Medicaid
Trends in Medicaid Long-Term Care Spending
Research Report
Barbara Coleman, AARP Public Policy Institute
January 1999
Table of Contents:
- Introduction
- Medicaid Long-Term Care Services
- A Shift in Medicaid LTC Spending Patterns
- State Per Capita Spending
- Home Health Services
- Personal Care Services
- Home and Community-Based Care Waiver Programs
- Differences in State Allocations
- Conclusion
- Footnotes
Introduction
Medicaid is the single largest public source of funding for long-term care (LTC) in the United States, accounting for more than 38 percent of total long-term care expenditures in fiscal 1996. Medicaid spending for LTC more than doubled from fiscal 1987 through fiscal 1997, rising from $21.1 billion in fiscal 1987 to $56.1 billion in fiscal 1997. The bulk of Medicaid spending has gone to nursing home care over the years, but recent expenditure reports show states allocating an increasing share of that spending to home care services.
This report on trends in Medicaid long-term care spending is drawn from tables prepared by Brian Burwell of The MEDSTAT Group.1 Each year, Burwell compiles Medicaid long-term care spending data from reports submitted by states to the US Health Care Financing Administration (HCFA 64 reports).
Medicaid Long-Term Care Services
For years, nursing home care has been the predominant form of publicly funded long-term care. State Medicaid programs are required to pay for nursing home care and home health care for persons who qualify under federal and state criteria. The Medicaid Home Health Care benefit covers skilled nursing services, home health aides, medical supplies and equipment, and physical and other therapies.
In addition to these mandatory Medicaid benefits, states have the option of providing services to Medicaid beneficiaries under the Personal Care program and the Home and Community-Based Care (HCBC) Waiver program. The Personal Care program provides services that help individuals with basic activities of daily living, such as eating, bathing, and dressing. In 1997, 31 states chose to provide Personal Care benefits to Medicaid-eligible individuals. (See Figure 1 for Personal Care states.)
The HCBC Waiver program allows states to: 1) cover services for specific groups, such as older persons or persons with developmental disabilities, rather than for all Medicaid beneficiaries; 2) provide services on less than a statewide basis; 3) include a wider range of benefits than offered under the standard Medicaid
program; and 4) use a higher income-eligibility standard. States may cover a wide variety of nonmedical, social, and supportive services, such as case management, homemaker, home health care, personal care, adult day health, respite, and other services.2
Every state (except Arizona) had one or more home and community-based waiver programs in 1997. Arizona provides comparable services to waiver programs under a Section 1115 research and demonstration waiver.
This report uses the term "home care" as Burwell does to encompass the three Medicaid programs: Home Health, Personal Care, and Home and Community-Based Care Waiver programs.
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A Shift in Medicaid LTC Spending Patterns
Burwell's analysis of the HCFA 64 data shows that Medicaid spending for LTC increased 9.3 percent from fiscal 1996 to fiscal 1997 - the highest rate of growth in long-term care spending since fiscal 1992.
Burwell's review of national Medicaid long-term care expenditures from fiscal 1987 through fiscal 1997 shows a clear shift in spending patterns for long-term care services. Medicaid spending on nursing home and intermediate care facilities-mentally retarded (ICF-MR) care as a proportion of total Medicaid LTC spending dropped from 90.2 percent in 1987 to 75.8 percent in 1997.
Conversely, home care spending as a percentage of total Medicaid long-term care spending more than doubled - from 10.8 percent in 1987 to 24.0 percent in 1997 (see Figure 2).3
In 1987, the states reported spending a total of $2.1 billion for Medicaid home care services. Of the total, HCBC waiver programs constituted only $451 million (about 22 percent). By 1997, however, total Medicaid home care spending had grown to $13.5 billion, of which $8.1 billion (60 percent) went to waiver programs. Spending for the personal care program accounted for $3.2 billion (24 percent of 1997 home care expenditures) and home health services for $2.2 billion (16 percent).
Although Burwell uses national data from 1987, he confines his compilation of state-by-state long-term care spending to fiscal years 1992 through 1997. Over that period, New York led the states in total Medicaid spending for home care services. In fiscal 1992, the state spent $2.1 billion for home care, which grew to $3.5 billion in fiscal 1997, a total that dwarfs the spending of other states. California had the second highest expenditure with $630 million; three other states spent $500 million or more for home care in fiscal 1997 (Texas, $626.7 million; Ohio, $563.3 million; and Massachusetts, $523 million).
Total state long-term care expenditures must, of course, be viewed in the context of a state's population size. One would expect states the size of New York and California to have higher spending totals than smaller states. Size does not explain, however, why New York, the third largest state, spent more than five times as much as California, the largest state, on Medicaid home care services in fiscal 1997. (Table 1 shows state spending on home care for fiscal years 1993, 1995, and 1997.)
State Per Capita Spending
When one examines per capita Medicaid home care spending, state rankings change considerably from the rankings by total spending. Burwell divides total Medicaid home care expenditures by a state's total population to arrive at per capita rankings. The top five states in per capita home care spending in 1997 were New York, Rhode Island, Connecticut, Vermont, and Minnesota.
Rankings in per capita spending do not appear to be correlated with the proportion of persons age 65 and over in a state. Rhode Island was the second highest ranking state in per capita spending ($126.69) in 1997, and Rhode Island had the second highest ratio in the country of persons age 65 and over to total population (15.8 percent).
However, the highest ranking state in per capita Medicaid spending for home care was New York ($192.63), which was 15th among the states in percentage of persons age 65 and over.4 Connecticut was third in per capita spending ($112.15), but 9th in the percentage of older persons to total population.
There also appears to be little relationship between the percentage of people age 65 and older with incomes below the poverty level and a state's Medicaid per capita spending for home care. For example, four of the five top ranking states in per capita spending had lower rates of poverty for their older populations than the national average of 11.47 percent. Only New York at 12.96 percent was higher than the national average, but 15 other states had higher percentages of poor older persons.
Home Health Services
In fiscal 1987, Medicaid Home Health spending totaled almost $440 million. In the late 1980s and early 1990s, expenditures for Home Health services were increasing annually by 20 percent to 28 percent each year, but that growth began slowing by fiscal 1993. In fiscal 1997, total expenditures reached $2.2 billion, an amount that was only 5.9 percent higher than fiscal 1996 expenditures, the smallest one-year increase through the fiscal 1987-1997 period.
The lower rates of growth in Medicaid Home Health spending in recent years may reflect a strategy by some states to maximize the use of the Medicare Home Health program for older persons who are eligible for both Medicare and Medicaid. One recent study comparing Medicare and Medicaid spending on home health care concluded that some states with relatively high Medicaid costs appear to have adopted this 'Medicare maximization' approach as a way to shift costs from Medicaid to Medicare.5
Personal Care Services
Medicaid expenditures for the Personal Care program totaled $3.2 billion in 1997, almost triple the $1.2 billion spent
in 1987. Although only 31 states used the Medicaid Personal Care option program in 1997, 40 states offered personal care services under at least one of their HCBC waiver programs. Twenty-five states provided personal care services under both programs.
| $3.1 | $9.0 | $29.3 | $31.0 | $41.8 | $52.7 | ||
| $61.4 | $81.6 | $123.1 | $156.4 | $224.9 | $438.1 | ||
| $70.7 | $95.4 | $113.2 | $25.2 | $29.9 | $34.1 | ||
| $0.6 | $1.3 | $1.1 | $37.0 | $56.8 | $86.1 | ||
| $60.6 | $282.3 | $630.2 | $66.1 | $91.0 | $114.5 | ||
| $91.9 | $152.6 | $223.6 | $302.4 | $398.8 | $488.1 | ||
| $219.9 | $352.6 | $367.2 | $25.1 | $72.1 | $112.0 | ||
| $16.4 | $18.6 | $14.2 | $11.9 | $13.6 | $18.4 | ||
| $23.0 | $35.2 | $30.6 | $2,239.2 | $2,920.4 | $3,502.9 | ||
| $157.1 | $294.1 | $331.8 | $113.2 | $226.7 | $563.3 | ||
| $82.9 | $128.2 | $163.6 | $73.8 | $100.3 | $117.7 | ||
| $15.0 | $35.3 | $21.9 | $174.1 | $234.6 | $247.1 | ||
| $20.3 | $49.6 | $101.5 | $215.6 | $332.5 | $483.7 | ||
| $19.1 | $26.2 | $35.2 | $86.4 | $87.2 | $125.4 | ||
| $139.0 | $152.9 | $241.6 | $50.8 | $75.3 | $121.3 | ||
| $42.0 | $47.0 | $82.8 | $24.1 | $33.1 | $42.9 | ||
| $46.8 | $98.4 | $150.2 | $33.9 | $22.4 | $89.7 | ||
| $100.2 | $130.7 | $168.9 | $213.4 | $316.7 | $626.7 | ||
| $36.4 | $76.2 | $83.9 | $32.9 | $38.6 | $59.1 | ||
| $253.7 | $521.9 | $522.9 | $79.8 | $121.9 | $187.3 | ||
| $130.3 | $195.4 | $231.9 | $34.8 | $55.3 | $62.5 | ||
| $43.3 | $66.2 | $97.0 | $153.3 | $225.0 | $364.3 | ||
| $254.2 | $315.5 | $485.7 | $170.8 | $224.0 | $380.1 | ||
| $114.1 | $203.0 | $279.2 | $91.8 | $119.1 | $131.9 | ||
| $240.7 | n/a | $462.4 | $14.5 | $32.3 | $40.9 | ||
| $9.2 | $13.3 | $20.3 | $6,709.6 | $9,476.9 | $13,504.2 |
*Home care includes the Home Health, Personal Care, and Home and Community-Based Care programs.A state might choose to provide personal care services under a waiver program as well as administer the Personal Care Option program, because the programs serve different populations of Medicaid-eligible persons.
Home and Community-Based Care Waiver Programs
Burwell reports that 1997 Medicaid long-term care spending "was driven by a large increase in spending for Medicaid home and community-based care waiver services," which increased by 44.6 percent from fiscal 1996 to 1997. Spending on waiver programs has soared from only $451 million in fiscal 1987 to $8.1 billion in fiscal 1997.
States develop waiver programs for specific population groups that include aged and disabled persons, mentally retarded/developmentally disabled (MR/DD) persons, and brain-injured adults. Spending per capita varies considerably for the different categories of beneficiaries, with the highest per capita costs incurred for services for the MR/DD population.
Some states use waiver programs to provide personal care services because the waivers allow a state greater flexibility. For example, under a waiver, a state can use higher income-eligibility criteria rather than the standard Medicaid income-eligibility criteria.
About 80 percent of 1997 total HCBC waiver spending was for services for this group.6 Although MR/DD caseloads tend to be smaller in most states than the caseloads for programs serving older people, the cost of services for the MR/DD population can be three to four times higher. For example, Maine reported a per capita cost of $29,674 under its MR/DD waiver program in 1996, compared to $6,126 per capita in its elderly waiver program and $9,184 in its physically disabled waiver program.
Differences in State Allocations
Some states concentrate their home care efforts on only one of the three Medicaid programs. For example, of the $121 million spent by Rhode Island for Medicaid-covered home care in 1997, almost 97 percent was for the HCBC waiver programs. The state does not operate a Medicaid personal care program, and spent only about $4 million on its Home Health care program. On the other hand, New York's total home care spending is allocated among all three programs: 33 percent ($1.2 billion) on the HCBC waiver program; 44 percent ($1.6 billion) on the Personal Care program, and about 24 percent ($793 million) on the Home Health program.
Kentucky is an example of a state that makes greater use of Medicaid Home Health care than the other two Medicaid programs. Medicaid Home Health care spending comprised 58.7 percent ($99 million) of Kentucky's total $169 million in 1997 home care expenditures. The remaining $70 million came from the HCBC waiver program; Kentucky has no Personal Care program.
Conclusion
The factors that influence state spending on Medicaid home care services are unclear. Differences in the percent of persons age 65 and older and poverty rates of older persons do not appear to be significant influences. A recent study of variations in state spending for long-term care speculated that the variations "could be due to different philosophical beliefs about the value and importance of caring for people in their own homes," or could "as easily reflect the political power of the nursing home lobbies."7
However, the data clearly show that Medicaid expenditures for home care services have steadily increased in recent years, particularly expenditures for home and community-based care waiver program services for the MR/DD population. Home care services are expanding, and states continue to increase Medicaid spending for the vulnerable populations that need long-term care services.
1
Brian Burwell. "Medicaid Long Term Care Expenditures in
FY 1997." The MEDSTAT Group. Cambridge, MA. April 6, 1998.
2
States have different definitions for service categories such
as "home health" or "personal care," and sometimes
use these terms interchangeably with "homemaker" or
"chore" services.
3
Burwell notes these data are subject to change over time because
states can submit amended HCFA 64 reports. He also notes that
HCFA 64 data are by date of payment, not date of service.
4
American Association of Retired Persons (AARP) and U.S. Administration
on Aging. A Profile of Older Americans: 1997. AARP.
Washington, DC. December 1996.
5
Genevieve Kenny, Shruti Rajan, and Stephanie Soscia. "State Spending for Medicare and Medicaid Home care programs." Health Affairs. 17(1). January-February 1998.
6
Robert Prouty and K. Charlie Lakin, Eds. Residential Services for Persons with Developmental Disabilities: Status and Trends Through 1997. Research and Training Center on Community Living. University of Minnesota. Minneapolis, MN. May 1998.
7
Robert L. Kane, Rosalie A. Kane, Richard C. Ladd, and Wendy N. Veazie. "Variation in State Spending for Long-Term Care: Factors Associated with More Balanced Systems." Journal of Health Politics, Policy and Law." 23(2). April 1998.
Written by Barbara Coleman with graphics by Natalie Graves Tucker, AARP Public Policy Institute
January 1999
©1999 AARP
May be copied only for noncommercial purposes and with attribution; permission required for all other purposes.
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