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Medicaid and Long-Term Care for the Elderly: Implications of Restructuring

Although Medicaid is often thought of as a health insurance program for low income mothers and children, more than one-third of its expenditures are for long-term care, both community- and nursing home-based. Medicaid has now become the primary payer for those benefits, spending $46 billion in 1994 for elderly and disabled adults and children.

As Congress begins its next round of budget debates, long-term care spending will once again come under scrutiny. A new analysis for the Commonwealth Fund, Medicaid and Long-Term Care for the Elderly: Implications of Restructuring, by Judith Feder, Jeanne Lambrew, and Michelle Huckaby of Georgetown University, examines the impact of potential changes in the program.

Though Medicaid spending grew rapidly in the early 1990s, it has moderated dramatically in 1996. According to the authors, this slowdown may signal that budget targets can be realized without cuts or caps and that further reductions could hurt program beneficiaries.

Feder and her colleagues argue that proposals for either block grants or per capita spending caps would put vulnerable beneficiaries at risk. The block grants, which Congress has proposed, would hit the states that now provide more extensive long-term care than average. The per capita spending caps, which the Administration has proposed, could encourage states to replace high-cost long-term care beneficiaries with people who need less care.

The authors also argue that fiscally strapped states may seek to reduce their share of Medicaid expenditures by limiting access to home care as well as nursing homes.

Finally, they raise additional concerns about nursing home quality if current rules regarding payment are repealed or if legislation encourages nursing homes to convert to the less well-regulated status of residential care facilities.

The authors conclude that reduced federal dollars and increased state flexibility could decrease choice and quality for Medicaid beneficiaries and their families.

Facts and Figures

  • Medicaid pays 47 percent of the nation’s $72 billion bill for nursing care.
  • Medicaid finances the care of 67 percent of all nursing home residents.
  • The average yearly cost of nursing home care is $40,000.
  • To qualify for Medicaid nursing home benefits, beneficiaries must give up virtually all their assets and income.
  • Medicaid long-term care spending per aged resident ranges from $507 to $2,935 across the states. Eight of the 10 highest spending states would receive the lowest growth rate under a 1996 Congressional Medicare proposal.

The full report is not available at this time.

Publication Details



Medicaid and Long-Term Care for the Elderly: Implications of Restructuring, Judith Feder, Jeanne M. Lambrew, and Michelle Huckaby, The Commonwealth Fund, December 1996