Rising Demand for Paid Long-Term Care Services Seen in the Near Future

By 2050, 20 percent  of the population will be 65 or older.  That will be an increase of 8 percent from the current amount of 12 percent of the population being that age or older. This rapid increase in the number and percentage of people 65 or older in the upcoming years  got the Chairman of the Senate’s Finance Committee to ask the Congressional Budget Office (CBO) to investigate the impact of this growth on long-term care services.  In 2010, the CBO states in its report “Rising Demand for Long-Term Services and Supports for Elderly People,” the nation spent 1.3 percent of its gross domestic product (GDP) on long-term care services. By 2050, the CBO estimates that this will roughly triple,  increasing to somewhere near 3.0 t0 3.3 percent of GDP.

Current Spending

In 2011, CBO estimates that $426 billion was spent on long-term care services. Of that amount, roughly 55 percent, or $234 billion, was the cost of care provided by, or donated by  family members and friends, primarily adult daughters of the elderly. This amount is purely the value of care provided by these people for which they were not compensated.  This amount is important though, because as time moves on, the number of individuals available to provide care at no cost is expected to decrease and thus add to the amount of paid long-term care services needed.   In 2011, $192 billion was actually spent on long-term care services.  Medicare spent $68 billion, Medicaid spent $60 billion, private insurance spent $12 billion and, most surprisingly, $39 billion was paid in cash by the people receiving the care. The remaining $12 billion was spent by a variety of  state, local and federal agencies, such as the Department of Defense.

The annual average cost for a person to pay out-of-pocket or with private insurance in 2011 ranged from $50,000 in Oklahoma to about $135,000 in Connecticut, according to MetLife insurance.   Medicaid pays for the majority of long-term care services for people in a nursing home. According to the 2004 National Nursing Home Survey, 58 percent of nursing home residents were covered by Medicaid, but only half were covered by Medicaid when they were admitted to the facility.  

Costs of services at a nursing home are growing at a rate of about 4 percent per year from 2002 to 2012, according to the CBO.  Medicaid, however, is spending roughly the same amount on institutionalized care, increasing at a rate of about 1 percent per year, while the amount that Medicaid spends on providing long-term care services to people living in the community is increasing by about 8 percent a year.  CBO estimates that between 2013 and 2023, Medicaid spending on long-term care services will increase about 5.5 percent per year and Medicare spending on long-term care services will increase about 6.5 percent per year during the same time period.

Where Care is Provided

Roughly 20 percent of long-term care is provided in an institutional setting.  The majority of long-term care services–80 percent–are provided in people’s private residences, CBO reports.  Nursing homes provided 13 percent of long-term care services in institutional settings, and residential care or other types of facilities where skilled nursing is not a service provided roughly 5 percent of long-term care services.  Since the 1990s, the populations of residents in residential care facilities, where no nursing services are provided, is increasing, while the number of people receiving long-term care services in nursing homes is decreasing, according to the CBO.

In 2010, 4.0 percent of non-eldery adults provided long-term care services to a family member or a friend.  CBO estimates by 2050 the demand for these caregivers will more than double to 10 percent of the non-elderly population.  At the same time, though, the number of people available to provide care will shrink.  The interesting thing  is that CBO did not see an increase in the severity of illness among the elderly during the last ten years.  The percentage of elderly with functional disabilities has remained the same.  This is providing hope to CBO that even though there is expected to be a greater demand for services, the types of services and their complexity is not expected to change much.

The Sicker Are in Institutions

Elderly people who required assistance for  three or more functional limitations were more likely to receive care in institutional settings. Nearly 84 percent of all people in a nursing home had three or more functional limitations.  Only about 50 percent of residents in residential care facilities needed assistance with three or more functional limitations.   Oddly, the demographics at each type of facility are about the same, with 50 percent of nursing home residents and 53 percent of residential care facility residents being 85 or older; at both types of facilities women comprise about three-fourths of the population, the majority of which are widowed and, as a result, did not have a spouse to provide care at their residence, according to the CBO.

CBO found that more than half of the long-term care currently provided is done so at no cost by family and friends.  Concerns do exist, though, that the shrinking availability of family and friends to provide care, coupled with the modest increasing costs of long-term care, will result in a much larger demand for reimbursed care in the immediate future.  The good news is that the type of care is not expected to change much as statistics have shown that the types of care provided over the last ten years have remained stable.