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2
90-S0 EPW
CRS Report for Congress
Medicare and Medicaid Nursing Home Reform
Provisions in the Omnibus Budget Reconciliation
Act of 1987, P.L. 100-203
Richard Price
Specialist in Social Legislation
Education and Public Welfare Division
August 10, 1989
Revised January 16, 1990
CRS
Congressional Research Service The Library of Congress
The Congressional Research Service works exclusively for the Congress, conducting re-
search, analyzing legislation, and providing information at the request of committees,
Members, and their staffs.
The Service makes such research available, without partisan bias, in many forms includ-
ing studies, reports, compilations, digests, and background briefings. Upon request,
CRS assists committees in analyzing legislative proposals and issues, and in assessing the
possible effects of these proposals and their alternatives. The Service's senior specialists
and subject analysts are also available for personal consultations in their respective fields
of expertise.
MEDICARE AND MEDICAID NURSING HOME REFORM
PROVISIONS IN THE OMNIBUS BUDGET RECONCILIATION
ACT OF 1987, P.L. 100-203, AS AMENDED
SUMMARY
Over the past two decades Congress has been concerned with a variety
of issues related to the quality of nursing home care paid for by the Medicare
and Medicaid programs. More recently congressional attention has focused
on comprehensive reform of nursing home regulation. This interest was
generated largely as the result of regulations published by the Health Care
Financing Administration (HCFA) in 1982 that had the effect of easing the
regulatory requirements nursing homes had to meet in order to participate
in Medicare and Medicaid. The controversy of these regulations resulted in
an agreement by HCFA to commission the Institute of Medicine (IOM) of the
National Academy of Sciences to undertake a comprehensive study of Federal
nursing home regulations and to make recommendations on changes needed
to assure quality of care. IOM completed its report in 1986. Among other
things, IOM found the quality of care provided by many nursing homes to be
unsatisfactory and argued that a strong Federal role is essential in order to
improve quality. IOM's report, Improving the Quality of Care in Nursing
Homes, contained detailed recommendations for reforming the Federal
Government's role in regulating nursing homes.
IOM's recommendations, together with consensus positions developed by
national organizations representing nursing home residents, the nursing home
industry, and professionals working in nursing homes, served as the basis for
provisions in the Omnibus Budget Reconciliation Act of 1987 (OBRA 87) that
reform the statutory authority applying to nursing homes participating in
Medicare and Medicaid. The nursing home reform provisions of OBRA 87, as
they are often called, are divided into three major parts: (1) requirements
that nursing homes must meet in order to participate; (2) provisions revising
the survey and certification process for determining whether nursing homes
comply with these requirements; and (3) provisions expanding the range of
sanctions and penalties that HCFA and the States may impose against
noncompliant nursing homes. Implementation of these provisions is to be
phased in from 1988 through 1991, with major sections of the new law
becoming effective October 1, 1990. The provisions as they are contained in
the Medicare and Medicaid statutes are summarized in this report.
Since the enactment of the nursing home reform provisions of OBRA, a
variety of issues have arisen concerning the legislation. These have focused
principally on HCFA's implementation of the law. Nursing home associations,
advocate groups for residents of nursing homes, as well as the States have
expressed concern with HCFA's failure to meet deadlines for providing
guidance on certain provisions that have become effective in 1988 and 1989.
They are also concerned with the content of regulations that HCFA has
recently published. This report discusses various implementation issues in
the new law. The recently enacted Omnibus Budget Reconciliation Act of
1989 addressed some of these issues by, among other things, requiring HCFA
to publish regulations by specified dates and by delaying certain effective
dates.
CONTENTS
INTRODUCTION
1
GENERAL BACKGROUND INFORMATION ON
LAW AND REGULATIONS APPLYING TO NURSING HOMES
PARTICIPATING IN MEDICARE AND/OR MEDICAID
5
Medicare Requirements for Nursing Homes
5
Medicaid Requirements for Nursing Homes
6
SHORT SUMMARY OF NURSING HOME REFORM PROVISIONS
8
Skilled Nursing Facility and Nursing Facility
Requirements for Participation
8
Survey and Certification Process
9
Enforcement Process
9
Preadmission Screening and Annual Resident Review for
the Mentally Ill and Mentally Retarded
10
ISSUES IN THE IMPLEMENTATION OF OMNIBUS
BUDGET RECONCILIATION ACT 87 NURSING HOME
REFORM PROVISIONS
10
Health Care Financing Administration's Publication
of Final Regulations February 2, 1989
10
Preadmission Screening and Annual Resident
Review for the Mentally Ill and Mentally Retarded
11
Nurse Aide Training
14
Licensed Nurse Staffing
16
Surveying Nursing Homes' Compliance with OBRA
87s Requirements
18
APPENDIX: DETAILED SUMMARY OF NURSING HOME REFORM
PROVISIONS CONTAINED IN MEDICARE AND MEDICAID LAWS 21
Medicare Nursing Home Reform Provisions As Amended
21
Requirements for Skilled Nursing Facilities (unless otherwise
specified, effective October 1, 1990)
21
Provision of Services
21
Required Nursing Services
21
Nurse Aide Training
22
Physician Supervision
22
Social Workers
22
Residents' Rights
22
Transfer and Discharge Rights
23
Access and Visitation Rights
23
Equal Access to Quality Care
23
Admissions Policy
23
Protection of Resident Funds
23
Administration and Other Matters
24
State Responsibilities Relating to Skilled Nursing
Facility Requirements
24
Responsibilities of the Secretary of Health and Human
Services Relating to Skilled Nursing
Facility Requirements
24
Survey and Certification Process (unless
otherwise specified, effective
October 1, 1990)
25
Standard Survey
25
Extended Survey
26
Survey Protocol
26
Validation Surveys
26
Investigation of Complaints and Monitoring
Compliance
26
Disclosure of Results of Inspections and
Activities
27
Enforcement Process (effective January 1, 1988)
27
Medicaid Nursing Home Reform Provisions As Amended
28
Requirements for Nursing Facilities (NFs)
(unless otherwise specified, effective
October 1, 1990)
28
Provision of Services
28
Required Nursing Services
28
Nurse Aide Training
29
Physician Supervision
29
Social Workers
29
Residents' Rights
29
Transfer and Discharge Rights
30
Access and Visitation Rights
30
Equal Access to Quality Care
31
Admissions Policy
31
Protection of Resident Funds
31
Administration and Other Matters
31
State Responsibilities Relating to Nursing Facility
Requirements
31
Responsibilities of the Secretary of Health and Human
Services Relating to Nursing Facility Requirements
32
Survey and Certification Process (unless
otherwise specified, effective
October 1, 1990)
33
Standard Survey
33
Extended Survey
34
Survey Protocol
34
Validation Surveys
34
Enhanced Federal Matching for Survey
and Certification
34
Investigation of Complaints and Monitoring
Compliance
34
Disclosure of Results of Inspections and
Activities
35
Enforcement Process (effective January 1, 1988)
35
Preadmission Screening and Annual Resident
Review for the Mentally Ill and
Mentally Retarded (PASARR)
36
Nursing Facility Requirements for Preadmission
Screening for the Mentally Ill and
Mentally Retarded
36
State Requirements for Preadmission Screening and
Annual Resident Review for the Mentally
Ill and Mentally Retarded
36
Federal Matching Payments for Screening Activities
38
Alternative Disposition Plans
38
Definitions
38
Federal Requirements for Preadmission Screening
for the Mentally Ill and the Mentally Retarded
38
MEDICARE AND MEDICAID NURSING HOME REFORM
PROVISIONS IN THE OMNIBUS BUDGET RECONCILIATION
ACT OF 1987, P.L.100-203, AS AMENDED
INTRODUCTION
Over the past two decades Congress has been concerned with the quality
of nursing home care paid for by the Medicare and Medicaid programs, to
which significant Federal resources are devoted. Medicare's coverage of
nursing home care is focused on short stays for those persons who are acutely
ill and need skilled medical care. In FY 1987, Medicare's payments for
nursing home care amounted to about $600 million, or less than 1 percent of
total benefit payments made under the program. The Medicaid program's
payments are considerably larger, in part because the program pays not only
for short stays related to medical problems, but also longer stays needed by
chronically ill and chronically impaired individuals. In FY 1987, Medicaid
payments for nursing home care amounted to $13.2 billion, or nearly 30
percent of total program spending.
Recently, congressional attention has focused on reform of Federal
nursing home regulation that is intended to assure that Medicare and
Medicaid beneficiaries receive quality care. This interest was generated
largely as the result of regulations proposed by the Health Care Financing
Administration (HCFA)¹ in 1982 that had the effect of easing the regulatory
requirements nursing homes had to meet in order to participate in Medicare
and/or Medicaid. Among other things, the proposed changes would have
eased the annual inspection and certification requirements for facilities with
a good record of compliance. These regulations would have also authorized
States to accept accreditation of nursing homes by the Joint Commission on
Accreditation of Hospitals (JCAH) in lieu of State inspections as a basis for
certifying nursing homes as meeting Federal requirements for participation in
Medicare and Medicaid. Following their publication, Congress twice enacted
legislation prohibiting the Secretary of Health and Human Services (HHS)
and HCFA from implementing these regulations.
The controversy of these regulations resulted in an agreement by HCFA
to commission the Institute of Medicine (IOM) of the National Academy of
Sciences to undertake a comprehensive study of Federal nursing home
regulations and to make recommendations on changes needed to assure
quality care. IOM published its findings in 1986 in a report entitled
Improving the Quality of Care in Nursing Homes. This report contains
recommendations for the comprehensive revision and expansion of statutory
and regulatory requirements for nursing homes wishing to participate in
Medicare and Medicaid. The IOM found that the quality of care and quality
of life in many nursing homes are not satisfactory and that more effective
government regulation, including a stronger Federal role, could substantially
'HCFA is the agency within the Department of Health and Human
Services responsible for administering the Medicare and Medicaid programs.
CRS-2
improve quality in nursing homes. To accomplish this, the IOM report
recommended:
(1) specific changes in the standards of care which nursing homes
must meet in order to participate in Medicare and Medicaid;
(2) measures to strengthen the process of determining the extent to
which nursing homes are complying with standards for providing
quality care; and
(3) improvements in enforcing compliance with Federal standards.
The IOM report received broad support from both nursing home
associations and patient advocates' groups. Many of these groups met
regularly after the publication of the IOM report and developed detailed
consensus positions outlining how nursing home laws and regulations should
be changed and strengthened. Consensus positions on a variety of issues
were published by these groups in April 1987, in Campaign for Quality Care
in Nursing Homes.
Following the publication of the IOM report, several bills whose
provisions embodied many of the IOM's recommendations were introduced
into the 99th Congress. At that time, final action was not taken by the
Congress on any one of these. Bills were again introduced in the 100th
Congress, including those by Chairmen of Subcommittees and Committees
with jurisdiction over the Medicare and/or Medicaid programs. In the 100th
Congress, Congressmen Dingell, Waxman, and others introduced H.R. 2270,
which would amend requirements for nursing homes participating in the
Medicaid program. Congressman Stark and others introduced H.R. 2770,
which would amend the requirements for nursing homes participating in
Medicare. Senator Mitchell and others introduced S. 1108, which would
amend requirements for nursing homes participating in Medicare and/or
Medicaid. Versions of these bills were included in House and Senate
reconciliation bills considered in 1987.
The Omnibus Budget Reconciliation Act of 1987, P.L. 100-203 (OBRA
87), as finally enacted at the end of 1987, included provisions that
comprehensively reform the statutory authority applying to nursing homes
participating in Medicare and/or Medicaid. A number of technical and
correcting amendments to the original enactment were included both in the
Medicare Catastrophic Coverage Act of 1988, P.L. 100-360, and the Family
Support Act of 1988, P.L. 100-485. Implementation of these provisions is to
be phased in from 1988 through 1991, with major sections of the new law
becoming effective October 1, 1990. The amended new Medicare and Medicaid
law pertaining to nursing homes, commonly referred to as the nursing home
reform legislation, is summarized below.
While Congress was considering this legislation, HCFA proceeded on
another track of implementing IOM recommendations. HCFA argued that
CRS-3
many of the report's recommendations could be included in revised regulations
under then existing statutory authority. During 1987, HCFA issued two sets
of proposed regulations: A proposed rule of October 16, 1987, would have
revised requirements that nursing homes would have to meet in order to
participate in Medicare and/or Medicaid. A second proposed rule, published
November 18, 1987, would have revised the procedures for determining
whether a nursing home actually met the requirements for participation and
would have established sanctions for chronic or repeat violators of these
requirements. Before the comment period for these regulations had ended,
Congress had enacted a new statutory authority for nursing homes
participating in Medicare and Medicaid.
In February 1989, HCFA decided to move forward with one set of these
proposed rules. On February 2, HCFA published as a final regulation its
original October 1987 regulation to revise and consolidate requirements that
nursing homes must meet in order to participate in the Medicare and/or
Medicaid programs. (Earlier it had withdrawn its November 1987 regulation.)
This final regulation was revised to take into account comments from the
public on its original provisions. HCFA also incorporated in this final
regulation provisions that would implement certain new requirements
contained in OBRA 87 that are to become effective October 1, 1990. HCFA
indicated in its February 2 notice that the provisions of the regulation would
become effective August 1, 1989.
A coalition of consumer nursing home groups, led by the National
Citizens Coalition for Nursing Home Reform, asked HCFA to delay
implementation of the February 1989 regulations for a year. Other groups
filed suit asking a Federal court to declare the regulations illegal. All these
groups argued that HCFA was implementing portions of OBRA 87 without
providing them opportunity for public comment. These provisions, they noted,
were not to become effective until October 1990. They also pointed to
provisions of the regulations which they found inconsistent with the new law.
In addition, these groups expresseed concern with HCFA's failure to meet
deadlines for publishing regulations for certain other provisions of nursing
home reform law that had become effective in 1988 and 1989.
At a hearing held by the Senate Aging Committee in May 1989, HCFA
indicated that it would very likely delay the effective date of the February
regulation. On July 14, 1989, HCFA published a notice delaying
implementation of the regulation until January 1, 1990.
In budget reconciliation legislation considered in 1989, both the House
and Senate included in their respective bills, H.R. 3299 and S. 1750,
provisions that would amend certain provisions of the new nursing home
reform law. The enacted legislation, the Omnibus Budget Reconciliation Act
of 1989 (OBRA 89), P.L. 101-239, includes provisions that prohibit the
Secretary of HHS from implementing HCFA's February 2 regulation before
October 1, 1990; that require the Secretary to publish regulations on nurse
aide training programs and preadmission screening programs for the mentally
CRS-4
ill and mentally retarded; and that modify the training and competency
evaluation requirements of OBRA 87 for certain nurse aides.
This report provides (1) background information on how nursing homes
are regulated under Medicare and Medicaid; (2) a short summary of the
nursing home reform provisions of OBRA 87, as amended; (3) a discussion of
current issues in the implementation of the new law and amendments
contained in OBRA 89 that address these issues; and finally (4) a more
detailed summary of the law's provisions. This report will be revised from
time to time to reflect additional congressional actions to amend the nursing
home reform provisions of Medicare and Medicaid law.
For additional information on nursing home care in the context of issues
related to the financing and delivery of long-term care, see: U.S. Library of
Congress. Congressional Research Service. Long-Term Care for the Elderly.
Issue Brief No. IB88098; Financing and Delivery of Long-Term Care Services
for the Elderly. CRS Report for Congress No. 88-379 EPW; and Long-Term
Care Legislation: Summary of Selected Bills. CRS Report for Congress No.
89-238.
CRS-5
GENERAL BACKGROUND INFORMATION ON LAW AND
REGULATIONS APPLYING TO NURSING HOMES
PARTICIPATING IN MEDICARE AND/OR MEDICAID
Medicare and Medicaid have different nursing home benefits. However,
the requirements that nursing homes must meet for participation, the
procedures for surveying a nursing home's compliance with these
requirements, and sanctions for noncompliance are similar.
Medicare Requirements for Nursing Homes
Medicare is the Nation's Federal health insurance program for the elderly
and disabled and has a uniform eligibility and benefit structure throughout
the country. It includes among its benefits extended care services for persons
who need skilled nursing care on a daily basis or other skilled rehabilitation
services, which as a practical matter, can only be provided in a facility known
as a skilled nursing facility (SNF).
For those who qualify for the benefit, extended care must be provided by
a SNF which is certified to participate in Medicare. In order to participate
in the program and to receive Medicare reimbursement for services provided
to qualifying beneficiaries, SNFs must comply with certain requirements
contained in Medicare law and regulations. These requirements are often
referred to as "conditions of participation." They specify standards of staffing,
organization, and health and safety that the facility must meet. The nursing
home reform provisions contained in OBRA 87 revise these requirements for
SNFs, with an effective date of October 1, 1990.
Medicare law and regulations also specify general procedures for
determining whether a SNF complies with the requirements for participation.
The law requires the Secretary of HHS to enter into agreements with States
to survey SNFs to certify their compliance with these participation
requirements. With the survey agency's recommendations, HCFA, the HHS
agency responsible for administering Medicare, then makes a determination as
to whether it should enter into an agreement with the SNF to allow it to
participate. Agreements with SNFs in compliance with the requirements last
for 12 calendar months. This has the effect of requiring the survey agency
to review the SNF at least annually for compliance/noncompliance. OBRA
87 also contains provisions revising the survey and certification process for
determining whether SNFs should be permitted to participate in the Medicare
program. These provisions become effective October 1, 1990.
Survey agencies have been able to certify SNFs for participation if they
are found to be deficient in one or more standards and if the deficiencies,
individually or in combination, do not jeopardize the health and safety of
patients, and if the facility submits an acceptable plan of correction for
achieving compliance within a reasonable period of time. In August 1986,
HCFA implemented "intermediate sanction" requirements of law to provide
HCFA with an alternative penalty for SNFs with deficiencies that do not
CRS-6
immediately jeopardize the health and safety of the facility's patients but are
serious enough to require more emphasis than simply a plan of correction.
Prior to this time, the only sanction available to HCFA for such facilities was
termination of the facility's participation agreement. The intermediate
sanction authority implemented in 1986 has allowed HCFA to deny payments
for new admissions of Medicare patients to SNFs that are not in substantial
compliance with the law's requirements and standards of care, so long as the
deficiencies do not immediately jeopardize the health and safety of the
facility's patients. However, if it is determined that the deficiencies
immediately jeopardize the health and safety of the facility's patients, then
HCFA must terminate the facility's participation in Medicare. If the decision
is made to deny program payment instead of terminating a facility's
participation, the facility must achieve substantial compliance with program
requirements or be found to have made a good faith effort to correct its
deficiencies by the end of the 11th month following the month when a
decision was made to deny payment. Effective January 1, 1988, OBRA 87
revises and expands the intermediate sanctions that may be imposed against
facilities found to be out of compliance with the law's requirements. HCFA
has not yet issued regulations to implement the new sanction authority, and
existing policy remains in effect until their publication.
Medicaid Requirements for Nursing Homes
The Medicaid program is a Federal-State matching program providing
medical assistance for low-income persons who are aged, blind, disabled, or
members of families with dependent children. All States (except Arizona
which is operating an alternative demonstration program), the District of
Columbia, and the Territories currently participate in the program. Within
Federal guidelines, each State designs and administers its own Medicaid
program.
Under current law, the Medicaid program pays for services in three
different categories of nursing homes: skilled nursing facilities (SNFs),
intermediate care facilities (ICFs), and intermediate care facilities for the
mentally retarded (ICFs/MR). Neither the IOM report nor the nursing home
reform legislation enacted in 1987 dealt with ICFs/MR.
Medicaid law defines SNF services as services which are required to be
given to an individual who needs on a daily basis skilled nursing care
(provided directly by or requiring the supervision of skilled nursing personnel)
or other skilled rehabilitation services which as a practical matter can only be
provided in a SNF on an inpatient basis. Medicaid law requires SNFs
participating in Medicaid to meet the requirements specified in Medicare law
for SNFs participating in that program. Medicaid SNFs must therefore meet
the standards of staffing, organization, and health and safety that are
specified in Medicare law and regulations for SNFs.
Medicaid also pays for ICF services. Medicaid law defines an ICF as an
institution that is licensed under State law to provide on a regular basis
CRS-7
health-related care and services to individuals who do not require the degree
of care and treatment which a hospital or SNF is designed to provide but who
because of their mental or physical condition require care and services (above
the level of room and board) which can be made available to them only
through institutional facilities. ICFs are also required to meet: (1) standards
prescribed by the Secretary as he finds appropriate for the proper provision
of care, (2) such standards of safety and sanitation as are established under
regulation of the Secretary in addition to those applicable to nursing homes
under State law, and (3) requirements for protecting patients' personal funds.
As is the case for SNFs, ICFs must meet various requirements for staffing,
organization, and health and safety that have been specified by the Secretary
of HHS in regulations. These various requirements for ICFs are often
referred to as "standards" (in contrast to the "conditions of participation" that
apply to SNFs).
Effective October 1, 1990, OBRA 87 will eliminate the Medicaid
program's distinction between SNFs and ICFs, and, in so doing, will create a
"nursing facility" benefit under that program. At that time, nursing facilities
(NFs) will have to meet a single set of requirements in order to participate in
Medicaid.
Medicaid law and regulations, like those for Medicare, specify general
procedures for determining whether nursing homes participating in Medicaid
actually comply with the requirements for participation. Medicaid law
requires State Medicaid agencies to contract with the State survey agency
used by Medicare (if that agency is the agency responsible for licensing health
facilities) to survey facilities to determine whether they meet the requirements
for participation. The State Medicaid agency then decides whether it should
enter into an agreement with the nursing home in order to allow the facility
to participate in and receive reimbursement from the State's Medicaid
program. Survey agencies may certify a facility that is in compliance with the
requirements for participation for up to 12 months. OBRA 87 revises the
survey and certification process for nursing homes participating in Medicaid
in ways similar to the provisions governing SNFs participating in Medicare.
Under Medicaid, survey agencies have been able to certify nursing
facilities for participation even if they are found to be deficient in certain
standards for providing care, just so long as the deficiencies do not jeopardize
the health and safety of patients and if the facility submits an acceptable
plan of correction for achieving compliance within a reasonable period of time.
For deficiencies that require more than a plan of correction, the State, like
HCFA, has authority to deny payments for new admissions of Medicaid
patients to nursing facilities. OBRA 87 revises and expands the sanctions
that States and the Secretary may impose against noncompliant facilities
participating in Medicaid.
CRS-8
SHORT SUMMARY OF NURSING HOME REFORM PROVISIONS
OBRA 87, as amended, includes provisions that comprehensively reform
the statutory authority applying to nursing homes participating in Medicare
and/or Medicaid. The enactment contains two sets of provisions: those that
apply to SNFs participating in Medicare and other provisions that apply to
nursing facilities (NFs) in Medicaid. Often the provisions in the two sections
are identical. Each of the two sections is divided into three major parts: (1)
requirements which nursing homes must meet in order to participate in the
programs, (2) provisions revising the survey and certification process for
determining whether nursing homes comply with the requirements for
participation, and (3) provisions expanding the range of sanctions and
penalties the Secretary and States may impose against noncompliant nursing
homes. Both the Medicare and Medicaid provisions on nursing home reform
are summarized briefly below. Where significant differences in Medicare and
Medicaid law exist, the individual provisions are noted. A more detailed
summary of the provisions as they exist separately in Medicare and Medicaid
statutes is contained in the appendix of this report.
Skilled Nursing Facility and Nursing Facility Requirements
for Participation
In order to participate in Medicare and/or Medicaid, SNFs and NFs must
care for residents in a manner and in an environment that promotes the
quality of life of each resident. They must conduct and periodically update
a comprehensive assessment of each resident's functional capacity. SNFs and
NFs must provide certain specified services, directly or under arrangements
with others: nursing and specialized rehabilitative services; medically-related
social services; pharmaceutical services; dietary services; an on-going activities
program; and routine and emergency dental services. They must provide 24-
hour licensed nursing care sufficient to meet the nursing needs of residents
and must use a registered professional nurse at least 8 consecutive hours a
day 7 days a week. (HCFA may waive the registered nurse requirement for
certain rural SNFs, and States may waive both the registered nurse
requirement and the licensed nurse requirement under certain circumstances.)
Both SNFs and NFs must use as nurse aides only those persons who have
completed an approved training and/or competency evaluation program, or
who have had certain other training or work experience.
SNFs and NFs must protect and promote a resident's rights relating to
(1) choice of physician, (2) freedom from abuse, punishments and restraints,
(3) privacy (4) confidentiality of records, (5) accommodation of individual
needs and preferences, (6) voicing grievances, (7) organizing and participating
in resident groups, (8) participating in social, religious, and community
activities; (9) examination of survey results, and (10) any other right
established by the Secretary. SNFs and NFs must allow immediate access to
any resident by Federal and State officials, by the State ombudsman, and by
the resident's physician and immediate family members. They may transfer
or discharge a resident only under specified circumstances.
CRS-9
Facilities must establish and maintain identical policies and practices
with regard to transfer, discharge and Medicare/Medicaid covered services for
all individuals, regardless of source of payment. They must not require
individuals to waive their rights to benefits under Medicare or Medicaid. Nor
can they require a third party guarantee (or gift, money, donation, or other
consideration, in the case of Medicaid), as a condition of admission, or
continued stay in, the facility.
Survey and Certification Process
OBRA 87 establishes a new process for surveying SNFs and NFs to
determine their compliance with the requirements for participation. These
provisions are intended to assure that the survey process is resident-centered
and outcome-oriented, and not limited to observations of the facility, its
policies, and procedures. They are also designed to permit survey agencies to
concentrate their efforts on facilities providing substandard care. The new
law provides for two different surveys for certification: a standard survey
and an extended survey.
Every SNF and NF will be subject to an unannounced standard survey
that must be conducted not later than 15 months after the date of the
previous standard survey. The average interval between standard surveys in
a State must not exceed 12 months. Standard surveys must include, for a
resident sample that takes into account the differing characteristics of
residents in a facility, a review of the quality of care provided, residents'
plans of care and assessments, and the facility's compliance with resident's
rights.
Each facility found under a standard survey to have provided substandard
care will be subject to an extended survey. This survey must be conducted
immediately after the standard survey and must identify the policies and
procedures that resulted in substandard care. The extended survey must also
determine compliance with every requirement for participation, and must
include an expanded sample of residents' assessments, a review of staffing, in-
service training, and, if appropriate, contracts with consultants. At the
discretion of the Secretary or the State, any other facility, besides those found
to be providing substandard care, can be subject to an extended survey (or a
partial extended survey).
The Secretary of HHS must conduct onsite validation surveys of a
representative sample of each State's nursing homes, to determine the
adequacy of State survey activities. These validation surveys must amount to
at least 5 percent of the number of facilities surveyed by the State in a year,
but in no case less than 5 SNFs and 5 NFs.
Enforcement Process
OBRA 87 revises and expands the sanctions that States and the Secretary
may impose against nursing homes found to be out of compliance with the
CRS-10
requirements for participation. New sanctions that may be imposed include:
denial of payment for current residents (Medicare only) or new admissions
(Medicare and Medicaid); civil money penalties for each day of noncompliance;
appointment of temporary management; and, in the case of an emergency,
authority to close the facility or transfer residents, or both (Medicaid only).
Preadmission Screening and Annual Resident Review
for the Mentally III and Mentally Retarded
OBRA 87 requires in Medicaid law that States establish preadmission
screening programs to determine for mentally ill or mentally retarded
individuals seeking admission to a nursing home that they require the level
of services provided by a nursing home and, if so, whether they require active
treatment. Active treatment generally refers to an aggressive and continuous
program of specialized and generic training and specific therapies or activities
to improve an individual's functioning. OBRA also requires that all nursing
home residents who are mentally ill or mentally retarded and who were
admitted prior to January 1, 1989, be reviewed on an annual basis to
determine whether their continued placement is appropriate and whether they
require active treatment. The law requires that certain residents be
discharged if their placement in a nursing facility is found to be
inappropriate. These include persons who have not resided in the nursing
home for at least 30 months and those who do not require active treatment.
ISSUES IN THE IMPLEMENTATION OF OBRA 87 NURSING
HOME REFORM PROVISIONS
The nursing home reform provisions of OBRA 87 represent nearly 2
years of congressional deliberation on a variety of legislative proposals dealing
with the quality of nursing home care, detailed recommendations of a
comprehensive Institute of Medicine report, and the consensus positions of
national organizations representing the nursing home industry, nursing home
residents, and nursing home professionals. Since enactment, a variety of
issues have arisen concerning the legislation. These are currently centered on
HCFA's implementation of the new law.
Health Care Financing Administration's Publication of Final
Regulations February 2, 1989
On February 2, 1989, HCFA published final regulations that revise and
consolidate requirements that nursing homes must meet in order to
participate in Medicare and/or Medicaid. In general, the regulations would
have become effective August 1, 1989. These final regulations incorporated
revisions to an October 1987 proposed regulation that represented HCFA's
response to the Institute of Medicine report, Improving the Quality of Care in
Nursing Homes. The proposed regulations were published prior to the
enactment of the nursing home reform provisions of OBRA 87 in December
of that year. The final regulations also included provisions that applied to
certain new requirements contained in OBRA 87.
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Nursing home associations and consumer organizations objected to
HCFA's decision to move forward with these regulations. The Gray Panthers
Advocacy Committee and nursing home residents from three States and the
District of Columbia filed suit asking a Federal court to declare the final
regulations illegal. The groups bringing the case to court argued that the
regulations are inconsistent with the new law, fail to carry out the intent of
the law, and, for those provisions that implement portions of OBRA 87, did
not provide them opportunity for public comment prior to becoming effective.
Nursing home groups also objected to HCFA's decision to implement,
with this final regulation, provisions of OBRA 87 that were not to become
effective until October 1990. They pointed to other regulations which OBRA
required the Secretary to issue in 1988 and 1989, and whose deadlines the
Secretary had failed to meet. These included regulations that would provide
guidance to the States and facilities on implementing such provisions as nurse
aide training programs and preadmission screening for the mentally ill and
mentally retarded. Nursing home groups and States argued that HCFA
resources should have been devoted to developing regulations for provisions
that became effective for the States and facilities in 1988 and the first half of
1989.
In July 1989, HCFA issued notice that it would delay implementation of
the February 1989 regulations from August 1, 1989 to January 1, 1990.
HCFA also indicated that it expected to issue regulations on other portions
of OBRA nursing home reform provisions in 1989 (not yet issued).
In budget reconcilation legislation considered in 1989, both the House
and Senate addressed a number of nursing home reform issues, including a
moratorium on HCFA's February regulations. The House included in its
reconciliation bill, H.R. 3299, a provision that would prohibit the Secretary of
HHS from implementing the Medicaid portions of HCFA's February 2
regulation before October 1, 1990. The Senate Finance Committee had
reported a reconciliation bill that contained a similar provision applying to
both Medicare and Medicaid. However, in the bill as passed by the Senate,
S. 1750, the moratorium provision was deleted. The enacted OBRA 89, P.L.
101-239, included the moratorium provision, applying it to both the Medicare
and Medicaid regulations of the HCFA's February publication.
Preadmission Screening and Annual Resident Review for
the Mentally Ill and Mentally Retarded
OBRA 87 establishes requirements for the preadmission screening of
mentally ill and mentally retarded persons who are seeking nursing home
admission and annual resident review for those who are residing in nursing
homes. These requirements originated out of concern that many mentally ill
and mentally retarded persons are inappropriately placed in nursing homes
where they do not receive the care and, particularly, the active treatment
services needed for their conditions. A 1987 General Accounting Office (GAO)
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report, Medicaid: Addressing the Needs of Mentally Retarded Nursing Home
Residents, found that the active treatment needs of mentally retarded
residents of SNFs and ICFs in three States had generally not been identified
and met. States used placements in nursing homes in order to reduce
overcrowding in large State-operated intermediate care facilities for the
mentally retarded (ICF/MR).² In addition, States have a financial incentive to
place the mentally retarded in nursing homes rather than ICFs/MR, since the
costs for ICF/MR care are generally much higher than costs for SNF and ICF
care (in part because of the costs of active treatment which must be provided
in ICFs/MR).³ Similarly, States have an incentive to place the mentally ill in
Medicaid-certified SNFs and ICFs where the Federal Government will share
in the cost of their care.⁴
For this reason, OBRA 87 requires that States establish preadmission
screening programs to determine for mentally ill or mentally retarded
individuals seeking admission to a nursing home that they require the level
of services provided by a nursing home and, if so, whether they require active
treatment. OBRA also requires that all nursing home residents who are
mentally ill or mentally retarded and who were admitted prior to January 1,
1989, be reviewed on an annual basis to determine whether their continued
placement is appropriate and whether they require active treatment. (These
preadmission screening and annual resident review requirements are often
referred to as PASARR requirements.) The law requires that certain residents
be discharged if their placement in a nursing facility is found to be
inappropriate. These include persons who have not resided in the nursing
home for at least 30 months and those who do not require active treatment.
²U.S. General Accounting Office. Medicaid: Addressing the Needs of
Mentally Retarded Nursing Home Residents. GAO/HRD-87-77, Apr. 1987. p.
11.
³U.S. Congress. House. Committee on Energy and Commerce. Medicaid
Source Book: Background Data and Analysis. Committee Print 100-AA, Nov.
1988. p. 399, 401, 476. (Hereafter cited as House Committee on Energy and
Commerce, Medicaid Source Book.)
4State Medicaid programs may, at their option, cover services in two types
of institutions for the mentally ill: institutions for mental diseases, or IMDs,
and inpatient psychiatric hospitals. Services in IMDs may be covered only for
beneficiaries aged 65 and older. Services in inpatient psychiatric hospitals
may be covered only for beneficiaries under age 21. The effect of these rules
for the two types of institutional mental health providers is to exclude
Medicaid coverage of services in mental institutions for persons between the
ages of 21 and 65 years. HCFA has contended that Medicaid programs are
reimbursing, as SNF and ICF services, care that is actually being furnished
by IMDs, with some States improperly claiming Federal funds for IMD services
provided to beneficiaries between 21 and 65.
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OBRA required the Secretary to develop by October 1, 1988, minimum
criteria for States to use in making determinations as to whether a mentally
ill or mentally retarded individual requires the level of care provided by a
nursing home. By that date, the Secretary was also required to develop
minimum criteria for States' appeals processes for persons adversely affected
by screening decisions. Preadmission screening requirements became effective
January 1, 1989, regardless of whether the Secretary issued guidance to the
States or not.
Nursing home groups and advocates of the mentally ill and mentally
retarded have expressed concern with HCFA's implementation of these
requirements. During 1988, only drafts of program guidelines were available
to the States for implementing their own programs for screening the mentally
ill and mentally retarded. In May, 1989, HCFA issued interim guidelines to
the States to use for screening and review, but indicated that it intends to
use the formal rule-making process, with a comment period, before making
the guidelines' criteria binding on the States. Final regulations on
preadmission screening are, therefore, not yet in effect.
At a hearing before the Senate Special Committee on Aging May 18,
1989, nursing home groups pointed out that HCFA's various drafts have
differed in their definitions of mental illness and, by implication, who should
be screened for the appropriateness of nursing home care. The drafts have
also had different definitions of active treatment and the services that must
be provided by the States for those who require this level of care. These
groups are concerned that they will once again have to redesign screening
programs when the criteria are published as regulations. Nursing home
groups also objected to the application of these requirements to all persons,
regardless of whether they are private payers, Medicare beneficiaries, or
Medicaid-eligible individuals, so long as they are applying for admission to,
or residing in, a Medicaid-certified nursing home. For lack of timely guidance
and other reasons, two nursing home industry associations, the American
Association of Homes for the Aging and the American Health Care
Association, have entered into a suit against the Secretary of HHS, to stop
implementation of the preadmission screening requirements of OBRA.
In addition to these implementation issues, nursing home groups and
advocates for the elderly, mentally ill, and mentally retarded are also
concerned about those persons who are deflected from nursing home care in
the preadmission screening process and whether they are directed to other
appropriate sources of care. OBRA does not address this issue, except for
requiring an appeals process for those adversely affected in the screening.
For those who are actually discharged, there is also concern about whether
they receive the active treatment and other services they might need. In
many cases, such persons will not be eligible for Medicaid services, and States
alone will be responsible for paying for the costs of their care. These issues
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reflect more general problems in providing and paying for care for the
chronically mentally ill and mentally retarded.⁶
In budget reconcilation legislation considered in 1989, both the House
and Senate addressed a number of PASARR issues. The House's
reconciliation bill, H.R. 3299, included a number of provisions related to
PASARR, including those that would (1) prohibit the Secretary from taking
any compliance action against any State that, prior to the effective date of
HCFA's May 1989 guidelines, made a good faith effort to comply with the
statute; (2) require the Secretary to promulgate proposed regulations
implementing PASARR requirements within 90 days of enactment of the bill;
(3) provide that private pay patients would not be subject to PASARR until
they become eligible for Medicaid; (4) revise the definition of mental illness
for purposes of applying PASARR requirements from "a primary or secondary
diagnosis of mental disorder" to "serious mental illness as defined by the
Secretary"; and (5) substitute the phrase "specialized services" for the phrase
"active treatment." The Senate Finance Committee had reported a
reconciliation bill with many of these same provisions, but the bill as passed
by the Senate contained no amendments to the PASARR requirements.
In the enacted OBRA 89, signed into law on December 19, 1989, only one
PASARR provision was included. This provision requires the Secretary to
issue proposed regulations on PASARR requirements not later than 90 days
after enactment of OBRA 89.
Nurse Aide Training
For its report, Improving the Quality of Care in Nursing Homes, the
Institute of Medicine (IOM) found that over 70 percent of the nursing
personnel in long-term care facilities are nurse aides, and as much as 90
percent of resident care in nursing homes is delivered by them.6 IOM also
found that a majority of States had no specific training requirements for
aides, and in those States with some kind of training requirements, programs
followed no consistent educational model in content, goal, or organization.
Given the importance of their role in the nursing home, IOM recommended
that the Federal Government should mandate training of nurse aides prior to
employment.
OBRA 87 establishes new requirements for nurse aide training. On or
after January 1, 1990, nursing homes will be able to use as nurse aides (for
more than 4 months) only those persons who have completed a training
and/or competency evaluation program and are competent to provide care.
⁵House Committee on Energy and Commerce, Medicaid Source Book,
Appendices D and E.
⁶Institute of Medicine. Improving the Quality of Care in Nursing Homes.
National Academy Press, Washington D.C., 1986. p. 89, 90.
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For those nurse aides hired before July 1, 1989, nursing homes participating
in Medicare and/or Medicaid must provide for a competency evaluation
program and the preparation necessary for the aide to complete this program
by January 1, 1990. OBRA specifies that the training program include a
minimum of 75 hours of initial training. Approved training and competency
evaluation programs may include those offered by or in nursing homes.
OBRA also requires that Medicare and Medicaid reimbursements to nursing
homes recognize the costs of nurse aide training incurred by facilities.
Nursing home groups have expressed concern with HCFA's delay in
specifying criteria for training and competency evaluation programs. They
have pointed out that programs they were required to develop in the absence
of regulations will require extensive revamping once Federal regulations are
finally published. The Secretary was required to establish requirements for
approval of these programs by September 1, 1988. In April 1989, HCFA
issued program guidelines for approval of training and competency evaluation
program, but these are intended to provide only temporary guidance until
HCFA publishes regulations on these OBRA provisions later in 1989.
The April 1989 guidelines specify that the 75 hours of initial training
include at least 16 hours of classroom instruction prior to the trainee's direct
involvement with a nursing home resident. This classroom instruction should
include communication and interpersonal skills; infection control;
safety/emergency procedures; promoting residents' independence; and
respecting residents' rights. Initial training should include another 16 hours
of skills training that should ensure, at a minimum, competency in basic
nursing skills, personal care skills, mental health and social service needs,
basic restorative services, and residents' rights. The remaining hours of
initial training, according to the guidelines, can be used at the discretion of
the designers of the training program.
In their consideration of budget reconciliation legislation in 1989, both
the House and Senate considered a number of nurse training issues. The
House included in its reconciliation bill, H.R. 3299, provisions that would,
among other things, delay the effective dates of Medicaid training and
competency evaluation requirements for nurse aides; require the Secretary of
HHS to promulgate proposed regulations on the law's training requirements
within 90 days of enactment of the bill; and consider nurse aides as having
completed training and competency evaluation requirements if they had
received certain other training. The Senate Finance Committee reported a
reconcilation bill with similar provisions. However, the Senate-passed bill, S.
1750, contained only two provisions related to nurse aide training: (1) a
delay in the effective date for training and/or competency evaluation
requirements for nurse aides; and (2) a provision allowing States to waive
training and competency evaluation requirements for certain nurse aides that
have had certain experience and training.
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The enacted OBRA 89, signed into law December 19, 1989, as P.L. 101-
239, included a number of nurse aide training amendments that apply to both
Medicare and Medicaid requirements. These include provisions that:
delay from January 1, 1990, until October 1, 1990, the date by which
nurse aides must complete training and/or competency evaluation
programs and must be determined to be competent to provide
services; for aides employed as of January 1, 1990, nursing homes
must provide for competency evaluation to be completed by October
1, 1990;
require the Secretary to issue proposed regulations on nurse aide
training and competency evalution programs not later than 90 days
after enactment;
consider nurse aides to have completed a training and competency
evaluation program if, as of July 1, 1989, the aide had received 60
hours of initial training, and at least 15 hours of supervised practical
nurse aide training or regular in service education;
consider nurse aides to have completed a training and competency
evaluation program if they were found competent (whether or not by
the State) before July 1, 1989, after the completion of a course of
nurse aide training of 100 hours;
permit States to waive competency evaluation requirements for aides
who can demonstrate to the satisfaction of the State that they have
served as a nurse aide at one or more facilities of the same employer
in the State for at least 24 months before enactment of OBRA 89;
provide that nurse aides may establish competency through
procedures or methods other than the passing of a written
examination, and at the nursing facility at which the aide is (or will
be) employed, unless the facility is out of compliance with
requirements for participation; and
prohibit the imposition on nurse aides of any charges (including any
charges for textbooks and other required course materials) for
training and competency evaluation programs.
Licensed Nurse Staffing
One of the main differences that distinguishes the requirements for SNFs
participating in Medicare and Medicaid from those for Medicaid ICFs is the
licensed nurse staffing requirement. Medicare has required that SNFs have
on duty 24 hours a day licensed nurses, including the services of a registered
professional nurse at least during the day tour of duty 7 days a week.
Licensed nurses include registered nurses or practical (vocational) nurses
licensed by the State in which they practice. Certain rural SNFs may receive
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a waiver for the registered nurse requirement for a 48-hour period. OBRA 87
retained these same licensed nursing requirements for SNFs participating in
Medicare. Effective October 1, 1990, SNFs must provide 24-hour licensed
nursing care and must use a registered professional nurse at least 8
consecutive hours a day 7 days a week (with waivers permitted for the
registered nurse requirement for certain rural facilities).
For ICFs, on the other hand, Medicaid has only required that a licensed
nurse be on duty on the day shift 7 days a week. This licensed nurse could
be a registered nurse or a licensed practical or vocational nurse. As a
practical matter, this requirement would allow ICFs to use nurse aides to
provide all care for the remaining 18 hours of the day.
In its report, IOM observed that one of the major factors affecting quality
of care and quality of life in nursing homes is the number and quality of
nursing staff; greater numbers of nurses have been associated with improved
resident outcomes.⁷ IOM also stated that staffing patterns vary across
facilities, regions, and States, but for the most part there are inadequate
numbers of nurses to provide the minimum care needed.
IOM also looked at the differences between SNFs and ICFs and found
that administrative distinctions between the two do not in practice display
clear differences in the residents they serve.⁸ According to IOM, both kinds
of facilities are nursing homes that admit and care for residents with a wide
range of disabilities and service needs. For these various reasons, IOM
recommended that the distinction between the two types of facilities be
eliminated and that participating facilities be subject to the same quality
assurance criteria and procedures, with SNF minimum staffing standards
applied to all nursing homes.
Largely as a result of these recommendations, OBRA 87 includes in its
Medicaid amendments provisions that eliminate the distinction between SNFs
and ICFs. In their place, OBRA creates, effective October 1, 1990, a new
category of nursing home provider referred to as a nursing facility (NF). At
that time, nursing facilities will have to meet a single set of requirements in
order to participate in Medicaid. In general, these are almost identical to
Medicare's requirements for facilities participating in that program.
For licensed nursing staff, OBRA requires that NFs meet Medicare's
requirements; that is, 24-hour licensed nursing care, with a registered
professional nurse at least 8 consecutive hours a day, 7 days a week.
However, OBRA provides a broader waiver authority for NFs than it does for
Medicare SNFs. OBRA permits waivers for both the registered nurse and the
licensed nurse requirements. In addition, States will provide the waivers, and
⁷Tbid., p. 101.
⁸Tbid., p. 72 and 73.
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not HCFA. Specifically, OBRA authorizes States to waive registered nurse
and licensed nurse requirements if (1) the facility demonstrates that it has
been unable to recruit appropriate personnel; (2) the State determines that a
waiver will not endanger the health or safety of individuals staying in the
facility, and; (3) the State finds that, for periods when licensed services are
not available, a registered nurse or physician is obligated to respond
immediately to telephone calls from the facility.
How frequently States will provide waivers to NFs to allow them to
provide less licensed nursing care is, of course, not known at the present
time. Regulations implementing these requirements can also affect States'
willingness to provide waivers. These are currently being drafted by HCFA.
It should be noted that the Nation as a whole is experiencing shortages
of registered nurses and that health care providers of all kinds are faced with
the need to pay higher salaries to registered nurses in order to recruit and
retain these personnel. These higher salary costs, as well as OBRA's
requirements for increased licensed nurse staffing, will lead to increases in
States' Medicaid budgets. States, therefore, will have an incentive to provide
waivers to NFs. For this reason, OBRA contains a provision requiring the
Secretary of HHS to review State waivers and to assume this waiver
authority if he/she finds a clear pattern and practice by States of allowing
waivers in the absence of diligent efforts by NFs to meet the staffing
requirements.
The Senate Finance Committee included in its reported reconcilation bill
provisions to require States to inform ombudsmen and other State and private
agencies of waivers they grant for nurse staffing requirements under Medicaid.
The bill also required nursing facilities to inform present and prospective
residents of any waivers granted for these purposes. In addition, the bill
required the Secretary to study and report on the appropriateness of
establishing minimum caregiver to resident ratios and minimum supervisor to
caregiver ratios for nursing facilities receiving Medicaid payments. These
provisions, however, were not included in the Senate-passed bill, S. 1750. Nor
were they included in the enacted OBRA 89, P.L. 101-239.
Surveying Nursing Homes' Compliance with OBRA 87s Requirements
Prior to the consideration of nursing home reform legislation, the survey
process for determining a nursing home's compliance with Medicare and
Medicaid requirements for participation had been criticized on a number of
grounds. IOM found the survey process to be too predictable; facilities could
predict the timing of an annual survey visit within weeks of the actual visit,
because certification lasts exactly 12 months and an annual survey is required
by regulation at least 90 days before certification expires.⁹ IOM also found
the survey process to be inefficient, subjecting all nursing homes to the same
⁹Tbid., p. 106-108.
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survey intensity regardless of their past record of compliance. In addition,
IOM and others had criticized the survey process for its focus on paper
compliance and theoretical facility capability based on reviews of records and
procedures, rather than actual performance based on direct observation and
contact with residents.
To address these problems, IOM recommended a resident-centered,
outcome-oriented survey process that would require surveyors to observe care
being provided and its effect on residents. 10 It also recommended a two-stage
process that would allow survey agencies to concentrate their efforts on
facilities providing poor or marginal care. OBRA 87 included many of IOM's
specific recommendations: unannounced standard surveys that include a
review of the quality of care furnished to a sample of residents with varying
care needs; an audit of the facility's resident assessment reports; and an
extended survey for facilities that provide substandard care.
These requirements reinforce changes in the survey process that HCFA
has been implementing as the result of a court orders in 1985 and 1987.
Final regulations on a resident-centered survey process were published by
HCFA June 17, 1988, with an effective date of July 18, 1988. OBRA's new
survey process, to become effective October 1, 1990, will require new
regulations that are scheduled to be published as a proposed regulation later
in 1989. At the current time, nursing home groups are concerned with the
impact the February 1989 regulations on nursing home requirements will
have on the survey process and the ability of nursing homes to be found in
compliance. From the point of view of these groups, the new requirements
and their interpretative guidelines that HCFA has prepared for surveyors to
use in their inspections of nursing homes provide, in certain cases, insufficient
detail to determine compliance, and, in others, content that should have been
subject to public comment.
¹⁰Tbid., p. 109-111.
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APPENDIX: DETAILED SUMMARY OF NURSING HOME REFORM
PROVISIONS CONTAINED IN MEDICARE AND MEDICAID LAWS
Medicare Nursing Home Reform Provisions, As Amended
Requirements for Skilled Nursing Facilities (unless otherwise
specified, effective October 1, 1990)
The revised law, in a new section 1819 of Medicare, defines a skilled
nursing facility (SNF) as an institution (or a distinct part of an institution)
which (1) is primarily engaged in providing to residents skilled nursing care
and related services for residents who require medical or nursing care, or
rehabilitation services for the rehabilitation of injured, disabled, or sick
persons, and is not primarily for the care and treatment of mental diseases;
(2) has in effect a transfer agreement (meeting requirements of Medicare law)
with one or more hospitals having Medicare provider agreements with the
Secretary; and (3) meets the various requirements described below.
Provision of Services. SNFs must (1) care for residents in a manner
and in an environment that promotes the quality of life of each resident and
operate a quality assessment and assurance committee; (2) provide services to
attain or maintain the highest practicable physical, mental, and psychosocial
well-being of each resident, in accordance with a written plan of care; (3)
conduct a comprehensive assessment of each resident's functional capacity, no
later than 4 days after the date of admission, or after a significant change in
a resident's physical or mental condition, and, in no case less often than once
every 12 months; (4) provide directly, or under arrangements with others,
nursing services and specialized rehabilitative services; medically-related social
services; pharmaceutical services; dietary services; an on-going activities
program, directed by a qualified professional; and routine and emergency
dental services (for which the facility is not prohibited from making an
additional charge).
Required Nursing Services. SNFs must provide 24-hour licensed
nursing care sufficient to meet the nursing needs of residents and must use
a registered professional nurse at least 8 consecutive hours a day 7 days a
week. The Secretary of HHS may waive the requirement for a SNF to have
on duty a registered nurse for more than 40 hours a week if:
the facility is located in a rural area and the supply of SNF services
in the area is not sufficient to meet the needs of the area;
the facility has one full-time registered professional nurse who is
regularly on duty 40 hours a week; and
the facility either has only residents whose physicians have indicated
that they do not require a registered nurse or a physician for a 48-
hour period, or has made arrangements for a registered nurse or
physician to spend the time necessary to provide skilled nursing
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services on days when the regular full-time registered nurse is not
on duty.
These waivers are subject to annual renewal.
Nurse Aide Training. SNFs must not use (on a full-time, temporary,
per diem, or other basis) any individual as a nurse aide for more than 4
months, on or after October 1, 1990, unless the individual has completed a
training and competency evaluation program, or a competency evaluation
program, approved by the State, and is competent to provide nursing or
nursing-related services. For individuals used as nurse aides as of January 1,
1990, SNFs must provide for an approved competency evaluation program and
the preparation necessary for the aide to complete this program by October
1, 1990. Certain nurse aides are exempted from training and competency
evaluation requirements if they have had other specified training or work
experience.
Physician Supervision. SNFs must require that the medical care of
every resident be provided under the supervision of a physician and must
have a physician available to furnish necessary medical care in case of
emergency.
Social Workers. SNFs with more than 120 beds must have at least
one social worker (with at least a bachelor's degree in social work or similar
professional qualifications) employed full-time to provide or assure the
provision of social services.
Residents' Rights. SNFs must protect and promote a resident's rights,
including the following: (1) the right to choose a personal attending
physician and to be fully informed about care and treatment and to
participate in planning care and treatment; (2) the right to be free from
physical or mental abuse, corporal punishment, involuntary seclusion, and any
physical or chemical restraint imposed for purposes of discipline or
convenience and not required to treat the resident's medical symptoms; (3)
psychopharmacologic drugs may be administered only on the orders of a
physician and only as part of a plan designed to eliminate or modify
symptoms for which the drugs are prescribed; (4) the right to privacy; (5) the
right to confidentiality of personal and clinical records; (6) the right to reside
and receive services with reasonable accommodation of individual needs and
preferences and to receive notice before the room or room-mate of the resident
is changed; (7) the right to voice grievances about treatment or care and the
right to prompt effort by the facility to resolve grievances; (8) the right to
organize and participate in resident groups in the facility and the right of the
resident's family to meet in the facility with the families of other residents;
(9) the right to participate in social, religious, and community activities; (10)
the right to examine, upon reasonable request, the results of the most recent
survey of the facility and any plan in effect to correct deficiencies; and (11)
any other right established by the Secretary.
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Facilities must inform each resident, orally and in writing at the time of
admission, of the resident's legal rights, and make available to each resident,
upon reasonable request, a written statement of rights. SNFs must also
inform each resident of services available and related charges for services,
including any charges not covered under Medicare or by the facility's basic
per diem charge.
Transfer and Discharge Rights. SNFs must permit residents to
remain in the facility and must not transfer or discharge residents unless:
(1) the transfer or discharge is necessary to meet the resident's welfare which
cannot be met in the facility; (2) the transfer or discharge is appropriate
because the resident's health has improved sufficiently so that the resident no
longer needs the services provided by the facility; (3) the safety of individuals
in the facility is endangered; (4) the health of individuals in the facility would
be endangered; (5) the resident has failed, after reasonable and appropriate
notice, to pay (or to have paid under Medicare or Medicaid) for a stay at the
facility; or (6) the facility ceases to operate. SNFs must notify the resident
(and, if known, a family member of the resident or legal representative) of a
transfer or discharge. This notice must include information about the
resident's right of appeal, and the name, mailing address, and telephone
number of the State long-term care ombudsman. In general, notice of a
transfer or discharge must be made at least 30 days in advance, except under
certain specified circumstances when notice must be given in advance as many
days as is practicable.
Access and Visitation Rights. SNFs must permit immediate access to
any resident by Federal and State officials, by the State ombudsman, and by
the resident's physician (effective July 1, 1988). SNFs must also permit
immediate access for the immediate family or other relatives of the resident.
Facilities must also allow representatives of the State ombudsman, with the
permission of the resident or the legal representative of the resident, to
examine a resident's clinical records.
Equal Access to Quality Care. SNFs must establish and maintain
identical policies and practices with regard to transfer, discharge, and
Medicare covered services for all individuals regardless of source of payment.
Admissions Policy. SNFs must not require individuals applying to
reside or residing in the facility to waive their rights to benefits under
Medicare or Medicaid. Nor can they require a third party guarantee of
payment to the facility as a condition of admission (or expedited admission)
to, or continued stay in, the facility.
Protection of Resident Funds. SNFs cannot require residents to
deposit their personal funds with the facility. If the facility accepts the
resident's written authorization to hold personal funds, it must manage and
account for these funds by: (1) depositing any amount in excess of $50 in an
interest bearing account that is separate from any of the facility's operating
accounts; (2) assuring a full and complete separate accounting of each
CRS-24
resident's personal funds; (3) conveying promptly personal funds to the
resident's estate upon death of the resident; and (4) purchasing a surety bond,
or providing other satisfactory assurance to the Secretary, that establishes the
security of all personal funds of residents deposited with the facility. The
facility cannot impose a charge against a resident's personal funds for items
or services paid for by Medicare or Medicaid.
Administration and Other Matters. SNFs must (1) be licensed under
State and local law; (2) meet the nursing home requirements of the Life
Safety Code of the National Fire Protection Association; (3) operate and
provide services in compliance with all applicable Federal, State, and local
laws and regulations and with accepted professional standards and principles;
(4) employ as administrator of the facility an individual who has met
standards established by the Secretary of HHS; (5) meet other requirements
pertaining to the health, safety, and well-being of residents or to the physical
plant as the Secretary of HHS may find necessary. SNFs must also notify
the State licensing agency of any change in (1) the ownership or controlling
interest of the facility, (2) officers, directors, agents, or managing employees,
(3) the corporation, association, or other company responsible for the
management of the facility, or (4) the administrator or director of nursing.
State Responsibilities Relating to SNF Requirements. States must
take a number of actions in connection with the new statutory requirements
for SNFs:
specify approved nurse aide training and competency evaluation
programs (January 1, 1989);
begin review and reapproval of these programs (January 1, 1990);
establish and maintain nurse aide registries of all persons who have
satisfactorily completed training and evaluation programs and those
who have been involved in resident neglect or abuse (January 1,
1989);
provide for an appeals process for transfers and discharges (October
1, 1989);
implement and enforce standards for administrators of SNFs
(January 1, 1990); and
specify an instrument to be used by facilities for resident
assessments (July 1, 1990).
Responsibilities of the Secretary of HHS Relating to SNF
Requirements. The Secretary must take a number of actions in connection
with the new statutory requirements for SNFs:
CRS-25
establish requirements for the approval of nurse aide training and
competency evaluation programs, including areas to be covered in
programs, content of curriculum, minimum hours of initial (75
hours) and ongoing training and retraining, qualifications of
instructors, and procedures for determining competency (September
1, 1988); OBRA 89 requires the Secretary to issue proposed
regulations on these requirements by March 19, 1990;
establish guidelines for States' appeals processes for transfers and
discharges of residents from SNFs (October 1, 1988);
develop standards for assuring the qualifications of SNF
administrators (March 1, 1989);
specify a minimum data set of core elements and common definitions
for use by facilities in conducting resident assessments (January 1,
1989);
designate one or more resident assessment instruments (April 1,
1990);
specify nursing home costs which may be charged to residents'
personal funds and those which are covered by Medicare (July 1,
1988);
provide in regulations that reimbursement to SNFs take into account
the costs of complying with the new requirements that facilities must
meet as the result of the nursing home reform legislation (including
the costs of conducting nurse aide training and competency
evaluation programs); and
evaluate and report to Congress on the implementation of the
resident assessment process for residents of SNFs (January 1, 1992).
Survey and Certification Process (unless otherwise specified,
effective October 1, 1990)
OBRA 87 establishes a new process for surveying SNFs to determine
their compliance with the requirements described above. Under the new law,
the Secretary of HHS will be responsible for surveying and certifying the
compliance of State-owned SNFs with these requirements, and States will be
responsible for surveying and certifying the compliance of all other facilities.
The new law provides for two different surveys for certification: a standard
survey and an extended survey.
Standard Survey. Every SNF will be subject to an unannounced
standard survey, conducted by a multidisciplinary team. This standard survey
must be conducted not later than 15 months after the date of the previous
standard survey. The average interval between standard surveys in a State
CRS-26
must not exceed 12 months. Standard surveys must include, for a case-mix
stratified sample of residents, a review of the quality of care furnished by the
facility (as measured by certain indicators), residents' written plans of care
and assessments, and the facility's compliance with residents' rights
requirements. A standard survey (or an abbreviated standard survey) may
also be conducted within 2 months of any change of ownership,
administration, management, or director of nursing, in order to determine
whether the change has resulted in any decline in the quality of care provided
by the facility.
Extended Survey. Each SNF found under a standard survey to have
provided substandard care will be subject to an extended survey. This survey
must be conducted immediately after the standard survey (or, if not
practicable, not later than 2 weeks after the standard survey) and must
identify the policies and procedures that resulted in substandard care. The
extended survey must also determine compliance with every requirement for
participation in Medicare, and must include an expanded sample of residents'
assessments, a review of staffing, in-service training, and, if appropriate,
contracts with consultants. At the discretion of the Secretary or the State,
any other facility, besides those found to be providing substandard care, can
be subject to an extended survey (or a partial extended survey).
Survey Protocol. Standard and extended surveys must be based on a
protocol developed, tested, and validated by the Secretary not later than
January 1, 1990. They must be conducted by individuals who meet minimum
qualifications specified by the Secretary. The Secretary and the States must
implement programs to measure and reduce inconsistency of survey results
among surveyors.
Validation Surveys. The Secretary must conduct onsite validation
surveys of a representative sample of each State's SNFs, to determine the
adequacy of State survey activities. Validation surveys must amount to at
least 5 percent of the number of SNFs surveyed by the State in a year, but
in no case less than 5 facilities. The Secretary's finding of a facility's
noncompliance with the requirements for participation is binding and
supersedes a State's finding of compliance. If the Secretary finds, on the
basis of validation surveys, that a State has failed to perform surveys as
required or that its performance is inadequate, the Secretary must provide for
an appropriate remedy, which may include training of survey teams in the
State.
Investigation of Complaints and Monitoring Compliance. Every
State must maintain procedures and adequate staff to investigate complaints
of violations of requirements for SNFs. States must review and investigate,
through the State agency responsible for surveys and certification, allegations
of resident neglect and abuse and misappropriation of resident property by
nurse aides. States must also monitor onsite, on a regular, as needed basis,
noncompliant SNFs.
CRS-27
Disclosure of Results of Inspections and Activities. SNFs must
post survey results in a place readily accessible to residents and residents'
representatives. The Secretary and the States must make available to the
public (1) information about all surveys and certifications, including
deficiencies and plans of correction, (2) copies of cost reports filed by facilities
under Medicare or Medicaid, (3) copies of statements of ownership, and (4)
information that must be reported to the Secretary about facilities' owners
and certain other individuals who have been convicted of certain offenses.
States must also notify the State long-term care ombudsman of the State's
findings of a SNF's noncompliance with requirements, and must also provide
to its State Medicaid fraud and abuse control unit all survey and certification
information. If a State finds that a SNF has provided substandard quality of
care, it must notify the attending physician of each resident and the State
board responsible for the licensing of the SNF's administrator.
Enforcement Process (effective January 1, 1988)
OBRA 87 revises and expands the sanctions that States and the Secretary
may impose against noncompliant SNFs. The sanctioning process of the new
law distinguishes between nursing homes with deficiencies which do and do
not immediately jeopardize the health or safety of residents.
If a State finds after a survey that a facility is not in compliance with
the requirements for participation, and that its deficiencies immediately
jeopardize the health or safety of its residents, the State must recommend to
the Secretary that the Secretary either (1) take immediate action to remove
the jeopardy and correct the deficiencies through the appointment of
temporary management, or (2) terminate the facility's participation in
Medicare. In addition, the Secretary may impose other sanctions, including
civil money penalties for each day of noncompliance, and denial of payment
for Medicare beneficiaries already in the facility or for new admissions to the
facility. Similar authority is provided to the Secretary if comparable
deficiencies are found in a survey made by the Secretary.
If a State finds that a facility is not in compliance and that its
deficiencies do not immediately jeopardize the health or safety of its residents,
then the State may recommend to the Secretary that the Secretary impose
any of the following sanctions: denial of payment for current Medicare
residents of the facility or for new admissions; civil money penalties for each
day of noncompliance; and appointment of temporary management. Similar
authority is provided the Secretary for a finding of comparable deficiencies.
If a facility has not complied with the law's requirements within 3
months after a finding of noncompliance, the Secretary must deny payments
for new admissions. For facilities found on three consecutive standard
surveys to have provided substandard care, the Secretary must deny payment
for current Medicare residents and new admissions and monitor the facility
until it has demonstrated that it is in compliance and will remain in
compliance. For facilities that are taking steps to eliminate deficiencies
CRS-28
according to a plan of correction submitted by the State and approved by the
Secretary, the Secretary may continue Federal Medicare payments to the
facility for no longer than 6 months.
Medicaid Nursing Home Reform Provisions, As Amended
Requirements for Nursing Facilities (unless otherwise specified,
effective October 1, 1990)
Effective October 1, 1990, OBRA 87 eliminates the Medicaid program's
distinction between SNFs and ICFs and establishes a single category of
nursing home provider and nursing home benefit, referred to as "nursing
facility." (OBRA 87 did not amend Medicaid law pertaining to intermediate
care facilities for the mentally retarded (ICFs/MR), or institutions for mental
diseases.) The new law combines current law definitions of SNFs and ICFs
into a definition for nursing facility (NF). A NF is defined in section 1919 of
Medicaid law as an institution (or a distinct part of an institution) which is
primarily engaged in providing to residents (1) skilled nursing care and
related services for residents who require medical or nursing care, or (2)
rehabilitation services for the rehabilitation of injured, disabled, or sick
persons, or (3) on a regular basis, health-related care and services to
individuals who because of their mental or physical condition require care and
services (above the level of room and board) which can be made available to
them only through institutional facilities. NFs must meet a single set of
requirements which are very similar to those described above for SNFs
participating in Medicare.
Provision of Services. NFs must (1) care for residents in a manner
and in an environment that promotes the quality of life of each resident and
operate a quality assessment and assurance committee; (2) provide services to
attain or maintain the highest practicable physical, mental, and psychosocial
well-being of each resident, in accordance with a written plan of care; (3)
conduct a comprehensive assessment of each resident's functional capacity, no
later than 4 days after the date of admission, after a significant change in a
resident's physical or mental condition, and in no case less often than once
every 12 months; (4) provide directly, or under arrangements with others,
nursing services and specialized rehabilitative services; medically-related social
services; pharmaceutical services; dietary services; an on-going activities
program, directed by a qualified professional; and routine and emergency
dental services.
Required Nursing Services. NFs must provide 24-hour licensed
nursing care sufficient to meet the nursing needs of residents and must use
a registered professional nurse at least 8 consecutive hours a day 7 days a
week. States may waive these requirements if:
the facility demonstrates that it has been unable, despite diligent
efforts (including offering wages at the community prevailing rate
for nursing facilities) to recruit appropriate personnel;
CRS-29
the State determines that a waiver will not endanger the health or
safety of individuals staying in the facility; and
the State finds that, for periods when licensed services are not
available, a registered nurse or physician is obligated to respond
immediately to telephone calls from the facility.
These waivers are subject to annual renewal and to review by the Secretary
of HHS. If the Secretary finds a clear pattern and practice by States of
allowing waivers in the absence of diligent efforts by facilities to meet the
staffing requirements, the Secretary must assume and exercise the State's
waiver authority.
Nurse Aide Training. NFs must not use (on a full-time, temporary,
per diem, or other basis) any individual as a nurse aide for more than 4
months, on or after October 1, 1990, unless the individual has completed a
training and competency evaluation program, or a competency evaluation
program, approved by the State, and is competent to provide nursing or
nursing-related services. For individuals used as nurse aides as of January 1,
1990, NFs must provide for an approved competency evaluation program and
the preparation necessary for the aide to complete this program by October
1, 1990. Certain nurse aides are exempted from training and competency
evaluation requirements if they have had other specified training or work
experience.
Physician Supervision. NFs must require that the medical care of
every resident be provided under the supervision of a physician and must
have a physician available to furnish necessary medical care in case of
emergency.
Social Workers. NFs with more than 120 beds must have at least one
social worker (with at least a bachelor's degree in social work or similar
professional qualifications) employed full-time to provide or assure the
provision of social services.
Residents' Rights. NFs must protect and promote a resident's rights,
including the following: (1) the right to choose a personal attending
physician and to be fully informed about care and treatment and to
participate in planning care and treatment; (2) the right to be free from
physical or mental abuse, corporal punishment, involuntary seclusion, and any
physical or chemical restraint imposed for purposes of discipline or
convenience and not required to treat the resident's medical symptoms; (3)
psychopharmacologic drugs may be administered only on the orders of a
physician and only as part of a plan designed to eliminate or modify
symptoms for which the drugs are prescribed; (4) the right to privacy; (5) the
right to confidentiality of personal and clinical records; (6) the right to reside
and receive services with reasonable accommodation of individual needs and
preferences and to receive notice before the room or room-mate of the resident
is changed; (7) the right to voice grievances about treatment or care and the
CRS-30
right to prompt effort by the facility to resolve grievances; (8) the right to
organize and participate in resident groups in the facility and the right of the
resident's family to meet in the facility with the families of other residents;
(9) the right to participate in social, religious, and community activities; (10)
the right to examine, upon reasonable request, the results of the most recent
survey of the facility and any plan in effect to correct deficiencies; and (11)
any other right established by the Secretary.
Facilities must inform each resident, orally and in writing at the time of
admission, of the resident's legal rights, and must make available to each
resident, upon reasonable request, a written statement of rights. NFs must
inform each resident of the requirements and procedures for establishing
eligibility for Medicaid, including rules pertaining to the special treatment of
income and resources of couples when one spouse is institutionalized and the
other remains in the community. NFs must also inform each Medicaid
beneficiary of items and services covered by Medicaid and other items and
services offered for which the resident may be charged and the amount of
these charges. NFs must inform each other resident of services available and
related charges for services, including any charges not covered under Medicare
or by the facility's basic per diem charge.
Transfer and Discharge Rights. NFs must permit residents to
remain in the facility and must not transfer or discharge residents unless: (1)
the transfer or discharge is necessary to meet the resident's welfare which
cannot be met in the facility; (2) the transfer or discharge is appropriate
because the resident's health has improved sufficiently so that the resident no
longer needs the services provided by the facility; (3) the safety of individuals
in the facility is endangered; (4) the health of individuals in the facility would
be endangered; (5) the resident has failed, after reasonable and appropriate
notice, to pay (or to have paid under Medicaid or Medicare) for a stay at the
facility; or (6) the facility ceases to operate. NFs must notify the resident
(and, if known, a family member of the resident or legal representative) of a
transfer or discharge. This notice must include information about the
resident's right of appeal, and the name, mailing address, and telephone
number of the State long-term care ombudsman. In general, notice of a
transfer or discharge must be made at least 30 days in advance, except under
certain specified circumstances when notice must be given in advance as many
days as is practicable. Before a resident is transferred for hospitalization or
therapeutic leave, NFs must provide written information about the State's
and facility's policies on the period (if any) during which the resident will be
permitted to return and resume residence in the facility (often referred to as
bed-hold policy).
Access and Visitation Rights. NFs must permit immediate access to
any resident by Federal and State officials, by the State ombudsman, and by
the resident's physician (effective July 1, 1988). NFs must also permit
immediate access for the immediate family or other relatives of the resident.
Facilities must also allow representatives of the State ombudsman, with the
CRS-31
permission of the resident or the legal representative of the resident, to
examine a resident's clinical records.
Equal Access to Quality Care. NFs must establish and maintain
identical policies and practices with regard to transfer, discharge, and the
provision of Medicaid covered services for all individuals regardless of source
of payment.
Admissions Policy. NFs must not require individuals applying to reside
or residing in the facility to waive their rights to benefits under Medicaid or
Medicare. Nor can they require a third party guarantee, or gift, money,
donation, or other consideration, as a condition of admission (or expedited
admission) to, or continued stay in, the facility.
Protection of Resident Funds. NFs cannot require residents to
deposit their personal funds with the facility. If the facility accepts the
resident's written authorization to hold personal funds, it must manage and
account for these funds by: (1) depositing any amount in excess of $50 in an
interest bearing account that is separate from any of the facility's operating
accounts; (2) assuring a full and complete separate accounting of each
resident's personal funds; (3) notifying the resident of balances that might
affect the person's continued Medicaid eligibility; (4) conveying promptly
personal funds to the resident's estate upon death of the resident; and (5)
purchasing a surety bond, or providing other satisfactory assurance to the
Secretary, that establishes the security of all personal funds of residents
deposited with the facility. The facility cannot impose a charge against a
resident's personal funds for items or services paid for by Medicaid or
Medicare.
Administration and Other Matters. NFs must (1) be licensed under
State and local law; (2) meet the nursing home requirements of the Life
Safety Code of the National Fire Protection Association; (3) operate and
provide services in compliance with all applicable Federal, State, and local
laws and regulations and with accepted professional standards and principles;
(4) employ as administrator of the facility an individual who has met
standards established by the Secretary of HHS; (5) meet other requirements
pertaining to the health, safety, and well-being of residents or to the physical
plant as the Secretary of HHS may find necessary. NFs must also notify the
State licensing agency of any change in (1) the ownership or control interest
of the facility, (2) officers, directors, agents, or managing employees, (3) the
corporation, association, or other company responsible for the management
of the facility, or (4) the administrator or director of nursing.
State Responsibilities Relating to Nursing Facility Requirements.
States must take a number of actions in connection with the new statutory
requirements for NFs:
specify approved nurse aide training and competency evaluation
programs (January 1, 1989);
CRS-32
begin review and reapproval of these programs (January 1, 1990);
establish and maintain nurse aide registries of all persons who have
satisfactorily completed training and evaluation programs and those
who have been involved in resident neglect or abuse (January 1,
1989);
provide for an appeals process for transfers and discharges (October
1, 1989);
implement and enforce standards for administrators of NFs (January
1, 1990);
specify an instrument to be used by facilities for resident
assessments (July 1, 1990);
take into account in their payments to NFs the costs of complying
with the new requirements that facilities must meet as the result of
the nursing home legislation;
provide for a reduction in payment to NFs with waivers for licensed
nurse staffing to take into account the lower costs (if any) of
nursing care at the facility; and
make available to the public the data and methodology used in
establishing payment rates for NFs.
Responsibilities of the Secretary of Health and Human Services
Relating to Nursing Facility Requirements. The Secretary must take a
number of actions in connection with the new statutory requirements for
NFs:
establish requirements for the approval of nurse aide training and
competency evaluation programs, including areas to be covered in
programs, content of curriculum, minimum hours of initial (75
hours) and ongoing training and retraining, qualifications of
instructors, and procedures for determining competency (September
1, 1988); OBRA 89 requires the Secretary to issue proposed
regulations on these requirements by March 19, 1990;
provide enhanced Federal matching payments (the Federal Medical
Assistance percentage for a State plus 25 percentage points, not to
exceed 90 percent) for State activities required in connection with
nurse aide training and competency evaluation programs for the 8
calendar quarters beginning July 1, 1988 (in subsequent years the
rate becomes 50 percent for these activities);
establish guidelines for States' appeals processes for transfers and
discharges of residents from NFs (October 1, 1988);
CRS-33
develop standards for assuring the qualifications of NF
administrators (March 1, 1989);
specify a minimum data set of core elements and common definitions
for use by facilities in conducting resident assessments (January 1,
1989);
designate one or more resident assessment instruments (April 1,
1990);
specify nursing home costs which may be charged to residents'
personal funds and those which are covered by Medicaid (July 1,
1988);
develop criteria and procedures for monitoring waivers granted NFs
by States for licensed nurse staffing requirements (October 1, 1988);
review and approve or disapprove States' plans to provide for an
appropriate adjustment in payment amounts for NF services;
provide, upon request, technical assistance to the States for the
development and implementation of case mix reimbursement systems;
and
evaluate and report to Congress on the implementation of the
resident assessment process for residents of NFs (January 1, 1993).
Survey and Certification Process (unless otherwise specified,
effective October 1, 1990)
OBRA 87 establishes a new process for surveying NFs to determine their
compliance with the requirements described above. Under the new law, the
Secretary of HHS will be responsible for surveying and certifying the
compliance of State-owned NFs with these requirements, and States will be
responsible for surveying and certifying the compliance of all other facilities.
The new law provides for two different surveys for certification: a standard
survey and an extended survey.
Standard Survey. Every NF participating in Medicaid will be subject
to an unannounced standard survey, conducted by a multidisciplinary team.
This standard survey must be conducted not later than 15 months after the
date of the previous standard survey. The average interval between standard
surveys in a State must not exceed 12 months. Standard surveys must
include, for a case-mix stratified sample of residents, a review of the quality
of care furnished by the facility (as measured by certain indicators), residents'
written plans of care and assessments, and the facility's compliance with
residents' rights requirements. A standard survey (or an abbreviated standard
survey) may also be conducted within 2 months of any change of ownership,
administration, management, or director of nursing, in order to determine
CRS-34
whether the change has resulted in any decline in the quality of care provided
by the facility.
Extended Survey. Each NF found under a standard survey to have
provided substandard care will be subject to an extended survey. This survey
must be conducted immediately after the standard survey (or, if not
practicable, not later than 2 weeks after the standard survey) and must
identify the policies and procedures that resulted in substandard care. The
extended survey must also determine compliance with every requirement for
participation in Medicaid, and must include an expanded sample of residents'
assessments, a review of staffing, in-service training, and, if appropriate,
contracts with consultants. At the discretion of the Secretary or the State,
any other facility, besides those found to be providing substandard care, can
be subject to an extended survey (or a partial extended survey).
Survey Protocol. Standard and extended surveys must be based on a
protocol developed, tested, and validated by the Secretary not later than
January 1, 1990. They must be conducted by individuals who meet minimum
qualifications specified by the Secretary. The Secretary and the States must
implement programs to measure and reduce inconsistency of survey results
among surveyors.
Validation Surveys. The Secretary must conduct onsite validation
surveys of a representative sample of each State's NFs, to determine the
adequacy of State survey activities. Validation surveys must amount to at
least 5 percent of the number of NFs surveyed by the State in a year, but
in no case less than 5 facilities. The Secretary's finding of a facility's
noncompliance with the requirements for participation is binding and
supersedes a State's finding of compliance. If the Secretary finds, on the
basis of validation surveys, that a State has failed to perform surveys as
required or that its performance is inadequate, the Secretary must reduce
matching payments to the State for survey and certification activities. This
reduction must be equal to 33 percent of the ratio of the total number of
residents in noncompliant facilities to the total number of residents in
facilities surveyed by the Secretary. The Secretary may also provide for the
training of survey teams in the State.
Enhanced Federal Matching for Survey and Certification. Federal
matching payments for State survey and certification activities will be made
at the rate of 90 percent in FY 1991, 85 percent in FY 1992, 80 percent in
FY 1993, and 75 percent in FY 1994 and thereafter.
Investigation of Complaints and Monitoring Compliance. Every
State must maintain procedures and adequate staff to investigate complaints
of violations of requirements for NFs. States must review and investigate,
through the State agency responsible for surveys and certification, allegations
of resident neglect and abuse and misappropriation of resident property by
nurse aides. States must also monitor onsite, on a regular, as needed basis,
noncompliant NFs.
CRS-35
Disclosure of Results of Inspections and Activities. NFs must post
survey results in a place readily accessible to residents and residents'
representatives. The Secretary and the States must make available to the
public (1) information about all surveys and certifications, including
deficiencies and plans of correction, (2) copies of cost reports filed by facilities
under Medicaid or Medicare, (3) copies of statements of ownership, and (4)
information that must be reported to the Secretary about facilities' owners
and certain other individuals who have been convicted of certain offenses.
States must also notify the State long-term care ombudsman of the State's
findings of a NF's noncompliance with requirements, and must also provide
to its State Medicaid fraud and abuse control unit all survey and certification
information. If a State finds that a NF has provided substandard quality of
care, it must notify the attending physician of each resident and the State
board responsible for the licensing of the NF's administrator.
Enforcement Process (effective January 1, 1988)
OBRA 87 revises and expands the sanctions that States and the Secretary
may impose against noncompliant nursing homes. The Secretary's new
sanction authority is effective January 1, 1988, with regard to noncompliant
SNFs and ICFs. States must amend their Medicaid plans to include the law's
new sanctions by October 1, 1989. The Secretary must provide through
regulations guidance to the States on these new sanctions by October 1, 1988.
This same expanded authority will also apply to NFs beginning October 1,
1990. The sanctioning process of the new law distinguishes between nursing
homes with deficiencies which do and do not immediately jeopardize the
health or safety of residents.
If a State finds after a survey that a facility is not in compliance with
the requirements for participation, and that its deficiencies immediately
jeopardize the health or safety of its residents, the State must either (1) take
immediate action to remove the jeopardy and correct the deficiencies through
the appointment of temporary management, or (2) terminate the facility's
participation in Medicaid. In addition, the State may impose other sanctions,
including civil money penalties for each day of noncompliance, denial of
payment for new Medicaid admissions to the facility, and, in the case of
emergency, closing the facility or transferring residents to other facilities.
Similar authority is provided to the Secretary if comparable deficiencies are
found in a survey made by the Secretary.
If a State finds that a facility is not in compliance and that its
deficiencies do not immediately jeopardize the health or safety of its residents,
then the State may terminate the facility's participation in Medicaid and/or
impose one or more sanctions. These include denial of payment for new
Medicaid admissions; civil money penalties for each day of noncompliance;
appointment of temporary management; and, in the case of an emergency,
authority to close the facility or transfer residents, or both. Similar authority
is provided the Secretary for a finding of comparable deficiencies. The new
CRS-36
law also specifies procedures to be followed where the State and Secretary do
not agree on findings of noncompliance.
If a facility has not complied with the law's requirements within 3
months after a finding of noncompliance, the State must deny payments for
new admissions. For facilities found on three consecutive standard surveys to
have provided substandard care, the State must deny payment for new
Medicaid admissions and monitor the facility until it has demonstrated that
it is in compliance and will remain in compliance. For facilities that are
taking steps to eliminate deficiencies according to a plan of correction
submitted by the State and approved by the Secretary, the Secretary may
continue Federal Medicaid matching payments to the State for no longer than
6 months.
In addition to establishing new sanction authority for noncompliance,
OBRA 87 also authorizes States to establish a program to reward, through
public recognition or incentive payments, or both, NFs that provide the
highest quality care to residents who are Medicaid beneficiaries. These
programs would be eligible for Federal matching payments at the rate of 50
percent.
Preadmission Screening and Annual Resident Review for the
Mentally п and Mentally Retarded (PASARR)
OBRA 87 establishes requirements for the preadmission screening and
annual resident review for the mentally ill and mentally retarded who are
either seeking nursing home admission or already residing in a nursing home.
These requirements, often referred to as PASARR requirements, apply to
nursing facilities (including current law SNFs and ICFs and future NFs), the
States, and the Secretary of HHS.
Nursing Facility Requirements for Preadmission Screening for
the Mentally Ill and Mentally Retarded. For new admissions occurring
on or after January 1, 1989, nursing facilities must not admit any new
resident who is mentally ill or mentally retarded, unless the State mental
health or State mental retardation authority has determined, prior to
admission, that the prospective resident requires the level of services provided
by a nursing facility. In addition, if the individual requires nursing facility
services, a determination must be made as to whether the resident requires
active treatment for mental illness or mental retardation. The State's
determination must be based on an independent physical and mental
evaluation performed by a person or entity other than the State mental
health or mental retardation authority.
State Requirements for Preadmission Screening and Annual
Resident Review for the Mentally п and Mentally Retarded. Effective
January 1, 1989, each State must have in effect a preadmission screening
program for the mentally ill and mentally retarded seeking admission to a
nursing facility.
CRS-37
For current residents who are mentally ill or mentally retarded (and who
were admitted prior to January 1, 1989), each State must have reviewed and
determined, as of April 1, 1990:
whether or not the resident requires the level of services provided by
the nursing facility, or the level of services provided by an inpatient
psychiatric hospital for individuals under age 21 or an institution
for mental diseases for persons 65 years of age or older; and
whether or not the resident requires active treatment for mental
illness or mental retardation.
These reviews and determinations must be made on an annual basis for
nursing facility residents who are mentally ill or mentally retarded. They
must be based on an independent physical and mental evaluation performed
by a person or entity other than the State mental health or mental
retardation authority.
For persons who have resided in the nursing home for at least 30 months
and who are found not to require the level of services provided by a nursing
facility, but who require active treatment for mental illness or mental
retardation, the State must, in consultation with the resident's family or legal
representative and care-givers:
inform the resident of the institutional and noninstitutional
alternatives covered under the State plan for the resident;
offer the resident the choice of remaining in the facility or of
receiving covered services in an alternative appropriate institutional
or noninstitutional setting;
clarify the effect on eligibility for services under the State plan if
the resident chooses to leave the facility (including its effect on
readmission to the facility); and
regardless of the resident's choice, provide or arrange for needed
active treatment.
If these persons choose to remain in the nursing facility, States will receive
Federal matching payments for the costs of their nursing facility services.
For persons who have not resided continuously in the nursing home for
at least 30 months and who do not require the level of services provided by
a nursing facility and who require active treatment, the State must:
arrange for the safe and orderly discharge of the resident from the
facility;
CRS-38
prepare and orient the resident for discharge, and
provide or arrange for needed active treatment.
For persons, regardless of their length of stay, who do not require the
level of services provided by a nursing facility and who do not require active
treatment, the State must:
arrange for the safe and orderly discharge of the resident, and
prepare and orient the resident for discharge.
States must have in place by January 1, 1989, an appeals process for
individuals adversely affected by screening determinations.
Federal Matching Payments for Screening Activities. Federal
matching payments will be made for State screening activities at the rate of
75 percent. No Federal matching payments will be available for persons who
are determined not to need nursing facility care.
Alternative Disposition Plans. States will be considered to be in
compliance with the requirements for persons who do not require nursing
home care but do require active treatment, if the States have entered into an
agreement with the Secretary for the disposition of these residents and the
State is in compliance with the agreement. These agreements may provide
for additional time for the States to discharge and/or provide active treatment.
Definitions. OBRA 87 defines the terms "mentally ill," "mentally
retarded," and "active treatment."
An individual is considered "mentally ill" if the individual has a primary
or secondary diagnosis of mental disorder (as defined in the Diagnostic and
Statistical Manual of Mental Disorders, 3rd edition) and does not have a
primary diagnosis of dementia (including Alzheimer's disease or a related
disorder).
An individual is considered to be "mentally retarded" if the individual is
mentally retarded or a person with a related condition (such as cerebral palsy
or epilepsy, as described in Medicaid regulations pertaining to intermediate
care facilities for the mentally retarded).
"Active treatment" has the meaning given the term by the Secretary in
regulations, but does not include, in the case of a resident of a nursing
facility, services that must be provided under the new law.
Federal Requirements for Preadmission Screening for the
Mentally пи and the Mentally Retarded. The Secretary must develop by
October 1, 1988, minimum criteria for States to use in making determinations
as to whether a mentally ill or mentally retarded individual requires the level
CRS-39
of services provided by a nursing facility. The failure of the Secretary to
develop these criteria does not relieve the States of their responsibility to
conduct the screening activities described above. (OBRA 89 requires the
Secretary to issue proposed regulations on these minimum criteria by March
19, 1990.) By October 1, 1988, the Secretary must also develop minimum
criteria for States' appeals processes for persons adversely affected by
screening decisions. The Secretary must also review a sufficient number of
cases to determine a State's compliance with the requirements to provide
active treatment to those residents of nursing facilities who must be
discharged.
A&S
The Christian Science Monitor, May 23,1988, PP. 1, 32.
Maturing America looks to
quality long-term care for elderly
MAIN PETER STAFF
Mr. and Mrs. Herb Edmonds: she's a volunteer worker at center for elderly
By Robert P. Hey
cared for in nursing homes. Many are receiv-
Staff writer of The Christian Science Monitor
ing long-term assistance. Perhaps three times
St. Petersburg, Fla.
that number get similar aid at home.
S
EVERAL elderly couples stroll the banks
Quality and cost vary widely, but nursing-
of Mirror Lake here, enjoying the
home care is expensive. Experts project that
warmth of a welcome spring sun. Across
by the year 2000 several times the current
the street, the shuffleboard courts are packed.
number of elderly will need financial assist-
And a bowling-ball game is in progress at the
ance, and that Americans will be paying $129
nearby lawn bowling club.
billion a year to nursing homes by then.
Everywhere, it seems, the el-
Yet long-term care is a subject
derly are in motion.
that many older Americans seem
But while these active oldsters
to want to discuss only in the
don't seem to have a care in the
abstract. When asked about their
world, appearances can be decep-
own concerns, they quickly
tive. Many have at least one ma-
change the subject. But they are
jor concern - that someday they
more willing to talk about what
might need long-term care.
they are doing to help others -
"Everybody I know is think-
which is, in fact, how many of
ing about it," insists a retired
the needs of the elderly are being
Pinellas County, Fla., employee
met.
who prefers not to give her name.
Here in St. Petersburg's cheery
Every day an average of 1.5
THE COST OF
yellow-brick Sunshine Center for
million Americans, nearly 90
CARE
the elderly, Mrs. Herb Edmonds,
percent of them elderly, are being
Please see CARE back page
© 1988 The Christian Science Publishing Society. Reproduced by the Library of
Congress, Congressional Research Service with permission of copyright claimant.
continued
CARE
from front page
a 76-year-old long-time volunteer, says,
sue. Most experts say 1988 will be a year
In recent years US health-care costs
"What I like to do is take care of the old
of exploration, with actual changes in
have been rising faster than the in
federal law likely in the next administra-
rate: Now at 12 percent of the gros
people. I think they need a friend."
tional product, they are expected to reach
For years America turned an unseeing
tion.
In a few weeks the US House of Repre-
15 percent by the turn of the century.
eye to the problem of long-term care.
Given today's massive federal deficit
Every year as many as a million people
sentatives is scheduled to vote on a pro-
problems, can Uncle Sam afford to pay
were spending themselves into poverty
posal by Reps. Claude Pepper (D) of Flor-
any additional health-care costs, even for
trying to pay nursing-home costs.
ida and Edward Roybal (D) of California
a purpose as worthy as this? Experts
Untold hundreds of thousands of rela-
that would provide financial help to peo-
disagree.
tives and friends have been laboring, of-
ple being cared for at home.
ten without relief, to care for people in
A number of very different proposals
are being introduced into Congress that
Many spouses left destitute
their homes.
At present, couples must virtually
would craft government's response to
The elderly and their families are no
spend themselves into poverty before
helping Americans with the cost. Several
longer the only ones concerned about
medicaid will help pay for long-term care.
long-term care. Government officials rec-
hearings will explore the issue this year.
No one wants to leave a spouse destitute.
Meanwhile, two Florida metropolitan
ognize the problem. So do national politi-
But this happens every year to hundreds
cal candidates and a growing number of
areas, Orlando and Fort Myers, are slowly
of thousands of Americans in nursing
"sandwich" generation Americans - mid-
expanding a telephone hot line that links
homes, where the average annual cost is
dle-age people with children in college
a broad array of previously unconnected
$22,000. Congressman Pepper says that
and with parents who require or may
services, from health care to housework,
"a million Americans become pauperized"
need expensive or time-consuming care.
which can help senior citizens stay at
this way annually. Even middle-class
"I believe that long-term care is going
home.
America, he adds, is "not able to meet the
to be one of the major national issues in
The American Association of Retired
[financial] demand" of long-term nursing-
the next few years," says Alice Rivlin, an
Persons is working on plans for a nation-
home care.
economist with the Brookings Institution.
wide hot line that will offer people infor-
And nursing homes are not even half
She recently completed a study and a
mation and referrals on health services
the story. "Seventy-five percent" of all
book on the subject.
available in their communities. For the
long-term care takes place ir the home,
past year the 28 million-member AARP
says Thomas Burke, chief of staff of the
Promising developments
has made long-term care one of its main
Department of Health and Human S
Developments are under way that
focuses. Its campaign was instrumental in
ices.
should ultimately lead to better care, fi-
bringing the issue into the national spot-
Nearly all of that is provided by
nancial aid to those who need it, and help
light this year.
members or friends. Dr. Rivlin says the
for those who labor unrecognized outside
evidence shows "that the family system
their immediate families.
More need for long-term care
in the United States has responded" to the
For one thing, Americans of all ages
Relatively few people in their 60s require
long-term care needs of relatives "quite
now realize that neither Uncle Sam's
nursing-home care. But 3 in 10 Americans
remarkably." She says the overall "bur-
medicare program nor most general-pur-
over 85 the fastest-growing age group
den on the family has increased enor-
pose health-insurance plans cover long-
now spend at least part of every year in
mously" in recent years, as middle-age
term care. That knowledge is a necessary
nursing homes.
couples have to raise children, work out-
first step to improvement.
Demographers say the number of
side the home, scrape up college-tuition
Most experts say a combination of pri-
Americans over 65, now nearly 30 mil-
payments, and care for older relatives,
vate insurance and government programs
lion, will double in the next 40 years.
often all at the same time.
should provide most of the funding, but
More important, the number of Ameri-
they disagree widely on the blend.
cans over 85 will keep growing at the
Virtually every expert says long-term
fastest rate: 1 percent is now over 85; by
care is a problem that can be insured
2030 nearly 3 percent (8.6 million people)
against by spreading the risk- by encour-
are expected to be.
aging many people to purchase insurance
"We will have more people needing
that only a small percentage will ever
long-term care" than America can now
need.
aid, says Dr. William Roper, administra-
Small but quickly growing numbers are
tor of the Health Care Finance Adminis-
buying specific insurance to cover long-
tration of the United States Department
term care. About 70 insurance companies
of Health and Human Services. His
now offer improved, though far from per-
agency handles medicare and medicaid.
fect, plans.
Nationally, individual Americans pay
"Over half a million people are covered
nearly half the cost of nursing-home care
at this time," says Bruce Boyd, chairman
from their own pockets. Medicaid, the
of the long-term-care task force of the
program that is supposed to help the poor
Health Insurance Association of America.
with medical expenses, pays a little more
That's 2½ times more than just three
than 40 percent. Private health insurance
and medicare - the federal program sup-
years ago.
Congress has begun looking at the is-
posed to provide dollars for the elderly's
health care - together pay less than 3
percent. At-home care costs vary from
case to case but are usually less.
A&S
FRIDAY, MAY 27, 1988
pp 3, 5.
THE CHRISTIAN SCIENCE MONITOR
NATIONAL
NORMAN MATHENY STAFF
Mrs. Sidney Forstall and Mrs. Loraine Cook chat outside a typical housing wing at Kendal at Longwood
New 'barons' emerge in the House
By Robert P. Hey
Typical residents are vigorous
Residents have "a lifetime
Staff writer of The Christian Science Monitor
and healthy, and they are past
contractual guarantee" of accom-
Kennett Square, Pa.
retirement age. As in other retire-
modations, meals, and medical
Kendal at Longwood is a splen-
ment facilities they eat most meals
aid, says Anne Somers, a geriatri-
did site for a retirement commu-
together, and take part in activi-
cian and professor at the Robert
nity. The hills around it have in-
ties, retiring to the privacy of
Wood Johnson Medical School in
spired three generations of
their rooms when they choose.
Princeton, N.J.
painting Wyeths and a whole
Entrance and monthly fees en-
A decade ago there were few
school of American landscapists.
title the few requiring
such facilities across
History flows through the area.
long-term care to re-
America. But the num-
A stone's throw away is the Revo-
ceive it in the medical
ber is "growing by
lutionary War battlefield of
wing, at no added cost.
leaps and bounds,"
Brandywine, where Washington
It's a classic example
says Alice Biache, vice-
vainly sought to block the British
of insurance: All resi-
president of Goodwin
advance on Philadelphia, now less
dents pay for care that
House, a continuing-
than an hour's drive away.
only a few will use.
care retirement facility
Kendal is home to about 360
A facility "is defi-
in- Alexandria, Va.
retirement-age Americans. Called
nitely in the long-term
"Everyone is jumping
1 continuing-care retirement com-
care insurance busi-
THE COST OF
on the bandwagon,"
nunity, it is gaining favor across
ness," says Lloyd
CARE
she says. Yet fewer
he United States.
Lewis, Kendal's execu-
than 5 percent of
tive director. He says
America's elderly live
the medical wing of facilities that
in retirement homes, and only a
are similar to Kendal provide "one
modest percentage of them are in
of the most viable, cost-effective"
continuing-care facilities.
kinds of long-term care available.
Please see CARE page 5
© 1988 The Christian Science Publishing Society. Reproduced by the Library of
Congress, Congressional Research Service with permission of copyright claimant.
continued
CARE
from page 3
Professor Somers says there is vast
The vast majority of continuing-care
potential for growth. "My own guess is
retirement communities are nonprofit.
that at least 25 percent of the elderly" are
But profitmaking corporations, eyeing
willing and able to pay the money re-
the prospects for a greatly expanded mar-
quired to live in such facilities. "Pro-
ket, are beginning to enter the field.
vided," she adds, "they have confidence
Experts warn that the elderly check:
in the [financial] integrity of the insti-
(1) the commitment of the sponsoring or-
tution."
ganization to the needs of the elderly and
It's not cheap. Somers says an appli-
not merely to the financial bottom line;
cant must pay a $35,000-to-$90,000 en-
(2) the financial stability of the sponsor-
trance fee. Additional monthly payments
ing organization.
run from about $1,000 to $1,600.
And when these facilities are built for
Skeptics say high fees automatically
those will no expertise, Alan Hunt warns,
limit growth. They note that 1 of every 8
"in most cases, those have been just trou-
older Americans lives in poverty, despite
ble." The costs have been too high; some
improvements in care for the elderly
have gone bankrupt. Mr. Hunt chairs the
made in the past two decades. At least an
legal committee of the American Associ-
equal number live just above poverty's
ation of Homes for the Aging.
edge.
But well-run facilities can provide resi-
Advocates note that most Americans
dents with protection from a deep con-
over 65 own homes. Thus, Somers says,
cern of many elderly: how to pay for long-
by selling their houses most could come
term care, should they need it.
up with the entrance fees. But, she con-
cedes, it is "more speculative" as to how
The very affluent have sufficient fi-
many could afford the monthly fee.
nancial resources; the very poor have
Some of these facilities, like Kendal,
medicaid. But the majority of middle-
are spread out like campuses. Others, in
class Americans are still looking for a
urban settings like Goodwin House, are
way to protect the bulk of their estate,
high-rises that look like apartment
however modest, so they can give it to
buildings.
family or friends.
Many residents find a.sense of home
Fortunately the stirrings of progress
and extended family in their continuing-
are now present. Organizations that
care communities. Says Marjorie Trent, a
speak for the elderly are insisting on
former teacher and school administrator
progress, as are the elderly and their
who has lived for 14 years at Kendal: "I
children.
think it's the ability to be independent
The insurance industry is offering a
and yet to have backing, as if you had a
host of new programs. Government is
family. To have somebody to fall back on,
moving toward decisions on care.
that makes this place so attractive. You
How the situation will be resolved is
feel secure."
not yet clear. What is apparent is that the
Yet Ms. Biache warns such a facility
old answer - that nothing can be done -
"isn't for everyone. Not everyone could
no longer suffices.
adjust to congregate living." Then there's
the matter of location - "a big factor," she
says. It's something anyone planning re-
tirement ought to consider. "Nearness to
family," for one thing. And does a person
prefer the city or the country?
A&S
The Christian Science Monitor, May 26, 1988, pp. 3, 4.
R. NORMAN MATHENY - STAFF
Mary Bowden (right) chats with nurse and friend Carolyn Anthony
The challenges of caring
for a relative at home
By Robert P. Hey
sight as America's population con-
Staff writer of The Christian Science Monitor
tinues to grow older.
Washington
In every corner of the United
Earl Smith and Mary Bowden
States, people, like the Smiths and
and her mother are three in 6
the Bowdens, are dealing with long-
million.
term care. (Caring for your par-
That's how many Americans
ents, Page 24.) In a poll taken last
have received care at home this
year, 47 percent of the respondents
year, rather than in nursing institu-
said they had had some experience
tions. Some, like Mr. Smith and Ms.
with long-term care. They were an-
Bowden, are physically ailing; oth-
ers, like Ms. Bowden's mother, have
Care '88, a joint effort by the Ameri-
© 1988 The Christian Science Publishing Society. Reproduced by the Library of
Congress, Congressional Research Service with permission of copyright claimant.
swering a poll taken for Long Term
mental problems.
can Association of Re-
Contrary to popular
tired Persons and the
belief, four times as
Villers Foundation to put
many elderly Americans
long-term care on the na-
are cared for at home or
tional agenda.
in someone else's as are
Until recently Smith
in nursing homes - - 6 mil-
spent his days in a re-
lion vs. fewer than 1½
cliner watching through
million. Like Mr. Smith,
the sliding glass door as
more than half are being
Washington's seasons
helped by wives or
THE COST OF
marched past. "For the
daughters. He was as-
CARE
last six years, really, I've
sisted by both.
been caring" for him, his
"People would rather
wife said a few weeks
stay in their own homes than go to a
before he died earlier this month.
nursing home," says Eric Shulman,
The emotional, physical, and fi-
legislative director of the National
nancial challenges the Smiths faced
Council of Senior Citizens.
are typical for those caring for rela-
The annual cost of home health
tives at home.
care in America has risen an esti-
The federal medicare program is
mated 20 to 25 percent in recent
supposed to help the elderly with
years. Three years ago individual
medical costs. But it does not pay
Americans and medicaid together
for most long-term home care or
paid about $9 billion. By 1990 the
nursing-home care - only for skilled
annual cost of home care is expected
assistance, as from a physician or
to reach $16 billion, with no end in
Please see CARE next page
continued
CARE
from preceding page
nurse. In cases like Smith's, the bulk of
Today nearly 11,000 US organizations
of his sight five minutes." It's a typical
the help required is in ordinary activities
provide home care, says Val Halaman-
problem: Many people who are dependent
like walking, dressing, and feeding.
daris, president of the National Associ-
on care-givers become uneasy when they
That's why women like Mrs. Smith de-
ation of Home Care. "We've known for
are not in view.
vote years, with little or no help, to caring
years what to do" to help people at home,
Efforts are under way in Congress to
for their husbands. They cannot afford
he says. "It's just a question of having the
provide funds that would, in part, pro-
any aid. And the government and most
will to do it, and finding some method of
vide the Mrs. Smiths across America with
insurance companies have been unwilling
financing it."
time to do something outside the home -
to provide money unless these people
The US House of Representatives is
perhaps only an hour or two a week to
spend so much of their own funds first
expected to vote shortly on the first of
shop, eat lunch with a friend, or just take
that they become impoverished.
several major bills that deal, at least in
a walk. Some new private insurance plans
Mary Bowden and her mother are a
part, with at-home care. Sponsored by
would also provide reimbursement for
case in point. They live in a modest pub-
Reps. Claude Pepper (D) of Florida and
such respites.
lic-housing apartment almost within sight
Edward Roybal (D) of California, it would
But a family's decision to care for a
of the gleaming buildings that house Con-
provide federal funding through medi-
loved one at home is not based on cost or
gress and the Supreme Court.
care for home care, not only for the el-
personal effort or what the government
Weekdays, a publicly provided aide
derly but for Americans of all ages. But
does or does not do to help. It's based on
cares for them, which isn't easy because
most such proposals would carefully limit
love.
Ms. Bowden's mother, who is in her 90s, is
what care could be financed.
blind, incontinent, very confused, and has
"Maybe I've just got a good heart. "I
Such a government program would re-
love him. As long as I can stand up and I
great difficulty walking.
quire a new bureaucracy, says Peter
At night and on weekends, Ms. Bowden
can take care of him, I'm going to
Ferrera, a policy analyst at the Heritage
provides the care, which is even more
'cause I want to be with him as long as
Foundation. He and others worry about
difficult: She is in her late 70s, has var-
he's here," Mrs. Smith said recently.
costs and the quality of care. Checking on
How did Smith feel about that? "I'm
ious health problems, and is also sight-
both quality and cost in millions of homes
married to the most wonderful woman in
less. But she doesn't complain.
would be difficult for "bureaucracy to
Many families cannot afford anything
the world," he said.
cope with," he says. "This is where a
beyond what public funds can pay. Those
private-sector initiative properly could
families who can pay for home assistance,
better deal with it."
usually wind up with a blend of paid help
In many states there is little if any
and volunteer aid by relatives. One is the
family of Alice L. of suburban New York.
regulation of at-home care agencies and
She can get around her apartment but
reports of poor care or even mistreatment
needs a constant companion. From break-
by unqualified aides occasionally arise.
Many experts are concerned that as serv-
fast to supper during the week, a nurse
ices expand the quality could seriously
aids her, paid for by the family. To keep
deteriorate.
the budget from breaking, her two daugh-
Mr. Halamandaris says care has gener-
ters alternate caring for her, at night and
on weekends. No one complains, but it's
ally been good: "Only seven home-care
providers have been convicted of fraud
not easy: Both are married, have teen-age
and abuse in the whole history" of at-
children, and work full time.
home care. But he concedes that "we're
And that's part of the problem with
starting to see some breakdown in qual-
trying to care for relatives at home. In.
ity" among those organizations that es-
many families, both husband and wife
sentially are brokers between people who
now have full-time jobs. When the need
need care and individuals who say they
arises for someone to care for a relative at
home, often the care-giver often has to
can provide it.
quit working.
But for many families the quality of
That's why one of the fastest-growing
such care is irrelevant: They cannot af-
areas in health care is in organizations
ford anything beyond what public funds
that, for a price, provide home care. Until
pay for, and that's often too little.
recently, only a few of them existed; most
Early this spring the Smiths had
were nonprofit like the Visiting Nurse
moved into their daughter's apartment.
Association of Washington, D.C. For in-
Until then, Mrs. Smith says, she was so
stance, Judy Hyatt, a registered nurse
house bound "I felt like climbing the
with the association, regularly checked
walls
He just don't want me to get out
on Smith.
,A&S
The Christian Science Monitor, May 24, 1988, pp. 1, 36.
The high cost of long-term care
Congress is looking to
restitch US patchwork
of private, public aid
By Robert P. Hey
R NORMAN MATHENY STAFF
Staff writer of The Christian Science Monitor
Washington
Who pays the bill? For elderly Ameri-
cans, that may be the most challenging
aspect of long-term care.
Nursing-home care averages $22,000 a
year, well beyond the means of the aver-
age American.
Care at home, while generally less, can
also be expensive. US Rep. Claude Pepper
(D) of Florida says that it accounts for
more than 80 percent of the cost of long-
term health care in the United States.
"We simply don't have an organized
way of paying for long-term care, either
privately or publicly," says Alice Rivlin,
who with fellow Brookings Institution
scholar Josh Weiner has just completed a
study and a book on the subject.
Over the years a patchwork of pay-
ments has been stitched together: Individ-
ual Americans pay for a little more than
half of this custodial care, such as help
with washing and dressing. Medicaid,
which was designed to aid the poor, pays
about 40 percent, while private insurance
and medicare, intended to aid the elderly,
combine to pay for less than 3 percent.
About a million elderly Americans sink
into poverty every year trying to pay for
nonmedical long-term care. Some Ameri-
Caroline Anderson's nursing-home bill is about $22,000 a year
cans, concerned they are spending their
"There are going to be no easy solu-
way into poverty - and medicaid eligibil-
tions," says Daniel P. Bourque, "and per-
ity - by paying for long-term care, violate
haps no single solution. And therefore we
attempt to pass some of their assets on to
need to look everywhere we can for solu-
their children. "It's a terrible moral and
tions." Mr. Bourque is corporate senior
ethical dilemma," says a lawyer who spe-
vice-president of the Voluntary Hospitals
cializes in estate planning.
of America, an association of nonprofit
There is indeed "widespread abuse of
hospitals.
the system, driven by people's conviction
Edmund F. Haislmaier favors empha-
that
everybody else does it," says
sizing private insurance. Very few health-
William Roper, Washington's top admin-
insurance policies cover long-term care.
istrator for medicare and medicaid.
But financing such care through private
As the number of elderly continues to
policies, he says, is "a perfect example of
grow, greater demands will be placed on
what insurance is designed for" - with
nursing homes and organizations that
nany people paying, through premiums,
provide home care, both stretched to the
1 portion of the cost of financing the long-
limit. And new federal rules, intended to
erm care that only a few will ever need.
improve the nursing-home quality, will
Although long-term care is insurable,
also increase costs. And most experts say
a significant pay raise will solve the se
'the question is how you get people to
ouy" such insurance, says Judith Feder,
vere nursing shortage in the field.
Everyone agrees that the present hap-
co-director of the Center for Health Policy
hazard mix of funding must be changed.
Studies at Georgetown University. When
But there is wide disagreement on how.
people are elderly, the premiums can be
too high for them. When they are young,
© 1988 The Christian Science Publishing Society. Reproduced by the Library of
Congress, Congressional Research Service with permission of copyright claimant.
continued
such care seems a remote prospect.
Two years ago about 5,000 Americans
Hall of the Aetna Insurance Company.
ernment policy that, it says, would stimu-
held such policies; today some 440,000
Some insurance companies offer plans
late innovation in private long-term
that take inflation into account, but for
insurance.
policies are in force. Many people say the
higher premiums. Says Dr. Feder: "They
At the same time, it does not rule
industry is on the verge of a major surge
are improving the benefits and protection
an agreement with Mitchell. "There is
in these policies, as they are improved
- but that raises the price.
The better
and are offered in job benefit packages.
room for compromise," says Susan Van
So far, most insurance policies have been
it is, the fewer people can afford it."
Gelder, the group's associate director of
purchased by individuals.
Dr. Rivlin says only a third of America
research and policy development.
But most experts say policies will not
can afford private insurance. Thus, she
A proposal by the American Associ-
be widely purchased until there is afford-
concludes, some form of government fi-
ation of Retired Persons (AARP) would
able protection against inflation. "It's al-
nancing will be needed, even if effective
also require individuals to pay part of the
most ludicrous" to offer a 20-year-old a
private plans become widely
cost. It would provide finan-
policy with no inflation increment, for
available.
cial aid to the elderly, the
possible use 60 years later, says Robert
Dr. Roper is skeptical
disabled, and to children un-
about establishing a federal
der 18. People in nursing
program now: "I don't think
homes would pay 30 percent
we know enough to craft a
of room and care costs; those
uniform national policy [for
receiving home care would
financing] at the moment."
pay 20 percent.
A number of proposals are
Representative Pepper,
being introduced into Con-
Congress's best-known advo-
gress that would provide
cate for the elderly, would
substantial federal payments
revamp medicare to pay the
for long-term care and pro-
THE COST OF
home-care costs for the el-
tect more assets of the mid-
CARE
derly, the disabled, and
dle class.
children.
Many proposals would fi-
Sen. Edward Kennedy (D)
nance the cost through a tax on the
of Massachusetts proposes paying the full
wealthy by requiring that social security
costs of care at home and the first six
taxes be collected on all wages, instead of
months in nursing homes. Longer nurs
the first $45,000 each year, as under cur-
home stays would be partly reimbur
rent law. But higher taxes are as unpopu-
Sen. David Durenberger (R) of Mir
lar with Congress as they are with the
sota says: "In the short term it's a matter
public.
of" changing programs like medicare and
Yet funding must be figured out in
medicaid "to expand the options for reim-
advance if any proposal is to have a
bursement at the community level," such
change to become law. "The days are
as home care. "In the longer term, the
over," says Sen. George Mitchell (D) of
emphasis is on individual responsibility"
Maine; "when we can simply add new
to finance long-term care, privately..
benefits to programs and let someone else
As serious as the problem is, some US
JOAN RAPAPORT STAFF
figure out" where the money will
officials wonder whether Americans
come from. Senator Mitchell
really want to give priority to an expen-
Who pays for long-term care?
chairs the Senate Finance Sub-
sive new program for long-term care over
committee on Health. He will
other major domestic issues, notwith-
3.9%
1.8%
1.5%
likely be a key congressional
standing polls that report a willingness to
Veterans
Medicare
Private
player.
pay higher taxes in return.
Administration,
insurance
Mr. Mitchell has scheduled
"Yes, we can have a [higher] payroll
state, local,
hearings for Friday on his bill to
tax," admits Thomas Burke, chief of staff
public
provide limited government as-
of the Department of Health and Human
assistance
sistance to people requiring long-
Services, "but is this all we have to worry
term care. His proposal, like most,
about?" At a meeting of the AARP's legis-
envisions a combination of gov-
lative council, he ticked off other prob-
ernment program and private in-
lems: AIDS, a 25 percent school dropout
43.4%
49.4%
surance. He would have individ-
rate, a $1 trillion unfunded US health-
uals, presumably through insur-
care liability. "We have a drug problem
Personal,
ance, pay the cost of long-term
that
is
getting
worse
We lose $117
family
care for the first two years. A new
billion [annually] to alcohol problems in
government program would pay it
the US." Then there's teen pregnancy.
thereafter.
"Long-term care - you don't get it
The health insurance industry
free," he warned. "You get it at th
opposes his proposal, calling it
pense of something else."
premature. Instead the Health In-
surance Association of America
Source Senate Special Committee on Aging
seeks changes in tax law and gov-
A&S
WEDNESDAY, MAY 25, 1988 pp.3, 4.
THE CHRISTIAN SCIENCE MONITOR
NATIONAL
A NORMAN MATHENY STAFF
Nursing-home resident Frances Stokes gets hug from aide Angela Lester: many aides are underpaid, overworked
Fewer nurses for fuller nursing homes
By Robert P. Hey
more Americans enter and remain in the fields of nurs-
Staff writer of The Christian Science Monitor
ing and nursing aides. Health-care facilities "will need
Providence, R.I.
29 percent more employees by 1995" just as the pool of
When Rhode Island held a job fair at the Providence
prospects for low-skilled jobs, such as nurse's aides, is
Civic Center a few weeks ago, Judith Robidoux was
shrinking, says James Paxton. As vice-president for
there.
human resources of Beverly Enterprises, he works for
As director of nursing at the Waterman Heights Nurs-
America's largest nursing-home chain, with nearly 1,100
ing Home in nearby Greenville, she was seek-
facilities.
ing to recruit nurses and nurse's aides. So
"We compete for unskilled employees"
were the representatives of half a dozen
with hotels, schools, government, and restau-
other health organizations.
rants, Mr. Paxton says.
Ms. Robidoux was making an effort to deal
The US Department of Labor forecasts
with one of the most serious problems facing
that the demand for nurses and nurse's aides
nursing homes and other groups that provide
will rise much faster than the average for all
long-term care to elderly Americans: not
occupations through the year 2000. Behind
enough nurses.
this demand is the immense growth forecast
"There is a real shortage," says Paul
in the number of elderly Americans: They
Willging, executive vice-president of the
THE COST OF
make up 90 percent of those requiring long-
American Health Care Association, which
CARE
term care, such as help in walking, dressing,
primarily represents nursing homes across
and caring for themselves.
the United States. "Two-thirds of our mem-
Moreover, new federal and state regula-
bers have nursing vacancies; one-third of them have
tions will soon require added nurses and better trained
vacancies that" force them to have staff members to
aides in nursing homes. Yet "nursing schools are clos-
work double shifts or take similarly extraordinary meas-
ing," Mr. Willging says. "Enrollment is dropping dra-
ures to meet state and federal standards.
matically."
Experts say today's problems will worsen unless
Please see CARE next page
© 1988 The Christian Science Publishing Society. Reproduced by the Library of
Congress, Congressional Research Service with permission of copyright claimant.
continued
CARE
cial in charge of programs, like medicaid,
"Some parts of it can be very unappealing,"
from preceding page
which pay a little less than half the nation's
such as aiding patients who have lost con-
nursing-home costs.
trol of their bodily functions. "Tu
Nursing homes and other long-term care
The Labor Department says that in 1986
rates approach 200 percent in
acilities face other serious problems: the
the median salary of full-time registered
homes," he says. "You'll have three people
mount government programs pay them;
nurses in the US was $23,900. Those who
filling the position in some homes" in a
he paper work these programs require;
worked in nursing homes were generally
year.
and the slow pace of construction of care
among the lower-paid half - in 1987 their
One way to help retain aides, experts
acilities. There's also the persistent issue
median salary was $19,900. As Robidoux of
say, is to build a career ladder for them.
of the quality of care, widely agreed to be
Waterman Height says: "We're competing
Besides providing higher pay and more re-
nuch better than in the 1970s but still far
with the hospitals to get nurses, and the
spect, Paxton says, "we must also provide
rom first rate in many places.
hospitals can pay higher salaries."
career options.
Finally, there is the challenge of plan-
When former and current nurses discuss
Finding the right employee in the first
ing for the future. Will technological im-
problems in their profession, almost inevi-
place is also essential. "The successful nurs-
rovements in medical care mean that, as
tably they mention the lack of respect ac-
ing-home employee," Paxton says, "has a
ome experts say, many more Americans,
corded them, especially in hospitals.
strong piece of nurturing and caring in his
uch as accident victims, will be cared for in
Experts and nurses themselves say
personality.
I think we have to remem-
ursing homes, with a resultant need for
higher salaries would help. But for nursing
ber that a nursing home is a person's
igger staffs? Or will it mean a dramatic
homes that would
home."
ncrease in at-home care, meaning a lower-
mean higher costs,
Despite the lower
han-expected demand for institutional
which would be
Projected nursing-home
taffs?
passed on to pa-
population
Will the US develop a policy on long-term
tients and their fam-
ilies in higher
OW being considered? If so, how will this
charges. Already
5,000
JOAN RAPAPORT STAFF
pay, some regis-
tered nurses cite ad-
Numbers in
vantages to working
are, as the result of the many proposals
thousands
for nursing homes
and
home-care
olicy affect nursing homes?
Americans in nurs-
agencies: Nurses
The heart of a nursing home is its staff -
ing homes are pay-
4,000
have more respect
he nurses who are largely responsible for
ing an average of
and greater respon-
lanning care and supervising it; and the
$22,000 a year.
3,000
sibility for patients'
ides, who provide 90 percent of the day-to-
Administrators
2,000
care.
ay care. Without enough trained staff
and other experts
Hospitals,
nembers, the quality of assistance is com-
on long-term care
1,000
three-fourths
romised.
say that, in an effort
America's
In the short run, the efforts of resource-
to hold down costs,
0
1985 1990* 2000° 2010* 2020* 2030* 2040*
are employed, are
ul institutions like Waterman Heights
medicaid often re-
estimated
what one nurse calls
Jursing Home can pay off. Judith Robi-
imburses nursing
"doctor driven":
Source US Administration on Aging
oux called her day at the Rhode Island job
homes for less than
Physicians make
air very successful. She talked with more
the cost of the actual care. The program is
the decisions. Nurses say they often feel
an 100 prospects and gave out 75 applica-
jointly funded by the federal government
they are rushing around carrying out physi-
ons: "If I get 5 to 10 good employees, it
and individual states; the latter determine
cians' orders without being able to fully use
vill be well worthwhile."
the amount that will be paid, which varies
their own knowledge and abilities.
Dealing with the long-run problem of
state to state.
It's different in nursing homes and at-
ursing shortages requires national plan-
"Some states are paying in the low $30s
home care: Nurses do much of the planning
ing. Consequently, a commission on nurs-
for a day of nursing home care," says
to see that patients' needs are met.
ig appointed by the US Department of
Willging. This doesn't cover the actual cost,
"I like my work because I teach people,"
ealth and Human Services is studying the
he says. Who makes up the difference? It's
says Phydariel Jackson, a registered nurse
roblem. In December it is to report its
the patient who pays privately. He fre-
with the Visiting Nurse Association of
ndings and recommendations to Otis
quently is charged more than the actual
Washington, D.C. Ms. Jackson, who has a
owen, secretary of the department.
cost in what is a de facto subsidy of medic-
gift for gaining the trust even of recalci-
"I think that a major part of the problem
aid patients.
trant people, visits patients in their homes
that nurses have been paid relatively
Beyond salary is training. To provide
and helps family members learn to care for
ttle and treated relatively badly," says
quality, Beverly Enterprise's Paxton says,
them. "I like the independence of it," she
illiam Roper. Therefore, many of those
nursing homes "must provide very skilled
says quietly, "and the people are so nice,
ained as nurses "aren't working as
training to the unskilled."
too."
urses," he says. As administrator of the
Retaining nurse's aides is almost as diffi-
ealth Care Financing Administration, Dr.
cult as recruiting them. "Being a nurse's
oper is the federal government's top offi-
aide is awfully tough," Willging says.
IP4026
A&S
REPORT TO CONGRESS
AND THE SECRETARY
[EXCERT]
OI
BY THE
TASK FORCE
ON
LONG-TERM
HEALTH CARE POLICIES
ii
30
LL
LOK
U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES
SEPTEMBER 21, 1987
EXECUTIVE SUMMARY
costs for long-term care are paid directly out-
of-pocket, while less than 2 percent is paid
The challenge of meeting the needs of our
through insurance.
disabled and aging population requires im-
The statute creating the Task Force re-
mediate attention. Few individuals can
quested recommendations for action in the
finance an extended nursing home stay or
areas of education, market development, and
other long-term care services entirely out of
consumer protection to improve and foster
their assets and incomes. Many people,
the growth of long-term care insurance.
however, may be able to provide for nursing
The Task Force accepted the definition of
home and other long-term care services
long-term care insurance adopted by the Na-
through buying long-term care insurance.
tional Association of Insurance Commission-
At age 65 people are estimated to have
ers (NAIC) in their Long-Term Care Insurance
more than a 43 percent risk of entering a
Model Act (Model Act). This definition re-
nursing home some time during the rest of
quires insurance to offer benefits for not less
their lives. However, financing long-term care
than 12 consecutive months in a setting
is not just a problem for older persons. In the
other than an acute care unit of a hospital.
year 2000, 40 percent of functionally depen-
The Task Force added explanatory notes to
dent Americans will be less than 65 years
the definition to clarify certain points: 1) serv-
old. Besides the high cost of financing in-
ices are covered in various settings-at home
stitutional care, disabled and older persons
or in the community, as well as in institu-
living in the community will need long-term
tions; 2) long-term care insurance does not
care services to remain at home.
duplicate Medicare coverage for those eligi-
The Task Force on Long-Term Health Care
ble; 3) covered services include personal care
Policies strongly recommends that both pub-
to maintain activities of daily living; 4) future
lic and private sectors take steps immediately
policies may bring arrangements not yet en-
to encourage expansion of private financing.
visioned; and 5) the Task Force encourages
for long-term care services through long-
development of both the products covered
term care insurance. Even during the Task
by the definition and other forms of risk
Force's deliberations, and partly in response
pooling.
to its initiatives, the development of long-
Private long-term care insurance can pro-
term care insurance has moved forward, but
tect people against large out-of-pocket ex-
the pace of development needs to accelerate.
penses. It gives individuals the opportunity
The Task Force offers its recommendations
to retain choices and develop a flexible,
as a blueprint for more rapidly developing
planned response to a potentially ruinous
and expanding a private system for financ-
event that will confront many people over 65
ing long-term care.
as well as many disabled people under 65.
Long-term care includes a wide range of
Insurance offers the most cost effective, col-
medical and support services for people who
'lective approach to meeting financial risks
suffer physical or mental disorders causing
that often devastate individuals.
functional limitation or disability and there-
The Task Force believes a broad market for
fore need assistance for an extended period
long-term care insurance can and should be
to maintain or promote functional well-being.
developed. While very few disabled and older
Long-term care ranges from informal in-
persons have obtained long-term care insur-
home services to institutional skilled
ance, no other private financing mechanism
nursing.
appears to offer a more cost effective and via-
Spending on long-term care has grown
ble means of meeting long-term care costs.
rapidly and will continue to grow as the popu-
lation ages. Almost half the institutional
1
The Task Force acknowledges that private
long-term care insurance policies and
long-term care insurance cannot provide a to-
through the regulation of the reserves for
tal solution for financing long-term care. For
continuing care retirement communities.
the foreseeable future long-term care will
Market Development-The absence of
continue to be provided by formal and infor-
basic data on the use of long-term care in-
mal caregivers, in institutional, home, and
surance by an insured population and the
community settings, and financed by a mix-
need to define benefit levels present
ture of public and private expenditures.
problems for insurance companies in
When the Task Force reviewed integrated
designing products that meet certain
public/private approaches, especially those
needs: 1) cover services in expanded set-
significantly expanding government financial
tings like homes and communities; 2) pre-
support for catastrophic episodes of long-
vent overuse of services (induced demand);
term care, it concluded that more informa-
and 3) avoid creating a risk pool weighted
tion was needed to determine the viability
too heavily to those most likely to require
of a joint public/private approach.
long-term care (adverse selection). The
The Task Force identified and analyzed
Task Force generally concluded that insur-
market factors that promise to stimulate an
ance companies must be given latitude to
active private long-term care insurance mar-
experiment with benefit design and utili-
ket with attractive and affordable products
zation controls if they are to develop
and, at the same time, provide reasonable
products that will be affordable and attrac-
protection for consumers. In the judgment of
tive to consumers.
the Task Force, the critical factors are these:
Epansion of the market through employer-
Public Awareness--Consumers need to
sponsored long-term care insurance-Offer-
be more aware of several key topics: 1) the
ing long-term care insurance through em-
absence of long-term care coverage under
ployment has the greatest potential to
Medicare, Medicare supplement insur-
cover large numbers of people, but pene-
ance, and most acute care insurance and
trating this market will require overcom-
prepaid health programs; 2) the potential
ing impediments and providing incentives.
costs of long-term care over their lifetime;
Tax incentives-Existing rules must be clar-
3) the range, cost, and availability of long-
ified in several respects: the tax treatment of
term care insurance products; and 4) the
reserves for long-term care insurance and in-
advantages and limitations of various in-
terest on those reserves and the tax treat-
surance features. In particular, the Feder-
ment of long-term care insurance in general.
al government has a responsibility to
Tax incentives are especially important to en-
inform Social Security beneficiaries that
courage development of long-term care in-
Medicare does not cover long-term care
surance through.employment-based plans
services.
and vested retirement funds. Compared to
Consumer Protection-The Task Force
other approaches, employement-based plans
found that the Long-Term Care Insurance
would make more attractive and affordable
Model Act developed by the National As-
products available and extend coverage to
sociation of Insurance Commissioners
the largest number of people.
provides a sound basis for balancing the
Efforts of the NAIC have significantly ad-
interests of product development with
vanced the work of the Task Force in develop-
adequate protection for consumers.
ing recommendations to assure responsible
However, greater consumer protection can
marketing practices and prevent sales abuses.
be provided through more stringent re-
In adopting the Model Act, the NAIC has es-
quirements for renewability of individual
tablished an appropriate vehicle for protect-
ing consumers. The Task Force was able to
2
further NAIC efforts by developing an addi-
3. Promote the availability of long-term care
tional recommendation to give Insurance
insurance through employment. Offering
Commissioners greater authority over cancel-
long-term care insurance through employ-
lation and renewability of long-term care in-
ment is an effective way to make attractive,
surance policies
affordable coverage available to large
The Congress charged the Task Force to
groups of working-age people. A number of
recommend ways to assure a reasonable rela-
approaches promise to help accomplish this
tionship between premiums and benefits, and
objective. Tax incentives and encourage-
this task presented marked difficulties. The
ment of employer cooperation will be es-
NAIC draft regulations dated June 22, 1987,
sential to these efforts. At a minimum, the
rely on loss ratio to test premium reasonable-
present restrictions on buying long-term
ness, but the Task Force concluded that this
care insurance through cafeteria plans and
test is of limited use at present. Further de-
flexible spending accounts should be
veloping actuarial tables on frequency and du-
removed.
ration of nursing home stay and utilization
4. Develop long-term care insurance financ-
may prove to be more helpful in judging the
ing through vested pension funds. Both be-
real value of long-term care insurance.
fore and after retirement, individuals should
The Task Force adopted 41 recommenda-
be permitted to use vested pension and
tions. Taken together, they provide practical
retirement savings (including IRAs, Keogh
directions for strengthening long-term care
plans, and others) to purchase long-term
financing through private insurance. They vary
care insurance. Transfers from such funds
in difficulty of implementation, effect on the
should not be taxed or subject to penalties.
issues, cost effectiveness, political acceptabil-
5. Use Federal and State tax codes to en-
ity, and budget impact. Particularly important
courage the purchase of long-term care in-
recommendations cover seven areas, and their
surance. Most desirable would be
implementation should command the highest
broad-based measures that effectively en-
priority
courage purchase of long-term care insur-
1. Inform Consumers that Medicare,
ance without unduly reducing government
Medigap, and acute health care insurance
revenues. The most important incentive in
do not cover long-term care. The Depart-
lowering the cost of long-term care insur-
ment of Health and Human Services
ance depends on clarifying whether tax ex-
should communicate directly to all current
empt status applies to long-term care
and new Social Security beneficiaries the
insurance reserves held by insurers and to
exact nature and limitations of Medicare
the investment earnings credited to them.
long-term care coverage, as well as availa-
6. Encourage new approaches to determine
ble alternatives. Effective communication
eligibility for long-term care insurance
will require developing appropriate infor-
benefits. The level-of-care and service defi-
mation and referral capabilities.
nitions currently in use are unreliable in de-
2. Encourage States to adopt the National
termining eligibility for long-term care
Association of Insurance Commissioners'
insurance benefits. The Task Force believes
Long-Term Care Insurance Model Act. A
that developing need assessment systems,
number of States have already adopted the
based on ability to perform activities of daily
Model Act, and all other States are strongly
living, offers a useful alternative in decid-
encouraged to do the same. The Task
ing eligibility for benefits.
Force believes, however, that the cancella-
7. Encourage greater cooperation in the col-
tion provision should be more limited than
lection and sharing of long-term care data.
permitted in the Model Act.
3
The Task Force, with the cooperation of the
data and recommends further Federal,
Department of Health and Human Services
State, and private efforts to improve the
and the Veterans Administration, has taken
quality and availability of actuarial data.
steps to increase the sharing of Federal
4
Chapter I
Encouraging innovative approaches to de-
termining eligibility for long-term care in-
RECOMMENDATIONS
surance benefits.
Encouraging greater cooperation between
The Task Force adopted recommendations
the public and private sectors to improve
to promote and develop a market for long-
the quality and availability of actuarial
term care insurance and to assure consumer
data on long-term care.
protection against possible market abuses.
Following are specific Task Force recom-
Not every member of the Task Force fully
mendations. They focus on elements of the
agrees with every recommendation, but all
Congressional mandate to the Task Force.
recommendations were supported by a sub-
They are listed by category, generally in the
stantial majority of Task Force members.
order the issues are discussed in Chapters III
These recommendations may vary in
through VII.
difficulty of implementation, effect, cost ef-
fectiveness, political acceptability and budget
CREATING AWARENESS
impact. Taken together, however, they pro-
1. When discussing the Medicare program,
vide a desirable direction for States, the Fed-
the Federal government, including the
eral government, and the private sector to
Congress, must be careful to communi-
follow in strengthening private financing of
cate accurately the limited nature and ex-
long-term care.
tent of long-term care coverage.
The Task Force considers several recom-
2. Public information campaigns are need-
mendations particularly significant. These
ed to make people aware that Medicare,
major recommendations affect both in-
Medigap (Medicare Supplement Insur-
dividual and group policies. Recommenda-
ance), and existing health care policies
tions that would reduce costs do SO for both
provide little or no coverage for long-term
types of policies. The consumer protection
care services.
section focuses particularly on the individu-
3. The Department of Health and Human
al policy, as group policies derive much of
Services should:
their consumer protection through negotia-
a. Tell all current and new Social Securi-
tion at the time they are established. The
ty beneficiaries, through direct mail-
Task Force emphasizes the following steps as
ings and use of Social Security District
its major recommendations:
Offices, that Medicare does not cover
Communicating the information that
most long-term care services.
Medicare, Medigap, and acute health care
b. Publish a separate Medicare guide
insurance do not cover most long-term
describing the limited Medicare
care services.
skilled nursing facility benefit and
Encouraging States to adopt the Nation-
home health benefit, which are orient-
al Association of Insurance Commission-
ed toward providing post-acute care.
ers' (NAIC) Long-Term Care Insurance
C. Develop a long-term care insurance
Model Act.
buyer's guide.
Developing employer-sponsored long-
d. Develop a model public information
term care insurance.
program for use by States.
Developing long-term care insurance
e. Provide assistance in implementing
financed through vested pension funds.
such programs at the request of States.
Using Federal and State tax codes to en-
f. With the NAIC, create a clearinghouse
courage development of long-term care in-
for sharing knowledge of successful in-
surance.
formation programs.
5
g. Assist businesses and unions in edu-
10. Publications on Medicare, Medicaid, Medi-
cating employees about long-term
gap, the Civilian Health and Medical Pro-
care insurance.
gram of the Uniformed Services (CHAM-
4.
State Insurance Commissioners should:
PUS), and Veterans Administration pro-
a. Require Medigap policies to state the
grams should more clearly explain the
extent of, and limits on, long-term
coverages and limitations of these benefits
care coverage.
with respect to long-term care.
b. Develop and distribute long-term care
insurance buyer's guides, individually
STIMULATING DEMAND
or through the NAIC.
11. Federal, State, and private public infor-
5. Insurers and their trade associations
mation efforts should:
should:
a. Target the messages to specific age
a. Review their informational and promo-
groups, such as pre-40, 40-65, and
tional materials to ensure that they
post-65.
accurately describe long-term care
b. Focus on the need for people to plan
needs and coverage.
early for financing long-term care.
b. Develop educational programs explain-
C. Emphasize that long-term care in-
ing long-term care needs and financ-
cludes non-institutional as well as in-
ing options.
stitutional services.
6.
Long-term care service providers, individ-
12. Public information programs should work
ually and through their organizations and
with organizations that represent or serve
associations, should develop and distrib-
older people to increase the effectiveness,
ute public information programs dealing
coordination, and penetration of educa-
with long-term care needs and financing
tional efforts.
and delivery.
13. Federal and State governments should
7.
Consumer groups and organizations repre-
make long-term care insurance available to
senting older people should develop ma-
their own employees and retirees through
terials that deal specifically with the need
existing group mechanisms.
for long-term care services and the options
14. States should consider how their Medicaid
for financing and delivery of this care.
eligibility requirements might create in-
8.
Insurance companies, provider groups,
centives or remove disincentives to pur-
consumer groups, and organizations rep-
chasing long-term care insurance.
resenting older and disabled people should
work with groups and associations of phy-
CONSUMER PROTECTION.
sicians, nurses, lawyers, estate planners,
and others with whom people consult for
Adoption of the NAIC Model Act
advice and assistance on financing long-
15. State governments should adopt the Na-
term care needs, to increase aware-
tional Association of Insurance Commis-
ness and improve knowledge of long-term
sioners Long-Term Care Insurance Model
care insurance.
Act. The NAIC Model Act was designed
to protect consumers, promote product
AVAILABILITY AND SCOPE OF
availability, and encourage benefit ex-
PUBLIC PROGRAMS
perimentation, and its provisions make
9.
The President should designate a lead
appropriate distinctions between group
agency to direct all Federal agencies
and individual coverage. However, the
providing health care benefit programs to
Model Act should be amended as fol-
inform beneficiaries clearly about the
lows: Individual policies should be can-
limited nature of any long-term care bene-
cellable only for the most unusual and
fits provided under these programs.
compelling reasons and therefore,
6
only with the permission of the State In-
ment terminates, an insured group is disband-
surance Commissioner. At the same time,
ed, or the master long-term care policy in
the insurer should be entitled to adjust
which the individual is participating is can-
rates in the same manner as they are ad-
celled.
justed on guaranteed renewable policies.
16. The State Insurance Commissioner should
Adequacy of Reserves for Continuing
have the authority to permit cancellation
Care Retirement Communities (CCRC)
of a long-term care insurance policy by
21. States should enact legislation based on
class, but only when it is determined to
the standards for CCRCs established by
be in the best interest of the public to do
the American Association of Homes for
SO.
the Aging and by the American Academy
of Actuaries to:
Preventing Sales Abuses
a. Review the actuarial fitness and finan-
17. State governments should continue to be
cial viability of the CCRCs as they be-
responsible for vigorously protecting con-
gin operation.
sumers from fraudulent, unfair, or illegal
b. Assure appropriate actuarial and finan-
sales or claims practices. The Federal gov-
cial planning to cover long-term care
ernment should not impose on States re-
health costs and residents' needs.
quirements for regulating long-term care
C. Require CCRC developers and man-
insurance in the absence of a showing that
agers to disclose fully all services and
the States are failing to meet their respon-
care to be provided and method of
sibilities for consumer protection.
financing, currently and in the future.
18. As the NAIC Model Act recommends,
States should require that disclosure ma-
Market Value Measures
terials inlong-term care insurance policies:
22. At this time, loss ratios are based on rela-
a. Meet specific standards for readabili-
tively crude projections and are not a
ty, content, location, and layout.
good measure of market value. The Task
b. Contain an "outline of coverage," in-
Force therefore discourages undue reli-
cluding limitations on coverage and
ance on such estimates. To the extent a
provisions for renewal.
regulator is committed to using a target
19. Insurance organizations that provide train-
loss ratio, however, the parameters recom-
ing and/or continuing education for insur-
mended for long-term care insur-
ance agents, such as insurance companies,
ance by the NAIC should be used.
the Association of Health Underwriters,
23. As the NAIC Model Act recommends,
and the Association of Life Underwriters,
State Insurance Commissioners should
should develop specific programs on long-
continue to review new long-term care
term care insurance, long-term care
insurance filings carefully to assure that
financing, and the legal and ethical con-
such policies are not deceptive or mis-
siderations of selling insurance.
leading.
Portability
Policy Design
20. Insurers should be encouraged to develop
24. Long-term care insurance companies
employment-based group insurance poli-
should offer purchasers the option of
cies and other types of group-sponsored
buying benefits that cover long-term
coverage for long-term care that enable
care provided in the home or community,
policyholders to contine the coverage or
as well as in institutions.
convert to individual policies or make
25. Insurers and States, through the NAIC,
other acceptable arrangements if employ-
should work together to develop stan-
7
dard definitions for levels of care and
persons with equal need for long-term
services which could be used in long-
care to have equal access to insurance
term care insurance policies.
benefits, regardless of prior hospitaliza-
26. Insurance companies should be encour-
tion or nursing home stays.
aged to determine eligibility for benefits
using an "activities of daily living" need
TAX INCENTIVES AND
assessment scale. Insurers using level-
EMPLOYMENT ISSUES
of-care definitions to determine benefit
31. The U.S. Department of the Treasury
eligibility should seek to avoid making
should formalize its position regarding
coverage for institutional services depend
the tax treatment of the long-term care
on distinctions among skilled nursing
insurance reserves held by insurers and
services, intermediate care services, and
the investment earnings credited to them.
custodial services.
Such reserves should be treated in the
27. Long-term care insurers are encouraged
same manner as similar reserves support-
to use the case management approach to
ing traditional life insurance products,
determine and coordinate the most ap-
that is, additions to the reserves and earn:
propriate level of care in the most cost
ings on them should be tax-deductible to
effective manner.
the extent that reserves are required to
28. Minimum eligibility and benefit standards
support benefits under the contracts.
should be limited to those set forth in the
32. Premiums paid, including amounts paid
NAIC Model Act and regulations and such
by employers on behalf of employees,
additional standards as may be necessary
and benefits received under long-term
to protect against offering illusory bene-
care insurance policies and plans should
fits.
be treated in at least the same manner
29. Consistent with the NAIC Model Act:
as medical care benefits for tax purposes.
a. State legislatures and regulators should
The idea of treating premiums paid by in-
recognize the experimental nature of
dividuals as partially tax-deductible, apart
long-term care insurance and allow rea-
from the exemption for general medical
sonable flexibility to insurers in devel-
expenses, should be considered.
oping eligibility criteria and benefit lev-
33. Federal tax laws should be clarified or mod
els for long-term care insurance.
ified to remove impediments to employ-
b. State laws and regulations should pro-
er sponsorship and to funding long-term
vide insurers reasonable latitude to de-
care coverage as an employee benefit:
velop new products designed to limit
a. Long-term care insurance should be a
insurance-induced demand and adverse
permissible benefit under Internal Rev
selection, situations in which the ex-
enue Code Section 125 cafeteria plans.
istence of the insurance creates a de-
b. Incentives for employers to pre-fund
mand for it and attracts buyers who
retiree health benefits, including long-
are more in need of its protection than
term care benefits, that were eliminat-
the population at large.
ed in the Deficit Recovery Act of 1984
30. As the NAIC Model Act recommends,
(DEFRA) should be restored. Specif-
State regulation of long-term care insur-
ically, deductible employer contribu-
ance should not universally prohibit mak-
tions to pre-fund retiree medical bene-
ing a prior hospital stay and/or prior nurs-
fits plans should be allowed to take
ing home stay prerequisite to eligibility
into account future medical inflation,
for payment of benefits. However, insur-
and the earnings on funds set aside for
ance companies should be encouraged to
such benefits should not be taxed if
develop alternatives that permit insured
retained in fund.
8
C. Employers should be allowed to trans-
37. States are encouraged to offer tax-favored
fer assets from over-funded pension
treatment for long-term care insurance in
plans to fund retiree welfare benefit
the same manner recommended to the
plans without penalty or taxation.
Federal government.
34. Individuals should be allowed to make
tax-free transfers from vehicles that finance
DATA NEEDS
retirement income to buy long-term care
38. Federal and State government agencies
insurance. Such transfers should be per-
should share long-term care data in an ex-
mitted both before and after retirement
peditious and open manner with each
and should include transfers from:
other, with the insurance industry, and
a. Pension funds.
with other interested parties.
b. Life insurance funds.
39. The Department of Health and Human
C. Individual Retirement Accounts (IRAs).
Services should request input from States,
d. Keogh plans.
the insurance industry, and other inter-
e. Annuities.
ested parties when planning new long-
f. Stock bonus and employee stock own-
term care surveys.
ership plans.
40. Insurance companies, trade associations,
35. Retirees should be allowed to transfer a
the Veterans Administration, States, and
portion of their post-retirement income
the Department of Health and Human
tax-free to purchase long-term care insur-
Services should cooperate with the Society
ance.
of Actuaries in its efforts to collect long-
36. The range of financing options should be
term care data.
expanded by allowing funding of long-
41. The Department of Health and Human
term care as a contingent benefit under
Sérvices should continue to sponsor peri-
pension plans and life or disability insur-
odic long-term care data conferences to
ance contracts.
provide information on recent Depart-
ment surveys.
9
Chapter II
dependence, preventing spousal impoverish-
ment, leaving an inheritance, or something
CONCLUSIONS
else.
The Task Force believes that long-term
FINANCING LONG-TERM CARE
care financing will continue to come from a
THROUGH PRIVATE INSURANCE
mixture of sources for the foreseeable future.
With the older population growing at a
Some Task Force members, however, favor a
much faster rate than the population as a
greater public sector role in financing long-
whole, the need for long-term care services
term care, including a social insurance ap-
to older people as well as the disabled is like-
proach to the problem. Some members of
ly to grow proportionally faster than for youn-
the Task Force support a public/private pro-
ger age groups. Costs of services related to
gram structured to provide universal public
long-term care have risen rapidly over the
coverage after a fixed level of private cover-
past two decades and will continue to in-
age. The majority of the Task Force, however,
crease as the population ages. Clearly, then,
believed that greatly increased public spend-
the question is how shall we, as a society,
ing for long-term care services is unlikely, esc
finance long-term care services.
pecially in the short-term, and that privately
As discussed more fully in Chapter III, in-
sold long-term care insurance offers the best
dividuals pay for 51.4 percent of institution-
means at present for financing long-term
al long-term care directly out-of-pocket, and
care.
the Medicaid program pays for 41.8 percent.
The Task Force acknowledges that private
Services outside institutions are even more
long-term care insurance cannot provide a to-
heavily financed from out-of-pocket funds,
tal solution for financing long-term care serv-
although most home and community-based
ices for everyone. Indeed, studies suggest
care is provided by family and friends at no
that a significant number of people are not
cost to the recipient. The Task Force believes
likely to be able to afford to purchase long-
that private long-term care insurance can
term care insurance, including some who
offer individuals financial protection by sub-
now "spend down" to qualify for Medicaid.
stituting insurance benefits for significant
Others will find themselves uninsurable for
amounts of direct out-of-pocket expendi-
health or age reasons. However, reorganizing
tures. It may also, to some extent, reduce
and making the parts of the mixed financ-
Medicaid expenditures for some people who
ing system more efficient are a far better ap-
would otherwise exhaust their assets and in-
proach than waiting until the body politic can
come paying for long-term care services and
settle on one "right" solution.
then become dependent on Medicaid.
Large segments of society can and should
Private long-term care insurance would al-
provide for their own future needs. Private in-
low many individuals expanded options and
surance offers these individuals a reasona-
choices without impoverishing themselves.
ble alternative to spending their assets and
Private long-term care insurance can provide
impoverishing themselves to pay for long-
flexibility, giving people choices about the
term care. Public programs like Medicaid
policy bought, the type and level of care
should continue to provide for those in need.
received, and the settings where care is
Perhaps, with the expansion of private long-
received. Furthermore, long-term care insur-
term care insurance coverage, public pro-
ance can be integrated into a financial plan
grams will better be able to finance care for
that will pay for long-term care through in-
the needy.
surance, assets, and income in a mix that
Pooling is the most economical and effi-
suits the needs and desires of the individu-
cient private or public means of collectively
al, whether the goal is achieving financial in-
funding a future risk. Americans have a his-
11
tory of pooling risks, making circumstances
would reduce the cost of insurance, as well,
that would otherwise be financially disas-
and help make both individual and group
trous to an individual more manageable be-
policies more affordable at all ages.
cause the consequences are shared by a
The Task Force believes that the 422,000
group. Insurance is an efficient and well ac-
long-term care insurance policies already in
cepted means of pooling risks like the poten-
force demonstrate that there is a market for
tial need for long-term care. The Task Force,
long-term care insurance and that the mar-
therefore, focused on developing recommen-
ket can be more fully developed. The in-
dations it believes will open and maintain
crease in the number of individual policies
markets for quality private long-term care in-
purchased during the term of the Task Force
surance.
and the development of group long-term care
The high cost of long-term care and the
insurance products is a clear sign of grow-
demographics of an aging population make
ing interest. Recent public discussion on the
"pay-as-you-go" financing far less desirable
subject of long-term care coverage has un-
than funding the cost of these services in ad-
doubtedly contributed to increased demand
vance. There are several ways to accomplish
and led to the development of group policies,
this pre-funding. For example, if a small por-
policies with home-care options, and policies
tion of each worker's total compensation
that no longer use hospitalization as a
were devoted to investment in future long-
prerequisite for receiving long-term care
term care benefits throughout that worker's
benefits.
lifetime, sufficient funds would be available
The fact that many insurance companies
to fund long-term care needs.¹ Again, by
have entered or are planning to enter the
spreading the risk, pooling through private
long-term care insurance market suggests in-
insurance would reduce the amount of pre-
dustry consensus on a potential market. The
funding needed from any one person.
number of companies showing interest in
The viability of long-term care insurance
marketing a long-term care insurance
relates directly to 1) whether the premium
product has grown significantly, from fewer
is affordable, and 2) whether the product is
than 20 in 1984³ to more than 70 in 1987.4
designed to meet the needs and desires of
The Task Force also noted that since Medi-
consumers. Computer microsimulation
care began in 1965, a period of only 22 years,
modeling done for the Department of Health
insurance companies have been able to cover
and Human Services shows that by the year
about 70% of older people with Medigap in-
2018, 63 percent of those over age 65 could
surance. With the increasing affluence of
own some type of a long-term care insurance
older people, it seems reasonable to expect
policy if premium costs for those under 65
rapid growth of long-term care insurance if
did not exceed 1 percent of income and
market barriers discussed in this report can
premium costs for those over 65 did not ex-
be overcome.
ceed 3 percent of income.²
Private financing of long-term care
The number of people able to purchase in-
through insurance will demonstrate its
surance would increase if the purchase were
potential as marketing increases and people
made earlier when premium costs are low-
become as aware of their need for long-term
er. For example, the cost of insurance could
care as of other retirement needs. Offering
be reduced by taking advantage of a Task
long-term care insurance through the work-
Force proposal to use a part of vested pen-
place is critical to the successful develop-
sion funds during one's working years to pur-
ment of this market. This approach will
chase long-term care insurance. Other
promote market growth and reduce the age
methods might also encourage the offering
of purchase. Ultimately, the success of this
and purchase of long-term care insurance in
insurance will depend on the quality of
the workplace. Beneficial tax treatment
products offered and the ability of insurers
12
to experiment and serve market demands.
propriate placement; and use socially
Achieving a fully developed market de-
optimal financing. Under these arrange-
pends on how many of the issues discussed
ments, individuals or the private sector
in this report are addressed. Activity in the
generally would be responsible for the cost
market will occur more rapidly and fully if:
of the first 2 or 3 years of long-term care, and
1. State Insurance Commissioners continue
then a publicly funded program would as-
to support reasonable experimentation in
sume responsibility for financing these serv-
this product line.
ices. Proponents contend that such a
2. Insurers accept the need for regulatory re-
program could:
quirements related to product perfor-
Reduce premiums of private long-term
mance and continuation of coverage.
care insurance by shortening the period of
3. The Congress adopts the modest tax
financial risk.
changes proposed.
Improve consumer demand by creating
4. The U.S. Department of Treasury formal-
certainty that benefits of the combined
izes its position on the tax status of long-
program would not end while the need for
term care insurance reserves.
care continued.
5. The Department of Health and Human
Increase public awareness of long-term
Services and other organizations conduct
care needs and encourage purchase of
public information campaigns.
long-term care insurance to fill the gap in
6. Employers recognize a variety of ways to
the public program.
help employees meet long-term care
Reduce Medicaid costs by preventing
needs.
many people from transferring or "spend-
ing down" their assets on long-term care
ISSUES MERITING
and then becoming eligible for Medicaid.
FURTHER ATTENTION
Have a neutral influence on the Federal
Many other mechanisms for financing
budget, by reducing Medicaid expendi-
long-term care insurance could supplement
tures, or add relatively little new public ex-
or provide alternatives to the development
penditures.
of the long-term care insurance market. The
Opponents of this structured public/private
Task Force was unable to review all possibil-
approach counter that:
ities in the detail necessary to make informed
Insurance companies will not be interest-
recommendations Those discussed in this
ed in developing products for the small
section need further study to determine their
market left available to the private sector,
relative value, impact, and potential for
particularly given the probable public
financing long-term care. Some of these al-
pressure to fill more and more of that por-
ternatives were studied in greater detail by
tion with public coverage.
the Department of Health and Human Serv-
The program could be highly inequitable.
ices in the long-term care portion of the
Scarce public resources for the poor could
Catastrophic Illness Study.
end up subsidizing lengthy nursing home
stays and other services for wealthy per-
Public-Private Program
sons, since public monies would pay for
The Task Force reviewed proposals for a
all care beyond an initial period, regard-
structured public/private "stop-loss" pro-
less of income.
gram. Such programs could integrate pub-
There are better ways for insurers to limit
lic and private financing of long-term care
their risk, through policy design and an
services in a variety of ways, but they should
active private re-insurance market.
do the following: pool risk; ensure appropri-
ate types of care; provide incentives for ap-
13
Public awareness campaigns are a less costly
caid or other public indigency programs.
means of developing market demand.
The Task Force is pleased that the Depart-
The Medicaid "spend down" population
ment of Health and Human Services has re-
may not have sufficient discretionary in-
quested applications for projects to research
come to purchase long-term care insur-
and analyze long-term care costs, including
ance.
catastrophic long-term care costs, and the
Budget neutrality or low public cost can
Medicaid "spend down" process.⁶
only be achieved if current Medicaid users
reduce Medicaid long-term care utilization
Medicaid Initiatives in Support of
enough to offset the costs of new public
Long-Term Care Insurance
program eligibility for upper-income
The State of Indiana passed legislation in
1987 to make a person eligible for Medicaid
groups.
The Task Force was concerned about lack
coverage of long-term care without meeting
of actual data to substantiate either position.
other resource and eligibility standards if the
While expenditures of such a program would
individual is: 1) enrolled in Medicare Parts A and
certainly be substantial, the Task Force noted
B; 2) the beneficiary of a Medicare supple-
savings would depend on generating correct
ment policy or enrolled in a pre-paid health care
assumptions about the characteristics of those
delivery plan; and 3) the beneficiary of a long-
who "spend down" to Medicaid elig-
term care insurance policy or pre-paid plan with
ibility and the likelihood that they would pur-
long-term care benefits. This legislation requires
chase certain amounts of long-term care insur-
appropriate Federal waivers to take effect. The
ance. Even if the "spend down" population did
Task Force felt that this program might en-
have sufficient discretionary income to pur-
courage the development of the long-term care
chase long-term care insurance, the program
insurance market, could provide valuable data,
might produce an income transfer from low-
and should be given further study.
er income to higher income persons. Some
Social Health Maintenance Organizations
-
econometric models suggest that increasing
(S/HMOs)
sales of long-term care insurance to younger
The social/health maintenance organization
age groups might achieve the same savings in
(S/HMO) is a new concept in which a single
the Medicaid program without creation of a new
provider organization, like an HMO, assumes
public program.⁵ Finally, the reductions in
responsibility for providing a full range of health
premiums for long-term care insurance resul-
and personal care services under a fixed,
ting from this proposal appear modest.
pre-paid premium. Although there are only
The Task Force concluded that a recommen-
four S/HMOs currently being tested, the Task
dation on this subject would require more ex-
Force believes that the case management ap-
tensive data than now exist on the character-
proach they embody has the potential to coor-
istics of the Medicaid "spend down" population.
dinate and manage the use of acute and long-
Specifically, data need to be developed and col-
term care services cost effectively. The Task
lected on the following issues:
Force strongly supports the concept of man-
Methods of implementing "stop-loss" pro-
aged care. While a S/HMO offers more than
grams through government reinsurance ar-
management of long-term care, certainly much
rangements with private insurers and in-
can be learned about this approach from the
dividuals.
S/HMO. The Department of Health and Human
Savings in private insurance premium costs
Services has recently extended a demonstra-
generated by a public/private program.
tion program involving four S/HMOs which
Feasibility of subsidizing the purchase of pri-
should provide significant data for the private
vate long-term care insurance by Medi-
sector to review.
14
Home Equity Conversion
NOTES
Older home owners could be helped by
1 ICF Incorporated, "Policy Options For Long
financing that allows them to draw upon the
Term Care," Final Report Submitted to the
equity in their home without having to move
American Health Care Association (Washing-
elsewhere. Home equity conversion is a way
ton, DC, May 1987), P. 29.
to secure a loan and defer repayment. More
2 Department of Health and Human Services,
study and research needs to be undertaken to
Technical Work Group on the Private Financ-
determine the circumstances under which
ing of Long-Term Care for the Elderly, "Report
home equity conversion would be a useful
to the Secretary for Private Financing of Long
method of financing long-term care services.
Term Care for the Elderly" (Washington, DC,
The Congress and some State legislatures are
November 1986), p. 3-242.
currently considering legislation that would es-
3 Mark R. Meiners, "The State of the Art in
tablish a demonstration program in home eq-
Long-Term Care Insurance," in Long-Term Care
uity conversion.
Financing and Delivery Systems: Exploring
Some Alternatives. Conference Proceedings,
ORGANIZATION OF
ed. P.H. Feinstein, M. Gornick, and J.N. Green-
TASK FORCE REPORT
berg, Health Care Financing Administration
The balance of the Task Force report is or-
Publication No. 03174 (Washington, DC:
ganized into five parts. Chapter III describes
Government Printing Office, 1984).
the demographic and economic aspects of
4 Task Force on Long-Term Health Care Poli-
long-term care. Chapter IV discusses the need
cies, "Survey of Policies in Force," May 14,
for greater public awareness and makes
1987. (See Appendix A-3.)
recommendations for education to improve
5 Department of Health and Human Services,
knowledge about long-term care financing
Technical Work Group on the Private Financ-
and insurance. Chapter V reviews various con-
ing of Long-Term Care for the Elderly, PP.
sumer protection issues, describes the NAIC
3-241 to 3-243.
Model Act, and recommends more stringent
6 Federal Register, 52, No. 99 (May 22, 1987),
tests for cancelling individual long-term care
19398-19401.
insurance. Chapter VI analyzes tax treatment
of long-term care and explores the develop-
ment of employment-based group insurance.
Chapter VII examines barriers to market de-
velopment and suggests several approaches
to overcoming these barriers. The appendices
include materials prepared by or at the request
of the Task Force and selected materials
directly related to this report.
15
88-379 EPW
CRS Report for Congress
Financing and Delivery of Long-Term
Care Services for the Elderly
Carol O'Shaughnessy
Richard Price
Specialists in Social Legislation
Education and Public Welfare Division
May 25, 1988
CRS
Congressional Research Service The Library of Congress
(
The Congressional Research Service works exclusively for the Congress, conducting re-
search, analyzing legislation, and providing information at the request of committees,
Members, and their staffs.
The Service makes such research available, without partisan bias, in many forms includ-
ing studies, reports, compilations, digests, and background briefings. Upon request,
CRS assists committees in analyzing legislative proposals and issues, and in assessing the
possible effects of these proposals and their alternatives. The Service's senior specialists
and subject analysts are also available for personal consultations in their respective fields
of expertise.
ABSTRACT
The projected growth of the elderly population, combined with large and
increasing public and private out-of-pocket expenditures for long-term care
services, and especially nursing home care, has generated a great deal of
interest in altering the way long-term care services are financed and
delivered. Recent congressional action on catastrophic health insurance for
the elderly has brought new attention and focus to these issues and the
uncovered liability most elderly persons face for long-term care costs. This
report provides an overview of information on these two major issues in long-
term care--(1) the potentially catastrophic expenses elderly persons can incur
as the result of chronic illness or disability and (2) the need and demand for
additional home and community-based care. It includes information on charac-
teristics of the elderly and their utilization of long-term care services as
well as their projected utilization of services in the future. It also reviews
public sector programs that support long-term care and private sector
approaches that have been suggested in the past few years as feasible
alternatives for financing this care.
CONTENTS
ABSTRACT
iii
SUMMARY
1
OVERVIEW
3
I.
WHAT IS "LONG-TERM CARE?"
17
II. SELECTED CHARACTERISTICS OF THE ELDERLY AND MEASURING THEIR NEED
FOR LONG-TERM CARE
21
A. Growth of the Elderly Population
22
B. Economic Characteristics of the Elderly
24
1. Income and Poverty Rates
24
2. Net Worth
26
3. Future Resources
26
C. Utilization of Institutional and Community-Based Long-Term
Care Services
28
1. Utilization of Nursing Home Care
28
2. Utilization of Home and Community-Based Care
31
III. PUBLIC SECTOR PROGRAMS FOR FINANCING AND DELIVERY OF LONG-TERM
CARE SERVICES
37
A. Major Federal Programs and Activities Supporting
Long-Term Care Services
41
1. Medicaid--Title XIX of the Social Security Act
44
a. Medicaid's coverage of nursing home care
46
b. Medicaid "2176 Waivers" for home and community-based
care
48
2. Medicare--Title XVIII of the Social Security Act
51
3. Social Services Block Grant Program--Title XX of the
Social Security Act
55
4. The Older Americans Act
58
5. Supplemental Security Income Program-Title XVI
of the Social Security Act
63
B. Federal Research and Demonstration Initiatives
65
1. National Long-Term Care Channeling Demonstration
69
2. Social/Health Maintenance Organization Demonstra-
tion (S/HMOs)
72
C. State Level Initiatives
75
IV. PRIVATE SECTOR APPROACHES TO FINANCING AND DELIVERY OF
LONG-TERM CARE SERVICES
81
A. Private Health Insurance Coverage for Long-Term Care
82
B. Life Care or Continuing Care Retirement Communities
91
C. Home Equity Conversion
97
V.
ISSUES TO BE CONSIDERED IN FUTURE PROSPECTS FOR LONG-TERM CARE
103
BIBLIOGRAPHY
107
FINANCING AND DELIVERY OF LONG-TERM CARE SERVICES FOR THE ELDERLY
Summary
Long-term care is an important policy issue for the Congress. In the
future, the Nation will have significantly more elderly persons, both in
absolute numbers and as a proportion of the population. By the year 2040,
elderly persons will represent 22 percent of the Nation's population, as
opposed to the 12 percent they currently represent. In addition, those 85 and
over, who are at the greatest risk of needing long-term care, are one of the
fastest growing age groups in the country.
Studies show major increases in the need for long-term care for the
future. Today approximately 1.3 million elderly persons are residents of
nursing homes. For every elderly person residing in a nursing home, there are
at least twice as many persons living in the community requiring various kinds
of care. Estimates for the future show that the nursing home population might
be as high as 4.4 million persons by the year 2040, and the disabled elderly
population living in the community might include up to 14.4 million persons by
that time.
Expenditures for long-term care services, principally nursing home care,
already strain the budgets of public programs, as well as private resources.
In 1986, total national nursing home expenditures of $38 billion were financed
about equally by public programs, primarily the Medicaid program, and private
sources of payment. Nearly all of private spending for nursing home care was
paid directly by the consumer out-of-pocket. With nursing home care costing in
the range of $20,000 to $25,000 per year, this out-of-pocket spending can
represent a catastrophic expenditure for many elderly persons. In fact, many
elderly persons deplete their assets and income to pay Ior nursing home care
and thereby become eligible for Medicaid payment for their care.
Currently there is only relatively limited public sector funding available
for home care services for the disabled elderly living in the community.
Studies have estimated that between 60 and 80 percent of the care received by
the impaired elderly living in the community is provided by relatives and
friends who are not compensated for the care they provide.
Policymakers over the years have struggled with issues related to the
potentially catastrophic expenses of nursing home care and the need and demand
for additional home and community-based care. Currently a great deal of
consideration is being given to private sector options, and especially private
insurance, for financing these needs. Expanded public sector support might be
needed for the large numbers of needy elderly who could not afford such
alternatives.
CRS-3
OVERVIEW
Congress has considered issues related to the financing and delivery of
long-term care for nearly 15 years. The projected growth of the elderly
population, combined with large and increasing public and private out-of-pocket
expenditures for long-term care services, and especially nursing home care, has
generated a great deal of interest in altering the way long-term care services
are financed and delivered. In addition, policymakers have also sought ways
to expand community-based services to correct what some perceive to be a bias
in the current system for financing institutional long-term care. Recent
congressional action on catastrophic health insurance for the elderly has
brought new attention and focus to these issues and the uncovered liability
most elderly persons face for long-term care costs. This report provides an
overview of information on these two major issues in long-term care--(1) the
potentially catastrophic expenses elderly persons can incur as the result of
chronic illness or disability and (2) the need and demand for additional home
and community-based care. This report includes information on characteristics
of the elderly and their utilization of long-term care services as well as
their projected utilization of services in the future. It also reviews public
sector programs that support long-term care and private sector approaches that
have been suggested in the past few years as feasible alternatives for
financing this care.
CRS-4
The phrase "long-term care" refers to a wide array of medical, social,
personal, supportive, and specialized housing services needed by individuals
who have lost some capacity for self-care due to chronic illness or physical or
mental conditions which result in both functional impairment and physical
dependence on others for an extended period of time. Major subgroups of
individuals needing long-term care include the elderly and non-elderly
disabled, the developmentally disabled (primarily the mentally retarded), and
the mentally ill. This report focuses on long-term care services required by
the elderly, generally those persons 65 years and older. Elderly persons, by
virtue of their high risk of chronic illness that results in disability and
functional impairment, are the primary users of long-term care in this country.
The range of chronic illnesses and conditions resulting in the need for
supportive long-term care services is extensive. Unlike acute illnesses,
which occur suddenly and are usually resolved in a relatively short period of
time, chronic conditions are of an extended duration and may be difficult to
treat medically except to maintain the status quo of the patient. Although
chronic conditions occur in individuals of all ages, their incidence, especial-
1y as they result in disability, increases with age. These conditions may
include heart disease, strokes, arthritis, and vision and hearing impairments.
Dementia, the chronic, often progressive loss of intellectual function, is also
a major cause of disability in the elderly. At least half and perhaps as many
as 70 percent of patients with dementia have Alzheimer's disease, a chronic,
progressive, primary neurologic degeneration of unknown cause, which increases
in prevalence with advancing age and for which there is currently no effective
treatment.
CRS-5
Long-term care services include a wide variety of health and social serv-
ices provided in an institution, in the community, or in the home. Services
range from medical and therapeutic services for the treatment and management of
chronic illness to assistance with basic activities and routines of daily
living, such as bathing, dressing, cooking, and cleaning. These services are
provided by skilled personnel, such as registered nurses, therapists, and
social workers, as well as other personnel, such as homemakers and home health
aides. Family members and friends also play a key role in providing long-term
care services. By far, the majority of long-term care services are provided by
family members. Studies have estimated that between 60 and 80 percent of the
care received by the impaired elderly is provided by relatives and friends who
are not compensated for the care they provide.
Based on the projected growth of the elderly population and current
utilization patterns of institutional and community long-term care services,
major increases in the demand for long-term care can be anticipated for the
future. Today approximately 1.3 million elderly persons are residents of
nursing homes. This is about 5 percent of the total elderly population. In
addition, for every person 65 years of age and over residing in a nursing
home, there are twice as many persons living in the community requiring the
various kinds of care provided in an institution. Studies show significant
increases in the number of disabled elderly residing in nursing homes and in
the community for the future. The nursing home population might be as high as
4.4 million persons by the year 2040, and the disabled elderly population
living in the community might include 14.4 million persons by that time.
Expenditures for long-term care services, and especially for nursing home
care, strain the budgets of public programs, as well as private resources. In
1986, total national nursing home expenditures of $38.1 billion were financed
CRS-6
about equally by public programs and private sources of payment. Public
programs financed $18.1 billion of the total, and private sources $20.0
billion. Of total private spending for nursing home care in 1986, less than 2
percent was paid by private insurance coverage. Ninety-seven percent of the
total private spending for nursing home care was paid directly by the consumer
out-of-pocket. The average annual cost of nursing home care is in the range of
$20,000 to $25,000 per year, representing a catastrophic expenditure beyond
the financial reach of most elderly.
At least 80 Federal programs assist persons with long-term care problems,
either directly or indirectly through cash assistance, in-kind transfers, or
the provision of goods and services. Among these 80 programs, five are
generally considered to be the major programs of Federal support for long-term
care and these are discussed in detail in this report: Medicaid, Medicare, the
Social Services Block Grant (SSBG), the Older Americans Act, and the Supple-
mental Security Income program (SSI). It should be noted that there are a
large number of other Federal programs providing services such as specialized
housing and transportation services to the functionally disabled elderly. In
addition, numerous long-term care benefits are offered to veterans through the
Veterans Administration (VA). No one program, however, has been designed to
support a full range of long-term care services on a systematic basis.
The Medicare program is intended to address the acute medical care needs
of the aged and disabled. The program was not designed to respond specifically
to the chronic care needs of the elderly, for instance those with Alzheimer's
disease, over a sustained period of time. For this reason, it offers only very
limited protection against the costs of nursing home care and home care.
CRS-7
The Medicaid program, on the other hand, does support long-term services,
principally nursing home care, but only for certain low-income people or for
persons who have depleted their income and assets. The Medicaid program fi-
nanced 41.5 percent, or $15.8 billion, of the Nation's total expenditures for
nursing home care in 1986. This total also represented nearly 90 percent of
public spending for nursing home care.
Observers have noted that Medicaid's eligibility policies and benefit
structure have actually created financial incentives to use nursing homes
rather than community services. In general, Medicaid support for the chroni-
cally impaired elderly living in the community has been quite limited. In
addition, certain elderly poor who are ineligible for Medicaid while living in
the community may become eligible once they enter a nursing home, because the
State has a higher income eligibility standard for nursing home residents.
Others become eligible for Medicaid once they deplete their resources after
entering the nursing home as privately paying patients.
While the Medicaid program is the predominant Federal program supporting
long-term care services, two Federal social service programs provide community-
based services which may prevent or delay institutionalization--the SSBG pro-
gram and the Older Americans Act. However, their total resources are small in
comparison with total Medicaid expenditures devoted to both institutional and
community-based long-term care services. The SSBG program is generally limit-
ed to the provision of social services selected and defined by the State, and
provides services not only to the elderly, but also to families and children.
Funding under title III of the Older Americans Act is used for the development
of a service delivery system for older persons, focusing on social and
nutrition services, and in the 100th Congress, separate funding for in-home
services for the frail elderly was authorized.
CRS-8
In addition to these programs, the SSI program provides cash assistance
to needy aged, blind, disabled individuals, but can include, at the discretion
of the States, supplemental payments to support selected community-based
long-term care services.
While these various Federal programs supporting long-term care provide a
measure of flexibility to target services on specific groups or needs, their
differing eligibility requirements, service benefits, service definitions, and
reimbursement policies have resulted in a fragmented and uncoordinated
long-term care policy at the Federal level. In addition, this lack of
coordination among Federal programs has also presented major implementation
challenges to the States, especially where certain of these programs delegate
administrative responsibility to State governments.
The following chart summarizes some of the major differences among
Federal programs which support institutional and community-based care.
CRS-9
Major Federal Programs Supporting Long-Term Care Services:
Services Covered, Eligibility, and Administering Agency
Administering agency
Program
Services covered
Eligibility
Federal
State
Medicaid/Title
Skilled nursing
Aged blind,
Health Care
State Medicaid
XIX of The
facility /
disabled persons
Financing
agency
Social Security
Intermediate
receiving cash
Administration/
Act
care faci-
assistance under
HHS
lity b/
SSI; others
Home health c/ receiving cash
Adult day
assistance under
care b/
AFDC. At State
Personal care b/ option, persons
whose income
exceeds stand-
ards for cash
assistance under
SSI/AFDC, i.e.,
the "medically
needy."
Section 2176 Aged, blind,
In some cases,
waiver services,
disabled, or
the 2176 "waiv-
e.g., case mentally ill
er" program may
management, Medicaid
be administered
homemaker, eligibles
by another
personal care, (including
agency, e.g.,
adult day care, children) living
State agency on
habilitation, in the community
aging.
respite, and who would
other services
require nursing
at State op-
home level of
tion d/
care. At State
option, persons
living in the
community with
higher in-come
than normally
allowed under a
State Medicaid
plan.
See footnotes at end of chart.
CRS-10
Major Federal Programs Supporting Long-Term Care Services:
Services Covered, Eligibility, and Administering Agency (cont'd)
Administering agency
Program
Services covered
Eligibility
Federal
State
Medicare/Title 100 days of
Generally Social
Health Care N/A
XVIII of the skilled nurs-
Security status.
Financing
Social Security
ing care
Persons 65 years
Administration/
Act
facility
and over; per-
HHS
Home health
sons under 65
Hospice
years entitled
to Federal dis-
ability bene-
fits; and cer-
tain persons
with end-stage
renal disease.
Social Services
Variety of so-
No Federal
Office of Human
State social
Block Grant/
cial services
requirements.
Development
services
man
Title XX of the
as defined by
States may
Services/HHS
resou
S
Social Security
the State,
require means
agency. In
Act
including home-
tests.
some cases
maker, home
other State
health aide,
agencies may
personal care,
administer a
home-delivered
portion of
meals, and adult
title XX funds
day care.
for certain
groups e.g.,
State agency on
aging
See footnotes at end of chart.
CRS-11
Major Federal Programs Supporting Long-Term Care Services:
Services Covered, Eligibility, and Administering Agency (cont'd)
Administering agency
Program
Services covered
Eligibility
Federal
State
Older Americans
Variety of
Persons 60 years
Administration
State agency
Act/Title III
social services
and over.
No
on Aging/Office
on aging
as determined by
means tests, but
of Human De-
State and area
services are to
velopment
agencies on
be targeted on
Services/HHS
aging with those with
priority on in- social or eco-
home services.
nomic need.
Also case
management, day
care, protective
services.
Separate
appropriation
for home-
delivered meals/
and for in-home
services for the
frail elderly,
including adult
day care as a
respite for
families, and
minor home
modifications.
See footnotes at end of chart.
CRS-12
Major Federal Programs Supporting Long-Term Care Services:
Services Covered, Eligibility, and Administering Agency (cont'd)
Administering agency
Program
Services covered
Eligibility
Federal
State
Supplemental
Federal income
Aged, blind,
Social Security
State supple-
Security Income/
support. Maxi-
disabled per-
Administration/
mental payment
Title XVI of the
mum Federal
sons who meet
HHS
program may be
Social Security
payment for
federally
State or
Act
persons with no
established
federally
income is $354 income and
administered.
per individual
resources
and $532 per
requirements.
couple in 1988.
States may make
Supplemental
payments to
payment for non- other State-
medical housing defined
and/or in-home eligibility
services, at groups.
State option.
a/ Required for individuals over age 21.
b/ At option of State.
c/ Required for individuals entitled to skilled nursing home care.
d/ May be offered under a waiver of certain Medicaid State plan requirements, if
requested by the State and approved by HHS.
Policymakers have also been concerned about striking the right balance
between nursing home care services and home and community-based long-term care
services. By far the largest portion of public expenditures for long-term care
is for nursing home care, with the Medicaid program accounting for nearly 42
percent of total national spending for nursing home care. Other programs, such
as the SSBG and the Older Americans Act, while providing a range of community-
based long-term care services, have comparatively limited funding to provide a
CRS-13
balance to the enormous institutional support provided through the Medicaid
program. Long-term care reform in the past, therefore, has included efforts to
reduce inappropriate institutionalization of the chronically ill by creating
programs to assure that those referred for institutional care actually need
such care and by increasing the availability of community-based care services,
such as home care and adult day care services.
Various Federal research and demonstration projects have attempted to test
new ways of providing and coordinating long-term care services. Some of these
projects have led to the National Long-Term Channeling Demonstration program by
the Department of Health and Human Services (DHHS). With nursing home care
representing a substantial portion of public and private expenditures for
long-term care, these research and demonstration efforts have had the fol-
lowing objectives: (1) to reduce the cost of long-term care by reducing
inappropriate institutionalization and the demand for institutional care by
persons who could otherwise be served through community-based services at less
cost; (2) to test whether a carefully managed system of care would create more
efficient use of existing services and deter unnecessary institutionalization;
and (3) to make available to clients a wider range of community-based services
than previously existed. At best, the demonstrations have had mixed results in
terms of overall costs savings, reductions in the use of institutional care,
and effects on client functioning. Based on the weight of evidence emerging
from the enormous amount of research which has been conducted on the effects of
community-based care, many analysts have come to the conclusion that these
services were oversold as a cost-effective alternative to institutional care.
Analysts and service providers alike are increasingly recognizing that expanded
community care services may in fact be needed by a broader group of elderly
persons who need help to remain in their homes. These services may result in
CRS-14
additional expenditures for a functionally impaired population and this
expansion may represent an appropriate response to the needs of a changing
population.
Another major research and demonstration initiative of DHHS currently
underway is the social/health maintenance organization (S/HMO). This project
builds upon and extends the health maintenance organization model, where health
care services are offered to a defined population on a pre-paid capitation
basis. The S/HMO provides not only conventional health care services to a
group of elderly persons but also provides a range of long-term care services
including nursing home care, home health, and homemaker services. Among the
questions to be addressed by this demonstration are whether a consolidated
pre-paid system of acute and long-term care can produce greater savings than
conventional HMOs already serving Medicare beneficiaries, and whether the
long-term care services offered through the program will reduce nursing home
admissions and the number of persons who become eligible for Medicaid's nursing
home benefit.
Uncertainty about the potential costs of expanded community-based care,
and intervening concern about budget deficits and increasing expenditures under
entitlement programs which currently finance long-term care, have shifted the
focus of the long-term care debate from concern almost exclusively with reform
of Federal programs to consideration of private sector initiatives which might
relieve fiscal pressures on public programs. In addition, these private
sector alternatives are believed to offer potential protection against the
private catastrophic expenses that can result from a need for long-term care.
Some of the private sector options advanced as feasible alternatives for
financing long-term care include private health insurance, life care
communities, and home equity conversion. Not discussed in this report are
CRS-15
other options often suggested as alternative financing mechanisms for long-term
care, including the various tax code amendments proposed to provide savings
incentives for long-term care and others to assist families to continue
providing long-term care services.
The private sector option receiving the most attention recently is private
insurance for long-term care. The private long-term care insurance market has
been a rapidly growing one, with over 70 companies writing policies covering
over 420,000 persons. A number of barriers have been cited as impediments to
the development of meaningful long-term care insurance policies, such as the
potential for adverse selection (where only persons more likely to need
long-term care buy insurance) and induced demand (where individuals decide to
use more services because they have insurance and/or will shift from non-paid
providers, such as family members, to paid providers of care). Despite these
problems, insurance companies are writing more policies with broader coverage
and benefits. Currently there is interest in increasing the affordability of
premiums for long-term care insurance through employer-based group coverage and
through mechanisms designed to limit liability of the insurance company for
long-term nursing home costs.
Life care communities, also called continuing care retirement communities,
are living arrangements available to a limited but potentially growing number
of older persons. Such communities are established to provide housing, meals,
housekeeping, and certain long-term care services, as necessary, to older
persons for the duration of their lives. Older persons enter into a
contractual agreement which sets forth the services to be received by the
resident in exchange for financial payments, including an entrance fee and
monthly payments. The precise number of existing life care communities is
difficult to obtain due to issues in the definition for life care. However,
CRS-16
one source estimates about 683 communities and some estimates are higher.
Various analysts indicate the number is expected to grow in the future.
Supporters of this concept indicate that a life care contract provides
financial protection against the future costs of long-term care and offers a
protective living arrangement for persons whose needs will increase over time.
However, because of the substantial fees required for entrance and on a monthly
basis, some analysts believe this option may be available to only a limited
proportion of the elderly population.
Home equity conversion contracts, in which older persons use the equity in
their homes to finance certain expenses, have also been advanced as a means to
finance certain long-term care services. While substantial numbers of elderly
persons have accumulated equity in their homes, to date only a very limited
number of home equity conversion contracts have been negotiated.
Observers have pointed out that the economic status of future generations
of the elderly may improve to the extent that they will be able to finance,
through risk pooling arrangements, at least a portion of their long-term care
expenses themselves, without resorting to the impoverishment currently required
under Medicaid to qualify for that program's nursing home benefit. In
addition, others have noted that public programs will simply not be able to
support expanded long-term care services in the future as the ratio of workers
to retirees declines and as the number of the very oldest segment of the
population increases. For the time being, however, these options appear to
provide only limited opportunities for alternative financing schemes for
long-term care. In addition, they seem to have only limited applicability for
the large numbers of elderly who are poor or may be poor in the future.
CRS-17
I. WHAT IS "LONG-TERM CARE?"
The phrase "long-term care" refers to a wide array of medical, social,
personal, supportive, and specialized housing services needed by individuals
who have lost some capacity for self-care due to chronic illness or physical or
mental conditions which result in both functional impairment and physical
dependence on others for an extended period of time. Major subgroups of indi-
viduals needing long-term care include the elderly and non-elderly disabled,
the developmentally disabled (primarily the mentally retarded) and the mentally
ill. This report focuses on long-term care services required by the elderly.
Elderly persons, by virtue of their high risk of chronic illness that results
in disability and functional impairment, are the primary recipients of
long-term care in this country. 1/
The range of chronic illnesses and conditions resulting in the need for
supportive long-term care services is extensive. Unlike acute illnesses,
which occur suddenly and are usually resolved in a relatively short period of
time, chronic conditions are of an extended duration and may be difficult to
treat medically except to maintain the status quo of the patient. Although
chronic conditions occur in individuals of all ages, their incidence,
1/ Doty, Pamela, Korbin Liu and Joshua Wiener. An Overview of Long-Term
Care. Health Care Financing Review, v. 6, no. 3, spring 1985. P. 69.
CRS-18
especially as they result in disability, increases with age. 2/ These
conditions may include heart disease, strokes, arthritis, and vision and
hearing impairments. Dementia, the chronic, often progressive loss of intel-
lectual function, is also a major cause of disability in the elderly. 3/ At
least half and perhaps as many as 70 percent of patients with dementia have
Alzheimer's disease, a chronic, progressive primary neurologic degeneration of
unknown cause, which increases in prevalence with advancing age and for which
there is currently no effective treatment. 4/
The presence of a chronic illness or condition alone does not neces-
sarily result in a need for long-term care. For many individuals, their
illness or condition does not result in a functional impairment or dependence
and they are able to go about their daily routines without major hindrance or
need for assistance. 5/ It is when the illness or condition results in a
functional or activity limitation that long-term care services may be required.
Limitations can vary in severity and prevalence. For example, a chronic condi-
tion may result in dependence in certain basic self-care functions such as
bathing, dressing, eating, toileting, and/or mobility from one place to
another. These are referred to as limitations in "activities of daily living"
(ADLs). A second set of measures reflecting lower levels of disability in the
performance of a daily routine are often referred to as limitations in
2/ Rice, Dorothy and Carroll Estes. Health of the Elderly: Policy Is-
sues and Challenges. Health Affairs, v. 3, no. 4, winter 1984. P. 29.
3/ Rowe, John. Health Care of the Elderly. New England Journal of
Medicine, V. 312, no. 13, Mar. 28, 1985. P. 831.
4/ Ibid.
5/ Long Term Care: Background and Future Directions. Health Care
Financing Administration, Department of Health and Human Services, Jan. 1981,
HCFA 81-20047. P. 4.
CRS-20
This report discusses the financing of long-term care services, and especially
the extent to which various Federal programs cover and fund these services. It
also describes various proposals that have been advanced as alternative private
financing schemes for long-term care.
CRS-19
"instrumental activities of daily living" (IADLs). 6/ These include such
functions as shopping, cooking, cleaning, managing money, and taking medicine.
For example, certain individuals may not have limitations in basic self-care
functions, but may not be able to clean or shop without some kind of
assistance. Other individuals may suffer from a chronic condition or multiple
conditions resulting in limitations in both ADLs and IADLs and therefore
require a number of specific long-term care services.
Long-term care services include medical, therapeutic, and social services
for the treatment and management of chronic illnesses and conditions, and often
these are provided by skilled personnel such as registered nurses, therapists,
and social workers. They also include assistance with bathing, grooming,
housekeeping, cooking--the ADLs and IADLs mentioned above--and these services
are often provided by other personnel, such as homemakers, home health aides,
as well as volunteers, and family and friends.
Services can be provided in institutions (generally nursing homes), in the
community, or in the home. Long-term care services can be provided formally
through agencies or organizations that are paid for their services, or
informally by family or friends who offer assistance without compensation of
any kind. By far the great majority of long-term care services are provided by
family or friends.
The projected growth of the elderly population, combined with large and
increasing Federal and other public expenditures for long-term care services,
especially nursing home services, has generated a great deal of legislative
interest in altering the way in which long-term care services are financed.
6/ Liu, Korbin and Kenneth Manton. Disability and Long-Term Care. A
paper presented at the Methodologies of Forecasting Life and Active Life
Expectancy Workshop. Bethesda, Maryland, June 25-26, 1985.
CRS-22
family and friends meet all the needs of the elderly long-term care population
and what their role will be in the future.
This section provides information about certain demographic and income
characteristics of the elderly population. It also presents findings of
studies that estimate potential future utilization of long-term care services.
A. Growth of the Elderly Population
The aging of the Nation's population has dramatic implications for projec-
tions of need for long-term care services. The elderly population has grown
much more rapidly in this century than has the remainder of the population. As
table 1 shows, from 1900 to 1950, the total population doubled in size while
the population aged 65 and over increased by 4 times; from 1950 to 1980, when
the total population increased by 50 percent, the aged population doubled in
size, to 25.5 million. Between 1980 and the year 2020, the total population
is projected to increase by slightly more than 30 percent, while the elderly
population is projected to more than double again. By 2020, the projected
elderly population will be 51.4 million, and by 2040, it will increase by 30
percent to almost 67 million.
CRS-21
II. SELECTED CHARACTERISTICS OF THE ELDERLY AND MEASURING
THEIR NEED FOR LONG-TERM CARE
The need for long-term care services in the future--and the role of public
programs in financing these services-will depend on a number of factors.
These include demographic changes in the Nation's population, levels of
disability, medical advances in the prevention and treatment of chronic
conditions, and economic conditions which affect an individual's ability to pay
for services, to name a few. Estimating the dimension of the need for long-
term care is a difficult but critical task for policymakers.
Large and increasing amounts of public dollars already finance long-term
care services, and proposals to reform the way public programs pay for this
care are certain to have significant budgetary impact. However, it is
difficult to estimate the extent of this impact. One of the principal reasons
for this difficulty is the problem in estimating utilization of long-term care
services in the future. For example, medical advances may result in the
prevention of certain chronic conditions, or simply in incremental improvements
in their management. Medical and scientific advances could also lead to
reductions in general mortality which would result in increases in the size of
the potential long-term care population. In addition, family and friends
provide the bulk of long-term care services used by chronically disabled
elderly living in the community and do so without charge to any public or
private program. It is difficult to assess whether services provided by
CRS-23
TABLE 1. Size of the Elderly Population, 1900 to 2020
(in thousands)
65+
85+
Aged
Total U.S.
support
Year
population
No.
%
No.
%
ratio*
1900
76,303
3,084
4.0
123
0.2
7.6
1950
150,697
12,270
8.1
577
0.4
13.7
1980
226,505
25,544
11.3
2,240
1.0
18.6
2000
267,955
34,921
13.0
4,926
1.8
21.6
2020
296,597
51,422
17.3
7,081
2.4
29.3
2040
308,559
66,988
21.7
12,834
4.2
38.7
* Ratio of 65+ plus population to working age population, 19-64 years,
multiplied by 100.
Source: U.S. Department of Commerce. Bureau of the Census. Decennial
Censuses of Population 1900-1980 and Projections of the Population of the
United States by Age, Sex, and Race: 1983 to 2080 (Advance Report). Current
Population Reports, Series P-25. No. 952. May 1984. Projections are middle
series.
As a result of the rapid increase in the elderly population, their propor-
tion of the population increased from 4.0 percent in 1900 to 11.3 percent in
1980; this is expected to increase to 17.3 percent by 2020. At the same time,
the number of elderly in comparison to the number of persons in the working age
population (persons aged 19-64) has increased substantially. The aged support
ratio (that is, the ratio of the 65+ population to the working age population
19-64 years) increased from 7.6 in 1900 to 18.6 in 1980 and is expected to
increase to 29.3 by 2020, and to 38.7 by 2040. This means that there will be
fewer workers to support an aged population.
Despite the overall growth in the 65-plus group, the most critical demo-
graphic factor with implications for the future of long-term care service
utilization is the startling pace of increase in the oldest segment of society.
The "old-old," persons 85 and over, are currently one of the fastest growing
CRS-24
age groups in the U.S. population and, among the elderly, are at greatest risk
of needing and using long-term care services. This group represented only 0.2
percent of the total population in 1900, but increased to 1.0 percent in 1980;
by 2020, it is projected to be 2.4 percent of the population, and nearly 14
percent of the elderly population (up from about 9 percent in 1980). By 2040,
the old-old group is expected to be 4.2 percent of the population, 6 times as
large as it was in 1980.
B. Economic Characteristics of the Elderly
1. Income and Poverty Rates
In 1986, the median income of families headed by persons 65 or older was
$19,932; the median income of an unrelated individual in the same age group was
$7,731. This compares to $29,458 for all families and $12,116 for all unre-
lated individuals. 7/ Data from the 1980 Census of Population and Housing
show that the cash income of the elderly is lower in each older age group.
Married couples with a head aged 65-69 had a median income of $18,400,
compared to $11,200 for those 85 and over. Men aged 65 to 69 and living alone
had a median income of $8,200, while those 85 and over had incomes of $6,000;
the comparable figures for women living alone were $6,800 and $5,200,
respectively. 8/
71 U.S. Bureau of the Census. Current Population Reports. Series P-60,
no. 157. Money Income and Poverty Status of Families and Persons in the United
States: 1986 (Advance Data from the March 1987 Current Population Survey).
U.S. Govt. Print. Off., Washington, D.C., 1987. P. 14.
8/ U.S. Bureau of the Census. 1980 Census of Population and Housing.
Public Use Microdata Sample. Special tabulations.
CRS-25
The poverty rates for the elderly have shown a dramatic decline over the
last 25 years. In 1959, the poverty rate for the elderly was 35.2 percent and
by 1984 the rate had fallen to 12.4 percent, the lowest rate ever recorded for
that group. In addition, from 1982 to 1986, the poverty rates among the
elderly population in general have been lower than those for the rest of the
population. In 1986, 12.4 percent of those 65 and over were poor compared to
13.6 percent for the entire population. (In 1986, the estimated poverty
threshold for persons 65 years and over living alone or in households with no
other family members was $5,255, and for two person families whose head was 65
years and over, it was $6,630.)
The aggregate poverty rates, however, mask important differences within
the remainder of the population and within the elderly population. For
example, the rate for the entire population is inflated by the very high rates
of poverty among children. While the overall rate for the total population was
13.6 percent, the poverty rate for children under 18 years was 20.5 percent as
compared to 10.2 percent for the adult population aged 22-64 years. 9/
With respect to elderly population, specific groups are at substantially
greater risk of poverty, including the very old, female-headed households, and
minority and ethnic groups. Poverty rates increase sharply with age; in 1986,
the rate for persons aged 85 and over was 17.6 percent, nearly 2 times higher
than the rate for those 65 to 74 years which was 10.3 percent. 10/ Households
with female heads over 65 years had a poverty rate of 23.1 percent, almost
twice as high as the overall elderly poverty rate. Older minority groups are
particularly disadvantaged. For example, in 1986, the poverty rates for black
9/ Money Income and Poverty Status of Families and Persons in the United
States: 1986. P. 30.
10/ U.S. Senate. Special Committee on Aging. Aging America, Trends and
Projections. 1987-88 ed. Washington, D.C. P. 44.
CRS-26
and Hispanic elderly were 31 percent and 26.5 percent, respectively. Older
minority women have significantly higher rates of poverty than other groups.
Households with black or Hispanic female heads over 65 years had poverty rates
of 45 percent and 38.9 percent, respectively, in 1986. 11/
2. Net Worth
In 1984, the net worth of the elderly (including equity in their homes and
automobiles as well as other financial assets and subtracting any debt)
varied by age group. Households with heads aged 65 to 69 on average had
greater net worth ($66,600) than households with heads 70 to 74 ($60,600), or
households 75 and over ($55,200). The age group that will become elderly in
the next decade, those 55 to 64, had a higher level of net worth ($73,700)
than their immediate seniors, and also a higher level than younger age groups
($56,800 for those 45 to 54 and $35,600 for those 35 to 44). 12/ Beginning
with those aged 55 to 64, an increasing share of net worth is in the form of
home equity. This ranges from just over 50 percent of net worth among those
aged 55 to 64 to 57 percent among those 75 and over.
3. Future Resources
A number of sources indicate that in the future, the new elderly will have
increasingly higher incomes and assets. These predictions may have implica-
tions for the ability of the elderly to finance long-term care. Median income
11/ Money Income and Poverty Status of Families and Persons in the United
States: 1986. P. 24-26.
12/ U.S. Bureau of the Census. Current Population Reports. Series
P-70, no. 7. Household Wealth and Asset Ownership: 1984 (Data from the Survey
of Income and Program Participation). U.S. Govt. Print. Off., Washington,
D.C., 1986. P. 19.
CRS-27
among the elderly as a whole has been projected to rise (controlling for in-
flation) from 10 to 20 percent from 1980 to 1995 (assuming 1.0 to 1.5 percent
average annual growth in income among the general population). 13/ Under the
same growth assumptions, income among persons aged 55 to 64 is projected to
increase from between 15 and 20 percent in the same period. Asset levels are
even more difficult to project, but because of the improved historical personal
economic experiences of the future aged who have lived through the post-World
War II prosperity, some anticipate that their levels of resources will be
considerably greater than past generations of elderly. 14/ Other factors which
will affect the economic status of the younger elderly as well as those who
will become elderly in the coming decades have been cited as likely to have
positive effects on future financial improvements for these groups as compared
to their earlier counterparts. These include higher wage levels, broader
pension coverage, and higher labor force participation among married women. 15/
Although the relative well-being (measured with income and assets) of the
future elderly may on average be greater than that of recent generations of
elderly, there will also continue to be large differences among the various
groups of the elderly. Some of the differences will be the same as those
described above, based either on lifetime differences of individuals or on
sudden or gradual changes in family status or available sources of income and
assets. Even if poverty rates are substantially lower than they currently
13/ U.S. Bureau of the Census. Current Population Reports. Series
P-60, no. 122. Illustrative Projections of Money Income Size Distributions for
Households: 1980 to 1995. U.S. Govt. Print. Off., Washington, D.C., 1980.
Series C. 1.0 and 1.5 percent growth in household income.
14/ Etheredge, Lynn. An Aging Society and the Federal Deficit. Milbank
Memoral Fund Quarterly/Health and Society, V. 62, no. 4, 1984. P. 527-528.
15/ Ycas, Martynas and Susan Grad. Income of Retirement-Aged Persons in
the United States. Social Security Bulletin, V. 50, no. 7, July 1987. p. 14.
CRS-28
are, there may be more poor elderly than there are now, because of the increas-
ing numbers of elderly people. For example, if the poverty rate among the
elderly drops 20 percent by the year 2000, to 10.0 percent (from the 1986 level
of 12.4 percent), there would still be 3.5 million poor elderly--about the same
number as there were in 1986. If poverty rates were to remain constant, there
would be 4.3 million poor elderly in 2000. Thus, these demographic and income
factors may continue to exert pressure on public sector long-term care
programs.
C. Utilization of Institutional and Community-Based
Long-Term Care Services
1. Utilization of Nursing Home Care
Based on the projected growth of the elderly population and current
utilization patterns of institutional and community long-term care services,
major increases in the demand for long-term care can be anticipated for the
future. In 1985, the National Nursing Home Survey, conducted by the National
Center for Health Statistics, found approximately 1.3 million elderly persons
residing in nursing homes. 16/ Elderly nursing home residents accounted for 88
percent of total nursing home residents. They amounted to 5 percent of the
Nation's total elderly population 65 years of age and over.
When the elderly nursing home population is examined by age category,
residents aged 85 and over comprised the largest age group (45 percent),
followed by those 54 years of age (39 percent) and those 65-74 (16 percent).
16/ Use of Nursing Homes by the Elderly: Preliminary Data from the 1985
National Nursing Home Survey by Esther Hing. Advance Data from Vital and
Health Statistics. no. 135. DHHS Pub. No. (PHS) 87-1250. U.S. Department of
Health and Human Services. Public Health Service. National Center for Health
Statistics. Hyattsville, MD., May 14, 1987. P. 2.
CRS-29
See table 2. Elderly nursing home residents are also predominantly female.
Almost 75 percent of elderly residents were female in 1985. The use of nursing
homes increases with age for both males and females, but women used nursing
homes at significantly higher rates than men regardless of age group and
especially at the very oldest age category. This greater rate of utilization
by elderly women reflects their longer life expectancy and the greater
likelihood of persons without spouses and in poor health to enter nursing
homes. 17/
TABLE 2. Number, Percent Distribution and Rate of Nursing Home
Residents 65 Years of Age and Over By Age and Sex, United States 1985
Number of
residents per
1,000 popula-
Percent
tion 65 years
Age, sex
Number of residents
distribution
and over
Total
1,318,300
100.0%
46.2
Age
65-74 years
212,100
16.1
12.5
75-84 years
509,000
38.6
57.7
85 years and over
597,300
45.3
220.3
Sex
Male-total
334,400
25.4
29.0
65-74 years
80,600
6.1
10.8
75-84 years
141,300
10.7
43.0
85 years and over
112,600
8.5
145.7
Female--total
983,900
74.6
57.9
65-74 years
131,500
10.0
13.8
75-84 years
367,700
27.9
66.4
85 years and over
484,700
36.7
250.1
Source: Unpublished data from the 1985 National Nursing Home Survey.
National Center for Health Statistics. Due to rounding, numbers may not add to
totals.
17/ Ibid.
CRS-30
The number of elderly residents in nursing homes increased 17 percent from
1977 (the time of the last National Nursing Home Survey) to 1985. Those 85
years of age and over accounted for 76 percent of the increase in elderly
residents from 1977 to 1985. 18/ One study has estimated that the elderly
nursing home population will grow to 2 million by the year 2000, to 2.8 million
by the year 2020, and to nearly 4.4 million by the year 2040. 19/
The 1985 National Nursing Home Survey found that most elderly nursing home
residents required assistance with basic ADLs. As discussed above, limitations
in ADLs reflect dependence in such self-care functions as bathing, dressing,
eating, etc. In 1985, 91 percent of elderly residents of nursing homes
required assistance in bathing; 78 percent required assistance in dressing; 63
percent required assistance in using the toilet room; 63 percent required
assistance in transferring from a bed or chair; 55 percent were incontinent;
and 40 percent required assistance in eating. 20/
In general, elderly nursing home residents were more dependent in
performing these ADLs in 1985 than in 1977. A larger proportion required
assistance or had difficulty with bathing, using the toilet room, continence,
and eating in 1985 than in 1977. This can be explained in part by the
increasing number and proportion of very old persons (85 and over) residing in
nursing homes in 1985. 21/ However, the proportion of residents functionally
dependent in each ADL was generally higher in 1985 than in 1977 when age was
held constant. 22/ This might be the result of various State screening
18/ Ibid.
19/ Manton, Kenneth and Korbin Liu. The Future Growth of the Long-Term
Care Population: Projections Based on the 1977 National Nursing Home Survey
and the 1982 Long-Term Care Survey. Unpublished paper, 1984. P. 20.
20/ Use of Nursing Homes by the Elderly, P. 4.
21/ Ibid.
22/ Use of Nursing Homes by the Elderly, P. 5.
CRS-31
programs that have attempted to control expenditures for nursing home care by
limiting placement in nursing homes to those with the greatest functional
dependencies. See chapter III, Part C of this report for more information
about these programs, generally referred to as preadmission screening
programs.
Analysis of nursing home utilization for those persons actually entering a
nursing home has found a high degree of variance in their lengths-of-stay. In
general, analysis has found two broad categories of persons using nursing home
care-those who have short lengths of stay and those with long stays. One
model developed with data from two previous National Nursing Home Surveys found
that long-stayers stay an average of 2.5 years, and short-stayers an average of
1.8 months. 23/ Other analysis has estimated that the great majority of
persons entering a nursing home stay for relatively short periods of time.
This analysis shows that 75 percent of persons entering a nursing home stay
less than one year, and one-third to one-half of all entrants stay less than 3
months. Few persons entering a nursing home--14 to 17 percent--stay more than
3 years. 24/
2. Utilization of Home and Community-Based Care
For every person 65 years of age and over residing in a nursing home,
there are at least twice as many persons living in the community requiring
assistance with limitations in various ADLs and IADLs. The 1984 National
Health Interview Survey, conducted by the National Center for Health
23/ Keeler, Emmett, Robert Kane, and David Solomon. Short- and Long-Term
Residents of Nursing Homes. Medical Care, Mar. 1981, V. XIX, no. 3. P. 365.
24/ Cohen, Marc, Eileen Tell, and Stanley Wallack. The Lifetime Risks
and Costs of Nursing Home Use among the Elderly. Medical Care, V. 24, no. 12,
Dec. 1986. P. 1169.
CRS-32
Statistics, provides information about this functionally dependent elderly
population living in the community. Specifically, the survey included a
special questionnaire, the Supplement on Aging (SoA), to provide information on
the physical limitations, chronic conditions, use of community services, and
living arrangements of elderly persons residing in the community.
The SoA sought to measure functional limitations in two ways. First, it
asked persons if they had difficulty performing ADLs, as well as other home
management activities that reflect lower levels of disability if a limitation
is present. These home management activities, referred to as IADLs, include
such functions as cleaning, cooking, and shopping. As noted above, the
presence of a functional limitation does not necessarily result in the need
for a long-term care service. For this reason, the SoA asked a second set of
questions to determine whether persons received help with their limitations.
Persons receiving help with their functional limitations are a subset of those
persons who have difficulty with an activity, and, according to SoA, might be a
better measure of functionally-limited persons living in the community. 25/
The SoA found that about 6 million elderly noninstitutionalized persons
had difficulty performing ADLs. These individuals amounted to 23 percent of
the elderly population living in the community. Of these persons, about 2.5
million, or 10 percent of all noninstitutionalized elderly persons, received
help with their limitations. By the SoA standard, these persons might be
considered the ADL functionally-limited population living in the community.
25/ Dawson, D., G. Hendershot, and J. Fulton, Aging in the Eighties:
Functional Limitations of Individuals Age 65 years and Over. Advance Data from
Vital and Health Statistics, no. 133. DHHS Pub. No. (PHS) 87-1250. Public
Health Service. National Center for Health Statistics. Hyattsville, MD. June
10, 1987. P. 5.
CRS-33
The SoA also found that about 7 million, or 27 percent, of the noninstitu-
tionalized elderly had difficulty performing home management IADLs. About 22
percent of these persons received help with these activities. 26/
Another survey, the National Long-Term Care Survey, also provides
information about the functionally impaired elderly population living in the
community, the assistance they receive for their limitations, as well as who
pays for this assistance and how much it costs. The National Long-Term Care
Survey, administered in 1982 and 1984, identified elderly Medicare enrollees
who were living in the community and who were functionally impaired in ADLs or
IADLs for at least 3 months. The SoA, by way of contrast, did not limit its
sample to persons who experienced a functional limitation for a given period of
time.
Analysis of 1982 survey data shows that an estimated 4.6 million elderly
persons were living in the community with limitations in ADLs and IADLs of at
least 3 months' duration. 27/ These persons represented 18 percent of the
elderly population. Of this total, approximately 1.4 million persons had IADL
limitations only. The remaining 3 million had limitations in ADLs, with 1.5
million persons having limitations in 1 to 2 ADLs, 683,000 having limitations
in 3 to 4 ADLs, and 849,000 having limitations in 5 to 6 ADLs. 28/ Based on
the 1982 survey findings, the same authors estimate that the population with
these ADL and IADL limitations will increase to nearly 7.3 million by the year
2000, to 10.1 million by the year 2020, and to 14.4 million by the year 2040.
26/ Dawson, et. al., Aging in the Eighties. P. 5-6.
27/ Liu, Korbin, Kenneth Manton, and Barbara Liu. Home Care Expenses
for the Disabled Elderly. Health Care Financing Review, V. 8, no. 2, winter
1985. P. 52.
28/ Ibid. These numbers do not add to the total because of the existence
of unknowns in the survey.
CRS-34
Results of the 1982 survey also show that most of the disabled elderly
living in the community received assistance for ADL and IADL problems from
spouses, children, or other informal sources of support. 29/ Of the 4.6
million functionally limited elderly, more than 70 percent (3.2 million)
relied exclusively on nonpaid sources of assistance. This finding corresponds
to other research that has estimated that between 60 to 80 percent of the care
received by the impaired elderly is provided by relatives and friends who are
not compensated for the care they provide. 30/
There is evidence that informal care giving is one of the key factors in
delaying or preventing institutionalization of the frail elderly. However, the
aging of the Nation's population has important implications for the availa-
bility of informal family sources of support for long-term care. Estimates
from the 1982 National Long-Term Care Survey show that the average age of
caregivers of the impaired elderly was 57 years. More striking is the finding
that one-quarter of caregivers was aged 65-74, and 10 percent was 75 years or
older. These data support the view that informal services are largely
provided by the "young-old" to the "old-old." 31/ As the population ages, very
old chronically ill parents with children who themselves are retired or
chronically impaired will become more common. 32/ Researchers have noted that
the probability of young elderly (aged 65-69) women having at least one
surviving parent aged 85 or older will more than double over the next 60
29/ Ibid.
30/ Long-Term Care: Background and Future Directions. Health Care
Financing Administration, Department of Health and Human Services. Jan. 1981,
HCFA 81-20047.
31/ U.S. Congress. House. Select Committee on Aging. Exploring the
Myths: Caregiving in America. Pub. no. 99-611, Jan. 1987, Washington, D.C.
32/ Long-Term Care: Background and Future Directions, p. 12.
CRS-35
years. 33/ This factor has tended to underline the need for a range of formal
services which can support caregivers.
33/ Soldo, Beth and Kenneth Manton. Health Status and Service Needs of
the Oldest Old: Current Patterns and Future Trends. Milbank Memorial Fund
Quarterly/Health and Society, V. 63, no. 2, spring 1985. p. 310.
CRS-37
III. PUBLIC SECTOR PROGRAMS FOR FINANCING AND DELIVERY OF
LONG-TERM CARE SERVICES
Implicit in any discussion of long-term care policy is the fact that
large amounts of public dollars currently finance long-term care services, and
that even greater amounts will be spent in the future as the elderly
population, especially the very old, increases. It is not easy to aggregate
spending data for the various Federal, State, and local programs that support
nursing home and non-institutional long-term care services. At least 80
Federal programs alone assist persons with long-term care problems, either
directly or indirectly through cash assistance, in-kind transfers, or the
provision of goods and services. In addition, differences in definitions of
services to be included in long-term care and inconsistent reporting across
programs make aggregation of expenditure data very difficult, if not
impossible.
However, it is generally agreed that most of the public sector's support
for long-term care services is for nursing home or other institutional care.
In 1986, the Nation spent $38.1 billion for nursing home care, accounting for
9.4 percent of total personal health care expenditures. Approximately 47
percent of the Nation's expenditures for nursing home care, or $18.1 billion,
was financed by Federal, State, and local governments.
By far the largest portion of public expenditures for nursing home care
is financed by the Medicaid program for the poor and medically indigent. In
CRS-38
1986, Federal, State, and local Medicaid expenditures for nursing home care
amounted to $15.8 billion. This represented 41.5 percent of total national
spending on nursing home care and 87 percent of public spending for nursing
home care in 1986. 34/
Medicaid's expenditures for nursing home care also represented a signifi-
cant portion of total program spending. Medicaid program data show that pay-
ments for nursing home care (excluding nursing homes for the mentally retarded)
amounted to 30 percent of total program spending for services in FY 1986. In
addition, the aged accounted for the great majority of nursing home payments in
the Medicaid program. Eighty percent of Medicaid's payments for nursing home
care were for elderly beneficiaries in FY 1986. Furthermore, these payments
for nursing home care for the elderly represented two-thirds of all program
payments made on behalf of the elderly. Nursing home payments accounted for
more than 75 percent of total program payments for the elderly in 27 States in
FY 1986.
It should be noted that the share of nursing home care financed by public
programs has been declining since 1979, from 56 percent to 47 percent in 1985.
In part, this can be explained by vigorous State efforts to control
34/ The source for the above information is the Health Care Financing
Administration's (HCFA) annual report on national health care expenditures.
This report provides a useful analysis of expenditures for major categories of
health services, sources of payment (out-of-pocket, private insurance,
Medicare, Medicaid, and other Federal, State, and local programs) for these
services, and the relative share each of these sources' payments represents of
total national spending. With regard specifically to nursing home care, the
HCFA analysis includes spending for all persons using this service. In the
HCFA analysis, these persons include the elderly, the mentally retarded, and
others. Expenditures attributable solely to the elderly cannot be isolated
from the total for nursing home care. Medicaid program data, on the other
hand, allows spending for Medicaid's nursing home benefit for the mentally
retarded to be excluded from total nursing home spending.
CRS-39
expenditures for nursing home care under their Medicaid programs. 35/ These
efforts have included limitations on the construction of nursing home beds,
either through requirements to certify the need for more beds before construc-
tion can begin, or through the prohibition of construction or addition of beds
altogether (often referred to as moratoriums). States have also used various
forms of utilization review and pre-admission screening mechanisms to limit
inappropriate use, as well as reimbursement policies to control costs per day
of care provided.
By way of contrast, the Medicare program for the aged and disabled
accounts for only a small portion of the Nation's expenditures for nursing home
care. Medicare's expenditures amounted to $600 million and represented less
than 1.6 percent of national spending and 3.3 percent of public spending for
nursing home care in 1986.
Expenditures for non-institutional community-based services are relatively
small compared to spending for nursing home services. Whereas nursing home
care represented a sizeable portion of total Medicaid spending for health care
services in 1986, home health care accounted for only 3.3 percent of total
Medicaid spending in that year and amounted to approximately $1.35 billion.
One State (New York) alone accounted for 57 percent of total Medicaid home
health expenditures.
Medicare's spending for home health care benefits is also a small propor-
tion of total program expenditures. In 1986, Medicare payments for home health
care amounted to 3 percent of total program payments for covered services.
35/ Nursing Home Reimbursement under Medicaid. Intergovernmental Health
Policy Project. Washington, D.C., Feb. 1986. P. 2.
CRS-40
While its share remains small, home health care has been one of the
fastest growing components of both the Medicare and Medicaid budgets. Between
1974 and 1986, home health care expenditures under Medicare increased from $139
million to $2.27 billion. This represented a 26 percent average annual com-
pound rate of growth. (It should be noted that this rate of growth has slowed
considerably, recently. Between 1984 and 1985, Medicare home health care
expenditures increased by 14.1 percent. Between 1985 and 1986, they increased
by 4.7 percent.) Medicaid expenditures for home health have also increased
rapidly--from $31 million in 1974 to $1.35 billion in 1986, a 37 percent
average annual compound rate of growth.
While the Medicaid program is the predominant Federal program supporting
long-term care services, a variety of social service programs provide
community-based services which may prevent or delay institutionalization.
Chief among these are the SSBG program and the Older Americans Act. While
their total resources are small in comparison with total Medicaid expenditures
devoted to both institutional and community-based long-term care services, in
many communities these two programs represent an important source of support
for services for the frail elderly and often fill gaps in service needs not met
by either the Medicare or Medicaid programs.
All States provide a number of home and community-based long-term care
services for diverse client groups, including children, disabled, and the
elderly, through the SSBG program under title XX of the Social Security Act.
Such services may include homemaker, home health aide, chore, adult day care
services, and adult foster care. Due to the lack of Federal reporting
requirements, very little national data are available on recipients of services
and expenditures under the program. However, home-care type services for needy
groups is the one service provided by almost all States.
CRS-41
Home care, including homemaker, chore, and personal care services, is one
of the major service categories under title III of the Older Americans Act.
For FY 1987, it was estimated that the program provided homemaker services to
686,000 older persons and home health aide services to 151,000 older persons.
The Older Americans Act also authorizes a home-delivered meals program for
homebound elderly. An estimated 86 million home-delivered meals were served to
729,000 persons under auspices of the program during FY 1987.
A. Major Federal Programs and Activities Supporting Long-Term Care Services
As noted above, at least 80 Federal programs assist persons with long-term
care problems, either directly or indirectly through cash assistance, in-kind
transfers, or provision of goods and services. These programs often respond in
a manner that is problem-specific, categorical in nature, or targeted at
specific client groups. For example, certain programs provide health services
while excluding social services; others are oriented to the elderly to the
exclusion of the younger disabled. Some programs carry income eligibility
requirements, others do not.
This section describes selected Federal programs--Medicaid, Medicare, the
SSBG, Older Americans Act, and SSI programs--which address the health and
social services needs of the elderly. Taken together, these programs consti-
tute the major focus of Federal financial support presently available for both
community-based and institutional long-term care services. The differing
characteristics of these programs reflect what some observers point out to be
the uncoordinated nature of Federal support for long-term care services.
Not discussed here are a host of other Federal programs dealing with such
components of the long-term care spectrum as housing, transportation, tax
policy, as well as services provided through the VA. It should be noted,
CRS-42
however, that numerous long-term care benefits are offered to veterans through
the VA, including nursing home care, domiciliary care, outpatient clinics, and
adult day health services, as well as cash payments for aid and attendance for
certain severely disabled veterans. Services are offered directly by the VA
and are also provided on a contract basis in non-VA hospitals and community
nursing homes, and on a grant basis in State veterans' home facilities. Issues
surrounding the financing and delivery of long-term care services to the
veteran population are of increasing concern to the VA because of the growing
number of older veterans. By the year 2000, approximately 2 out of every 3
males age 65 or older will be veterans and the VA is predicting dramatic
increases in the need for and utilization of various long-term care services by
the veteran population.
The discussion immediately below summarizes some of the major differences
of the Medicaid, Medicare, SSBG, Older Americans Act, and SSI programs in
their approach to health and social services in general and long-term care in
specific. This discussion is followed by a more detailed description of each
of these programs.
o PROGRAM GOALS. Medicaid is the major Federal program financing
health care services for certain low income persons. While it
provides health care benefits, and to a limited degree,
medically-related social services, to certain eligible persons
with chronic care needs, it is not designed to support the full
array of long-term care services on a systematic basis. Its
principal form of support for long-term care services is for
nursing home care. Medicare, on the other hand, is a nationwide
health insurance program for the aged and disabled and is intended
primarily to address acute medical care needs. To the extent that
it provides coverage for certain long-term care services, it does
so with the intent of reducing the need for more intensive and
expensive acute care services; the program was not designed to
respond specifically to chronic care needs of the elderly over a
sustained period of time. The SSBG program is designed to assist
families and individuals in maintaining self-sufficiency and
independence; however, the program is generally limited to the
provision of community-based social services selected and defined
by each State and does not support institutional care. The Older
Americans Act is intended to foster the development of a broadly
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defined, comprehensive and coordinated service system for the
aged; however, it is limited in its ability to have a significant
impact on long-term care due to its small level of resources as
compared to other programs. The SSI program's purpose is to
provide an income floor for needy aged, blind, and disabled
individuals; it provides cash payments but not services.
O ADMINISTRATIVE AUTHORITY AND FINANCING MECHANISMS. The Medicare
program is administered and financed at the Federal level with
uniform national standards. The Medicaid, SSBG, and Older
Americans Act programs are shared Federal-State programs with
States responsible for implementation of Federal legislation and
regulations. The SSI program is administered at the Federal level
but allows States to augment the Federal SSI payment and this
portion of the program may be federally or State-administered.
The Medicaid and Older Americans Act programs carry specific
requirements for States to match Federal funds, whereas the SSBG
does not. By virtue of their statutory obligations to benefici-
aries, Medicare, Medicaid, and SSI represent uncontrollable
expenditures in the Federal budget. In contrast, the total
funding available for programs under the Older Americans Act is
subject to an annual limit imposed through the appropriations
process. Although the SSBG is considered an entitlement program
to States, it carries a statutorily imposed Federal expenditure
ceiling.
O SERVICE BENEFITS, DEFINITIONS, AND STANDARDS. As a general rule,
Medicare and Medicaid provide reimbursement primarily for medical
and health care services; however, in certain instances Medicaid
reimbursement is available for social service components of health
care services, e.g., under State options for personal care or
adult day care services and under "section 2176" home and
community-based waiver provisions. The SSBG program provides
reimbursement for social services only but will provide coverage
for medical care when such care is "integral but subordinate" to
the provision of a social service. Funding under title III of the
Older Americans Act is to be used for the development of a service
delivery system for older persons, focusing on supportive and
nutritional services. Recipients of SSI receive a cash payment
which is federally determined but States may decide how much and
for what purpose to supplement the Federal payment. Definitions
for similar or complementary services vary among programs and
sometimes among programs within a single State. Certain service
definitions are established at the State level, or at the local
level by individual service providers. Similarly, standards for
services may be established upon legislative specifications.
O ELIGIBILITY. Entitlement for Medicare is generally based on
Social Security status. Eligibility for Medicaid is linked to
actual or potential receipt of cash assistance under the
federally-assisted Aid to Families with Dependent Children program
and the SSI program for the aged, blind, and disabled. The SSBG
does not require that applicants or recipients meet income
eligibility guidelines, although States may set standards. The
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Older Americans Act program prohibits income testing for services;
however, funds under the program must be directed toward those
with the greatest social or economic need. Eligibility for the
Federal payment portion of SSI is based on federally established
income and asset rules.
1. Medicaid--Title XIX of the Social Security Act
The Medicaid program is a Federal-State matching program providing medical
assistance for certain low-income persons. Each State administers its own pro-
gram and, subject to Federal guidelines, determines eligibility and scope of
benefits. In general, each State also determines the payment rate for serv-
ices provided to Medicaid recipients. The Federal Government's share of medi-
cal expenses is tied to a formula based upon the per capita income of the
State. At a minimum, the Federal Government will pay 50 percent of the costs
of medical care; this amount ranges up to 79.65 percent in the lower per capita
income States.
The States vary greatly with regard to services they include in their
plans and groups eligible to receive these services. For example, major
long-term care services provided under Medicaid include intermediate care
facility (ICF) services, skilled nursing facility (SNF) services, and home
health services. 36/ Other Medicaid services sometimes associated with the
36/ Medicaid law defines SNF services as services which are required to
be given to an individual who needs, on a daily basis, skilled nursing care
(provided directly by, or requiring the supervision of, skilled nursing
personnel) or other skilled rehabilitation services which, as a practical
matter, can only be provided in a SNF on an inpatient basis. Medicaid law
defines an ICF as an institution that is licensed under State law to provide on
a regular basis health-related care and services to individuals who do not
require the degree of care and treatment which a hospital or SNF is designed to
provide but who because of their mental or physical condition require care and
services (above the level of room and board) which can be provided only through
institutional facilities. Effective Oct. 1, 1990, P.L. 100-203, the Omnibus
Budget Reconciliation Act of 1987, will eliminate Medicaid's distinction
between SNFs and ICFs, and will create in their place a "nursing facility"
benefit.
CRS-45
needs of long-term care patients include: private nursing services, clinic
services, personal care services at home, adult day health services, physical
therapy and related services, and inpatient care for patients 65 years of age
or older in institutions for mental diseases. However, not all States cover
these services equally. In addition, States may cover certain other home- and
community-based services under special waiver programs reviewed and approved by
the Secretary of the DHHS.
Medicaid law requires that States cover under their programs the "cate-
gorically needy"--all persons receiving assistance under the Aid to Families
with Dependent Children (AFDC) program and most persons receiving assistance
under the SSI program. States may also cover additional persons as categori-
ically needy. These might include persons who do not receive cash welfare
assistance, but become eligible for Medicaid according to special income rules
used by certain States for persons residing in nursing homes. By Federal law,
this special level can be no more than three times the basic SSI payment level,
and is often referred to as the "300 percent rule."
In addition to the categorically needy, States may at their option cover
the "medically needy," persons whose income and resources are large enough to
cover daily living expenses, according to income levels set by the State, but
not large enough to pay for medical care. If the income and resources of the
"medically needy" individual are above a State-prescribed level, the individual
must first incur a certain amount of medical expense which lowers the income to
the medically needy levels (the so-called "spend-down" requirement). Thirty-
seven States and jurisdictions have medically needy programs that can cover the
elderly. As a result of State variations such as these, persons with identi-
cal circumstances may be eligible to receive Medicaid benefits in one State but
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not in another; even individuals in the same State with similar incomes may not
be equally eligible for benefits due to welfare rules.
a. Medicaid's coverage of nursing home care. Over the years,
observers have noted that Medicaid's eligibility policies and benefit structure
have actually created financial incentives to use nursing homes rather than
community services. Until fairly recently, Medicaid support for chronically
impaired elderly persons living in the community has been quite limited. Many
of the non-skilled personal care and supportive services needed by chronically
impaired elderly persons to remain in the community were simply not covered
under Medicaid. These services, however, are typically covered as part of
Medicaid's nursing home benefit. In addition, certain lower income elderly who
were ineligible for Medicaid while living in the community could become
eligible for nursing home care, if they resided in a State using a higher
income eligibility standard for nursing home residents (the 300 percent rule).
Others become eligible for Medicaid once they deplete their resources
after entering the nursing home as privately paying patients. With nursing
home care costing in the range of $20,000 to $25,000 a year, many elderly
persons in nursing homes can quickly meet the resources and income requirements
for Medicaid coverage of their care by spending down. A 1983 General
Accounting Office (GAO) report, Medicaid and Nursing Home Care, reviewed case
studies and did other anlysis that showed that one-quarter to two-thirds of
Medicaid patients in nursing homes in certain areas initially entered as
private paying patients and subsequently converted to Medicaid. 37/ GAO also
37/ Medicaid and Nursing Home Care: Cost Increases and the Need for
Services Are Creating Problems for the States and the Elderly. U.S. General
Accounting Office, CAO/IPE-84-1. Oct. 21, 1983, P. 25-26.
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found that higher proportions of residents with longer nursing home stays were
supported by Medicaid than those with shorter stays.
The 1985 National Nursing Home Survey provides limited information about
persons shifting to Medicaid payment for their nursing home care. At the time
of the survey, 605,800 residents (41 percent) reported that Medicaid was their
primary source of payment at admission, and 885,700 residents (59 percent)
reported that other non-Medicaid sources (such as own income or family support,
Medicare, other government programs, etc.) were the primary source of payment
at admission. 38/ For those not using Medicaid as the primary source of pay-
ment for their care at admission, 20.5 percent reported shifting to Medicaid at
some point prior to the last month before the Nursing Home Survey interview.
However, data about the precise point when Medicaid became the primary source
of payment and the length of the spend-down process--was not collected by the
survey. The National Nursing Home Survey also shows that the percentage of
persons shifting to Medicaid increased as duration of stay in the nursing home
increased.
Another analysis published by the House Select Committee on Aging provides
estimates of the length of time of spend-down and the risk of impoverishment
for elderly persons needing long-term care services. This study uses a micro-
simulation model of income and assets developed by the Urban Institute,
together with data from the Medicare and Medicaid programs on the cost of
long-term care services, to estimate the length of time elderly persons using
long-term care services would find their income and assets spent down to the
Federal poverty level. The study estimates that 70 percent of elderly persons
living alone find their income spent down to the Federal poverty level after 13
38/ Unpublished data from the 1985 National Nursing Home Survey, National
Center for Health Statistics, Department of Health and Human Services.
CRS-48
weeks in a nursing home, and over 90 perçent are impoverished within 1 year of
admission. 39 / When both income and financial assets were considered, nearly
one-half of the elderly living alone are impoverished after 13 weeks in a
nursing home and approximately two-thirds are impoverished within 1 year. For
couples, 34 percent are impoverished after one spouse has spent 13 weeks in a
nursing home and almost 80 percent are impoverished when income alone is
considered. When both income and assets are taken into account, almost one-
half of couples are impoverished after 1 year in a nursing home.
b. Medicaid "2176 waivers" for home and community-based care. In
order to allow States to broaden coverage for a range of community- based long-
term care services and to receive Federal reimbursement for these services,
Congress in 1981 passed legislation authorizing the Secretary of DHHS to
approve special State applications to provide such services under their
Medicaid programs. These services are often referred to as "2176 waiver
services" after the section in the Omnibus Budget Reconciliation Act of 1981
which originally authorized them.
Under a 2176 waiver program, States may cover home and community-based
services in only a portion of the State, rather than in all geographic juris-
dictions as would be required absent a waiver. In addition, they may limit
coverage of selected services to certain State-defined individuals eligible for
assistance, rather than offering these services to all persons in particular
eligibility groups. States may also determine eligibility for 2176 waiver
services using the same more liberal income criteria used for determining
eligibility for nursing home care, rather than the lower income limits usually
39/ U.S. Congress. House. Select Committee on Aging. Long-Term Care
and Personal Impoverishment: Seven in Ten Elderly Living Alone Are at Risk.
Pub. No. 100-631. Oct. 1987, Washington, D.C.
CRS-49
applied to people living in their homes. Most States with 2176 waiver
programs use these more liberal income standards. 40/ States must limit
coverage of these services to persons who would otherwise require and have paid
for by Medicaid, the level of care provided in institutions.
Prior to the 2176 waiver program, Medicaid services available to frail
elderly persons living in the community were generally restricted to medical
and medical-related services. The waiver authority acknowledges that a wide
variety of other non-medical services may be needed in order prevent or post-
pone institutionalization. For this reason, services traditionally considered
to be social services are covered by the waiver authority. These include case
management (commonly understood to be a system under which responsibility for
locating, coordinating, and monitoring a group of services rests with a desig-
nated person or organization), homemaker/home health aide services, personal
care services, adult day care, respite care, and other services that can
contribute to the health and well-being of individuals and their ability to
reside in a community-based setting. States have used this "other" category to
provide home modificiations and transportation services, among others. A
National Governors' Association (NGA) survey in July 1987 found 37 States with
operational waiver programs that serve elderly persons in at least some part of
the State. 41/ About 59,000 elderly persons were being served in these pro-
grams.
The Omnibus Budget Reconciliation Act of 1987 (OBRA87) established a new
waiver authority for the elderly, separate from the 2176 waiver authority.
40/ U.S. Congress. Congressional Research Service. Medicaid Eligibility
for the Elderly in Need of Long-Term Care. CRS Report for Congress no. 87-986,
by Edward Neuschler. Prepared under Contract no. 86-26. Center for Policy
Research. National Governors' Association, Sept. 1987. P. 34.
41/ Ibid.
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With this new authority, Congress was responding to an issue that had arisen in
connection with HCFA's implementation of the 2176 authority. To meet the law's
requirement that the average per capita expenditures under 2176 waiver programs
not exceed average per capita expenditures that would be incurred in the
absence of the waiver, HCFA required States to use a formula demonstrating
budget neutrality. This formula required States to estimate the number of
individuals who would otherwise be served in a Medicaid nursing home bed.
HCFA used this estimate as a ceiling on the number of persons who could be
served under the waiver. States that had restricted their supply of nursing
home beds through certificate-of-need programs or construction moratoria were
therefore limited in the number of persons they could serve under the waiver.
Congress, therefore, established in OBRA87 a new waiver authority to
allow States to provide, according to a new definition of budget neutrality,
home and community-based services to elderly persons at risk of nursing home
care. The budget neutrality formula limits States electing the waiver to a
maximum percent rate of growth in their institutional and noninstitutional
long-term care outlays under Medicaid, compounded annually. The Secretary is
required to promulgate, by October 1, 1989, indices for projecting increases in
institutional and non-institutional long-term care costs, as well as State-
specific projections of increases in the number of residents over age 75. Upon
promulgation of these indices, the test for budget neutrality will be the
greater of: (1) the sum of the percentages yielded by these indices, and (2) 7
percent, compounded annually.
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2. Medicare--Title XVIII of the Social Security Act
Medicare is a Federal health insurance program with a uniform eligibility
and benefit structure throughout the United States. The program covers most
individuals entitled to Social Security benefits, persons under 65 entitled to
Federal disability benefits, and certain individuals with end-stage renal
disease. Coverage is available to persons without regard to their income or
assets.
Medicare's coverage is focused primarily on acute health care, particu-
larly hospital and physician care and accompanying periods of recovery. It was
never envisioned to provide protection for long-term care, and for this reason,
it offers only very limited protection against the costs of long-term care
types of services. Program coverage of nursing home care, for instance, is
limited to short-term stays in certain kinds of nursing homes, referred to as
SNFs, and only for those persons who can demonstrate a need for daily skilled
nursing care for a condition related to a prior hospitalization. Many persons
who require long-term nursing home care do not need daily skilled nursing care,
and, therefore, do not qualify for Medicare's benefit. As a result of these
restrictions, Medicare covered, for those persons receiving SNF benefits, an
average of 27 days of care in 1984. 42/ In addition, the program paid for less
than 2 percent of the Nation's nursing home expenditures in 1986.
For similar reasons, Medicare pays for limited amounts of community-based
long-term care services, primarily through the program's home health benefit.
To qualify for home health services, the Medicare beneficiary must be confined
to his or her home and under the care of a physician. In addition, the person
42/ Medicare: Use of Skilled Nursing Facilities, 1984. Health Care
Financing Administration. Office of Research and Demonstrations. Research
Brief no. 86-4. P. 2.
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must be in need of skilled nursing care on an intermittent basis, or physical
or speech therapy. Services must be provided by a home health agency certified
to participate under Medicare, according to a plan of treatment prescribed and
reviewed by a physician. Most chronically impaired persons do not need skilled
care to remain in their homes, but rather supportive care and assistance with
basic self-care functions and daily routines that do not require skilled
personnel. Although there is no statutory limit on the number of home health
visits covered under the program, persons receiving home health services under
Medicare used an average of 27 visits in 1984. 43/ Medicare's skilled care
requirements for home health limit utilization of the benefit.
In addition to these SNF and home health care benefits, Medicare covers a
range of long-term care services, and especially home care services, for
terminally ill beneficiaries. These services, authorized in 1982 and referred
to as Medicare's hospice benefit, are available to beneficiaries with a life
expectancy of 6 months or less. Hospice care benefits include nursing care,
medical social services, physicians' services, counseling, therapy services,
home health aide and homemaker services, medical supplies, including drugs and
biologicals, and short-term inpatient care. Medicare expenditures for hospice
care amounted to $35 million for FY 1986 and $63 million for FY 1987.
The introduction in FY 1984 of a prospective payment reimbursement system
(PPS) for inpatient hospital care under Medicare has raised a number of
questions about its impact on the quality of care received by the elderly,
including care available in long-term care settings covered by the
43/ Kirby, Will, Vikki Latta, and Charles Helbing. Medicare Use and Cost
of Home Health Services, 1983-84. Health Care Financing Review, V. 8, no. 1,
fall 1986. P. 93.
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program-SNFs, home health, and hospice. 44/ Moreover, concern has been raised
about the effects of PPS on the ability of community-based social service
agencies, partially supported by the Older Americans Act and the SSBG, to
adjust their programs to meet the growing needs of hospital discharged patients
for certain social services, such as home-delivered meals and a variety of
other in-home services not covered by Medicare or Medicaid.
Medicare's PPS sets predetermined fixed payment rates for each hospital
inpatient admission, based on the diagnosis-related group (DRG) into which
that admission falls. This fixed payment provides hospitals with incentives
to limit costs incurred for each Medicare patient admission, generally either
by reducing lengths of stay and/or intensity of care provided.
Since the introduction of PPS, average lengths of stay in hospitals have
decreased markedly for Medicare beneficiaries. In 1982, the last full year
before PPS, average hospital length of stay for persons 65 and over was 10.1
days. By 1985 it had declined to 8.8 days and in the last 2 years has risen
slightly to 8.9 days. 45/ To the extent that this decrease in length of stay
represents a reduction in unnecessary acute care, one objective of PPS reform
is being met. However, concern has been expressed about the availability and
quality of care for those beneficiaries who may be discharged sooner from
hospitals and who may need additional services that may or may not be covered
by Medicare as SNF or home health care. GAO has identified a number of issues
which must be evaluated in any assessment of the impact of PPS on
44/ U.S. General Accounting Office. Post-Hospital Care: Efforts to
Evaluate Medicare Prospective Payments Effects Are Insufficient.
GAO/PEMD-86-10. June 1986. P. 10.
45/ American Hospital Association National Panel Survey as reported in
Technical Appendixes to the Report and Recommendations to the Secretary, U.S.
Department of Health and Human Services. Prospective Payment Assessment
Commission, Mar. 1988. P. 26.
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post-hospital care: Have patients' post-hospital care needs changed since
implementation of PPS? How are patients' needs being met? Are patients having
access problems? How have long-term care costs been affected? 46/ Currently
little information exists to provide conclusive answers to these questions,
although HCFA has sponsored a number of studies that are intended to address
these issues.
In addition, limited studies have noted that earlier hospital discharges
are having a marked effect in some areas of the country on the demand for
community-based social services. An early study, which attempted to measure
the changes in the service delivery patterns and priorities of community-based
long-term care services provided through the Older Americans Act since imple-
mentation of PPS, found increases in the length of service and varieties of in-
home services required by the elderly. 47/ Other observers have pointed to
growing pressures to use limited social services funding to respond to the
needs of patients discharged sooner from hospitals under PPS, resulting in a
reduction of services for other chronically ill or functionally impaired
elderly living in the community who have not been discharged from a hospital
and who require services to remain independent.
46/ Post-Hospital Care: Efforts to Evaluate Medicare Prospective
Payment Effects Are Insufficient, P. 12.
47/ U.S. Congress. House. Committee on Education and Labor. DRGs and
the Community-Based Long Term Care System. Testimony presented by the
Southwest Long-Term Care Gerintology Center, University of Texas Health Science
Center, Dallas. July 30, 1985.
CRS-55
3. Social Services Block Grant Program-Title XX of the Social
Security Act
Title XX of the Social Security Act authorizes block grants to States for
a wide range of social services to diverse population groups, including the
aged, disabled, and children. States are allowed considerable discretion in
their support of social services as long as the services are structured to meet
the following goals of the program: achieving or maintaining economic
self-support and self-sufficiency; preventing or remedying neglect, abuse, or
exploitation; preventing or reducing inappropriate institutional care by pro-
viding for community-based care; and securing referral or admission for insti-
tutional care when other forms of care are not appropriate, or providing
certain services, such as counseling or discharge planning, to individuals in
institutions (excluding room and board). The SSBG provides reimbursement for
social services only, but will provide coverage for medical care when such
care is "integral but subordinate" to the provision of a social service.
States receive allotments of SSBG funds on the basis of the State's
population, within a Federal expenditure ceiling. There are no requirements
for use of title XX funds-States are provided relative freedom to spend
Federal social service block grant funds on State-identified service needs.
Legislation in the 100th Congress authorized $2.75 billion for FY 1988; for FY
1985 through FY 1988, the appropriation level has been $2.7 billion.
The title XX program was significantly changed by provisions of P.L.
97-35, the Omnibus Budget Reconciliation Act of 1981, effective in FY 1982.
Through FY 1981, the program contained requirements regarding the population to
be served and the kinds of services to be provided to families and individuals.
Under provisions of P.L. 97-35, States were given much more discretion in
determining the service population and services to be offered. The law
CRS-56
eliminated requirements that States expend a portion of funds for welfare
recipients, that services be limited to families with incomes below 115 percent
of the State median income, and that fees be charged to persons with specified
income levels. While previous State planning requirements were lessened, the
law continues to require States to develop and make public a report on how
funds are to be used prior to the State plan period, including information on
the types of activities to be funded and the characteristics of individuals to
be served.
The 1981 law also eliminated State reporting requirements; therefore, only
very scant data are available as to the extent to which title XX supports
long-term care services. Two sources of data provide only limited information
as to States' efforts in community-based long-term care services. The first is
a DHHS analysis of the States' pre-expenditure reports under title XX (a report
on States' intended use of funds); the second is an analysis of a limited
number of States' use of funds by the American Public Welfare Association
(APWA). According to the DHHS analysis of States' SSBG FY 1987 pre-expenditure
reports, home-based services (including homemaker, chore, home health,
companionship, and home maintenance services) were to be provided by 49 States
(to adults and children); adult day care by 24 States; and adult foster care by
15 States. According to SSBG data compiled by the APWA for a limited number of
States, in 1985 homemaker, home management, and chore services were provided to
5.7 percent of total title XX recipients, or about 110,020 persons of all ages.
Home-based services accounted for about 8.9 percent of total expenditures, or
$171 million (out of a total estimated amount of Federal, State, and local
funds of $2.8 billion). Adult day care services were provided to less than 1
percent of total title XX recipients, or about 5,181 persons for the States
included in the survey. They accounted for $28.9 million, or 1.5 percent of
CRS-57
total expenditures. 48/ It should be noted that these data are for total title
XX recipients. National data specific to the elderly and disabled population
and by service are limited. A recent telephone survey of States by the
American Association of Retired Persons (AARP) showed that for 44 States, the
proportion of SSBG funds used for the elderly ranged from 1 to 50 percent, with
the average amount at 18 percent. The survey also found that the services most
frequently provided to the elderly were home-based services (41 States); adult
protective services (29 States); adult day care (18 States); transportation ¹(17
States); and nutrition services (17 States). 49/
Although the SSBG represents the major social service program supported by
the Federal Government, its ability to significantly support the long-term
care population is relatively limited. Because it provides a variety of social
services to a diverse population, the program has competing demands. For
example, the program is one of the major Federal programs supporting child day
care and protective services for children and as well as a variety of other
services to children and disabled. The APWA data on social services provided
in 20 States in FY 1985 points out the diversity of services available. A
total of 5 services accounted for over one-half of all services provided to
recipients as follows: information and referral services (19.4 percent);
protective services for children (13.6 percent); family planning services (7.1
48/ American Public Welfare Association (APWA). A Statistical Summary
of the Voluntary Cooperative Information System (VCIS) Social Services Block
Grant (SSBG). Data for FY85. Jan. 1988. Data were compiled by the APWA
under its VCIS where States voluntarily report data on their social service
programs. Data for recipients are for 20 States and expenditures are for 29
States. Total expenditures including a combination of State and local funds,
Federal title XX funds, and other funds for 29 States, were an estimated $2.8
billion in 1985.
49/ Gaberlavage, George. American Association of Retired Persons.
Social Services to Older Persons Under the Social Services Block Grant. Apr.
1987. P. 6.
CRS-58
percent); child day care services (7 percent); and counseling services (6.4
percent). 50/ Moreover, community care programs such as those supported by
title XX are minimal when compared to Federal programs which support
institutional care. For example, Federal funds available for all title XX
activities in 1986 ($2.7 billion) were approximately 27 percent of total
Federal nursing home expenditures in that year ($10.1 billion).
4. The Older Americans Act
The Older Americans Act carries a broad mandate to improve the lives of
older persons in the areas of income, emotional and physical well-being, hous-
ing, employment, social services, civic, cultural, and recreational opportuni-
ties.
The purpose of title III of the Act, which authorizes formula grants to
States for services to older persons, is to foster the development of a compre-
hensive and coordinated service system for older persons in order to (a) secure
and maintain maximum independence and dignity in a home environment for older
persons capable of self-care; (b) remove individual and social barriers to eco-
nomic and personal independence for older persons; and (c) provide a continuum
of care for the vulnerable elderly. Of the Act's total funding in FY 1988, the
major share--70 percent--is devoted to the title III program. Under title
III, grants are made to State agencies on aging, which in turn award funds to
670 area agencies on aging, to plan, coordinate, and advocate for, a
comprehensive service system for older persons.
Title III supports a wide range of supportive services, as well as
congregate and home-delivered nutrition services. Certain supportive services
50/ Ibid., APWA, P. 13.
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have been given priority by Congress, including in-home services, such as
homemaker and home health aide, visiting and telephone reassurance, and chore
services. Each area agency is required to spend a portion of its supportive
services allotment on these services. Other community-based long-term care
services which may be provided under title III include case management, assess-
ment, adult day care, and respite care, among others.
Services under the title III program are to be provided to older persons
without regard to income, although concentrated on those with the greatest
social or economic need. Older persons are to be given the opportunity to
contribute to the cost of services, but failure to do so cannot be a basis for
denial of service.
Unlike the title XX program in which States receive a block of funds for
unspecified social services, Congress makes separate appropriations of title
III funds for supportive services, for congregate nutrition services (in which
older persons receive meals and other services in a group setting), and for
home-delivered nutrition services. States receive allotments of these funds
according to the number of older persons in the State as compared to all
States. The law gives States and area agencies flexibility to define the
supportive services to be provided and to transfer funds among the three
service categories. Although a wide range of social services, including
community-based long-term care services, may be supportd by title III, the
major share of funding is devoted to the nutrition services programs. Total FY
1988 appropriations for title III are $834.4 million, with 67 percent of this
amount appropriated for nutrition services. Only about one-third of title III
funds is specifically appropriated for the entire range of social services
authorized by the Act.
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In-home services clearly represent an expenditure priority for the title
III program. According to a National Data Base on Aging survey of 121 area
agencies, in 1984, about one-quarter of funds controlled by area agencies
(including Older Americans Act funds as well as non-Older Americans Act funds)
was directed at in-home services. While a substantial portion of these funds
was spent on the home delivered meals component, which receives a separate
appropriation under the Act, almost an equal proportion of the total spent on
in-home services was devoted to housekeeping, personal care, and chore
services. 51/
In recognition of the demand for community-based long-term care services,
Congress amended the title III program in 1987 to create a separate authori-
zation of funds for non-medical in-home services for the frail elderly as part
of the Act's reauthorization legislation (P.L. 100-175). Although support for
home care services has been a priority under the title III program for some
time, under prior law there was no separate authorization of funds for this
purpose. In-home services, therefore, had to compete with other social service
funding priorities of State and area agencies. The following services are
authorized under the new program: homemaker and home health aide; visiting and
telephone reassurance; chore maintenance; in-home respite care, and adult day
care as a respite for families; and minor home modification not to exceed $150
per client. State agencies on aging receive allotments for in-home services on
the basis of the current title III formula (that is, based on the State's share
of the population 60 years or over as compared to all States). States are
required to develop eligibility criteria for the use of in-home services,
51/ Data are from a random sample survey of 121 area agencies on aging
in 1984. Supplied by the National Data Base on Aging, a service of the
National Association of State Units on Aging and the National Association of
Area Agencies on Aging.
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taking into account factors such as age, and other factors related to frailty.
For FY 1988 $25 million was authorized and $4.8 million was appropriated.
The ability of the Older Americans Act to have a significant impact on
the long-term care system is limited, due to its relatively small level of
funding as compared to other programs. However, many State and area agencies
have made strides to improve long-term care services through coordination
activities with health and other social service agencies, and through the
development of a social service infrastructure for the elderly at the local
level. Some State agencies on aging have also acted as catalysts to reorganize
community-based health and social services systems at the State and local
levels so as to serve more effectively the long-term care population. For
example, State agencies have developed case management and assessment systems
through area agencies on aging and have supported services otherwise unavail-
able to the frail population. In other cases, State agencies on aging have
been given responsibility for the administration of the section 2176 home and
community-based waiver program under Medicaid. Although the amount of funding
which title III devotes to community-based long-term care services may repre-
sent a small fraction of the amount spent for these services under Medicare and
Medicaid, the title III program has the flexibility to fill gaps in services
for persons otherwise unserved. Since Older Americans Act services may be
provided without the restrictions required under Medicare and without certain
income tests specified by Medicaid, in some cases title III may be used to
serve persons whose Medicare and Medicaid benefits have been exhausted or who
are ineligible for Medicaid.
Although the congregate nutrition program receives the major share of
title III funding, in recent years States have increasingly shifted funds from
this program to other title III services, including the home-delivered meals
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and supportive services components. In FY 1987, States shifted about $49
million from the congregate nutrition appropriation to the other service
components. This represented about a 14 percent decrease from the
appropriated amount of $348 million. Reasons cited for this trend include the
increasing age of the older population and increased demand for home-based
services by a frailer and older population. An evaluation of the Older
Americans Act nutrition program performed for the Administration on Aging
showed that recipients of home-delivered nutrition services tended to be older,
poorer, and in worse health than congregate nutrition participants.
Another Older Americans Act long-term care activity, which may receive
increased attention in the future as the number of nursing home residents
grows, is the long-term care ombudsman program. Under this program, each State
agency on aging is required to establish an Office of the State Long-Term Care
Ombudsman whose responsibility is to investigate and resolve complaints made
by, or on behalf of, older individuals who are residents of long-term care
facilities. Complaints may relate to action or inaction of long-term care
providers or other agencies which may adversely affect the health, safety,
welfare, or rights of residents. Ombudsmen are required to exercise oversight
of SNFs, ICFs, board and care homes, and other adult care homes. Each State is
required to assure that program representatives will have access to facilities,
residents, and their medical and social records. Although the operation of the
ombudsman program has been a required activity under the title III program
since 1978, Congress recently amended the law to create a separate authoriza-
tion of funds to support the program.
Total funding to support the ombudsman program in FY 1986 was $19.1
million, including Federal, State, and local funds. About 10,900 persons were
working at the State and local levels to implement the program, the majority of
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whom were volunteers. Complaints frequently received by the program are those
related to inadequate hygiene, physical abuse, personal items lost, stolen or
used by others, and understaffing of facilities.
5. Supplemental Security Income Program-Title XVI
of the Social Security Act
The SSI program is a federally-administered income assistance program
authorized by title XVI of the Social Security Act. Enacted by the 1972 Social
Security Amendments and implemented in 1974, it replaced previous programs of
State income assistance for the aged, blind and disabled. The SSI program
provides a minimum income level for aged, blind, and disabled persons whose
countable income does not exceed the Federal maximum monthly SSI benefit. In
1988 the monthly Federal SSI benefit is $354 for an individual and $532 for a
couple with no other income. SSI payments are made to individuals under
uniform, nationwide rules with respect to income and assets, and definitions of
blindness and disability. In 1987 an estimated 4.4 million individuals
received Federal SSI payments (1.5 million aged persons and 2.9 million blind
or disabled persons). 52/
The SSI program also allows States to supplement the Federal SSI payment
through optional supplemental payments to individuals. All but eight States
and jurisdictions provide some form of optional State payments. (These are
Arkansas, Georgia, Kansas, Mississippi, the Northern Mariana Islands,
Tennessee, Texas, and West Virginia.) Each State determines whether it will
make a supplemental payment, to whom, and in what amount. These State
supplemental payments, also paid on a regular monthly basis, are intended to
52/ This number includes persons receiving Federal SSI payments and/or
federally-administered State supplementation. Data as of Sept. 1987.
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supplement the basic Federal SSI payment for food, shelter, clothing,
utilities, and other necessities. Some States provide optional State
supplemental payments to all persons qualifying for SSI benefits, while others
may limit payments to certain State-defined SSI recipients, or may extend
payments to persons who would be eligible for SSI except for excess income.
A significant number of States provide supplemental payments to the basic
SSI payment to support selected community-based long-term care services for
certain eligible persons, including the frail elderly, the mentally retarded,
or the chronically mentally ill. This is because the Federal SSI payment may
be insufficient to pay for services which extend beyond room and board, such as
non-medical supervision in group living arrangements or personal care
services.
A recent analysis of State supplemental payment programs by the Center for
the Study of Social Policy found that 43 States supported a diverse range of
long-term services through their optional State supplemental payment program in
1987. All 43 States offered supplemental payments for certain State-defined
out-of-home care, and 6 of the 43 States also supplemented the income of
persons requiring long-term care assistance in their homes. Payments are made
to individuals to support residence in a variety of supported housing arrange-
ments, such as domiciliary care homes, adult foster care homes, congregate care
facilities, adult residental care homes as well as for in-home services, such
as homemaker or personal care services. The report indicated that although
most States offer specialized payments to meet certain long-term care needs,
most of the programs are relatively small. It was estimated that there may be
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about 320,000 SSI recipients nationwide who receive supplemental payments
because of their need for long-term care services. 53/
B. Federal Research and Demonstration Initiatives
Over the last decade, the Federal Government has made a substantial
investment in research and demonstration activities in community-based care by
supporting a wide range of projects designed to test new ways of providing and
coordinating long-term care services as well as to achieve costs savings in
the provision of care. Federally funded demonstrations have been sponsored
principally by DHHS, and within DHHS, by HCFA and the Administration on Aging
(AoA). In some cases, HCFA has waived Medicare or Medicaid service or
eligibility requirements so that a fuller range of services may be provided to
persons who would not ordinarily benefit under the existing programs. With
nursing home care representing a substantial portion of public and private
expenditures for long-term care, most Federal research and demonstration
efforts have had the following objectives: (1) to reduce the cost of long-term
care by reducing inappropriate institutionalization and the demand for insti-
tutional care by persons who could otherwise be served through community-based
services at less cost; (2) to test whether a carefully managed system of care
would create more efficient use of existing services and deter unncessary
institutionalization; and (3) to make available to clients a wider range of
community-based services than previously existed. In order to accomplish these
objectives, the projects developed case management systems to screen and assess
persons judged "at risk" of institutional care in order to divert, where
53/ The Center for the Study of Social Policy, Completing the Long-Term
Care Continuum: An Income Supplement Strategy, Washington, D.C., Mar. 1988.
P. 27-46.
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appropriate, persons to community-based care. In addition, case management
systems were designed to improve the delivery of care to chronically ill
persons with complex needs. Multidisciplinary teams (generally composed of
medical, health, and social service professionals) were established to carry
out the case management responsibilities.
Because the success of Federal demonstration projects was premised on
findings of cost savings to the Medicare and Medicaid programs, effective
client targeting strategies were of paramount importance. Projects used
various methods to select prospective clients for demonstrations. Such methods
ranged from the selection of persons whose needs, based on results of assess-
ments of functional capacity, indicated a likelihood of nursing home entry, to
acceptance of only those persons who had already been determined eligible for
nursing home placement based on specified nursing home pre-admission screening
procedures. It was believed that the demonstration projects could achieve
cost savings only by serving those persons who could meet, or actually met, SNF
or ICF level of care requirements, but who could be equally well cared for in
the community by lower cost services.
Most of the projects have terminated as Federal demonstrations, but most
have been viewed as precursors to the DHHS National Long-Term Care Channeling
Demonstration Program begun in 1980 and completed in 1985. 54/ Because this
demonstration was the most ambitious and extensive community-based long-term
care effort to date, its results will be discussed separately below. However,
some general remarks can be made about the themes which have emerged from these
earlier demonstration initiatives.
54/ It should also be pointed out that these demonstration initiatives
also served as a model for the creation of the Medicaid Section 2176 home and
community-based waiver program discussed earlier in this paper.
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At best, the demonstrations have shown mixed results in terms of overall
costs savings, reductions in the use of institutional care, and effects on
client functioning. Various reviews of the demonstrations conducted over the
past decade have attempted to compare their respective findings and make
general statements about their results. 55/ In general, many of these reviews
have indicated that the demonstration findings do not support the view that
cost savings can be achieved through the substitution of community-based
long-term care services for institutional care. In some cases, the community-
based services offered to clients were found to be "add on" services, that is,
additional benefits whose costs were not offset by reduced nursing home costs.
In addition, there is some evidence that any costs savings that were achieved
by diverting nursing home-bound clients to community care were offset by the
additional costs incurred as a result of the case management and assessment
process.
One of the principal reasons for these findings has been difficulty in
developing effective strategies for targeting community-based services on those
persons who would actually have entered a nursing home without such services.
Many of the projects served persons who were functionally disabled but who, in
the long run, would not have entered a nursing home for a variety of reasons.
55/ Among the many reviews of these projects are the following: Stassen,
Margaret and John Holahan, Long-Term Care Demonstration Projects: A Review of
Recent Evaluations. Working Paper: 1227-2. The Urban Institute. Washington,
D.C. Feb. 1981; Berkeley Planning Associates, Evaluation of Coordinated
Community-Oriented Long-Term Care Demonstration Projects. Prepared for the
Health Care Financing Administration. Berkeley, California. May 1985;
Burwell, Brian. Home and Community-Based Care Options under Medicaid.
Affording Access to Quality Care: Strategies for Medicaid Cost Management.
National Governors' Association Center for Policy Research. Washington, D.C.
July 1986; Doty, Pamela. Can Home and Community-Based Services Provide Lower
Cost Alternatives to Nursing Homes? Working Paper. Health Care Financing
Administration. Washinton, D.C., Dec. 1984. Kemper, Peter, Robert Applebaum,
and Margaret Harrigan, A Systematic Comparison of Community Care Demonstra-
tions. Institute for Research on Poverty, Special Report. June 1987.
CRS-68
Thus, the projects were not found to have had any significant impact on re-
ducing nursing home utilization. One exception to this has been a program in
South Carolina which showed a substantial reduction in nursing home utilization
though the implementation of a managed care system. This reduction has been
attributed to the fact that the project accepted for community-based services
only those clients who had already been determined to be in need of nursing
home care through a State mandatory nursing home preadmission screening pro-
gram. Although the demonstration was able to reduce nursing home utilization
by successfully targeting a client group at high risk of institutionalization,
it was able only to break even in terms of total costs. Consistent with the
results of some of the other demonstrations, the South Carolina demonstration
showed new costs generated by the case management process and additional
community-based services. 56/
In the area of the effects of the community care projects on client
functioning, there are also mixed results. Some of the projects were able to
demonstrate reduced mortality, and improved client outcomes in terms of func-
tional or cognitive abilities. However, other projects were not able to
support totally the view that a wider range of community care options would
have overall positive benefits on the health and well-being of clients. In
some cases, this may be attributed to the fact that the projects were serving
almost exclusively a very frail and disabled group whose functional status
could not be easily improved by an expanded range of community-based service.
These findings may point up the dilemma of providing services to a chronically
disabled group--because the needs of this group are so complex and of such a
56/ Burwell, P. 83; and Mathematica Policy Research, Inc. The Evaluation
of the National Long-Term Care Channeling Demonstration: Final Report.
Prepared for the Department of Health and Human Services, May 1986. P. xix, 14.
CRS-69
chronic nature, real improvement in client outcome may not in fact be an
attainable goal.
Based on the weight of evidence emerging from the enormous amount of
research which has been conducted on the effects of community-based care, many
analysts have come to the conclusion that these services were oversold as a
cost-effective "alternative" to institutional care. 57/ Demonstrations have
shown that most persons who use expanded community care are not at risk of
institutionalization, and of those who are, few become long-stayers. That is
not to say, though, that these persons are not in need of such care. Analysts
and service providers alike are increasingly recognizing that a broader group
of disabled elderly persons, and their family caretakers, need and prefer
expanded community care services. Expanded community care and the additional
costs of such services may, therefore, simply represent an appropriate response
to the needs of a changing population. 58/
1. National Long-Term Care Channeling Demonstration
In 1980, three units within DHHS-HCFA, AoA, and the Office of the
Assistant Secretary for Planning and Evaluation--initiated the National
Long-Term Channeling Demonstration. This project was designed to test whether
a carefully managed approach to the provision of community-based long-term
care services to a frail elderly population living outside institutions could
help control overall long-term care costs while maintaining or improving the
well-being of its clients. This project has been the largest, and the most
57/ Weissert, William G. Seven Reasons Why It Is So Difficult to Make
Community-Based Long-Term Care Cost Effective, Health Services Research, V. 20,
no. 4., Oct. 1985. P. 432.
58/ Ibid.
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rigorously designed, demonstration undertaken to test the effectiveness of a
case-managed approach to long-term care service provision. The program com-
prised 10 States and local sites, with about 6,326 frail elderly clients, and
was designed with experimental and control groups.
The term "channeling" refers to organizational structures and systems
which coordinate available long-term care resources and manage them effectively
on behalf of functionally-impaired clients. Channeling was expected to achieve
its effects principally by providing clients with case management services, and
by substituting less costly community or informal services for more expensive
institutional care. Services included a range of community care options such
as home health aide, homemaker, nursing, and respite care. Service expendi-
tures were subject to pre-established controls.
The program was devised to answer questions which previous Federal demon-
strations had not totally answered, such as how much do case management sys-
tems cost and how best to target community-based services on those who would
otherwise be institutionalized. Other questions to be answered by the demon-
stration included: Does channeling reduce institutionalization and hospitali-
zation? Is use of formal health and social services in the community in-
creased? Do formal services substitute for services of families and friends?
What impact does channeling have on public and private costs of long-term care,
on longevity, improved health status, and overall client well-being?
The final results of the channeling demonstration do not support the
argument for case-managed community-based services solely on the basis that
they substitute for institutional care or that they can reduce the total costs
of long-term care. However, the project did identify a range of unmet needs on
the part of very frail older persons living in the community. Channeling
clients were of advanced age (average age, 80 years), poor (average income of
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clients and spouses was $570 per month), and had major limitations in ability
to conduct activities of daily living.
Major findings of the demonstration include the following:
o The increased costs of case management and expanded community
services offered by the demonstration were not offset by reduced
nursing home costs. As a result, costs increased overall for
those persons receiving expanded services;
O Despite the frailty of the population, channeling did not identify
a population who, without the services, would have entered a
nursing home. Channeling did not substantially reduce nursing home
utilization;
Channeling did not affect longevity, hospital use, or use of
physicians and other medical services;
Channeling increased formal community service use. Service
expenditures were highest for home health aide and homemaker/
personal care services. Almost three-quarters of services
dollars were spent for these services. This finding supports the
prevalent view among social and health services providers that
assistance with personal care and housekeeping represent the
largest service need of the functionally imparied elderly and the
one area which is inadequately supported by existing programs;
o Channeling did not have any major impact on the amount of care-
giving already provided to clients by families and friends.
(This finding is consistent with a wide body of gerontological
literature indicating that initiation of formal services for
impaired persons does not supplant the informal service provided
by family and friends.); and
O Channeling did not affect measures of client functioning, but did
reduce unmet need for services, increased cients' confidence in
receipt of care, and increased life satisfaction. 59/
While it is difficult to generalize about the application of the findings
of the demonstration to other situations, the overall implications of the
demonstration led to the following statement included by the evaluators in the
final report:
Expansion of the case management and community services beyond what
already exists, then, must be justified on the basis not of cost
savings but of benefits--increased in-home care, reduced unmet needs,
59/ Mathematica Policy Research, Inc., P. 76-77 and 169-176.
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and improved satisfaction with life among clients and the informal
care-givers who bear most of the care burden. 60/
2. Social/Health Maintenance Organization Demonstration (S/HMOs)
In 1980, HCFA, DHHS, and private foundations began funding the develop-
ment, planning, and operation of the S/HMO concept for financing acute and
long-term care services for an elderly population eligible for Medicare and/or
Medicaid. The S/HMO concept builds upon and extends the health maintenance
organization (HMO) model for financing acute, medical care services. Spe-
cifically, an HMO offers health insurance coverage for specific health care
services on a pre-paid, capitation basis (the premium charge for enrollment)
and either provides directly, or arranges to have provided, the health services
covered under the insurance contract. The HMO is at risk for the costs of the
services it covers; that is, it will experience some level of profit or loss on
the basis of its ability to estimate in advance its revenues and the utiliza-
tion and costs of services it provides.
The success of conventional HMOs in managing acute medical care services
and costs suggested the possibility of expanding the concept to include long-
term care services to allow the elderly to begin to pool their risk for chronic
care. Under the 3-year HCFA S/HMO demonstration, four test sites across the
country have assumed responsibility for financing and providing a full range of
medical and long-term care services under a fixed budget which is determined in
advance. The four S/HMO sites are the Kaiser Permanente Medical Program in
Portland, Oregon; Metropolitan Jewish Geriatric Center in Brooklyn, New York;
Ebenezer Society in Minneapolis, Minnesota; and Senior Care Action Network in
Long-Beach, California. These four sites serve an elderly population eligible
60/ Ibid., P. 185.
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for Medicare and/or Medicaid. Enrollees are to be a representative mix of
people--from well to significantly impaired. Medicare, Medicaid, and private
premiums will finance the services.
Long-term care services covered by S/HMOs include nursing home services,
home health services, homemaker/home health aide services, personal care, adult
day care, respite care, and home-delivered meals. Each S/HMO site has its own
defined long-term care benefit. Because of limited experience with long-term
care insurance and utilization, long-term care services are covered up to a
maximum dollar amount per year and require a copayment. The limits range from
$6,500 per year to $12,000. In addition, S/HMOs share with the Federal Govern-
ment risks for plan losses in excess of certain dollar limits during the first
30 months of the demonstration and eventually assume full risk for the utiliza-
tion and costs of covered services.
The four demonstration sites began providing services in 1985 and will
continue to do so through September 1992. An independent contractor will
evaluate all four sites. In general, the S/HMO demonstration is intended to
provide information about the cost effectiveness of providing services in an
integrated and managed system of care, its impact on the utilization of health
and long-term care services by the elderly, and its effect on the quality of
care available to the eligible population. Among the specific questions DHHS
expects this demonstration to address are the following:
o Whether comprehensive long-term care insurance can be marketed to
a significant number of elderly;
o What combination of benefits, eligibility criteria, premium and
marketing techniques produce a viable long-term care insurance
plan;
Whether a consolidated, pre-paid system of acute and long-term
care services can produce greater system savings than HMOs serv-
ing Medicare beneficiaries with acute care services only;
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O Whether the new privately financed long-term care benefits will
significantly reduce nursing home admissions and Medicaid "spend-
down;"
O Whether quality of care, service continuity and access can be
improved by consolidating acute and long-term care in a single
managed system; and
o Whether informal support (i.e., care provided by family members,
friends and community volunteers) of chronically impaired elderly
is enhanced in a pre-paid, risk-based, case-managed health care
system offering both acute and long-term care services.
Prior to the S/HMOs actual operation, the Office of Management and Budget
(OMB) opposed Medicare waivers required to initiate the demonstration. Citing
the Medicare program's acute medical care orientation, OMB opposed in principle
the use of Medicare funds for long-term care. 61/ OMB feared that the demon-
stration, by covering additional chronic care and social services, would
increase consumer demand and pressure for support of long-term care through
Medicare and other Federal programs. In addition, OMB argued that, if the
consolidated prepaid system for acute and long-term care envisioned in the
S/HMO demonstration did produce savings in acute hospital costs, Medicare would
not save money, given the great demand for long-term care as reflected in high
occupancy rates in nursing homes and the large amount of community-based care
provided informally by family and friends. Medicare would simply end up paying
for long-term care through the capitated Medicare payment paid to S/HMOs, which
is higher than the rate paid to other HMOs providing services to Medicare
beneficiaries. Thus, Medicare funds would replace Federal/State funds used
under the Medicaid program for long-term care, State/local funds supporting
community programs, private out-of-pocket expenditures by individuals, and
61/ Social Health Maintenance Organization Demonstrations: First
Returns, National Health Policy Forum. Issue Brief 454, Washington, D.C. P.
6.
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informal care. The result would be cost shifting, rather than savings to the
Medicare program.
In the end, Congress overrode OMB objections and mandated the S/HMO
demonstrations in the Deficit Reduction Act of 1984. The four S/HMO sites
have been in operation since 1985. Recently the Congress extended the
operation of the demonstration through September 1992. Marketing the S/HMO
concept proved more difficult than anticipated and sites could not reach their
enrollment goals, for the purposes of the demonstation evaluation, in the time
scheduled. HCFA has contracted with the Institute for Health Policy Studies of
the University of California/San Francisco to evaluate the S/HMO demonstration.
An interim report on the first 2 years' experience with enrollment, marketing,
service utilization, and expenditures is expected to be delivered to Congress
sometime in 1988.
C. State Level Initiatives
The fragmentation and lack of coordination among major Federal programs
which support long-term care services have provided the States with major
implementation challenges. The Medicaid, Social Services Block Grant, and
Older Americans Act programs all delegate administration and implementation
responsibility to the States, and, in so doing, require the States to deal
with problems inherent in the different goals of these programs, as well as
their varying eligibility requirements, service benefits, and reimbursement
policies. These implementation problems have also resulted from the fact that
fragmentation at the Federal level has been mirrored in State administra-
tion, with major long-term care programs being administered by different State
agencies.
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Many States have responded to these challenges by enacting legislation
and/or creating initiatives to reorganize and restructure benefits offered
through the Federal programs, and to consolidate the administration of various
long-term care programs in a single State agency.
State initiatives to alter and coordinate their long-term care policies
were inspired, in part, by federally sponsored demonstration projects begun in
the 1970s. Despite the mixed and rather negative results of the federally-
sponsored demonstration efforts with respect to the impact of expanded
community-based care on the costs of care, the directions established by the
demonstrations have had widespread influence on State program development. For
example, demonstrations funded under Medicaid and Medicare waiver authori-
ties and the Older Americans Act research and demonstration authorities have
served as models for State-mandated case management systems and nursing home
preadmission screening programs. Some States have, through the creative use of
Medicaid, SSBG, and Older Americans Act funds, created major system-wide
changes in the way in which community care is organized and delivered. In
addition, demonstration initiatives have also served as a testing ground for
new community-based service models. For example, adult day care demonstrations
which took place during the 1970s encouraged State and local agencies to merge
existing health and social service funds available under Medicaid, SSBG, and
the Older Americans Act to create the now more than 1200 adult day care pro-
grams in existence.
Although Federal direction and funding may have served as the impetus for
improving and expanding community care services, certain parallel activities
have been initiated by States without the benefit of Federal demonstration
funds and without any changes in Federal legislation. Some States have
developed statewide community care programs, and as one author points out,
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where such systems exist, frequently State revenues are the dominant source of
funding. 62/ Reliance on State funding has the advantage of allowing States
to design programs without the restrictions that accompany Federal funding.
Other States have addressed community-based long-term care needs by redirecting
existing Federal program funds or by using existing Federal and complementary
State funds in new ways. For example, the Virginia State Medicaid agency
operates a nursing home pre-admission screening program through local public
health departments for persons likely to be admitted to a nursing home but
whose needs could be addressed through community-based services. The
Massachusetts State agency on aging has established community-based organiza-
tions to manage certain key home care services for older persons through
creative use of title III Older Americans Act funds and State funds. The Utah
State agency on aging has established a program to identify persons at risk of
being institutionalized and has developed alternative community-based service
plans using personnel of the State's area agencies on aging network.
The objective of reducing institutional care costs and diverting potential
users to other forms of care may have been the original impetus behind much of
State efforts to alter long-term care systems. However, as evidence from
demonstrations has proven to be increasingly less optimistic about cost-
savings, long-term care systems development has become a priority of State
legislatures for other reasons, such as the growth and aging of the elderly
population and the necessity to plan for the future, and the desire of State
legislators and planners to be responsive to the preferences of the elderly for
community-based care over care in institutional settings.
There are several themes evidenced in State level initiatives.
62/ Justice, Diane. State Initiatives in Reforming Long-Term Care.
Business and Health, Dec. 1986. P. 18.
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o Control of institutional access through screening/assessment
procedures. Many States have initiated screening and compre-
hensive medical and social assessment procedures of those "at
risk" of long-term care services in order to ascertain the most
effective and least costly care option, given the client's needs.
Such screening and assessment procedures are generally applied to
persons about to enter a long-term care facility. A 1985 national
survey found that 30 States had in operation pre-admission screen-
ing programs designed to determine the need and appropriateness of
nursing home placement. 63/
o Reorganizing access to community services. Some States have
devised projects aimed at reorganizing access to community
services by providing case management services or "gateway"
procedures for clients. This concept has been developed to
overcome problems associated with multiple providers and
duplication of services that result in client confusion as to
source of care and unnecesary administrative costs among agencies.
The availability of Medicaid funds under the 2176 home and
community-based service waiver program has spurred the development
of many more case management systems but perhaps not on a
statewide basis.
O Consolidation of State administrative and funding responsi-
bilities. Some States have combined authority for the
administration and funding for all, or most, long-term care
services under one State agency. Such action is designed to
improve coordination and management of care, and to overcome
fragmentation resulting from diverse requirements under various
Federal programs.
O Cost control mechanisms. Some States have eliminated the
uncertainty of whether community care will exceed institutional
care costs by pre-establishing upper cost limits on such care; for
example, community care may be provided only when such care does
not cost more than a certain percentage of institutional care. An
example of this concept is contained in New York's Nursing Home
Without Walls program. This cost control concept was incorporated
into the National Long-Term Care Channeling Demonstration program
and has been a basic element of certain Medicaid 2176 home and
community-based service waiver programs.
o Tax incentives for dependent care. Many States permit favorable
tax treatment for families or other caretakers who care for
dependent older persons. According to a survey of the National
Association of State Units on Aging, 27 States and the District of
Columbia have adopted some form of dependent care tax credits,
generally designed to assist in the care of dependents by adults
who are working or seeking work. Of these 27 States, five have
63/ Iverson, Laura Hines. A Description and Analysis of State Pre-
admission Screening Programs. Interstudy Center for Aging and Long-Term Care.
Excelsior, MN. Mar. 1986.
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enacted tax provisions specifically designed to assist caregivers
with the expenses of caring for older persons. These States are
Arizona, Idaho, Iowa, North Carolina, and Oregon. 64/
64/ National Association of State Units on Aging. State Tax Policy
Options for the Elderly: A Guide for Aging Advocates. Washington, D.C.,
May 1985. P. 46-47.
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IV. PRIVATE SECTOR APPROACHES TO FINANCING AND DELIVERY OF
LONG-TERM CARE
During the past several years, the focus of the long-term care debate has
shifted from concern solely with reform of the way Federal programs support
long-term care to consideration of private sector initiatives which might im-
prove the elderly's ability to finance long-term care. This shift in focus
has occurred for several reasons.
Expenditures under entitlement programs which already finance health and
long-term care services, Medicare and Medicaid, have increased substantially
over the years and continue to increase, despite reconciliation legislation
which has slowed the rate of growth of these expenditures. There have also
been large budget deficits which make the establishment of any new program
difficult for some policymakers, especially one that might result in large
additional and unpredictable Federal expenditures that could contribute to the
deficit.
In addition, observers have noted that the decline in the ratio of workers
to retirees and the growth in numbers of the very oldest segment of the
population may have a marked impact on the ability of public programs to
support long-term care in the future. Others also point out that the economic
status of future generations of the elderly may improve significantly and that
they may therefore be able to pay for a larger portion of the cost of certain
long-term care services.
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A number of private sector approaches have been suggested as potentially
feasible alternatives for financing long-term care services. These range from
ways to pool risks associated with the need for long-term care, through private
insurance and life care communities for example, to conversion of an elderly
homeowner's equity into a source of funds to pay for care. A discussion of
each of these options and their feasibility for financing long-term care
follows. Another method of risk pooling, the S/HMO, was discussed above in the
section on Federal demonstrations. This report does not discuss still other
options suggested for enhancing the elderly's ability to finance long-term care
expenses, including various savings incentives such as individual retirement
accounts (IRAs), and other tax code modifications to assist families providing
long-term care services.
What role private sector options will play in the future in financing
long-term care is unclear at the current time. The improvement in the economic
status of certain groups of elderly may lead policymakers to create incentives
for relatively better off persons to use these options to finance at least a
portion of the costs of their care. Public sector support might be reserved
for the most needy income categories of elderly and/or for those with large and
prolonged long-term care costs. At the current time, however, most elderly do
not have the resources to pay for the catastrophic expenditures associated with
long-term care services over an extended period of time. For many, depletion
of assets and income on the cost of care and subsequent Medicaid eligibility is
the only option.
A. Private Health Insurance Coverage for Long-Term Care
Among the private sector approaches receiving the most attention recently
as a potential alternative for financing long-term care services is private
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health insurance. This alternative has been suggested not only because of
growing fiscal constraints on public program expenditures, but more basically
because private insurance coverage is currently available for a wide variety
of health care services and catastrophic illness. Private insurance, however,
has only recently been available for long-term care services or the
catastrophic costs associated with long-term care.
Expenditures for long-term services, and especially for nursing home care,
not only strain the budgets of public programs; they are also a burden on
private resources. In 1986, total national nursing home expenditures of $38
billion were financed about equally by public programs and private sources of
payment. Public programs financed $18 billion of the total, and private
sources $20 billion. Of total private spending for nursing home care in 1986,
only 1.5 percent was paid by private insurance coverage. Ninety-seven percent
of the total private spending for nursing home care was paid directly by the
consumer out-of-pocket. The average annual cost of nursing home care is in
the range of $20,000 to $25,000 per year, representing a catastrophic
expenditure beyond the financial reach of most elderly. 65/ In fact, one study
found nursing home cost to be the primary catastrophic expense of elderly
persons with out-of-pocket expenses over $2,000 a year. For these individuals
with high out-of-pocket costs, nursing home care accounted for over 80 percent
of these costs. 66/
In addition, private insurance coverage has been viewed by many as a
promising alternative because of general interest among the elderly population
in purchasing private insurance to supplement their Medicare benefits.
65/ Doty, Liu, and Wiener, P. 74.
66/ Rice, Thomas, and Jon Gabel. Protecting the Elderly Against High
Health Care Costs. Health Affairs, V. 5, no. 3, fall 1986. P. 17.
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Approximately 70 percent of the elderly purchase such policies. While these
policies generally pay only certain deductible and coinsurance amounts for
which Medicare beneficiaries are liable and do not cover long-term care, the
widespread interest of the elderly in this broader coverage suggests to some
observers that a market for long-term care coverage can and does exist.
Futhermore, advocates of this approach argue that nursing home utilization
is an insurable event. They point to the studies, mentioned earlier in this
report, showing that 75 percent of persons entering a nursing home stay less
than 1 year, and relatively few stay for long periods of 3 years or more.
Although there is a good deal of activity today in the private long-term
care insurance market, with more policies being offered and older policies
being revised to provide more liberal coverage to the consumer, the private
insurance industry has approached this potential market with caution. They
have pointed out a number of problems. First, insurers have been concerned
about the potential for adverse selection in long-term care insurance, where
only those persons more likely to need care actually buy insurance. In
addition, they point to the problem of the induced demand for services that can
be expected to be generated by the availability of new long-term care
insurance. With induced demand, sometimes also referred to as moral hazard,
individuals decide to use more services because they have insurance and/or will
shift from non-paid to paid providers for their care. This is especially
critical in long-term care with about 60 to 80 percent of long-term community-
based services being provided by family or friends who are not currently
compensated.
There is the additional problem that many long-term care services that are
felt to be critical in enabling frail elderly persons to remain in their homes
are custodial, non-medical services. Traditionally these services, such as
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personal care and homemaker services are considered noninsurable because of
difficulty in confining eligibility to a limited number of people. In
addition, given the nature of many chronic conditions, many people who need
long-term care will need it for the remainder of their lives, resulting in an
open-ended liability for the insurance company.
The insurance industry has pointed to one other barrier to the
development of private insurance policies: that being the major role played by
Medicaid in financing long-term care and especially nursing home care.
According to this view, Medicaid is already viewed by many as a national
coverage program for long-term nursing home care and does not have attached to
it any stigma of a welfare benefit for the poor. Although Medicaid requires
individuals to spend down their resources and income on the cost of their care
before they can become eligible for Medicaid, the insurance industry and others
have also observed that the ability of individuals to plan for the transfer of
assets in advance of using nursing home care expands the number of persons who
can receive this Medicaid benefit.
Despite these problems, the insurance industry has indicated increasing
interest in the long-term care market. Surveys of long-term care insurance
policies in 1986 found approximately 30 policies. 67/ In 1987 the DHHS Task
Force on Long-Term Care Insurance Policies found 73 companies writing long-term
care insurance policies covering 423,000 persons. 68/
67/ Wiener, Joshua, Deborah Ehrenworth, and Denise Spence. Private Long-
Term Care Insurance: Cost, Coverage and Restrictions. Unpublished paper. The
Brookings Institution. Washington, D.C., Dec. 1987. Long-Term Care
Insurance: Coverage Varies Widely in a Developing Market. U.S. General
Accounting Office. May 1987. GAO/HRD-87-80.
68/ U.S. Dept. of Health and Human Services. Report to Congress and the
Secretary by the Task Force on Long-Term Health Care Policies. Sept, 1987. P.
72.
CRS-86
Available long-term care insurance policies vary greatly by benefits
covered and length of time benefits are covered. Initially coverage of most
plans focused on nursing home care. More recently developed policies seem to
be offering more home care benefits. A GAO survey of 33 policies in 1986
found that nursing home benefits ranged from 3 months to 6 years, and home
health benefits ranged from 10 days to 6 years. 69/
Most plans provide indemnity benefits that pay only a fixed amount for
each day of covered service, thereby limiting the insurers' liability.
Generally these payment amounts are not indexed to increases for inflation.
Almost all long-term care policies contain restrictive clauses to limit further
an insurer's liability and to control utilization of services. For example,
policies frequently require that covered care be medically necessary or follow
a hospitalization before benefits are paid. This may be particularly
restrictive for persons needing certain home care and personal care assistance.
In addition, policies often exclude from coverage certain pre-existing
conditions and will deny claims for services needed in connection with such
conditions.
Premiums for these diverse policies vary a great deal. Premiums are
generally set by age at purchase, and the initial premium remains constant as a
person ages, unless all premiums are raised for all age groups. A Brookings
Institution survey of available policies in 1986 found that a low option policy
paying $40 per day for skilled nursing care and meeting certain other criteria
had an average annual premium of $318 for persons purchasing at the age of 65
and $728 for persons age 79-80. A high option policy paying $60 a day for
skilled nursing services had an average annual premium of $684 for persons age
65 and $1,496 for individuals 79-80. 70/ Brookings points out that these
69/ U.S. General Accounting Office, Long-Term Care Insurance, P. 21.
70/ Wiener, Private Long-Term Care Insurance, P. 5.
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premiums are much higher than premiums for insurance policies that many elderly
purchase to supplement their Medicare coverage. A 1985 survey found that the
majority of persons buying these supplemental policies paid $250-350 a
year. 71/
Many agree that one of the keys to the future development and growth of
the long-term care insurance market is increasing the affordability of pre-
miums. One of the ways to accomplish this is to expand the pool of persons to
whom policies are sold. Employer-based group coverage, some argue, offers
significant potential for expanding the long-term care insurance pool and
reducing premium cost. Premiums should be lower in employer-based group
coverage because younger age groups with lower levels of risk of needing long-
term care would be included, allowing reserves to be built up. In addition,
group coverage has lower administrative expenses. Currently a significant
portion of long-term care insurance premiums is associated with the expense of
marketing and underwriting individual policies, where sales are made one at a
time. 72/ Group coverage for long-term care has not been available until
fairly recently. Some of these plans cover active and retired employees and
their spouses, as well as the parents of active employees. At the end of 1986,
one insurance company announced its intention of offering group coverage for
long-term care. As of December 1987, three insurance companies sold coverage
to 6 different groups, with a total of 15,000 persons enrolled. 73/
In addition, the Office of Personnel Management announced in January 1987,
the intention of adding a new long-term care option to the life insurance
71/ Ibid.
72/ Rivlin, Alice, and Joshua Wiener. Caring for the Disabled Elderly:
Who Will Pay? The Brookings Institution. Washington, D.C. 1988. P. 69.
73/ Health Insurance Association of America. Employer-Sponsored Group
Long-Term Care Plans as of Dec. 1987.
CRS-88
program currently available to Federal employees. Under the proposal, Federal
employees who have been covered under the life insurance program for at least
10 years and who are at least 50 years old could convert a portion of their
basic insurance to long-term care protection. As presently conceived, Federal
employees could voluntarily elect to pay an additional long-term care premium
that would entitle the employee up to 3 years of nursing home care or home
health benefits paid at a fixed amount.
But just how broad-based employer interest is in a new employee benefit,
let alone a long-term care benefit, is unclear at the present. Many employers
currently face large unfunded liabilities for retiree pension and health
benefits. Many employers also experienced this year fairly substantial
increases in premiums for their current health benefits plans. In addition,
employers offering coverage for long-term care have required their employees to
assume the full premium cost of the plans.
One other suggestion has been offered for increasing the affordability of
long-term care insurance. This would involve limiting the exposure of the
insurance company to long-term nursing home costs by guaranteeing Federal or
other government payment beyond a certain length of stay. Under this proposal,
which is often referred to as stop/loss, persons who use long-term care would
be responsible for the first 2 or 3 years of costs of care and would pre-
sumably buy an insurance policy to provide that protection. After that
exposure, a government program would pick up the costs, without requiring
persons to deplete their income and assets for the cost of care as is currently
required under Medicaid. One of the assumptions behind this proposal is that
insurance companies would be able to reduce premium costs since they would no
longer have to worry about the costs of long-stay nursing home patients.
CRS-89
There is interest at both the Federal and State levels in this idea. One
State, Indiana, has passed legislation providing to those persons purchasing a
qualifying long-term care policy (i.e., a policy that meets certain criteria)
the protection of Medicaid without requiring a person to spend down income and
assets. This program will not be implemented until July 1989. It should be
noted that the private insurance industry has expressed reservations about this
approach and has suggested that premium costs may not be significantly reduced
when a government program begins to pick up the costs for long-stay nursing
home patients. The insurance industry suggests that initial age of purchase
has more of an impact on premium cost than duration of coverage.
The DHHS Task Force on Long-Term Health Care Policies included in its
September 1987 report to Congress a number of other recommendations for
expanding the market for long-term care insurance. These include (1) informing
consumers that Medicare and other health insurance policies do not cover long-
term care; (2) encouraging the purchase of long-term care insurance through
the preferential tax treatment of pension and other retirement funds used for
this purpose; (3) creating other tax incentives that would encourage the
development and purchase of policies; and (4) assuring consumer protection by
encouraging States to adopt standards for policies that meet those developed by
the National Association of Insurance Commissioners in its Long-Term Care
Insurance Model Act.
What role private insurance will play in the financing of long-term care
in the future is unclear at this time. Certainly its role is very limited for
the poor and near-poor elderly. In addition, concern has been expressed about
the extent to which existing policies will cover long-term care expenses in the
future.
CRS-90
The Brookings Institution has been looking at various private sector
options for financing long-term care, and especially the private insurance
option. In a recently published book, Caring for the Disabled Elderly: Who
Will Pay, the Brookings authors argue that long-term care insurance will
finance only a modest proportion of total nursing home expenditures by the
years 2016-2020. 74/ They point out that one of the major problems with
private long-term care insurance policies is the lack of an indexed benefit. A
policy that pays $60 a day for care when a person purchases the policy at the
age of 65 will not buy much care 20 years later when that person is most likely
to use the benefit, if that benefit is not indexed to inflation or medical care
inflation.
However, as noted above, the private insurance market for long-term care
is a rapidly changing one. Three Blue Cross/Blue Shield plans have introduced
service benefit long-term care insurance policies, which cover a certain number
of nursing home days and home health visits, without regard to cost of a day of
care. These policies are implicitly indexed. In addition, other indemnity
policies have recently come on the market with indexed benefits.
The large number of changes in long-term care insurance policies in the
past few years indicate that this market is in the early stages of development.
Whether private insurance will play a significant role in financing long-term
care in the future will depend in part on the nature of changes in this market
over time. Policymakers will be watching to see if the insurance industry will
create products that provide meaningful protection for the expenses associated
with long-term care and whether these products will be affordable by large
numbers of persons.
74/ Rivlin and Wiener, Caring for the Disabled Elderly, P. 22-23.
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B. Life Care or Continuing Care Retirement Communities 75/
One long-term care living arrangement available for financing long-term
care services for a limited but potentially growing number of elderly persons
is the life care community. Life care communities, also called continuing care
retirement communities, are organizations, usually situated in a campus-like
setting, established to provide housing, meals, housekeeping, and social
activities, to older persons for the duration of their lives. In addition to
these basic services, life care communities provide long-term care services
offered on the grounds of the facility.
The distinguishing characteristic about life care communities is the
guarantee that residents will be provided with a range of services as long as
they are residents of the community. Rights and obligations of the resident
and the community are defined under the terms of a life care contract. The
life care contract sets forth the services to be received by the resident in
exchange for financial payments, including an entrance fee and monthly charges.
Because the life care contract is intended to provide financial protection
against the future cost of long-term care services for each resident, it is
viewed in part as a form of insurance.
Long-term care services provided in a life care community may include
skilled and intermediate nursing home care, personal care, and other health
care services such as home nursing, and physical, occupational, or speech
therapy. Life care communities may differ in the amount of pre-paid nursing
care offered under the terms of the contract. Acute care and hospital care are
not provided, and some communities may require the resident to share in the
75/ Portions of this section were drawn from CRS Report 85-1127 EPW,
Life Care Communities: Description and Current Issues, by Evelyn Howard,
Dec. 23, 1985.
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cost of health/long-term care services they receive from the community. Resi-
dents continue to use Medicare and/or private insurance plans to cover the
costs of acute and long-term care services.
Generally residents who enter life care communities are relatively healthy
but as their health/long-term care needs increase, they are provided with
increased services as stipulated under the terms of the life care contract.
The number of life care communities and residents is relatively small.
Estimating the exact number of facilities and residents is difficult due to
variations in the definitions used to characterize communities. A 1987 study
by the American Association of Homes for the Aging (AAHA) and Ernst and Whinney
found about 683 communities. 76/ Another report estimated that in 1986 there
were about 850 communities serving about 150,000 households. 77/ Analysts
predict growth in the number of facilities in the future, yet sources of
information differ as to how much growth has actually occurred and will occur
in coming years. One source indicated that in the last decade, the total
number of communities has remained relatively constant, with smaller facilities
being replaced by larger communities. 78/ According to an AARP study, the
number doubled in the past 10 years and is expected to more than double in this
76/ American Association of Homes for the Aging and Ernst and Whinney.
Continuing Care Retirement Communities, An Industry in Action. 1987. P. 5. A
1984 study, Continuing Care Retirement Communities: An Empirical, Financial
and Legal Analysis [by] Howard E. Winklevoss and Alwyn V. Powell estimated that
there were about 275 life are communities serving about 90,000 elderly persons.
Another survey of the life care industry in 1984 by Laventhol and Horwath,
estimated about 600 communities.
77/ These numbers were cited in a 1986 Wall Street Journal article cited
in Netting, F. Ellen and Cindy Wilson. Current Legislation Concerning Life
Care and Continuing Care Contracts. The Gerontologist, V. 27, no. 5, 1987. P.
647.
78/ Ibid.
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decade. 79/ Although most of the life care facilities in existence are
operated by private, non-profit organizations, and some are affiliated with
religious organizations (primarily Protestant), there has been increasing
interest on the part of corporations, including major hotel, hospital and
nursing home chains, insurers, and banks, in developing such facilities. 80/
In order to gain access to a life care community, a resident is required
to pay a lump sum entrance fee with monthly payments thereafter which are
usually adjusted for inflation. Fees are generally based on the size and type
of living unit (e.g., studio, one-, two-, or three-bedroom apartment). In
addition, fees are based on some actuarial assumptions, such as life expectancy
rates and projected future health care needs.
Some analysts have observed that the entrance and monthly fees may make
the life care or retirement community option inaccessible to large numbers of
elderly. The AAHA-Ernst and Whinney study found that the median entrance fee
was $45,300 for a 1-bedroom unit in 1986, with entrance fees ranging from
$19,500 to $107,450, depending on the size of the living unit. Average monthly
fees in 1986 ranged from $570 to over $1,100, depending on the type of facility
and size of living unit. 81/ Others, however, dispute the claim that life care
is only for the relatively well-off elderly.
The life care concept is a form of long-term care insurance in that resi-
dents pool their resources and share the risk of future costs of long-term
care services. A portion of the entrance fees and monthly fees paid by all
residents is used by the community to pay for the health and long-term care
79/ American Association of Retired Persons. National Continuing Care
Directory, edited by Ann Trueblood Raper. Washington, D.C., 1984. P. 5.
80/ Netting and Wilson, Current Legislation Concerning Life Care, P. 645.
81/ American Association of Homes for the Aging and Ernst and Whinney, P.
17, 19-24.
CRS-94
costs of a small number of residents needing more extensive care at any given
time. Because only a small number of residents would be expected to need
intensive services at a given time, the fees could be considered like insur-
ance premiums paid by the entire group but used by only a small group at a
given time. In some cases, participation in a life care community may be
viewed as a form of income redistribution when some portion of the fees paid
by all residents are used to subsidize the costs of residents who can no
longer afford to pay for their own care. 82/
Supporters of life care communities indicate that there are a number of
advantages in this mode of long-term care. Life care communities offer contin-
uous, and in large part, pre-paid health and supportive care in a protected
setting with personal and financial protection against the costs of future
health long-term care needs. Residence in such a community may offer
increased opportunities for residents to maintain their relatively healthy
status upon entry since professional oversight is available on a regular
basis, as compared to completely independent living in the community where
older persons may not actively seek health promotion opportunities. Residence
in a protective community which offers a range of care may allay the fears that
many elderly face of making a sharp transition from their homes to permanent
residence in a nursing home when they become suddenly disabled. The pooling of
health and long-term care risks may reduce the uncertainties of future costs of
care, and the care provided under the terms of the life care contract can
supplement coverage of acute care provided by Medicare and private health
insurance.
82/ Winklevoss and Powell, Continuing Care Retirement Communities, P. 13.
CRS-95
While life care communities may offer an option to some elderly, and even
increasing numbers in the decades to come, they may not be able to serve a
large proportion of the elderly population in general. Life care is not an
option for the poor elderly or those with relatively intense pre-existing
health/long-term care needs. Moreover, the idea of signing over a large
portion of accumulated assets in one lump sum to an organization in return for
protection against future costs may not be acceptable to large numbers of
elderly persons. Turning over assets in such a way may eliminate inheritances
for children which some elderly may wish to protect.
While some elderly may not be able to afford the relatively hefty entrance
fees, analysts have pointed out that the equity older persons have in their
homes may be employed for this purpose. The proportion of elderly persons
owning their homes is large and they have substantial equity as a result. Of
the 18.9 million households headed by older persons in 1985, 73 percent were
owners. 83/ The median value of equity in homes held by the elderly in 1984
was $46,000. 84/ More than 80 percent of the elderly have paid-off mort-
gages. 85/, One study points out that the high level of net home equity held by
the elderly is not held only by those with higher income. About 65 percent of
all elderly poor are homeowners, with 22 percent of the poor having more than
83/ Unpublished data from the Department of Housing and Urban Develop-
ment.
84/ U.S. Bureau of the Census. Current Population Reports. Series
P-70, no. 7. Household Wealth and Asset Ownership: 1984. U.S. Govt Print.
Off., Washington, D.C., July 1986. The mean value of home equity in 1984 was
$55,000.
85/ Jacobs, Bruce. The National Potential of Home Equity Conversion.
The Gerontologist, V. 26, no. 5, 1986. P. 496.
CRS-96
$50,000 in net home equity. 86/ Other analysts indicate that because future
generations of elderly will be better off than those of the past, they may be
in a more advantageous position to afford payments for life care communities in
the future. Inflation-adjusted retirement income under Social Security
combined with private pensions and with IRA income may make the inflation
adjusted monthly fees associated with life care communities payable by
increased numbers of future generations of elderly.
Experience with life care communities is limited as are data about their
effect on costs of organizing an integrated, pre-paid approach to long-term
care service delivery. While it has offered an attractive option to a small
number of elderly persons in the past, there have been problems. Some communi-
ties have experienced financial problems due in part to poor actuarial assump-
tions about the projected longevity of residents and their future health care
needs, resulting in depletion of funds to cover costs. In view of these con-
siderations, there has been interest on the part of Federal and State officials
in more oversight and regulation over the development of these facilities in
the interest of consumer protection. 87/ According to a 1986 national survey,
20 States had enacted legislation to regulate the life care industry and 7
States had such legislation under development. 88/
86/ Jacobs, Bruce and William Weissert. Home Equity Financing of Long-
Term Care for the Elderly. Long Term Care Financing and Delivery Systems:
Exploring Some Alternatives. Conference Proceedings. Health Care Financing
Administration, Department of Health and Human Services. Washington, D.C.
Jan. 1984. P. 83.
87/ See U.S. Senate Special Committee on Aging, Life Care Communities:
Promises and Problems. S. Hrg. 98-276. Washington, D.C. May 25, 1983. In
1978, the Federal Trade Commission began investigating management and marketing
practices of some life care communities.
88/ Netting and Wilson, Current Legislation Concerning Life Care, p. 645.
CRS-97
C. Home Equity Conversion
The search for alternative approaches to financing long-term care
services has led some researchers to analyze the feasibility of using the
single largest asset most older persons have--the equity in their home. As
pointed out in the previous section, about 73 percent of elderly headed
households are homeowners. The overall homeownership equity held by elderly is
substantial. The total equity held by elderly homeowners is estimated to be
between $548 billion and $700 billion. 89/ Some observers believe that, if
converted into a source of cash, homeowner equity could be a tangible means of
financing long-term care services for some elderly who are "house rich, but
cash poor."
There are two major types of mortgage instruments which may be used to
convert equity into income: reverse mortgages, and sale/leaseback
contracts. 90/
O The reverse mortgage is the reverse of the traditional mortgage in
the sense that the homeowner receives monthly payments from the
lender instead of making such payments to the lender. The
homeowner enters into a loan agreement under which the lender
becomes committed to making a stream of monthly payments to the
borrower and the payments are to be repaid at some future date.
The monthly payments (and interest on those payments) accumulate
as a debt against the home. Usually the payments are calculated
to accrue to some predetermined value over some predetermined time
period. An elderly homeowner, for example, may obtain a reverse
89/ U.S. Department of Health and Human Services. Catastrophic Illness
Expenses. Report to the President, Nov. 1986. p. 80-81. See U.S. Congress.
Senate. Special Committee on Aging. House Select Committee on Aging. Home
Equity Conversion. Issues and Options for the Elderly Homeowner. Statement of
Bruce Jacobs, University of Rochester. P. 14; and testimony of Kenneth Beirne,
General Deputy Assistant Secretary for Policy Development and Research,
Department of Housing and Urban Development. Briefing Document. House Pub.
99-513. Washington, D.C., Jan. 28, 1985. P. 58.
90/ Reverse mortgages are also sometimes described as reverse annuity
mortgages or loan plans. For further information, see Converting Home Equity
Into Income for the Elderly: Issues and Options, by B. Ellington Foote, CRS
Report No. 84-42. Apr. 5, 1984.
CRS-98
mortgage under which the monthly payments will accumulate a debt
of $60,000 in 10 years. At the end of the loan term the
homeowner may have the option of obtaining a new reverse mortgage,
or paying the debt by selling the home or converting to a regular
first or second mortgage. The term for reverse mortgages
typically ranges from 7 to 10 years. Under the Individual
Retirement Mortgage Account, which is offered in about 7 States,
the reverse morgage runs for the remainder of the individual's
lifetime.
o Under the sale/leaseback contract, the homeowner sells the equity
in the home but retains the right to reside there, usually for
life. The buyer of the equity provides the elderly homeowner with
a down payment and pays the balance in regular monthly
installments. The seller, then, in effect becomes a renter of the
home which he/she formerly owned.
In one extensive analysis of the potential for application of homeowner
equity toward payment of long-term care expenses, researchers concluded that
there is evidence that a large proportion of older persons could use some of
their home equity to finance long-term care needs. This analysis showed that
about one-third to one-half of all elderly homeowners at high risk of need for
home care could finance a portion of home care needs out of homeowner equity.
The analysis also found that homeowner equity could be used to pay for long-
term care insurance premiums as well as for nursing home care. 91/ Another
analysis which reviewed the potential for use of homeowner equity to purchase
private long-term care insurance showed that home equity conversion could
increase the ability of some elderly homeowners to pay for long-term care
insurance, but concluded that reverse annuity mortgages and sale/leaseback
arrangements do not easily provide for long-term care financing. Since these
arrangements provide payments to individuals for longer periods of time than
91/ Jacobs, Bruce and William Weissert. Home Equity Financing of
Long-Term Care for the Elderly. Long Term Care Financing and Delivery Systems:
Exploring Some Alternatives, Conference Proceedings, Health Care Financing
Administration, Department of Health and Human Services. Washington, D.C.,
Jan. 24, 1984. It should be noted that these findings were based on a model of
probability of using home equity for this purpose, not on actual experience as
to application of equity toward long-term care expenses.
CRS-99
usually needed to finance certain long-term care expenses, they may not have
wide application for certain expenses requiring lump sums of cash over a short
period of time. This report suggested that home equity conversion could be
more useful if financial institutions permitted owners to use their homes as
lines of credit, as necessary, to pay for long-term care expenses. 92/
While the idea of using home equity for payments of on-going expenses of
the elderly has appeared in the literature for a number of years, the actual
number of home equity conversion contracts is very limited. Lenders in only a
handful of States have offered home equity loans and these loans may not be
made on a regular basis. 93/ Therefore, the actual experience is relatively
meager and its specific application to long-term care may be tentative.
Recent changes in the Federal tax code may encourage the development of the use
of home equity for purposes defined by elderly homeowners.
Thus far, there appears to be a lack of consumer demand. Moreover, some
have indicated that it is not possible to accurately estimate demand until a
variety of products are available and experience with various programs is
accumulated by individuals and organizations to save as examples for other
potential users. 94/ A number of obstacles have been cited as barriers to the
future development of these arrangements. Many of the elderly may be
reluctant to enter into these agreements because they wish to pass on some
92/ ICF Incorporated. Private Financing of Long-Term Care: Current
Methods and Resources. Phase II. Submitted to the Office of the Assistant
Secretary for Planning and Evaluation, Department of Health and Human Services,
Jan. 1985. P. 25-26.
93/ According to an information paper of the U.S. Senate Special Commit-
tee on Aging, lenders in the following States have offered loans: Arizona,
Califoria, Maine, Minnesota, New Jersey, Ohio, Pennsylvania, and Wisconsin. See
U.S. Congress. Senate. Special Committee on Aging. Turning Home Equity into
Income for Older Homeowners: An Information Paper. S. Rept. 98-216. July
1984. P. 12.
94/ Jacobs, The National Potential of Home Equity Conversion, P. 502.
CRS-100
inheritance to their heirs. Also, even if this strategy were more widely
available, some question whether the elderly would actually use the funds to
pay for long-term care services. Other elderly may not participate because
they may feel that services available from public sources will be decreased if
they use their home equity. Also, they may feel that if they outlive their
equity, they may be forced to move. A number of other issues have been raised,
including possible depreciation of homes, and concern that the elderly would
not receive fair market value for their homes or that the lenders may default
on the loans. These issues would require consumer protection measures.
There has been reluctance on the part of financial institutions to offer
these instruments, particularly due to the current lack of mortgage insurance
on the loans. Also, if the elderly homeowner lives beyond his/her equity,
lending institutions may lose money because they may be reluctant to evict an
elderly homeowner when the equity is exhausted. Finally, institutions may not
want to enter into agreements in cases where the home is not expected to appre-
ciate.
Other issues with respect to the tax implications of home equity conver-
sions remain to be resolved. According to the Department of Housing and Urban
Development (HUD), the status of sale/leaseback arrangements under the Internal
Revenue Services (IRS) code is unclear. Questions in need of resolution in-
clude the right of the seller-lessee to take advantage of the one-time
homeowner capital gains exclusion, and the ability of the purchaser-lessor to
depreciate the rental property like other rental property. 95/
While home equity conversion is not extensively available, such arrange-
ments may be attractive to some elderly for targeted long-term care expenses
95/ U.S. Congress. Senate Special Committee on Aging and House Select
Committee on Aging. Home Equity Conversion: Issues and Options for the
Elderly Homeowner. Testimony of Kenneth Beirne, P. 59.
CRS-101
if the market became sufficiently developed and loans were devised to be re-
sponsive to individual needs. Conversion of home equity into cash to be
applied toward the down payment for life care facilities was discussed above.
Conversion of home equity to remain in one's own home may be more attractive
in the long run than using equity to finance a life care facility down-payment.
Because this option allows "house rich, but cash poor" elderly to remain in
their own homes by drawing upon a ready flow of funds, it may ultimately
appeal to many more persons than life care. It may particularly appeal to
those without heirs. Advocates of this concept indicate that this strategy
could generate a significant amount of funds which, if directed toward payment
of long-term care services currently paid for by public sector programs, could
reduce pressure on these programs.
CRS-103
V. ISSUES TO BE CONSIDERED IN FUTURE PROSPECTS FOR LONG-TERM CARE
In the past, debate on Federal long-term care policy has focused on a
number of isues which policymakers still seek to resolve: how to offer more
consistent and adequate protection for long-term care expenses; how to strike a
balance between institutional and community-based care; and how best to target
services on those most in need. Whereas in the past these issues were
discussed principally in the context of proposals to reform Federal programs
of suppport, more recent attention has been given to the role private sector
alternatives, such as private insurance, life care communities, and home
equity conversion mechanisms, can play in protecting the elderly from the
catastrophic costs of long-term care. However, analysts have pointed out that
alternatives such as these may not reach a large proportion of the elderly in
need of long-term care and may only cover a portion of the costs of care they
require. Some analysts, therefore, believe that both public and private sector
strategies must be employed to accomplish goals of assuring adequate access to
care and protection against the costs of this care. Recognizing that public
financing is limited, policymakers have focused their concern with reform of
public sector programs on strategies to define what portion of the elderly
population in need of long-term care should be covered, what portion of
expenses should be covered, and what financing alternatives can be identified.
Reform of the way current Federal programs finance long-term care will be an
area of continued interest due to the large Federal investment in long-term
CRS-104
care as well as the large numbers of elderly who depend on these programs for
assistance.
Some of the questions to be addressed in the future may include the
following:
O What are appropriate roles for public programs and private sector
options to play in the financing of long-term care? How should
the public and private sectors respond to the needs of a diverse
population? What alternatives can be developed to assure that
public and private sector options will complement each other?
Assuming that some expansion of public programs will be necessary,
how should the eligible population be defined? Should eligibili-
ty be based on levels of disability? If so, what levels? Should
the presence of a family caregiver determine the level of benefits
received? To what extent should the cost of an expanded public
approach be borne by families and individuals? Should financial
responsibility be related to ability to pay? What measures should
be employed for controlling the costs of care?
To what extent should an expanded Federal role represent a modifi-
cation of the Medicare program whose focus is on acute care? To
what extent are the characteristics of long-term care services
sufficiently different from acute care to require other approaches
to reform?
What are appropriate roles for both the Federal and State
governments in an expanded public sector approach? Given the
substantial investment by some States in developing statewide
systems for community-based long-term care over the past decade,
what role should States play in the future?
Can private sector alternatives begin to improve the ability of
the elderly to finance their own long-term care expenses without
reform of Federal programs of support? Can comprehensive long-
term care coverage be provided without public mandate and/or
subsidy? What measures are necessary to obtain an adequate
population base for long-term care insurance that is affordable?
What tax incentives would be most effective in stimulating the
development of an adequate private market for insurance?
Public programs and limited private insurance currently provide
more support for institutional forms of long-term care than for
community-based care. While uncertainty about the costs of
expanded community-based care has inhibited the broadening of
coverage, community care is the option of choice among many
elderly persons. There is also substantial evidence that family
members would prefer to continue providing support services to
their disabled members if assistance were more fully available to
ease the burden of caregiving. What are the most efficient means
of assisting families while at the same time assuring cost
CRS-105
controls and efficient use of both public and private sector
support?
O What other viable options exist for enchancing the elderly's
ability to finance long-term care expenses without impoverishment?
Some have encouraged Federal and State tax modifications, and cash
accumulations plans such as Individual Retirement Accounts for
long-term care. Others have pointed to the need to expand
incentives for special housing arrangements for the elderly.
CRS-107
BIBLIOGRAPHY
American Association of Retired Persons. National continuing care directory,
edited by Ann Trueblood Raper. Washington, D.C., 1984.
American Association of Retired Persons and the Administration on Aging. A
profile of older Americans: 1984.
Doty, Pamela, Korbin Liu and Joshua Wiener. An overview of long-term care.
Health Care Financing review, V. 6, no. 3, spring 1985.
Etheredge, Lynn. An aging society and the Federal deficit. Milbank Memorial
Fund Quarterly/Health and Society, V. 62, no. 4, 1984.
Feder, Judith and William Scanlon. The long-term care marketplace: an
overview. Healthcare Financial Management, V. 14, no. 1, Jan. 1984.
ICF Incorporated. Private financing of long-term care: current methods and
resources. Final report. Submitted to the Office of the Assistant
Secretary for Planning and Evaluation, Department of Health and Human
Services, Jan. 1985.
Increasing private financing of long-term care: opportunities for
collaborative action. SRI International, Aug. 1985.
Knowlton, Jackson, Steven Clauser, and James Fatula. Nursing home
preadmission screening: a review of State programs. Health Care
Financing review, V. 3, no. 3, Mar. 1982.
Laventhol and Horwath. life care industry. Philadelphia, Pa., 1984.
Liu, Korbin and Kenneth Manton. Disability and long-term care. A paper pre-
esented at the Methodologies of Forecasting Life and Active Life Expec-
ctancy Workshop. Bethesda, Maryland, June 25-26, 1985.
Liu, Korbin, Kenneth Manton, and Barbara Liu. home care expenses for nonin-
stitutionalized elderly with ADL and IADL limitations. Unpublished paper.
Apr. 23, 1985.
Long-Term Care: The challenge to society. Health Insurance Association of
America. 1984.
CRS-108
Meiners, Mark. The case for long-term care insurance. Health affairs, v. 2,
no. 2, summer 1983.
Meiners, Mark and Gordon Trapnell. Long-term care insurance: premium
estimates for prototype policies. Medical care, V. 22, no. 10. Oct.
1984.
Rice, Dorothy and Carroll Estes. Health of the elderly: policy issues and
challenges. Health affairs, V. 3, no. 4, winter 1984.
Rivlin, Alice and Joshua Wiener. Caring for the disabled elderly: Who will
pay? The Brookings Institute. Washington, D.C. 1988.
Rowe, John. Health Care of the Elderly. New England Journal of Medicine, V.
312, no. 13, Mar. 28, 1985.
Soldo, Beth J. and Kenneth C. Manton. Health status and service needs of the
oldest old: Current patterns and future trends. Milbank Memorial Fund
Quarterly/Health and Society, v. 63, no. 2, spring 1985.
Torrey, Barbara Boyle. Sharing increasing costs on declining income: The
Visible Dilemma of the Invisible Aged. Milbank Memorial Fund Quarterly/
Health and Society, V. 63, no. 2, spring 1985.
U.S. Congress. Senate. Special Committee on Aging. The cost of caring for
the chronically ill: The case for insurance. Hearing. S. Hrg. 98-1224.
Sept. 21, 1984.
U.S. Congress. Senate. Committee on Finance. Long-term health care.
Hearing. S. Hrg. 98-732. Nov. 3, 14, 1983.
U.S. Department of Health and Human Services. Catastrophic illness expenses,
Report to the President. November 1986.
-----
Health Care Financing Administration. Long-term care: background and
future directions. HCFA 81-20047. Jan. 1984.
-----
Health Care Financing Administration. Long-term care financing and
delivery systems: Exploring some alternatives. Conference proceedings.
Washington, DC. Jan. 1984.
-----
Health Care Financing Administration. Report to Congress and the
Secretary by the Task Force on long-term health care policies. Sept. 21,
1987.
U.S. Department of Health and Human Services, Office of Research and
Demonstrations. Short-term Evaluation of Medicaid: Selected Issues.
Pub. no. 84-9. July 1, 1984.
U.S. General Accounting Office. Long-term care insurance: coverage varies
widely in a developing market. May 1987. GA0/HRD-87-80.
CRS-109
Medicaid and nursing home care: Cost increases and the need for services
are creating problems for the States and the elderly. GAO/IPE-84-1. Oct.
21, 1983.
Winklevoss and Alwyn V. Powell. Continuing care retirement communities: An
empirical, financial and legal analysis. Published for the pension re-
esearch council, Wharton School, University of Pennsylvania, by Richard D.
Irwin, Inc., Homewood, Illinois, 1984.
CRS
Congressional Research Service
The Library of Congress
Washington, D.C. 20540
Catastrophic Health Insurance
IP 370C
President Reagan signed the Medicare Catastrophic Protection Act of 1988
(Public Law 100-360) into law on July 1, 1988. The law provided insurance
to Medicare beneficiaries against the catastrophic expenses of serious illness
or injury. The expanded benefits were financed through increases in Medicare
premiums. On December 13, 1989, President Bush signed the Medicare
Catastrophic Coverage Repeal Act of 1989 (Public Law 101-234) which
repealed the catastrophic coverage provisions of Public Law 100-360. The
material in this Info Pack discusses both laws and the problem of catastrophic
health insurance.
Members of Congress who want further information on this topic may
contact CRS at 707-5700. Additional CRS Reports may be identified by
looking in the current Guide to CRS Products (for congressional use only)
under "Health Insurance" and in the latest Update under "Health."
Additional information on this subject, primarily in periodicals and
newspapers, may be found at a local library through the use of indexes such
as the Readers' Guide to Periodical Literature, Public Affairs Information
Service Bulletin (PAIS), and various newspaper indexes.
We hope this information will be helpful.
Congressional Reference
Division
IP370C
AS
A20
November 23, 1989
THE NEW YORK TIMES
Lawmakers Tell the Elderly:
'Next Year' on Health Care
By MARTIN TOLCHIN
Special to The New York Times
WASHINGTON, Nov. 22 - Hours
cluding the politically unpopular sur-
concern on the part of the members
after Congress voted to repeal the
tax. Repeal came on a voice vote, with
that when we next undertake to ad-
Medicare act covering the high costs of
less than a handful of senators in the
dress the problems of health care for
extended illness, House and Senate
chamber. The Senate had tried to save
the elderly, we will have the support of
leaders pledged today to address
parts of the program, but these efforts
the constituency."
health care for the elderly next year.
were rejected by the House.
But they acknowledged that many
"It's a quiet end to a long and loud
Senator Bob Dole, the Republican
political obstacles remained.
controversy," Mr. Mitchell said.
leader, also predicted that Congress
The repeal of the Medicare Cata-
would revisit the issue next year, but
About 40% Paid the Surtax
strophic Coverage Act was among the
said that the lawmakers' inability to
final acts of Congress before it ad-
The measure was intended to protect
revise the Medicare program sug-
journed for 1989 before dawn today. In
33 million older and disabled Amer-
gested that Congressional action would
the closing hours Congress also ap-
icans from the high costs of extended
be long and difficult.
proved a $14.7 deficit-reduction pack-
illness. It placed a ceiling on a Medi-
Representative Dan Rostenkowski,
age that includes several minor tax in-
care patient's payments for hospitals,
Democrat of Illinois, the chairman of
creases and retains across-the-board
doctors and prescription drugs. The
the House Ways and Means Commit-
spending cuts that automatically took
program also provided money for
tee, said that he was dismayed that
effect Oct. 1 to meet the requirements
skilled nursing home care, mammog-
those who received new health benefits
of the budget-balancing law.
raphy and hospice care and contained
were reluctant to pay for them. The
But the issue that dominated most of
a provision intended to prevent the im-
Congressman noted in a speech last
poverishment of those with spouses in
week in Chicago that the elderly have
nursing homes.
often won the battle with the young
But about 40 percent of the Medicare
over scarce Federal resources.
The contentious
beneficiaries had incomes high enough
'The Old Have Gotten More'
to pay the surtax, which could be as
much as $800 a year for an individual.
"One of the most unhappy results of
fight over
The surtax took effect this year, along
our ongoing budget gridlock has been
with the hospital benefits, while pay-
an uneven contest between the very
Medicare quietly
ments for doctors under the plan was
young and the very old," Mr. Rosten-
to take effect in January and the pre-
kowski said in the speech. "The young
ends at 2 A.M.
scription drug benefits in January 1991.
have lost nearly every time. That's
The plan is also financed by a flat pre-
partly because the old, however frail
mium of $4 a month that is deducted
they may be, are sophisticated enough
from Social Security checks.
to use the political process to press
The Senate had sought to retain the
their demands."
Congress's final days was the conten-
hospital benefits, along with the flat
He said that "the sad story of the
tious fight over repealing the expan-
premium, while eliminating the surtax.
1980's" was that "the old have gotten
sion of Medicare to help the benefici-
But the Senate vote to repeal came
more while the young have gotten
aries avoid financial ruin because of ill-
this morning came after the House
less."
ness. Despite several last-minute ef-
voted, 346 to 55, to reject the Senate ef-
Others insisted, however, that the
forts by the Senate to salvage part of
fort to retain the ceiling on hospital
Medicare expansion act helped an en-
the program, it finally fell. Tens of
payments.
tire family by freeing adult children
thousands of older Americans have
"The seniors want and need protec-
from the financial burdens of a sick
protested having to pay a surtax to
tion against catastrohic illness," said
parent, and thereby providing more
help finance the program, which pro-
Senator John McCain, Republican of
spending money for the entire family.
vided health benefits that many re-
Arizona, the sponsor of the Senate pro-
ceived as retirees.
posal.
They also protested the program's
The House voted 352 to 63 Tuesday to
failure to provide the protection many
repeal the program, it third over-
older Americans seek: insurance for
whelming vote to end the program.
the costs of long-term nursing home
care. Such expenses have forced many
Monthly Deductions to End
families into bankruptcy.
The program will end when the
Final Vote in Early Hours
President signs the bill and the deduc-
tions from the Social Security checks
"Understandably, there is a reluc-
will stop.
tance on the part of members of Con-
Some lawmakers lamented the re-
gress to get into the whole area, having
luctance of the elderly to pay for health
just been burned on catastrophic," said
benefits and questioned whether Con-
Senator George J. Mitchell, of Maine,
gress would approve legislation that
the majority Leader.
would require all taxpayers to pay for
The final vote to kill the entire pro-
the health care of the elderly, rather
gram of extended care came shortly
than address the health needs of the
before 2 A.M. after Senator Mitchell
young and the 37 million people with no
advised his colleagues that the Senate
health insurance.
had but two choices: repeal the pro-
House Speaker Thomas S. Foley of
gram or continue the current law, in-
Washington said, "I think there is a
©
1989 The New York Times. Reproduced by the Library of Congress,
Congressional Research Service with permission of copyright claimant.
IP370C
The Washington Post, October 7, 1989, pp. Al, A10
AS
rise gradually each year. It is paid by
the elderly since Medicare passed in
Health Law
all Medicare beneficiaries, and
1965. But opposition to the law sur-
McCain said the flat fee would fund
faced when Congress convened in
all the benefits that his bill retains.
January and has increased ever
Surtax
The proposal to repeal the law,
since, fed by the resentment over
proposed by Sens. John C. Danforth
the surtax.
(R-Mo.) and William V. Roth Jr. (R-
Repeal or major retrenchment on
Del.), was defeated, 73 to 26. A plan
1 broad social benefits law of this
Defeated
sponsored by Sen. Dave Durenber-
type is unprecedented in modern
ger (R-Minn.) to retain the surtax,
times. In the case of the catastrophic
but limited to $200 and save more
law, resentment was spurred by its
benefits than the McCain plan, lost
Senate Votes to Lower
unique financing scheme under
62 to 37.
which the beneficiaries bore the en-
During the 11-hour debate, Sen-
tire cost of the program through pre-
Catastrophic Benefits
ate opponents of repeal-many of
miums. All other social benefits of
whom also thought that McCain was
this type have been financed in whole
But Rejects Repeal
cutting back benefits too much-ex-
or in part by taxes on the general
pressed dismay at the intense oppo-
population or the working popula-
sition of elderly Americans over the
tion.
By Spencer Rich
surtax.
Durenberger argued that despite
Washington Post Staff Writer
Some noted that only 5.6 percent
resentment over the surtax, the larg-
of 33 million Medicare beneficiaries
er problem was "the doctor bills and
The Senate last night voted 99 to
would have to pay the $800 maxi-
medical bills" for 20 million older
0 to eliminate a controversial surtax
mum premium this year.
Americans with inadequate health
and sharply reduce benefits in the
"We've been hearing from some of
insurance coverage or income to pay
1988 law that protects elderly Amer-
the wealthiest citizens, said Minority
for medical care.
icans from catastrophic health costs.
Leader Robert J. Dole (R-Kan.).
Senate Majority Leader George J.
But the Senate refused to repeal
"The poor, the elderly and the sick
Mitchell (D-Maine) warned, "We
the program altogether, as the
are probably not going to contact
must not lose sight of those who
House voted to do Wednesday, 360
us."
have no other recourse, who need
to 66. The differences between the
"The whole U.S. has been swung
that catastrophic protection and have
versions will have to be settled in a
House-Senate conference.
around on their tails by the 5.6 per-
no other way to get it."
cent who don't want to pay for these
In the key, early vote, the Duren-
The unanimous Senate vote adopt-
benefits," Sen. Alan K. Simpson (R-
berger plan lost decisively despite
ed revisions proposed by Sen. John
Wyo.) said. "We're not confused;
the support of Mitchell, Dole and
McCain (R-Ariz.), an arch-foe of the
-we're terrorized
Yeah, it's a
Senate Finance Committee Chair-
surtax that was resented by elderly
Americans because the most affluent
social experiment; it's called pay for
man Lloyd Bentsen (D-Tex.) and the
what you get."
endorsement of Health and Human
would have to pay up to $800 this
"If we repeal this bill," Sen. Bill
Services Secretary Louis W. Sul-
year to help finance the program.
Bradley (D-N.J.) said, "people will die
livan.
"The surtax is the object of the ire
and the anger of the senior citizens
or go bankrupt
If we manage to
The White House, however, had
of America," McCain said. Sen. Phil
salvage this program, next year they
said the Cabinet secretary was
will thank us."
speaking for himself and not the ad-
Gramm (R-Tex.) said, "They hate it."
Under the McCain plan approved
Durenberger expressed anger
ministration. Sources said Sullivan
that President Bush had not taken an
protested to the White House
by the Senate, the program would
active role in defending the program.
against its refusal to endorse the Du-
retain the substantial improvement
"If he'd work half as hard on cata-
renberger plan, which he considered
in Medicare hospital benefits voted
strophic as he did on capital gains,
the closest measure that met the
in 1988, three improvements in
we'd still have a bill."
administration's professed desire to
Medicaid health care for the poor
But Sen. Orrin L. Hatch (R-Utah)
preserve the 1988 law.
and several smaller Medicare ben-
said, "Most of the benefits will con-
Besides cutting the maximum sur-
efits involving mammography, home
health services, respite benefits for
tinue at a modest cost and we get rid
tax to $200 per person this year, the
of the surtax."
Durenberger plan would have elim-
those caring for disabled relatives
and hospice care.
Sen. John D. Rockefeller IV (D-
But the Senate bill would would
W.Va.) said that while he backed Du-
eliminate two of the three biggest
renberger's plan as more generous
benefits in the 1988 law-the limits
to the elderly, McCain's plan "is bet-
on out-of-pocket costs for doctor bills
ter than nothing."
and prescription drugs.
When signed by President Ronald
While the bill would kill the surtax,
Reagan last year, the catastrophic
it would leave in effect a non-contro-
illness law was lauded as the most
versial $4 a month premium that will
significant advance in health care for
© 1989 The Washington Post Company. Reproduced by the Library of Congress,
Congressional Research Service with permission of copyright claimant.
IP370C
AS
The Washington Post, October 5, 1989, PP. Al, A28
But Fortney H. "Pete" Stark
Archer, the prime Republican
House Votes
(D-Calif.) said, "You allow the
sponsor of the repeal, called the
most well-to-do and highly organ-
special premium "an unfair tax" that
ized of the seniors to turn you away
subjects everyone who must pay it
from 20 million" who have no cat-
To Repeal
astrophic protection of their own.
to "the highest tax rates of any
"We are being stampeded by a small
group" in the country in order to fi-
group
the wealthiest, to deny
nance benefits for fellow seniors
Health Plan
benefits to everyone else."
who pay nothing and for the disa-
The catastrophic law increased
bled who receive Medicare, includ-
three major Medicare benefits. It
ing a growing AIDS population.
extended from 60 to 365 the num-
Policy analysts yesterday could
Action Follows Drive
ber of days each year of hospital-
not recall a similar instance where
ization that would be paid for by
Congress repealed a major benefit
By Elderly Against
Medicare; imposed a limit of $1,370
and predicted that the controversy
a year on a person's out-of-pocket
will dampen any enthusiasm for fu-
"Catastrophic" Surtax
costs for Medicare-eligible doctor
ture legislation to benefit the na-
See CATASTROPHIC, A28, Col. 1
tion's growing elderly population.
"This is without precedent," said
By Spencer Rich
Robert M. Ball, who served as So-
Washington Post Staff Writer
CATASTROPHIC, From A1
cial Security commissioner under
The House voted 360 to 66 yes-
three presidents and is a Washing-
terday to repeal the 1988 law de-
bills, and created a new prescription
ton consultant. Congress has
signed to protect the elderly from
drug benefit under which the gov-
trimmed entitlement benefits, but
the costs of catastrophic illness.
ernment would pay for the bulk of
usually adds or improves benefits
After the vote to kill a program
outpatient prescription costs once
for others in the process, Ball said.
once hailed as the Reagan admin-
out-of-pocket payments reached
Hugh Heclo, a political science
istration's major achievement in
$600 a year.
professor at George Mason Univer-
social policy, its supporters pro-
All three improvements, along
posed a compromise that would
sity and an authority on the federal
with some lesser ones, would be
have retained some benefits, but
bureacracy, said he could recall only
eliminated if the House bill passes
eliminated its most controversial
two similar instances of Congress
the Senate. Three major Medicaid
component-a special income-
wiping out benefit programs. The
based surtax. The House, however,
health benefits for low-income peo-
most recent occurred in the 1930s
was in no mood to compromise, and
ple would be retained.
when Congress, furious at the Ag-
defeated that plan by a vote of 269
Opposition to the catastrophic
riculture Department, abolished
to 156.
law first surfaced when Congress
programs designed to help tenant
The dramatic turnaround in the
convened last January and has in-
farms. The other was in the 1870s
House-which approved the pro-
creased in intensity ever since. Ob-
when it disbanded the Freedman's
gram overwhelmingly last year-
jections from the elderly centered
followed an intense lobbying cam-
Bureau, which was created to help
on an income based premium, or
former slaves.
paign by elderly Americans who
surtax, required to be paid by the
bitterly opposed the surtax, which
Yesterday's vote, Heclo said,
40 percent of the elderly with the
could cost the most affluent up to
"lays the seeds for more inter-gen-
$1,050 a year by 1993.
highest incomes to help finance
erational conflict," with younger
benefits.
If the Senate follows the House's
people questioning why "we have
lead, it will mark the first time since
The amount rises along with in-
been too generous to that portion of
the rise of the welfare state that
come and could reach $800 a per-
the population
They're taking
Congress has acted to retract a ma-
son this year for the better-off el-
it all and we're having to pay for it.
jor entitlement program. Support-
derly. Although only 5.6 percent of
They're not grateful for what we're
ers of the repeal yesterday said
the elderly would pay the $800
trying to do."
they were responding to the wishes
maximum this year, and three-fifths
Among the explanations given by
of the elderly, while opponents
would pay no surtax because their
members of Congress for the sever-
warned that the House was making
incomes are too low, the provision
a mistake that would haunt it.
ity of the protests:
prompted an avalanche of protests
The 1988 law "has no support
The benefit is the first to be
that even caught groups such as the
among the people we purport to
funded entirely from premiums on
American Association of Retired
help," said Rep. Brian J. Donnelly
beneficiaries, whereas benefits for
(D-Mass.), cosponsor of the repeal
Persons, which supported the bill,
the elderly traditionally have been
move along with Reps. Bill Archer
by surprise.
paid for in whole or in part by gen-
(R-Texas) and Marty Russo (D-III.).
eral taxes on the whole population.
© 1989 The Washington Post Company. Reproduced by the Library of Congress,
Congressional Research Service with permission of copyright claimant.
An estimated 5 million elderly al-
The substitute was drafted last
ready have roughly equivalent ben-
week in a last-ditch effort to stave
efits financed in whole or in part by
off the repeal move. Archer, Don-
their former employers. For them,
nelly and other advocates of repeal
the high premiums are seen, in the
said the best course would be to
words of one critic, as "a dead loss."
repeal the whole law and start over
The mistaken belief by many el-
again to construct some form of
derly who will pay little or nothing
program that contained the benefits
because their incomes are too low
the elderly want with what they
that they they must pay the $800.
viewed as a fairer financing mech-
The belief by many elderly that
anism.
long-term nursing-home care or
custodial home care is preferable to
Staff writer Bill McAllister
additional hospital and doctor bill
contributed to this report.
protections.
Calling for repeal, Donnelly said,
"We didn't see a year ago
the
fatal flaws. Over half the benefici-
aries already had this coverage. We
forced them to take it and pay an
added fee" and did not give them
WHAT WAS VOTED DOWN
"the right to choose their health
coverage."
Rep. Willis D. Gradison Jr. (R-
T
he catastrophic-illness insurance program that the House
Ohio) said a better course than re-
voted to repeal yesterday was signed into law by President
peal would be to "refine" and cor-
Ronald Reagan 15 months ago. The following key provisions would
rect the act's flaws. He said at least
be eliminated from the law if the Senate concurs:
15 million to 20 million elderly "will
Unlimited hospitalization coverage.
be much worse off" because of ben-
A cap on out-of-pocket payments for doctors' bills.
efit loss from repeal.
Help in paying for prescription drugs.
"We in the Congress can't take
Mammogram coverage.
the heat from a wealthy few," said
House Ways and Means Committee
Improved coverage for nursing home care.
Chairman Dan Rostenkowski (D-
Improved benefits for care in the home.
III.). "All principles are abandoned
Improved hospice benefits.
Five million senior citizens
A special premium or surtax of up to $800 per person this year
may be complaining about the sup-
that would have helped finance the benefits.
plemental," but many millions :nore
A flat monthly fee ($4 in 1989).
of the 33 million on Medicare, he
SOURCES: The Washington Post, Democratic Study Group, Congressional Quarterly Almanac
said, are being hurt by repeal.
Like the Donnelly-Archer pro-
posal, the substitute introduced by
Stark, Gradison and Henry A. Wax-
man (D-Calif.) proposed to kill the
premium and wipe out most of the
major catastrophic-illness benefits
of the 1988 law. But it would have
retained the 1988 law's new pre-
scription-drug benefit, several oth-
er Medicare benefits, including rou-
tine mammography screenings, and
the Medicaid provisions.
inated the drug benefit. It would
have retained not only hospital im-
provements but the new limit on out-
of-pocket costs for doctor bills.
The 1988 law provided three ma-
jor benefits designed to protect fam-
ilies from the costs of catastrophic
illness that can wipe out a lifetime of
savings overnight.
One increased the number of days
of hospitalization that Medicare
would pay for from 60 days a year to
365. A second guaranteed that no
Medicare patient need pay more
than $1,370 a year out of pocket for
Medicare-eligible doctor bills. The
third provided that Medicare would
pay the bulk of an individual's costs
for non-hospital prescription drugs
once out-of-pocket outlays reached
$600 a year. Of these three, only the
hospital benefit would be preserved
in the new Senate measure.
In addition, the 1988 law provided
three major new Medicaid health
benefits for low-income persons that
would be preserved in both the
House and Senate bills. They would
prevent the impoverishment of a
person whose spouse must go to a
nursing home, provide Medicaid care
for all poor pregnant women and in-
fants and make the state pay Medi-
care fees for low-income elderly.