , 1995).

An increase in the wage rates will reduce the demand for labor (Rosko et. al. , 1995). Substantial research and policy efforts have been devoted to understanding nursing home utilization patterns. There are a variety of legislative proposals before congress that are targeted at dealing with the financial consequences resulting from prolonged nursing home stays. The two proposals that have received the most publicity, the Mitchell bill and the Kennedy bill, use vastly different approaches to deal with the problems (Rice, 1989). The Mitchell bill (S. 305) provides public coverage for nursing home stays (with a 30% copayment) after a person has been institutionalized for two years, during which the first two years of the stay, the resident would be responsible for payment through out-of-pocket expenditures or private long-term care insurance (Rice, 1989). The Kennedy bill (S. 2681) would provide public coverage for the front end rather than the back end of the stay and would pay all costs for the first six months of a nursing home stay, but the patient would be responsible for everything thereafter (Rice, 1989).

Another proposal that was introduced was the feasibility of a public-private long-term care-financing plan that would combine private long-term care insurance with special Medicaid eligibility requirements, this plan would also raise the Medicaid asset limit from the current $2,000 to the value of an individual’s insurance benefits (Arling et. al. , 1992). After using benefits, the individual could enroll in Medicaid and the insurance would substitute for asset spend-down, protecting individuals against catastrophic costs (Arling et. al. 1992). The research that is being done and has been done makes my paper important by stressing the need for managing the financial resources in healthcare and finding new and innovative ways to bring down healthcare cost for persons in need of long-term nursing care. This paper also stresses the need for all government, both state and federal, to continue working together with healthcare professionals to find ways to finance the cost of long-term care in nursing facilities with out compromising the Quality of care to the residents.

Also, pointed out in this paper were four of the problems of rising long-term care costs in nursing facilities, which are efficiency, government reimbursements and wage rates. The research articles that I have found to put together this paper do support my thinking about financing of long-term facilities. The funding that is presently in place is not enough and new resources need to be found to help fund these nursing facilities so resident’s quality of care does not suffer and a good portion of the financial burden is taken off the resident or family members.

In summary, the financing of nursing facilities for the elderly, mentally, and physically disabled is going to take the cooperation of healthcare professionals and lawmakers to bring about a changes to current payer sources and reimbursement systems. Works Cited Arling, Greg. , Hagan, Shelley. , Buhaug, Harald. (Aug. , 1992). The Feasibility of a Public-Private Long-Term Care Financing Plan. Medical Care, Vol. 30, pp. 699-717. Kaiser EDU. (March, 2007).

Financing Long-Term Care: Background Brief Retrieved July 8, 2008, from www. kaiseredu. org Rice, Thomas. (Dec. , 1989). The Use, Cost, and Economic Burden of Nursing-Home Care in 1985. Medical Care, Vol. 27, pp. 1133-1147. Rosko, Michael. D. , Chilingerian, Jon. A. , Zinn, Jacqueline. S. , Aaronson, William. E. (Oct. , 1995). The Effects of Ownership, Operating Environment, and Strategic Choices on Nursing Home Efficiency. Medical Care, Vol. 33, pp. 1001-1021