Long Term Care

Long-term care presents a significant burden for many persons and for public programs. Long-term care in a nursing home can cost more than $40,000 per year, with many nursing home residents paying that out of their own pockets. In addition to this out-of-pocket spending, Medicaid and Medicare paid out more than $51 billion in 1995 for long-term care for the elderly. More than a million elderly persons with extensive disabilities live at home, relying on their families for assistance. The aging of the baby boomers, particularly as they reach age 85 and older, will have a dramatic impact on the numbers of persons needing long-term care and will challenge individuals, families, and public programs to finance and furnish that care. This testimony (1) provides an overview of current spending for long-term care for the elderly, (2) discusses the increased demand that the baby boomers will likely create for long-term care, (3) describes recent shifts in Medicaid and Medicare financing of long-term care, and (4) discusses the potential role of private long-term care insurance in helping to pay for this care.

GAO noted that: (1) spending for long-term care for the elderly totalled almost $91 billion in 1995, the most recent year for which expenditures from all sources were available; (2) almost 40 percent of these dollars were paid for by the elderly and their families and almost 60 percent by Medicaid and Medicare; (3) these amounts, however, do not include many hidden costs of long-term care, since an estimated two-thirds of the disabled elderly living in the community rely exclusively on their families and other unpaid sources for their care; (4) according to current estimates by the Congressional Research Service, nearly a quarter of the nation's elderly population--over 7 million elderly people--have some form of disability for which they require assistance, such as help with bathing, dressing, eating, preparing meals, or taking medicine; (5) as the 76-million-strong baby boom generation ages, so too will its demand for long-term care increase; (6) long-range predictions of the magnitude of the baby boomers' long-term care needs, however, vary, with estimates of the disabled elderly ranging from 2 to 4 times the current disabled elderly; (7) estimates of cost are even more imprecise due to the uncertain impact of several important factors, including who will be needing care, the types of care they will need, and who will fund it; (8) Medicaid and Medicare, which currently finance almost two-thirds of long-term care, have undergone significant changes in recent years; (9) while historically the majority of Medicaid long-term care expenditures were for nursing home care, in recent years there has been a shift toward more financing of home and community-based care; (10) at the same time, Medicare, the largest public payer for home-based care, has been paying for care that more and more resembles long-term care; (11) private long-term care insurance, seen as a means of helping reduce the catastrophic financial risk for people needing long-term care and some of the financing burden that falls to public programs, has contributed little to date; (12) it is a relatively new form of insurance with a growing market; and (13) nevertheless, after 10 years, a very small proportion of the elderly or near-elderly have coverage.