State Medicaid Programs To Spend 1.6 Trillion Dollars On Long-Term Care Over The Next Twenty Years

Main Category: Medicare / Medicaid / SCHIP
Article Date: 30 Sep 2008 - 6:00 PDT

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State Medicaid programs will spend $1.6 trillion on long-term care expenses over the next twenty years, according to a new study released today by America's Health Insurance Plans (AHIP). When Federal matching funds are included, total government expenditures on long-term care will exceed $3.7 trillion.

Medicaid spending for long-term care will grow at a faster rate than overall health care spending, faster than Medicare, and faster than the national Gross Domestic Product.

"This report shines a spotlight on the need to better prepare for long-term care expenses and to explore ways to provide consumers with greater access to home and community based care options," said Karen Ignagni, President and CEO of AHIP. "Many Americans underestimate their risk of needing long-term care, underestimate the cost of care, and many erroneously believe they have long-term care coverage."

Paul A. London, an economist and former Commerce Department deputy undersecretary in the Clinton Administration, and Daniel I. Shostak, Ph.D. of Maryland-based Strategic Affairs Forecasting prepared the report on behalf of AHIP. The report provides national as well as state specific projections for long-term care costs. Projections were calculated using 2008 dollars.

If current policies and trends continue, between 2008 and 2027 annual Medicaid long-term care expenditures are projected to grow by 124% from $51.5 billion to $115.6 billion. In 2008, fifteen states are expected to spend $1 billion on Medicaid long-term care services. By 2027, 25 states will be spending $1 billion or more.

States with the highest projected expenditures over the next twenty years includes New York ($271 billion), California ($230 billion), and Pennsylvania ($104 billion.). States with the fastest growing Medicaid long-term care expenses are Alaska (7 percent), California (6.4 percent), and Arizona (5.9 percent).

"States cannot continue to shoulder the burden of long-term care costs without some major changes," said Daniel I. Shostak, MPH MPP, Strategic Affairs Forecasting.

The report projects Medicaid long-term care expenditures and does not include costs that Americans pay out of pocket for long-term care. Medicaid pays long-term care costs for low-income individuals or for those who have spent down their assets to the point of Medicaid eligibility. Medicare does not cover extended long-term care.

Increasingly expensive medical treatment and the aging of the baby boom population are major contributing factors to the increase in Medicaid long-term care expenses. In addition, many Americans have not purchased long-term care insurance to help cover the cost of care

Most Americans are not focused on planning for long-term care and are not taking appropriate steps to protect their retirement savings should they need long-term care services. Studies show that a 65 year-old today has a 70 percent chance of needing long-term care at some point in his or her lifetime. The average annual stay in a nursing home is $75,000.

AHIP recently launched a national education campaign to better inform consumers about their risks of needing long-term care and the valuable financial protection long-term care insurance provides. The campaign seeks to correct common misconceptions about long-term care, answer consumers' questions, and highlight the important financial protection and peace of mind that long-term care insurance provides. The centerpiece of this campaign is a consumer-friendly website, http://www.MyLifeMyFamily.com.

AHIP