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What's Ahead for 2003?

December 1, 2002
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A Nursing Homes/Long Term Care Management Roundup
A NURSING HOMES/LONG TERM CARE MANAGEMENT ROUNDUP Can it get any worse? Long-term care managers might be tempted to ask that as they look ahead. Actually, though, 2002 was a mixed bag for long-term care, with some positive signs glimmering among the usual strong negatives. True, the liability insurance crisis continues to threaten bottom lines across the United States; Medicare funding went over a "cliff" in October, pending a hoped-for last-minute save by a lame-duck Congress; states are sharpening their Medicaid budget-cutting knives; and staffing problems linger, bad economy or not. But ever-resilient providers seem to have reorganized themselves after the Medicare PPS meltdown; private long-term care insurance got a boost with a new federal employees' program that began last spring; and the federal government's Nursing Home Quality Initiative at least promises to become that quality-improvement collaboration that the nursing home field has long sought as an eventual replacement for "gotcha" regulation. And, behind everything, the demographic imperative-the aging Baby Boom-marches on. Much of this bodes well for the long term, but how will it all shake out next year? Nursing Homes/Long Term Care Management asked several interest-group leaders and analysts to focus their individual perspectives on the long-term care crystal ball. Steven Moses, President, Center for Long-Term Care Financing "In my crystal ball, I see more of the same, and conditions, in fact, worsening. Government (mostly Medicaid and Medicare) pays for the vast majority of all nursing home and home health services in the country. Government?fs share of these costs has increased 10% in the past decade, while its out-of-pocket costs have declined 10%. Consequent-ly, the public is desensitized to the financial risk of long-term care, and few peo-ple purchase private insurance to cover it. By the time they need long-term care, it's too late for people to insure privately, and the path of least resistance is government financing. In this way, the system continues to spiral downward toward the ultimate collapse I've predicted for a decade, and which is in its latter stages today.

"The problems of regulation and staffing are directly related to the financing problem. Heavy reliance on inadequate government financing led to staff shortages, which led to quality problems, which led to stricter and stricter regulations that have contributed to tort liability suits causing skyrocketing liability insurance premiums, leading to revenue shortages and more threatened bankruptcies, etc., etc. As LTC providers and financiers told us in the Center for Long-Term Care Financing?fs LTC Triathlon study, ?eThe government demands Ritz-Carl-ton care for Motel 6 rates while imposing a regulatory jihad.?f [For similarly colorful quotes from angry and frustrated LTC providers, financiers, and insurers, see The LTC Triathlon: Long-Term Care's Race for Survival at www.centerltc.org/pubs/triathlon.pdf.]*

"Regarding deinstitutionalization and the Olmstead decision, you'll never find a better case study in how good intentions can lead to disastrous consequences. The Department of Health and Human Services is spending millions to promote the ?eNew Freedom?f to receive Medicaid-financed long-term care at home and in assisted living facilities, and states are following the lead. Very negative unintended consequences will soon follow, for three reasons: (1) people will come out of the woodwork to take advantage of these new services and quickly overwhelm the program financially, (2) Medicaid estate planning (artificial self-impoverishment) will explode in popularity if it buys people Medicaid-financed services they want instead of just nursing home care, and (3) the budding market for private LTC insurance will collapse if the public perceives they can get home care and assisted living without having to pay for them personally. Ironically, unless the government first targets its scarce LTC resources effectively to the needy, any other efforts to finance home- and community-based services through Medicaid or Medicare will either remain tiny and underfinanced (as heretofore), or they will do more damage than good by impeding the potential sources for private financing of long-term care, which include home equity conversion, private LTC insurance, and personal savings and investment.

"I'm sad to say everything today points in the direction of repeating the mistakes of the past. Pushing more and more government money into financing long-term care services will only further desensitize the public to this risk, increase their appetite for taking advantage of the public programs, and reduce their sense of urgency to plan and insure for long-term care. Consequently, the current tragic status quo will likely continue to get worse.