A Cost-Effective Way to Care for an Aging Population

Home and community based services can go a long way toward preventing or delaying expensive nursing-home care.

The aging of the U.S. population, driven by the postwar baby boom generation, is upon us. As is true across the country, in our state of Nebraska baby boomers represent the largest birth cohort, projected to grow the state's 65-and-older population to nearly 420,000 by 2030. The proportion of older Nebraskans within the state's overall population is also growing because other demographic changes, such as birth rates and immigration, are not projected to keep pace with the aging of the state's residents. Consequently, legislators and other policy-makers are becoming increasingly concerned about the fiscal consequences of population aging.

Some of the impacts are already well known. In the United States, baby boomers are becoming eligible for Social Security and Medicare and will produce unprecedented strains on these programs, particularly over the next two decades. Additionally, since Medicare does not meet all health-care expenses, particularly long-term care costs, older Americans will pay higher out-of-pocket costs for these services and will increasingly rely upon Medicaid when they can no longer meet these expenses. In a state like Nebraska with an already large older population, the specter of future Medicaid long-term care costs looms quite large. These expenses totaled $742.5 million in fiscal year 2013 -- nearly 40 percent of the state's total Medicaid spending.

Nonetheless, the continued upward spiraling of Medicaid long-term care costs is not inevitable. Today, the highest Medicaid costs for long-term care derive from care provided by skilled-nursing facilities. The annual cost of nursing-home care in Nebraska averages more than $75,000 per person. However, nursing-home placement, while necessary for some individuals who require skilled nursing assistance 24 hours a day, seven days a week, is not needed by everyone who receives long-term care. The most effective way to save Medicaid costs is to delay or prevent unnecessary nursing-home placement.

Assisted living has long been marketed as a residential alternative to nursing homes, but these settings are limited in their capacity to meet the long-term-care needs of older adults. Assisted-living facilities are not required to provide the professional staffing needed by residents with clinical diagnoses such as dementia; in addition, most do not provide personal-care assistance for activities of daily living such as bathing, dressing, feeding and toileting. Further, the supply of assisted-living facilities in rural states like Nebraska is limited. And assisted living is expensive to families, since most of these facilities do not accept Medicaid.

For these reasons, the most effective way to lower long-term care costs, and to delay or prevent nursing-home placement, is through home and community based services (HCBS). In-home services such as home health and personal care cost roughly half of the $230 average per day for a skilled nursing facility in the United States. Community-based services, such as adult day care, cost one-quarter of the expenses for nursing home care. For many older Nebraskans, HCBS are already available, particularly for those in metropolitan areas who can afford to pay for services out-of-pocket. However, the affordability and the availability of private-sector HCBS providers for low-income and/or rural elders is limited. The best option for lowering long-term-care costs is to expand lower-cost HCBS in the public sector. This includes working in continued partnership with Area Agencies on Aging, which receive federal funding under the Older Americans Act to provide services such as nutrition, transportation and care management.

Although the demand for long-term-care services among older Americans will continue to increase over the next two decades, this does not necessarily require a corresponding increase in costs to states. The key lies in the ability of state policy-makers, working with providers in both the public and private sectors, to delay or prevent unnecessary nursing-home placement through the expansion of more affordable alternatives, specifically HCBS. The greater availability of these options will enable states to meet their long-term care challenges in a way that provides more choices for our seniors and is economically sustainable.

Christopher M. Kelly is an associate professor in the Department of Gerontology at the University of Nebraska at Omaha. Jerome Deichert is director of the Center for Public Affairs Research at the University of Nebraska at Omaha. This commentary is based on a policy brief prepared in December 2013 by the authors for the Nebraska Legislative Planning Committee.

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