By Anne Tumlinson

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.