Researching Costs

• Finance Modeling. Researchers at the Long Term Care Data Institute developed a computer simulation model to project the use and costs for providing long-term care for the chronically ill. The analytic framework for the model provides estimates of the lifetime use and costs of long-term care by superimposing mortality rates upon age-specific prevalence rates of long-term-care use. The input can be varied by purchaser, policy benefit design, eligibility triggers and local service costs. (See Program Results on ID# 023795.)
• Cost and Service Survey. Researchers at the California Association for Health Services at Home Foundation studied variation in costs and service utilization of long-term care among more than 87,000 patients in three states. (See Program Results on ID# 024045.)

Key Findings
Key findings from the study were:

• There was great variation among patient groups in resource use.
• Cost variations among agencies varied more than could be attributed to case-mix differences.
• For patients who received services for fewer than 120 days, utilization and costs were substantially higher for patients in Medicare fee for service (FFS) than in all other payer categories.
• Long-term patients represented 11.6 percent of all Medicare FFS patients, but accounted for 43.4 percent of the total FFS costs.

Research on State Financing
From 1997 to 1999, researchers at the Visiting Nurse Service of New York examined state efforts to reallocate long-term-care resources and expand home- and community-based services for older adults. (See Program Results on ID# 030172.)

Findings

• Senior health care, including long-term care, was not a top policy priority in 1997.
• Medicaid spending on home- and community-based services was growing faster than spending on nursing home care. However, the share of Medicaid long-term-care resources going to home- and community-based services was still small in most states.
• Most states sought additional revenue to fund home- and community-based services, principally through Medicaid waiver programs.
• Nearly half the states were encouraging purchases of private long-term-care insurance. States were also expanding programs with capitated long-term-care services (in which the provider is paid a set fee per patient, regardless of the amount or intensity of medical services provided).
• States were rapidly expanding public funding of long-term-care services for older adults living in assisted living facilities and other supportive housing arrangements that are alternatives to nursing homes.

Conclusions
The researchers reported the following conclusions:

• Reallocating a significant amount of public resources from nursing homes to home- and community-based services remained very difficult.
• Two strategies—developing managed long-term care and assisted living—were major areas of activity and high priorities for state policy-makers.
• There are substantial barriers to implementing programs with capitated long-term-care services. States have been more successful in expanding public funding of services in supportive housing.
• The majority of states, in the absence of federal long-term-care policy initiatives, are likely to continue the modest pace of change in their systems, with a gradual increase in the share of public resources devoted to home- and community-based services.

Balanced Budget Act and Home Health Care
The federal Balanced Budget Act of 1997 (BBA) changed the way Medicare home health care is reimbursed. Researchers at Laguna Research Associates and the Visiting Nurse Service of New York examined BBA's impact on Medicare beneficiaries, home health agencies and the health care system overall. (See Program Results on ID# 044186 and on ID# 045788.)

Findings

• The research revealed that the benefit changes led to significant reductions in the number of people who used home health services and the amount of services they received.

Conclusions

• Researchers concluded that the Balanced Budget Act "clearly has been successful at reining in the use of the [home health] benefit as well as shifting it toward skilled services."³

³ Murtaugh CM, McCall N, Moore S and Meadow A. "Trends in Medicare Home Health Care Use: 1997–2001." Health Affairs, 2003(22): 146–156.