Long-Term Care – Finally on its Way to the Altar?
A follow-up to the July 2003 Hot Topic,
Long-Term Care: Always the Bridesmaid, Never the Bride

Although millions of Americans rely on long-term care services to meet their health and personal assistance needs, the issue of how quality long-term care (LTC) services should be provided and financed rarely reaches the top of the policy agenda (see HCFO’s July 2003 Hot Topic, Long-Term Care: Always the Bridesmaid, Never the Bride). This is despite the severity of the problem: the majority of individuals who use LTC services in the United States are aged 65 and older, and this proportion inevitably will grow as the population ages.

In 2000, there were 34.9 million adults over the age of 65 (13 percent of the population)¹; this group is predicted to reach 53.7 million (16.5 percent of the population) by 2020.² The aging of the U.S. population will have a major effect on the demand for and supply of long-term care services and on the resources needed to provide those services.³

As LTC slowly moves onto the national policy stage, the research community is doing its best to answer the pressing questions of providers and policymakers. This year, for the first time, the AcademyHealth Annual Research Meeting, held from June 6-8 in San Diego, included LTC as its own substantive theme. There were five sessions focusing on the topic, featuring 21 presenters. Two HCFO grantees were among the presenters: Donald Taylor, Ph.D., Duke University, and Christopher Murtaugh, Ph.D., Visiting Nurse Service of New York (see below for full descriptions of their HCFO projects). Both studies have important findings for Congress to consider as they debate future changes to Medicare benefits.

Taylor’s work examined whether hospice saves money for Medicare and if it has any effect on out-of-pocket expenses incurred by the families of terminally ill Medicare beneficiaries. Preliminary results suggest that people who choose hospice are very similar to those who do not in terms of health care utilization two years prior to death—before the terminal illness phase. Thus, selection does not appear to explain the preliminary cost reductions observed in the study among hospice users in the last two-to-four months of life. Early findings do suggest hospice reduces costs to Medicare.

Murtaugh’s work examined how access to Medicare home health care has changed following the implementation of the Prospective Payment System (PPS). His findings show an unanticipated decline in the incidence of home health use post-PPS, with the greatest reduction in states with high historical use. The findings demonstrate little evidence of a major change in the types of beneficiaries receiving home heath care, but they suggest that access for diabetics should be monitored.

AcademyHealth, with support from The Commonwealth Fund, has also undertaken a five-year strategic initiative, Building Bridges: Making a Difference in Long-Term Care to make LTC a higher priority for policymakers. The strategic effort seeks to create opportunities to focus sustained attention on long-term care problems over a significant period of time.

The goals of this initiative are to:

• Explore in-depth high-priority issues in LTC financing and delivery;
• Foster communication and collaboration among LTC stakeholders;
• Seek consensus on what should be done, how, and by whom; and
• Stimulate research where gaps in knowledge impede progress toward a better LTC system.

The project will provide a venue to bring better information to bear on the high-priority LTC problems that policymakers and providers must address to improve access, quality of care, and quality of life for individuals with LTC needs.

The initiative will address a limited number of critical long-term care policy and practice issues through a series of colloquium discussions. Those conversations will continue beyond the events through workgroup discussions among conference participants and others. The kick-off colloquium was held on Saturday, June 5 in San Diego, and focused on two important issues: the use of information and information-based strategies for promoting quality improvement in LTC and the challenges of providing such care to the population who is dually-eligible for Medicare and Medicaid. Featured speakers included Karen Davis (The Commonwealth Fund), Judy Feder (Georgetown University), and Vincent Mor (Brown University). Panels of providers and policymakers responded to their presentations.

In addition to the work of Taylor and Murtaugh, HCFO has sponsored other research to inform policymakers and providers as the debate about how to most effectively finance high quality long-term care continues. AcademyHealth also has produced various other long-term care products. See below for a list of HCFO-funded grants relevant to long-term care:

HCFO-Funded Projects Relevant to Long-Term Care

Title: Meeting the Future Long-Term Care Needs of the Baby Boomers: How the Changing Structure of Families Will Affect Paid Helpers and Institutions
Institution: The Urban Institute
Principal Investigator: Richard J. Johnson
Time: December 1, 2003—November 30, 2005

How do families choose among types of long-term care services for older adults and what will be the demand for these services over the next 40 years? The researchers will estimate a model of informal family care, nursing home care, paid home care, and residence in assisted living settings. The model will show the impact of health status, financial resources, family networks, and relative prices, determined in part by family characteristics and in part by public policy. They will then use the model to simulate the effects of potential changes in public policy on long-term care decisions, including the impact of an expansion of Medicaid eligibility or of expansions in Medicare coverage of long-term care services. The objective of the project is to better understand how competing social, demographic, and economic trends combine to determine future demand for long-term care services.

Title: Impact of Private Long-term Care Insurance on Demand for Care: Setting and Intensity
Institution: Brandeis University
Principal Investigator: Christine Bishop, Ph.D.
Time: November 1, 2003–October 31, 2004

How does long-term care (LTC) insurance affect decisions about the setting of care and the level of service received among elders with disabilities? The researchers will answer the following research questions: 1) How does LTC insurance affect the probability of receiving care in a residential setting compared with the probability of receiving care in a community setting? 2) How does LTC insurance coverage affect the amount of formal and informal care used? Through their analyses, the researchers will estimate the future expenditures for LTC, future service capacity needs, and future burdens on families providing informal care. The objective of the project is to provide policymakers with better information as they consider decisions that would expand the use of LTC insurance and as they think about the future demand for LTC services.

Title: Does Hospice Save Medicare Money?
Institution: Duke University
Principal Investigator: Donald E. Taylor, Ph.D.
Time: October 1, 2003 – September 31, 2005

Does hospice save money for the Medicare program and does hospice have any effect on out-of-pocket expenses incurred by families of terminally ill Medicare beneficiaries? The study focuses on the Medicare hospice benefit. The researchers will conduct a literature review and empirical analyses to answer the above questions. They hypothesize that “hospice can provide effective palliative treatment to terminally ill patients while saving money for the Medicare program, by reducing expensive curative care that must be foregone to obtain hospice benefits.” The objective of this study is to inform policy makers about key issues that affect the ability of hospice to save money, including length of stay, underlying disease, and the propensity of hospice and non-hospice patients to use health care services.-hospice patients to use health care services.

Taylor presented early findings from this grant at AcademyHealth’s 2004 Annual Research Meeting.

Title: Impact of the Medicare Home Health Prospective Payment System on Beneficiaries and Program Costs
Institution: Center for Home Care Policy and Research
Principal Investigator: Christopher M. Murtaugh, Ph.D.
Time: November 1, 2003–October 31, 2004

How does long-term care (LTC) insurance affect decisions about the setting of care and the level of service received among elders with disabilities? The researchers will answer the following research questions: 1) How does LTC insurance affect the probability of receiving care in a residential setting compared with the probability of receiving care in a community setting? 2) How does LTC insurance coverage affect the amount of formal and informal care used? Through their analyses, the researchers will estimate the future expenditures for LTC, future service capacity needs, and future burdens on families providing informal care. The objective of the project is to provide policymakers with better information as they consider decisions that would expand the use of LTC insurance and as they think about the future demand for LTC services.

Murtaugh presented early findings from this grant at AcademyHealth’s 2004 Annual Research Meeting.

Title: Assessing the Impact of Medicaid Equalization Policies on Access to Nursing Home Care
Institution: Syracuse University
Principal Investigator: Madonna Harrington Meyer, Ph.D.
Time: January 01, 2002–July 31, 2003

Researchers at Syracuse University assessed the impact of Medicaid equalization policies for nursing home admissions on older persons and their families, the nursing home industry, and state Medicaid programs. The researchers set forth three objectives: 1) identify which states have passed provisions that limit the discrepancy between private and Medicaid rates; 2) assess the impact of that legislation on nursing home profits, closures, waiting lists, occupancy rates, and state Medicaid budgets; and 3) trace the passage of each state-specific policy to assess the feasibility of developing a model for a national Medicaid equalization law. The objective of the study is to inform policymakers about the implications of revising the Medicaid and long-term care systems through a national Medicaid equalization policy. While the results from this grant are still in progress and not yet published, preliminary findings indicate:

• Neither rate equity nor de facto rate equity seems to have adversely affected the Medicaid programs in study states.
• States with rate equity policies or practice have slightly higher proportions of beds certified for Medicaid only, which may assure Medicaid applicants more timely entry into nursing homes.

Title: The Impact of the Prospective Payment System on Nursing Home Care
Institution: Brown University
Principal Investigator: David Gifford, M.D.
Time: June 01, 2000–May 31, 2002

The SNF PPS created a fixed, all-inclusive, per diem reimbursement rate per patient, based on where that patient fits within a resource utilization group (RUGs) classification system. For some high-need RUGs, the cost of care may be higher than the per diem rate set by the SNF PPS due to increased pharmaceutical use, the costs of which may not have been fully assessed when calculating the per diem. Researchers at Brown University hypothesized that instituting a prospective payment system may give SNFs the incentive to block access to care for patients who fall into more severe RUGs classifications, potentially reducing care options and increasing the risk of negative outcomes for frail elderly. The researchers: 1) examined the effect of the SNF PPS on patient-level indicators, including access to SNFs, utilization of costly care (including pharmaceutical therapies whose costs go above the per diem cap) and re-hospitalization during high acuity episodes; and 2) examined the effect of the SNF PPS on facility-level indicators, such as case-mix, changes in SNF staffing, and bed availability. The objective of this project was to inform policymakers about the implications of prospective payment cost-reduction strategies on access to and quality of care through skilled nursing facilities.

The researchers found that the facilities that would lose the most revenue by accepting high-cost patients are admitting fewer of them, indicating that SNFs are inclined to limit their risk under a prospective payment system.

For a full summary of the findings of this grant, please see HCFO’s finding brief, “New Payment System Has Little Effect on Access and Quality.”

Title: Continuing Care Retirement Communities (CCRCs): An Efficient Alternative for Long-Term Care Provision and Financing?
Institution: Duke University
Principal Investigator: Frank A. Sloan, Ph.D.
Time: January 01, 1992–December 31, 1994

This study examined who enters CCRCs and why, which factors influence nursing home utilization in CCRCs, and financial stability of CCRCs by conducting a survey of CCRC residents and analyzing data from the 1989 National Long-Term Care Survey and the American Association of Homes for the Aging survey of CCRCs. Investigators also gathered primary data from selected states to evaluate CCRC financial solvency. Finally, by studying specific regulations, they assessed the potential of CCRCs as mechanisms for providing and financing long-term care for the low-and moderate-income elderly.

The researchers found that, compared with other types of CCRCs, those offering completely prepaid LTC coverage reduced use of nursing home care by 13 percent and personal care by 5 percent. CCRCs with prepaid LTC coverage did not use more stringent health screening at entry, so "cream-skimming" does not appear to explain this result. However, affordability is an important issue: CCRC residents with extensive contracts were wealthier than were other CCRC residents.

Several publications resulted from this grant:

Medicare Prospective Payment and Post-Hospital Transfers to Subacute Care

Effects of the Medicare Prospective Payment System on Hospital Cost Containment: An Early Appraisal

Bankruptcy Risk and State Regulation of Continuing Care Retirement Communities

Case Shifting and the Medicare Prospective Payment System

Medicare Prospective Payment and the Use of Medical Technologies in Hospitals

Hospital Care for the Self-Pay Patient

Continuing Care Retirement Communities: Prospects for Reducing Institutional Long-Term Care

Title: Evaluation of the Impact of the Resource Utilization Groups II System on Long-Term Care Facilities in New York
Institution: Greater New York Hospital Foundation, Inc. (GNYHF)
Principal Investigator: Barry M. Schultz, M.D.
Time: January 01, 1992–December 31, 1993

What is the impact of New York state's nursing home payment system using Resource Utilization Groups II (RUGS II) on access to long-term care services for Medicaid beneficiaries? What is its impact on changes in case-mix, financial status, and management practices of nursing homes in the state? This study, conducted by the Greater New York Hospital Foundation, Inc., used various quantitative analyses of nursing home cost reports and resident characteristic data, and interviews with key management staff and trustees to examine the period 1985 — 1990. The objective of the study was to provide policymakers with an assessment of this payment system’s long-term impacts and to judge its replicability for Medicaid and/or Medicare beneficiaries in other states.

The researchers’ findings include a dramatic increase in the number of residents scoring in the highest intensity resident-care categories, a substantial increase in staffing and expenditures for rehabilitation therapies, and a possible negative impact on the financial performance of New York long-term care (LTC) facilities. RUG-II appears to have been successful in improving access to nursing homes for individuals with heavy-care needs and in encouraging the appropriate utilization of institutionalized skilled nursing care.

Schultz BM, et al. RUG-II (Resource Utilization Group, Version II) Impacts on Long-Term Care Facilities in New York. Health Care Financing Review, Winter 1994, 16(2), pp. 85-99.

Title: Evaluation of New York City Model to Provide Home Care Services: The Cluster Care Demonstration
Institution: Harvard University, School of Public Health
Principal Investigator: Penny H. Feldman, Ph.D.
Time: November 01, 1990–July 31, 1993

Cluster care—where a team of workers provide home care services to a population clustered in a small geographic area—was evaluated as an alternative to traditional one-on-one home care services in New York City housing projects to inform city health officials of costs/benefits of reorganizing home health and social services. The evaluation documented the implementation of and assessed costs and outcomes associated with: 1) consolidating services at elderly housing sites; 2) deploying teams of home attendants and on-site supervisors rather than individual workers; 3) restructuring home attendant jobs; 4) adapting administrative systems to a new delivery model; and 5) helping clients gain access to a broader array of community services.

The researchers found that cluster care appears benign for home care clients with fewer limitations. For the more vulnerable, however, they recommend experimentation with low-cost interventions that might augment service and improve outcomes without reverting to traditional one-on-one care.

Feldman PH, et al. Medicaid-funded home care for the frail elderly and disabled: evaluating the cost savings and outcomes of a service delivery reform. Health Services Research, October 1996, 31(4), pp. 489-508.

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¹ Population Estimates Program, Population Division, U.S. Census Bureau, “Resident Population Estimates of the United States by Age and Sex: April 1, 1990 to July 1, 1999, with Short-Term Projection to November 1, 2000,” January 2, 2001. http://eire.census.gov/popest/archives/national/nation2/intfile2-1.txt.

² Population Estimates Program, Population Division, U.S. Census Bureau, “Projections of the Total Resident Population by 5-Year Age Groups, and Sex with Special Age Categories: Middle Series, 2016 to 2020,” January 13, 2000, www.census.gov/population/projections/nation/summary/np-t3-e.pdf.

³ Institute of Medicine. Improving Quality of Long-Term Care. 2000. www.iom.edu/includes/DBFile.asp?id=4136.