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Costs
for elderly care to rise rapidly
By
Keith M. Phaneuf
NewHavenRegister.com,
June 29, 2003
MANCHESTER
- Out of every $13 state government spends this year, roughly $1 will go
to provide nursing home care for just under 20,000 elderly patients.
Looked at another way, about $1 billion will be spent on one-half of 1
percent of the state’s population.
And if that seems lopsided, consider that the problem is only going to get
worse, according to state officials, nursing-home representatives and
advocates for the elderly.
People are living longer thanks to effective, but expensive, advances in
technology and medication.
That’s no secret.
Less noted by the media are close to 1,800 unfilled nursing home beds —
a surplus that has led state government to pare back funding in hopes of
weeding out some homes.
Connecticut faces a major budget crisis, with a deficit in the fiscal year
that begins Tuesday estimated at $1 billion. Republican Gov. John G.
Rowland and Democrats and Republicans in the General Assembly have thus
far failed to reach agreement on a new tax-and-spending plan.
State officials say they have taken other steps to try to control costs
over the last six years through home care and assisted-living programs.
Though they’ve been popular, those programs haven’t stopped nursing
home costs from growing rapidly.
And with a huge number of baby boomers expected to need nursing home care
or some alternative in less than 10 years, concepts such as competitive
bidding among nursing homes and tax credits to encourage young adults to
buy long-term care insurance are getting more attention.
TIME MARCHES ON
"We know there’s a tidal wave of baby boomers coming at us in
2010," said Toni Fatone, executive director of the Connecticut
Association of Health Care Facilities. "The problem is that no one in
government — state or federal — is sure what, if anything, they want
to do about it."
Fatone’s association represents nearly 160 of the 188 for-profit nursing
homes in Connecticut.
Combined with 60 nonprofit homes, these facilities provide just under
31,000 beds, currently serving 29,200 patients.
Almost two-thirds of those patients — about 19,800 — have the bulk of
their long-term care paid for by the state and federal governments through
the Medicaid program.
Under Title 19 of the federal Social Security Act, elderly people earning
less than a certain threshold are eligible for Medicaid assistance.
That threshold for most patients in Connecticut is $1,600 per month. For
the state, that amounts to a bill of almost $1 billion for the fiscal year
ending Tuesday and just under $1.05 billion in fiscal 2003-04.
That’s $5,177 per nursing home resident per month, according to Marc
Ryan, secretary of the state Office of Policy and Management and
Rowland’s budget director.
Because Medicaid is a joint program with the federal government,
Washington will reimburse Connecticut 50 cents for every dollar it spends
on nursing homes. But with the state budget restricted by a constitutional
spending cap, nursing homes tie up a huge share of the state’s allowable
expenditures.
Connecticut already ranks as one of the oldest states in terms of its
population. According the 2000 U.S. Census, that population is just going
to get older.
Just under 470,000 of Connecticut’s 3.4 million people, or 13.8 percent,
are 65 or older. That’s the sixth-largest per capita elderly population
among the 50 states and the District of Columbia.
By 2025, the elderly population is expected to reach 671,000, an increase
of more than 50 percent.
GROWING COST OF CARE
That’s not necessarily an insurmountable problem, provided lawmakers on
Capitol Hill and in Hartford can carve out enough dollars to cover
everyone.
But while the elderly population and health care costs are growing,
government funding has declined when compared with the actual cost of
providing services.
When Congress enacted Title 19 in 1965 lawmakers created a health care
safety net for the poor. Asset limits were low. People weren’t living as
long. And more elderly people were being cared for by their children.
Over the last 15 years the average age of a Connecticut nursing home
resident has risen from the low 70s to 83. Today’s patients, on average,
are on nine different medications ranging from something as inexpensive as
aspirin to Oxycontin, a powerful narcotic used to ease debilitating pain,
that can cost up to $1,100 per month.
"We’re getting people when they’re older and sicker, and things
are never going to go back to the way it used to be," Fatone said.
"With the technology and pharmaceutical advancements and other
clinical interventions that have been developed to keep people living
longer, the cost of care continues to grow," she added.
"Long-term care is not about simply warehousing people."
As nursing home costs have become an increasingly larger segment of the
state budget, the gap between what Medicaid provides and the cost of
services has grown steadily since the late 1980s.
In 1989 Medicaid payments covered 89 percent of the cost, according to
data compiled by the General Assembly’s Office of Legislative Research.
That ratio now is nearly 70 percent.
A second program, Medicare, is another source of revenue for nursing
homes, though nowhere near as significant as Medicaid.
Medicare is entirely federally funded, and payments are issued to nursing
homes based on the number of times specific treatments are provided rather
than on the number of income-qualified patients.
But last October Congress allowed a temporary Medicare rate increase to
expire. For Connecticut’s nursing homes that meant a loss of more than
$30 per patient per day. If Medicare remains unadjusted this fall, the
annual cost for these homes will surpass $40 million, according to the
Connecticut Association of Health Care Facilities.
NURSING HOMES IN TROUBLE
According to the state Department of Social Services, 11 nursing homes in
Connecticut are in "receivership," meaning their finances are
being administered by state officials to try to avoid bankruptcy.
Since 2001, nearly 50 homes have declared bankruptcy or entered
receivership. Fourteen homes have closed over the last 18 months.
"This is one of the most crucial issues that we absolutely have to
deal with," said state Sen. Edith G.
Prague, D-Columbia, one of the legislature’s most vocal advocates for
increased funding for nursing homes. "And we desperately need for
something to happen now."
There may be a current surplus of nursing home beds, but that excess
likely will vanish soon if something isn’t done, Prague said.
State government has been trying to lower the nursing home population by
offering alternatives.
Six years ago the state ended a waiting list for subsidized home-care
services and began dramatically increasing funding.
Annual expenditures have more than doubled over that time, from $71
million to $155 million, and more than 12,500 people are living in their
own homes with varying levels of assistance.
For those who can’t stay in their own homes but may not need a nursing
home, there is a second alternative.
Assisted-living pilot programs have been established in federal-
and state-subsidized congregate care housing projects. There are just over
225 residents served through these programs now at a cost of roughly $1
million per year.
Connecticut AARP Director Brenda Kelley said a 2002 survey of her
group’s members shows "they clearly want to remain independent in
their communities for as long as possible."
Kelley praised state officials for these alternative programs. She added
that while there always will be a significant elderly population that
needs nursing home care, the state has a financial interest in providing
the elderly with the alternatives they want.
But Fatone said Connecticut can expect its nursing home population to keep
growing. Because people are living longer, they may need home care or
assisted living for many years and still need a nursing home for a couple
of years, she said.
"We’re almost talking about two different populations here,"
she said.
If the alternatives can’t eliminate the need for nursing home care,
Connecticut shouldn’t pay for more homes than it has to, Ryan says.
Since 1997 the Rowland administration has followed a policy of trying to
restrict Medicaid rates to thin out the number of nursing homes.
"We really believe right now we still have about 1,000 too many
beds," Ryan said. "This situation siphons money off from good
nursing homes and into some homes that probably shouldn’t exist."
Though he wouldn’t name specific facilities, Ryan said some out-of-state
owners built up too much debt when they acquired homes. Prague said others
have been plagued by excessive administrative salaries.
Annual Medicaid rate increases from the state of 10 percent or more
vanished during the recession years of the early 1990s, steadily dropping
through 1997.
Since then rate hikes have been limited to 2 percent, except for a
one-time boost to raise staff salaries in 1999.
"What we’ve done over the last few years is try to starve some of
the homes out there," Ryan said.
Now that the economy has slowed, those rate hikes aren’t even coming
every year. The last 2 percent increase came in January, 18 months after
the previous one.
And proposals for the next state budget have included delaying the next 2
percent rate hike until October of 2004.
"At some point we have to admit we can’t keep underfunding
homes," Ryan said.
PROMOTING CARE INSURANCE
The Rowland administration put a new option on the table this spring by
suggesting a competitive bidding process for the state’s Medicaid
business.
It is a very broad proposal at this point. No one has defined how many
nursing homes might be chosen. Ryan said any plan would have to cover all
regions of the state, with a heavy emphasis on urban areas where many
Medicaid recipients are located.
But as long as care standards remain stringent and the elderly population
continues to swell, competitive bidding is, at best, an effort to slow an
ever-rising expense, he added.
A better solution, Fatone countered, would be for Connecticut to attack
nursing home costs through incentives to younger people.
The state already encourages younger people to buy long-term care
insurance. The Connecticut Partnership for Long-term Care, located within
OPM, allows people to retain more assets once they enter a nursing home if
they purchase the supplemental insurance while they’re younger.
Fatone said a more efficient means of promoting the idea would be tax
credits at both the state and federal level.
Ryan conceded that tax credits might have to be explored in the coming
years.
"That’s the crux of the problem," Fatone said. "We have
incredibly high standards at a time when the states and federal government
are feeling tremendous fiscal pressure. The politicians don’t want the
quality to drop, but they don’t want to ask individuals to help to pay
for it."
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