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Reforming Long-Term Care and Post-Acute Care Could Save Billions

Tumlinson Anne_46025_46026

Despite the extreme inside-the-Beltway focus on healthcare reform, there’s been hardly a mention of tackling reform of our long-term care system.  This is curious when you stop to consider that these services are used by the same seniors who use the most healthcare resources and that they account for hundreds of billions of dollars of personal and federal spending.  Our existing system strains already-stretched government resources and family networks and will become only more expensive as our nation ages.

A new report finds that a proposal to reform Medicare post-acute care could provide the funding needed to reform the long-term care system, resulting in overall savings of $35 billion over ten years—all the while improving efficiency in our post-acute care (PAC) system and creating a new, consistent, voluntary long-term care (LTC) benefit for seniors.

Reforming PAC is, in simple speak, a must-do.  Currently, Medicare payments for post-acute medical care – the kind of care that follows a stroke or major fall – are first based on where the care is provided, not on the actual patient condition and needs. There is widespread bipartisan agreement that reforming this disjointed, inefficient payment system could enhance care while also adding a healthy dose of spending discipline to Medicare. In addition, this could be a great area to showcase better evidence-based decision-making.

The question becomes what to do with the money generated through PAC reform.  The proposal at hand – which was developed by the American advanced by the American Health Care Association, the National Center for Assisted Living, and the Alliance for Quality Nursing Home Care – directs those savings toward the creation of a new, fully federalized, and voluntary LTC benefit system.

And there is certainly rationale for reforming LTC financing.  The nation currently spends more than $230 billion annually on a LTC system that inadequately protects today’s senior population from the financial devastation of a long-term disabling condition such as Alzheimer’s disease or stroke.  Seniors often rely on their savings, home equity, or children to pay for their care.  In the current economic climate, these sources of financing have proven to be a house of cards rather than a stable foundation—a problem that will gain urgency as the Baby Boomers swell the ranks of our Medicare population and families slowly recover from deep financial losses.

Specifically, the proposal seeks to combine PAC with LTC reform through the following measures:

  • Creation of a new, site-neutral Medicare payment system for post-acute care based on patients’ conditions and medical needs. Decisions would be based on more evidence using a standardized patient assessment tool.
  • Creation of a fully federalized, voluntary, catastrophic long-term care benefit. Medicaid would no longer pay for LTC for seniors.
  • An increased amount of private funds used for long-term care services. Individuals would share the cost burden of the new LTC benefit in the form of a personal responsibility allowance, scaled to income.

Using methods and assumptions similar to those employed by the Congressional Budget Office, Avalere Health built a model to assess the federal costs of these changes. According to the results, these Medicare PAC reforms would likely generate $81 billion in savings over 10 years of operation through more cost-effective placement of Medicare patients in PAC settings.  Those savings would offset the costs of launching a federal LTC program, which by Avalere estimates would cost $46 billion over 10 years.

The total 10-year program savings is $35 billion.

Any meaningful reform effort will involve a careful analysis of choices, policy options, and trade-offs.  This report illustrates how these types of tradeoffs and investments could play out—this time using PAC savings to fund urgently needed improvements to our LTC system.   It is precisely these types of policy choices that will guide this new chapter in national healthcare reform.

Anne Tumlinson has nearly two decades of experience in long-term care financing policy. She is currently a vice president at Avalere Health, directing research and analysis on post-acute and long-term care policy for government, foundation, and commercial clients.  She has co-published work with health reform experts including Jeanne Lambrew.


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21 replies »

  1. The government has been planning this for years already but until now there are a lot of people who are in dire need of financial assistance. I think they’ve come up with a program CLASS ACT a few years ago, which was designed to give financial help to people who need long term care. It was too good to be true or too ambitious that it was cancelled right before it started. So people these days have no other option but to rely on federal programs or to purchase private insurance. Long term care insurance cost is very expensive these days and this is becoming a serious problem for most people. In addition to that, there is also an annual increase in premiums which makes it more difficult for them to buy coverage. I know that the people should be responsible in paying for their long term care expenses but the government has a responsibility too. I really think long term care reform is needed now. This will benefit everyone from seniors to people with injuries, serious conditions and disabilities.

  2. There seems to be a particular resistance to changing process in the long term care community. The application of simple lean engineering tools to clinical and administrative processes would eliminate Millions. However, the mere mention of standardized work and measureable process and human performance brings discussions to a halt. Standardized work does not infringe on the medical professionals’ judgment or their ability to treat and cure residents/patients. It just takes the waste out of every process that does or might support the care giving process.

  3. Long-term and acute care, especially for conditions like stroke, SCI, and TBA, are definitely in need of reform. With any luck, such reform will manage maintain or better the current standard of care – the status quo seems to be content with gradual erosion of standards as costs increase and programs are cut. Heavy-lifting finances aside, what about increasing emphasis on transitioning high quality services out of expensive clinical environments to the home?

  4. At the turn of the 20th century 9 of 10 hospital beds were faith based supported. We can see that today in the names of many hospitals, Presbyterian, Methodist, Cedars, Our Lady of Perpetual Mercy etc.
    Care and concern cannot be regulated. Only tasks and money flow can be regulated. Those who believe that the government is the best provider of healthcare should look to England. Women with breast cancer are denied a medication that could help them because it is not on the British Medical Formulary. This could be a death sentence for a young woman who is otherwise healthy. What on earth do you think is going to happen to our elderly in nursing homes if we get national socialized healthcare and the money is not available because of rationed services. Our elderly still have value as human beings until they take their last natural breath. All of you who want to sit on the committee to determine who lives and who dies, raise your hand.
    I vote for a return to faith based supported healthcare.

  5. “A new report finds that a proposal to reform Medicare post-acute care could provide the funding needed to reform the long-term care system, resulting in overall savings of $35 billion over ten years”
    We reform the most abused public system on the planet, saving the US tax payer billions of dollars. We then take the savings and invest them into another government program ripe for abuse? I don’t have the solution but there has to be a better way! Why don’t we improve individual state LTC partnership programs while finding a way to work with established insurers to make coverage more universally available? Should the US tax payer be responsible for every other US taxpayer? Is there no hope for a system that empowers personal responsibility?

  6. I love when they talk about billions of dollars saved and spent like most people talk about when their wife goes to the department store with 3 bags of clothes touting how much money she saved. Anyway, reform is needed for 2 reasons to keep our Federal and State Governments out of financial problems, AND to allow Americans to save and transfer an inheritance to their children instead of giving it to the nursing home facilities.
    http://www.discoverlongtermcareinsurance.com

  7. In Hawaii, we have a problem with waitlisted patients. These are patients who are medically ready for discharge from the acute care setting but who cannot be placed in the post-acute care setting. We identified four key areas that contribute to this problem, many of which other bloggers are addressing. They are: reimbursement (need to build out a post-acute reimbursement methodology), capacity (insufficient type or quantity), workforce (insufficient numbers and the need for increased training in the care of higher acuity residents), and regulatory/government (streamlining the Medicaid eligibility process, overcoming the Medicare 3-day qualifying stay, etc.). We welcome the continued dialogue about post-acute care reform. Our waitlisted patient challenge in Hawaii, which represents anywhere from 200-275 patients per day that cannot be transferred from acute to post-acute care, is a symptom of our broken healthcare system nationwide.
    A full copy of our report on this issue can be located under “What’s New” on our homepage.

  8. I applaud anything and anyone that can reform long term care reimbursement. I have been working in long term care for 34 years and have seen a dramatic decline in how residents healthcare is paid for. While I deal with residents being admitted on Medicare/Medicaid my specialty is working with those residents admitted under a managed care plan. From my vantage point I find myself fighting the companies in order to allow the residents to recuperate to the level of being safe for discharge. The answer I get most times is “they can receive these benefits (OT/PT) at home. However, if they go home the nurses aide will only be approved for a max of 4 hrs/day, usually no more than 3-4 days a week. Who cares for them after the aide leaves? These patients, young or old have paid for these benefits for years and now when they most need the benefit, their stays are cut short because the companies don’t want to pay for in patient services. More & more patients are being admitted from the hospital to long term care facilites for sub-acute rehab. We need to reform all payor sources for long term care.

  9. First steps in reforming long term care: eliminate the PEG tube. If you can do that, then drive on to dialysis.

  10. In long term care even a great doctor cannot combat the consumerism in care. A former NC family physician of the year, a doctor who in my opinion is one of the greatest doctors I have met, staffs a nursing home as part of his practice. Patient families descend on him and demand outrageous and unrealistic actions for their loved one. The patient is getting great and appropriate care, but with the clout of CMS, DFS and all other regulators sided with the voter, right next to the plaintiff attorney crowd, even he has to capitulate and send patients to the ER just to sooth the family. Until this country gets a grip on death and dying, seniors will drain the system dry.

  11. Anne
    You do not mention the only the government’s only paid agent on the scene, the physician.
    CMS set up a system ripe for abuse, I see John Ballard’s story played out dozens of time a week. Yet they take their one agent on the scene and intentionally and specifically do not pay him to manage the patient. I take calls from the PT and the OT and the SW rom the NH all day long and cannot bill for it. The only folks left doing NH medicine have to do it in such volume that they are useless from a management point of view.
    Here is a reform, DRG acute rehab and SNF and actually pay the physician to manage the patient. You don’t have to do much, just a case rate of $500 or so and watch, billion, yes billions be saved.
    Without an honest broker supervising on the scene, the LTC industry will game every reform you outline. I have been unpaid so long, even a small bone will look like a steak

  12. Something just dawned on me.
    One of the driving metrics of reform is “outcomes.” (It is clear that more money, more medicine, more procedures and more devices do not insure better outcomes.)
    In the case of geriatrics, how does one measure “outcomes” when the natural life expectancy and recovery prospects are both low and short?

  13. I must agree that the savings should start with the Seniors, but it often seems that the end up with the worse outcomes. Most seniors have fixed incomes so I am all for supporting any type of reform that is in their favor.

  14. Praise the Lord! I thought no one would ever bring this up. My post-retirement jobs after a career in food service have been in senior living, both independent and assisted, and personal (non-medical) care. Seven years in that mix and taking care of my mother until her passing in January have given me an up close look at current long term care practices. And it’s not a pretty picture. Had I not learned the ropes first-hand my mother’s care would have been a nightmare.
    Rather than tell the professionals how to do their jobs I will stand on the sideline here and cheer. FWIW here are a couple of observations from my recent experience…
    ►Since there is no LTC for people with no assets, the only alternative is a skilled nursing facility. It is a conspicuous waste of time, space and resources to have someone in that environment who would be as well off in assisted living. Unfortunately, destitute old people and their families need not apply.
    ►The protocol for admission to a skilled nursing facility is a game. After three days in a hospital a physician must order rehab in a skilled nursing facility. Twenty days 100% then 80 days all but some dollar amount, then ZERO because the resident is then termed “custodial.” Ya’ll are the pros. You know the drill.
    ►I had the feeling that my mother (who took no meds, did most ADL’s, navigated to the dining room on her own, etc) was a cash cow for the facility. The CMS bills I saw were breathtaking. Take it from there…
    ►One client I had in a rehab situation was recovering from a physical problem but part of his “care” included speech therapy which was clearly wasted.(He was literally a rocket scientist, had a mind like a steel trap and was more articulate than most people.) Nevertheless he patiently complied with his “therapy” to break the monotony and pass the time. And yes, I feel confident this was about creating yet another line item for the revenue stream.
    ►Deinstitutionalization. I’ve mentioned it before and will continue ever chance I get. Dumping mental patients out of big, terrible state hospitals about fifty years ago may have been done with the best of good intentions but the experiment failed in a big way. This week’s release of “The Soloist” is a must-see.
    ►I see no reason why local public health departments can’t be upgraded to provide more public health care. Some semblance of infrastructure is already in place.
    Thanks in advance for any and all you do.

  15. I’d be in favor of almost any reform to long-term care and post-acute care.
    A federal government study showed that the implementation of the so-called “75 percent rule” would saves Medicare hundreds of millions of dollars. The rule requires that only 75 percent of patients being cared for in inpatient rehabilitation hospitals (IRFs) meet government criteria to allow IRFs to receive Medicare payments that are higher than rates paid to alternative care settings and traditional hospitals.
    The private-equity for-profit nursing homes have praised the new ruling because it directs the most medically complex patients to IRFs, while allowing them to “skim the creme” at the top by allowing patients with routine rehabilitative needs to receive care in skilled nursing centers (SNFs).
    Medically complex patients (traumatic brain injuries, spinal cord injuries and other complex neurological impairment) are relegated to IRFs, while medically less-complicated patients (hip fracture, joint replacement or strokes with significant cognitive impairment) are left to SNFs.
    The 75 percent rule has encouraged SNFs to increase their facility capacity. The nursing home can double the capacity of Medicare patients just out of hospitals, where it pays the most money, and add rehabilitation to the list of more-profitable services. Just another way to increase revenue.
    And those ancillary services would be more renumerative to the company when those services are owned by, or are shell companies belonging to the company. These ancillary services are an additional cost burden on nuring home residents and/or government programs.
    Private-equity for-profit nursing homes are run by corporations that are coldly efficient. If there is a way to play the system to make a higher profit, they will.

  16. Anne – I’ve written about the extraordinary lack of connectivity between Medicaid and Medicare when it comes to long term care for dual eligible seniors many times at http://www.letstalkhealthcare.org. Medicare & Medicaid are their own worst enemies – and do senior citizens a tremendous disservice – when it comes to financing care for seniors who are eligible for both programs. There’s a problem here that needs to be solved – I’m with you on that one.
    One question – Both Medicaid and Medicare think of themselves primarily as provider reimbursement programs, not as care managers or care overseers. They pay qualified providers for covered services, one at a time. That’s it. There is no continuum – just a service rendered that meets payment criteria. We now have years of Medicaid and Medicare demonstration programs all over the country that show better care and better outcomes when payors and providers think about care as a continuum, and not as just one service after another, but nothing ever changes.
    What makes you think Medicare or Medicaid are capable of thinking about or implementing a “site neutral” approach to payments?

  17. This would be a fantastic idea if the insurance companies provided equally accessible, universal coverage for all income brackets. This scenario only exists in a perfect economical world. Individuals currently covered by Medicaid depend on these benefits for health care preventive measures and upkeep. It is hard to accept such a drastic change of fully federalized, voluntary long term-care benefits. It is difficult to use a standardized patient assessment tool when individual health care needs vary so much. The question constantly arise that when cutting funds and trying to find private funds, where are the private funds going to come from? In the long run, there might be some big savings, but there will be some big upfront, out of pocket costs with this program.

  18. “Creation of a fully federalized, voluntary, catastrophic long-term care benefit.”
    This looks like it has adverse selection written all over it. I can imagine those with a family history of Alzheimer’s, dementia, etc. would be very interested in the program as would the disabled. Many among the mildly handicapped may expect to be unable to perform at least some of the activities of daily living (ADL’s) at a relatively young age. They would be interested in the insurance too if it’s affordable. Moreover, would people be able to (voluntarily) sign up for the benefit after it becomes clear that they need it? I think this approach is much more likely to cost money than save it. As for scaling the personal responsibility amount to income, higher income people would likely be net better off with private long term care insurance leaving the program with a higher percentage of lower and middle income people than it expects.

  19. Bravo on the good work, Anne. As a former member of the National Commission on Quality Long-term Care, I know that the human cost and financial cost of post-acute care is one we as a society ignore at our peril.
    For more context on this issue, see our reports,including, “Out of Isolation: A Vision for Long-Term Care in America,” go to: http://www.qualitylongtermcarecommission.org/reports.html

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