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Can Medicaid Long-Term Care Expenditures for the Elderly Be Reduced?

In research sponsored by The Commonwealth Fund and published in The Gerontologist, vol. 36, no. 6., Joshua M. Wiener investigates whether states can substantially reduce the rate of increase in Medicaid long-term care spending for the elderly without adversely affecting beneficiaries.

Wiener, a Principal Research Associate at the Urban Institute, writes that while there are a number of proposed strategies to reduce Medicaid spending, the only way that states are likely to make an appreciable difference in expenditures is by tightening eligibility rules, reducing payments to providers, and eliminating services.

Yet eligibility standards are already strict, he points out, and reducing payment levels could lead to lower quality or access to care. If availability of services were reduced, for instance, by limiting new nursing home construction, more long-term care needs would be unmet.

Unfortunately, Wiener writes, the research literature does not offer any "silver bullets" that would allow states to obtain large savings painlessly. The hard reality, he contends, is that the current method of Medicaid long-term care financing may be the most economical. Payment rates are lower than under Medicare and in the private sector; people can receive benefits only after exhausting their assets; the program pays only those costs that the elderly cannot; and service is limited largely to the severely disabled who do not have family supports. Within this system, it would be difficult to obtain large additional savings.

Strategies for Controlling Growth of Medicaid Expenditures for the Elderly:

  • Bring more private resources into the long-term care system. This could be accomplished by encouraging people to purchase long-term care insurance, enforcing prohibitions against the elderly transferring their assets to meet eligibility requirements, or more aggressively recovering money from the estates of deceased nursing home residents. These strategies, writes Wiener, have several shortcomings: long-term insurance is unaffordable for most elderly people, transferring assets is not as common as previously thought, and estate-recovery programs have historically recouped small proportions of nursing home expenditures.
  • Integrate acute and long-term care services through managed care. A number of demonstration projects are underway, including Social HMOs, On Lok and its Program of All Inclusive Care for the Elderly, and the Arizona Long-Term Care System. Some of the preliminary data are encouraging--especially in the sense that acute care use can be lowered in capitated care settings, but it is unclear whether integration of services generates long-term savings.
  • Reduce eligibility, reimbursement, services, and quality standards. If the methods above prove to be ineffective, states are likely to return to traditional cost-cutting methods.

Publication Details



Can Medicaid Long-Term Care Expenditures for the Elderly Be Reduced?, Joshua M. Wiener, The Commonwealth Fund, June 1996