What Will the Budget Cuts Mean for Long-Term Care?
Nothing good.
The Congressional budget resolution calls for cutting Medicaid expenditures by $880 billion over 10 years. Medicaid is the primary payer of long-term care services in the United States, covering 5.6 million Americans for nursing home, home health and assisted living care. Due to the high cost, while only 6% of Medicaid enrollees are receiving long-term care services, they account for 34% of all Medicaid spending. As a result, such care will have to be a large target of any Medicaid cuts.
According to KFF, to make up the shortfall in the federal funding of Medicaid costs, states would have to raise their share of Medicaid spending by 29%. Since the federal contribution varies from state to state, this is an average. The federal share of Medicaid expenditures is as high as 59% in West Virginia and as low as 17% in Wyoming.
The states can make up the shortfall by raising taxes, cutting expenditures for other services, restricting eligibility for Medicaid, limiting the services Medicaid covers, limiting reimbursement rates to providers, or a combination of several of these measures.
Block Grants?
While the Medicaid cuts are part of the Congressional budget resolution, we don’t know yet how they will be implemented. In his first administration, President Trump pushed block grants which would convert Medicaid from a program that reimburses the states for a portion of all Medicaid expenditures to specific dollar amounts, perhaps tied to inflation.
Part of the idea is that with cash grants and fewer rules on how the states spend the funds, they will be free to experiment and find savings without restricting eligibility or affecting the quality of care. Others are skeptical that this would work since Medicaid reimbursement rates, especially for nursing home care, are already so much lower than private pay or Medicare reimbursement rates.
Some block grant proposals tie the amount to the number of beneficiaries; some do not. This could become very important as the number of baby boomers likely to need long-term care starts exploding before the end of the 10-year life of the budget resolution. The oldest baby boomers will begin crossing the age-85 threshold, when the likelihood of needing assistance increases dramatically, in 2031 — just seven years from now. The U.S. Census Bureau projects that the number of Americans aged 85 and over will grow 60% over the next decade from 7 million today to 11.2 million in 2035.
Home Care on the Chopping Block?
While the budget cuts are prospective for now, the Trump administration has already closed the Administration for Community Living ACL, whose aim is to help seniors and others with disabilities live in the community. (As of this writing, the ACL website is still live and functioning.) Health and Human Services (HHS) has said that the functions of the ACL will be integrated into other HHS agencies. We’ll have to wait and see since the modus operandi of the Trump administration seems to be to cut first and perhaps pick up the pieces later.
Medicaid-funded home health care may be the easiest and most likely place for states to save money because they have more discretion over it than they do for nursing home coverage. This will likely result in more pressure on families to fill in the gap and more people moving to nursing homes when they can no longer afford the care they need to continue living in the community. According to researchers at the Center for Retirement Research at Boston College, families already provide the bulk of caregiving to seniors needing assistance.
In terms of saving money, restricting home health coverage could backfire since in the vast majority of cases Medicaid pays substantially more per beneficiary in nursing homes than for those receiving home health care.