The Cost of Health Care - Long-term Health Care

Longer life spans and life-sustaining technologies have created an increasing need for long-term care. For some older people, relatives provide the long-term care; however, those who require labor-intensive, round-the-clock care often stay in nursing homes.

Home Health Care

The concept of home health care began as post-acute care after hospitalization, an alternative to longer, costlier hospital stays. Home health care services have grown tremendously since the 1980s, when prospective payments for Medicare patients sharply reduced hospital lengths of stay.

In 1972 Medicare extended home care coverage to people under 65 only if they were disabled or suffered from end-stage renal disease. By the year 2000 Medicare coverage for home health care was limited to patients immediately following discharge from the hospital. As of 2003, Medicare covered beneficiaries' home health care services with no requirement for prior hospitalization. There were

TABLE 9.4
Medicaid recipients and medical vendor payments, by eligibility, race, and ethnicity, selected fiscal years 1972–2000
[Data are compiled by the Centers for Medicare & Medicaid Services from the Medicaid Data System]

Basis of eligibility and race and ethnicity	1972	1980	1990	1995	1996	1997	1998¹	1999²	2000
Recipients	Number in millions
All recipients	17.6	21.6	25.3	36.3	36.1	34.9	40.6	40.1	42.8
	Percent of recipients
Basis of eligibility:³
Aged (65 years and over)	18.8	15.9	12.7	11.4	11.9	11.3	9.8	9.4	8.7
Blind and disabled	9.8	13.5	14.7	16.1	17.2	17.6	16.3	16.7	16.1
Adults in families with dependent children⁴	17.8	22.6	23.8	21.0	19.7	19.5	19.5	18.7	20.5
Children under age 21⁵	44.5	43.2	44.4	47.3	46.3	45.3	46.7	46.9	46.1
Other Title XIX⁶	9.0	6.9	3.9	1.7	1.8	6.3	7.8	8.4	8.6
Race and ethnicity:⁷
White	- - -	- - -	42.8	45.5	44.8	44.4	41.3	-- -	- - -
Black or African American	- - -	- - -	25.1	24.7	23.9	23.5	24.2	-- -	- - -
American Indian or Alaska Native	- - -	- - -	1.0	0.8	0.8	1.0	0.8	-- -	- - -
Asian or Pacific Islander	- - -	- - -	2.0	2.2	2.1	1.9	2.5	-- -	- - -
Hispanic or Latino	- - -	- - -	15.2	17.2	17.5	14.3	15.6	-- -	- - -
Unknown	- - -	- - -	14.0	9.6	10.9	14.9	15.5	-- -	- - -
Vendor payments⁸	Amount in billions
All payments	$6.3	$ 23.3	$64.9	$120.1	$121.7	$124.4	$ 142.3	$ 153.5	$ 168.3
	Percent distribution
Total	100.0	100.0	100.0	100.0	100.0	100.0	100.0	100.0	100.0
Basis of eligibility:
Aged (65 years and over)	30.6	37.5	33.2	30.4	30.4	30.3	28.5	27.7	26.4
Blind and disabled	22.2	32.7	37.6	41.1	42.8	43.5	42.4	42.9	43.2
Adults in families with dependent children⁴	15.3	13.9	13.2	11.2	10.1	9.9	10.4	10.3	10.6
Children under age 21⁵	18.1	13.4	14.0	15.0	14.4	14.1	16.0	15.7	15.9
Other Title XIX⁶	13.9	2.6	1.6	1.2	1.2	2.2	2.6	3.4	3.9
Race and ethnicity:⁷
White	- - -	- - -	53.4	54.3	54.1	55.0	54.3	-- -	- - -
Black or African American	- - -	- - -	18.3	19.2	18.7	18.5	19.6	-- -	- - -
American Indian or Alaska Native	- - -	- - -	0.6	0.5	0.6	0.6	0.8	-- -	- - -
Asian or Pacific Islander	- - -	- - -	1.0	1.2	1.1	0.9	1.4	-- -	- - -
Hispanic or Latino	- - -	- - -	5.3	7.3	7.4	6.8	8.2	-- -	- - -
Unknown	- - -	- - -	21.3	17.6	18.1	18.2	15.7	-- -	- - -
Vendor payments per recipient⁸	Amount
All recipients	$358	$1,079	$2,568	$3,311	$3,369	$3,568	$ 3,501	$ 3,819	$ 3,936
Basis of eligibility:
Aged (65 years and over)	580	2,540	6,717	8,868	8,622	9,538	10,242	11,268	11,929
Blind and disabled	807	2,618	6,564	8,435	8,369	8,832	9,095	9,832	10,559
Adults in families with dependent children⁴	307	662	1,429	1,777	1,722	1,809	1,876	2,104	2,030
Children under age 21⁵	145	335	811	1,047	1,048	1,111	1,203	1,282	1,358
Other Title XIX⁶	555	398	1,062	2,380	2,152	1,242	1,166	1,532	1,778
Race and ethnicity:⁷
White	- - -	- - -	3,207	3,953	4,074	4,421	4,609	-- -	- - -
Black or African American	- - -	- - -	1,878	2,568	2,631	2,798	2,836	-- -	- - -
American Indian or Alaska Native	- - -	- - -	1,706	2,142	2,298	2,500	3,297	-- -	- - -
Asian or Pacific Islander	- - -	- - -	1,257	1,713	1,767	1,610	1,924	-- -	- - -
Hispanic or Latino	- - -	- - -	903	1,400	1,428	1,699	1,842	-- -	- - -
Unknown	- - -	- - -	3,909	6,099	5,603	4,356	3,531	-- -	- - -
- - - Data not available.
¹Prior to 1998 recipient counts exclude those individuals who only received coverage under prepaid health care and for whom no direct vendor payments were made during the year. Prior to 1998 vendor payments exclude payments to health maintenance organizations and other prepaid health plans ($19.3 billion in 1998 and $18 billion in 1997). The total number of persons who were Medicaid eligible and enrolled was 41.4 million in 1998, 41.6 million in 1997, and 41.2 million in 1996 (HCFA Medicaid Statistics, Program and Financial Statistics FY1996, FY1997, and FY1998, unpublished).
²Starting in 1999, the Medicaid data system was changed.
³In 1980 and 1985 recipients included in more than one category. In 1990–96, 0.2–2.5 percent of recipients have unknown basis ofeligibility. From 1997 onwards, unknowns areincluded in Other Title XIX.
⁴Includes adults in the Aid to Families with Dependent Children (AFDC) program. From 1997 onwards includes adults in the Temporary Assistance for Needy Families (TANF) program.
⁵Includes children in the AFDC program. From 1997 onwards includes children and foster care children in the TANF program.
⁶Includes some participants in the Supplemental Security Income program and other people deemed medically needy in participatingstates. From 1997 onwards excludes foster careand includes unknown eligibility.
⁷Race and ethnicity as determined on initial Medicaid application. Categories are mutually exclusive.
⁸Vendor payments exclude disproportionate share hospital payments ($15 billion in 1999 and 2000).
Notes: 1972 data are for fiscal year ending June 30. All other years are for fiscal year ending September 30. Data for additional years are available.
SOURCE: "Table 137. Medicaid Recipients and Medical Vendor Payments, according to Basis of Eligibility, and Race and Ethnicity: United States, Selected Fiscal Years 1972–2000," in Health, United States, 2003, Centers for Disease Control and Prevention, National Center for Health Statistics, National Vital Statistics System, Hyattsville, MD, 2003

TABLE 9.5
Medicare-certified hospices, by auspice, 1984–2001

Year	HHA	HOSP	SNF	FSTG	Total
1984	n/a	n/a	n/a	n/a	31
1985	n/a	n/a	n/a	n/a	158
1986	113	54	10	68	245
1987	155	101	11	122	389
1988	213	138	11	191	553
1989	286	182	13	220	701
1990	313	221	12	260	806
1991	325	282	10	394	1,011
1992	334	291	10	404	1,039
1993	438	341	10	499	1,288
1994	583	401	12	608	1,604
1995	699	460	19	679	1,857
1996	815	526	22	791	2,154
1997	823	561	22	868	2,274
1998	763	553	21	878	2,215
1999	762	562	22	928	2,274
2000	739	554	22	960	2,273
2001	690	552	20	1,003	2,265
Notes: Home health agency-based (HHA) hospices are owned and operated by freestanding proprietary and nonprofit home care agencies. Hospital-based (HOSP) hospices are operating units or departments of a hospital. Skilled nursing facility-based (SNF) hospices are operating units or departments of a skilled nursing facility or nursing facility. Freestanding (FSTG) hospices are independent, mostly nonprofit organizations.
SOURCE: "Table 1. Number of Medicare-Certified Hospices, by Auspice, 1984–2001," in Hospice Facts & Statistics, Hospice Association of America, Washington, DC [Online] http://www.nahc.org/Consumer/hpcstats.html [accessed April 20, 2004]

TABLE 9.6
Comparison of hospital, SNF, and hospice Medicare charges, 1995–98

	1995	1996	1997	1998
Hospital inpatient charges per day	$1,909	$2,068	$2,238	$2,177
Skilled nursing facility charges per day	402	443	487	482
Hospice charges per covered day of care	103	106	109	113
SOURCE: "Table 13. Comparison of Hospital, SNF, and Hospice Medicare Charges, 1995–1998," in Hospice Facts & Statistics, Hospice Association of America, Washington, DC [Online] http://www.nahc.org/Consumer/hpcstats.html [accessed April 20, 2004]

TABLE 9.7
Medicare benefit payments, fiscal year 2001 and fiscal year 2002

	2001 (estimated)		2002 (projected)
	Amount($millions)	Percent of total	Amount($millions)	Percent of total
Amount
Total medicare benefit payments^*	236,493	100.0	246,721	100.0
Part A
Hospital care	93,236	39.4	98,708	40.0
Skilled nursing facility	12,426	5.3	14,241	5.8
Home health	4,061	1.7	5,876	2.4
Hospice	3,419	1.4	3,756	1.5
Managed care	22,837	9.7	18,852	7.6
Total	135,979	57.5	141,432	57.3
Part B
Physician	40,380	17.1	42,548	17.2
Durable medical equipment	5,263	2.2	5,954	2.4
Carrier lab	2,361	1.0	2,533	1.0
Other carrier	8,422	3.6	9,787	4.0
Hospital	10,104	4.3	11,177	4.5
Home health	5,241	2.2	7,359	3.0
Intermediary lab	1,996	0.8	2,080	0.8
Other intermediary	7,499	3.2	7,942	3.2
Managed care	19,249	8.1	15,908	6.4
Total	100,514	42.5	105,289	42.7
^*Part A total does not include peer review organization payments. Figures may not add to totals due to rounding.
SOURCE: "Table 4. Medicare Benefit Payments, FY2001 and FY2002," inHospice Facts & Statistics, Hospice Association of America, Washington, DC [Online] http://www.nahc.org/Consumer/hpcstats.html [accessed April 20, 2004]

TABLE 9.8
Medicaid payments, by type of service, fiscal year 1999

	Amount ($millions)	Percent of total
Inpatient hospital	22,182.3	14.5
Nursing home	33,113.4	21.6
Physician	6,535.5	4.3
Outpatient hospital	6,074.7	4.0
Home health	10,923.3	7.1
Hospice²	345.2	0.2
Prescription drugs	16,566.8	10.8
ICF (MR) services³	9,326.2	6.1
Other	48,221.9	31.5
Total payments¹	153,289.4	100.0
¹Total outlays include hospice outlays from the Form Centers for Medicare and Medicaid Services (CMS)-64 plus payments for all service types included in the Medicaid Statistical Information System (MSIS), not just the eight service types listed. Hawaii did not report MSIS data for fiscal year 99.
²Hospice outlays come from Form CMS-64 and do not include Medicaid State Children's Health Insurance Program (SCHIP). All other expenditures come from the MSIS. The federal share of Medicaid's hospice spending is $197.2 million, or 57.1% of the total fiscal year 99 Medicaid hospice payments.
³ICF is intermediate care facilities. MR is mental retardation.
SOURCE: "Table 9. Medicaid Payments, by Type of Service, FY99," in Hospice Facts & Statistics, Hospice Association of America, Washington, DC [Online] http://www.nahc.org/Consumer/hpcstats.html [accessed April 20, 2004]

also no limits to the number of professional visits or to the length of coverage. As long as the patient's condition warranted it, the following services were provided:

Part-time or intermittent skilled nursing and home health aide services.
Speech-language pathology services.
Physical and occupational therapy.
Medical social services.
Medical supplies.
Durable medical equipment (with a 20 percent co-pay).

Over time, the population receiving home care services has changed. Today much of home health care is associated with rehabilitation from critical illnesses, and fewer users are long-term patients with chronic conditions.

TABLE 9.9
Number of states offering hospice under Medicaid, 1987–1999 & 2002

Year	Total number	States added	States dropped
1987	6	FL, KY, MI, MN, ND, VT
1988	15	DE, HI, IL, MA, NE, NY, NC, RI, TX, WI	MN
1989	24	AZ, CA, GA, ID, KS, MO, MT, PA, TN, UT	NE
1990	32	AL, AK, IA, MD, MN, NM, OH, VA, WA	TN
1991	34	CO, MS, TN	AK
1992	35	NJ
1993	36	DC, WV	AZ
1994	38	OR, WY
1995	40	AK, SC
1996	41	AR
1997	42	IN
1998	44	AZ, NV
1999	44
2002	46	TN, MN
SOURCE: "Table 10. Number of States Offering Hospice under Medicaid, 1987–1999," in Hospice Facts & Statistics, Hospice Association of America, Washington, DC [Online] http://www.nahc.org/Consumer/hpcstats.html [accessed April 20, 2004]

In 2000, 75 percent (1,017,900) of home health users received medical/skilled nursing services, 44 percent (600,900) received personal care, 37 percent (502,600) received therapy, and 12 percent (160,000) received psychosocial services. (See Table 9.10.)

From 1989 to 1997 annual Medicare spending for home health care rose 30 percent. Relaxed eligibility criteria for home health care, including elimination of the requirement of an acute hospitalization before receiving home care, enabled an increased number of beneficiaries to use services. Home health care use peaked in 1997 and began to decline in 1998. (See Table 9.11.)

MEDICARE LIMITS HOME CARE SERVICES.

The Balanced Budget Act of 1997 (PL 105-33) aimed to cut approximately $16.2 billion from Medicare home care expenditures over a period of five years. The federal government sought to return home health care to its original concept of short-term care plus skilled nursing and therapy services. According to Medicare's administrator, Nancy-Ann DeParle, some of the 4.8 million Medicare beneficiaries who received home health care would lose certain personal care services, such as assistance with bathing, dressing, and eating.

The Balanced Budget Act sharply curtailed the growth of home care spending, greatly affecting health care providers. Annual Medicare home health care spending fell 32 percent between 1998 and 1999 in response to tightened eligibility requirements for skilled nursing services, limited per-visit payments, and increasingly stringent claims review. (See Table 9.11.) The changes forced many agencies to close and transfer their patients to other home health care companies. It was estimated that 1,200 agencies nationwide went out of business in 1998. In addition, the FIGURE 9.2
Number of current home health care patients, 1992, 1994, 1996, 1998, 2000 number of current home health care patients declined (see Figure 9.2), in large part due to decreased funding. However, the decline began one year prior to the Balanced Budget Act, so more factors than decreased Medicare funding are likely to be playing a role in the decline.

Nursing Home Care

Growth of the home health care industry in the early 1990s (as shown by numbers of home heath care patients in Figure 9.2) is only partly responsible for the decline in the rate of Americans entering nursing homes (residents per 1,000 population), as shown in Table 9.12. Declines also occurred in years when numbers of home health care patients declined as well. Another reason for the decline in the rate of nursing home residents may be that the elderly are choosing assisted living and continuing-care retirement communities that offer alternatives to nursing home care. There is also a trend toward healthy aging—more older adults are living longer with fewer disabilities.

Still, in 1999 nearly 1.5 million adults age 65 and older were nursing home residents. Most were white (87.1 percent) and female (74.3 percent), and more than half (51.5 percent) were 85 years and older. (See Table 9.12.)

Nursing homes provide terminally ill residents with end-of-life services in different ways:

Caring for patients in the nursing home.
Transferring patients who request it to hospitals or hospices.
Contracting with hospices to provide palliative care (care that relieves the pain but does not cure the illness) within the nursing home.

TABLE 9.10
Number of current home health care patients by services received, sex, and race, 2000

Selected services¹	Number
All patients³	1,355,300
Medical/skilled nursing
Total medical and/or skilled nursing	1,017,900
Physician	32,300
Skilled nursing	1,016,500
Equipment and/or medication
Total equipment/medication	174,800
Durable medical equipment and supplies	109,500
Medications	88,900
Personal care
Total personal care	600,900
Continuous home care	53,100
Companion	40,400
Homemaker-household⁴	329,400
Personal care	476,400
Transportation	^*25,300
Respite care	^*17,000
Therapeutic
Total therapeutic	502,600
Dietary and/or nutritional	60,200
Enterostomal therapy	^*17,700
IV therapy⁵	52,700
Occupational therapy	112,300
Physical therapy	360,700
Respiratory therapy	29,500
Speech therapy and/or audiology	30,600
Other high tech care⁶	^*11,000
Psychosocial
Total psychosocial	160,000
Counseling	22,400
Psychological	^*14,700
Social	117,500
Spiritual and/or pastoral care	^*15,300
Referral	34,800
Other^6,7	46,300
^*Figure does not meet standard of reliability or precision because the sample size is less than 30 if shown without an estimate. If shown with an estimate, the sample size is between 30 and 59, or the sample size is greater than 59 but has a relative standard error of 30 percent or more.
¹Numbers will not add to totals because a patient may be included in more than one category.
²Other race includes Asian, Native Hawaiian or other Pacific Islander, American Indian or Alaska Native, and multiple races. All race categories include persons of Hispanic and not-Hispanic origin. Persons of Hispanic origin may be of any race.
³Total number of home health care patients.
⁴Includes Meals on Wheels.
⁵IV is intravenous.
⁶Includes enteral nutrition and dialysis.
⁷Includes dental, vocational therapy, volunteers, and other services.
SOURCE: Adapted from "Table 6. Number of Current Home Health Care Patients by Services Received, by Sex and Race: United States, 2000," National Home and Hospice Care Data, Centers for Disease Control and Prevention, National Center for Health Statistics, Hyattsville, MD, 2003 [Online] http://www.cdc.gov/nchs/data/nhhcsd/curhomecare.pdf [accessed May 1, 2004]

A combination of federal, state, and private monies finance nursing home care. According to the Administration on Aging, in 2000 almost half of the funds came from Medicaid, one-third came from private payment, 10 percent from Medicare, and 5 percent from private insurance.

Patients in a Persistent Vegetative State

In 2004 the precise number of patients in a persistent vegetative state (PVS) was unknown, as no system was in

TABLE 9.11
History of Medicare home health care spending growth, 1985–1999

Period	Annual spending rate	Significant change shaping service use
1985–88	1%	Tightened interpretation of coverage criteria; increased emphasis on medical review of home health claims.
1989–97	30%	Loosening of coverage criteria allowed more beneficiaries to receive more services.
1998–99	−32%	IPS limited per visit payments and limited aggregate agency payments; heightened scrutiny of claims; changed qualifying criteria for "skilled" services.
SOURCE: "Table 5. History of Medicare Home Health Care Spending Growth, 1985–99," in Medicare Home Health Care: Prospective Payment System Could Reverse Recent Declines in Spending, General Accounting Office, Washington, DC, September, 2000

place to count them. However, the most recent estimates ("Persistent Vegetative State and the Decision to Withdraw or Withhold Life Support," Journal of the American Medical Association, vol. 63, no. 3, January 19, 1990) are that there are approximately 15,000 to 25,000 PVS patients in the United States. The costs to maintain such patients range from $2,000 to $10,000 per month, depending on the acuity of care needed (the type, degree, or extent of required services).

The End-Stage Renal Disease Program

End-stage renal disease is the final phase of irreversible kidney disease and requires either kidney transplantation or dialysis to maintain life. Dialysis is a medical procedure in which a machine takes over the function of the kidneys by removing waste products from the blood. Medicare beneficiaries with ESRD are high-cost users of Medicare services. In 1972 amendments to the Social Security Act extended Medicare coverage to include ESRD patients.

When the ESRD program was started in 1974, it cost Medicare $229 million. By 1999 the Centers for Medicare and Medicaid Services (CMS) reported that expenses had risen to $10.8 billion for 266,280 people, or about 0.9 percent of all patients served by Medicare. This small percentage of patients accounted for about 6.5 percent of all Medicare reimbursements. In 1999 the average annual cost per ESRD patient was $40,583, about 7.5 times higher than for beneficiaries without ESRD ($5,385).

The segment of Medicare beneficiaries with a disability or ESRD rose from 3 percent of all Medicare beneficiaries in 1980 to 5.4 percent in 2000. This group is projected to grow to 8.7 percent by the year 2020. (See Figure 9.3.)