Cutting Medicaid Could Hurt Millions of Americans Who Need Long-term Care

Editors: Patti Boozang and Amanda Eisenberg
Authors: Carol Raphael, Stephanie Anthony, Lori Houston-Floyd 

Click here to subscribe to receive more content like this!
Help shape The 80 Million: What should we write about next?

tl;dr

• Medicaid is the major payer of long-term care (LTC) in the United States, including for nursing facility, home care and other community-based services. 

• The need for LTC services and related costs of care are growing, especially for aging Americans and their families as the “silver tsunami” continues. 

• Deep cuts to Medicaid being considered by Congress would shift Medicaid costs to states and could force states to cut LTC benefits, eligibility or provider payment.  

• As a result, millions of Americans and their families could face even greater financial and caregiving hardship than they do now in providing these expensive services for their loved ones. 

The 80 Million Impact

What are LTC services?  

LTC services, also referred to as long-term services and supports (LTSS), are a broad range of medical, personal care, rehabilitation or social services a person with physical or cognitive limitations may need. An estimated 70% of Americans will need LTC services in their lifetime.¹ For example, a frail, older woman might receive LTC services like: (1) a personal care aide who comes to her home to help her bathe and dress each morning; (2) home modifications to minimize her risk of falling; and (3) transportation to her medical appointments. These services enable her to remain in her home — near family to prevent social isolation — and attain the highest possible quality of life. 

LTC and LTSS services can be provided in other settings, such as a nursing home, an assisted living facility or adult day health center. Across the nation, these services are provided not just by paid workers, but also by unpaid family members, friends and neighbors, often because families have no insurance coverage for these services and the cost of paying for them out of pocket is prohibitive.  

The need for LTC services affects a wide range of Americans: 

• Adults ages 65 and older who may have physical frailties, chronic conditions, or diseases, such as cardiovascular or respiratory diseases, or dementia. 

• Adults and children with physical disabilities, including functional impairments, such as paralysis from spinal cord injuries or a traumatic brain injury.  

• Adults and children with degenerative diseases, such as amyotrophic lateral sclerosis (ALS). 

• Adults and children with intellectual or developmental disabilities, including people with conditions like cerebral palsy or autism that originate at an early age. 

• Adults and children with severe mental illness resulting in disability or limitations in personal care. 

• Children with medical complexities, such as muscular dystrophy, epilepsy or other seizure disorders or respiratory conditions, and who may require assistive equipment and aids such as a feeding tube, tracheostomy tube, or a ventilator. 

With the “silver tsunami,” (the rapid increase in the proportion of elderly individuals in the U.S. population) the need for these services is growing exponentially. 

Medicaid is the primary payer of LTC, and those costs make up a disproportionate share of spending. 

LTC services account for a significant and disproportionate portion of total Medicaid spending. In 2020, LTC spending represented 37% of total federal and state Medicaid expenditures, even though only 6% of Medicaid enrollees used LTC services.² Medicaid accounts for almost half of all LTC spending in our country,³ making Medicaid the primary payer for these services. Many people wrongly believe that Medicare will pay for LTC, when in fact Medicare only covers short-term nursing home and home care services to help people recover. Nearly a third of spending for long-term care comes from private means, like paying out of pocket. Private health insurance generally doesn’t cover LTC services. The small private LTC insurance market is unstable, and products are often prohibitively expensive.

For individuals to qualify for LTC coverage through Medicaid, they must meet Medicaid’s income and asset requirements. Many moderate-income older Americans and their families pay for services out of pocket until they exhaust or “spend-down” their resources to qualify for Medicaid. 

LTC services are expensive; most people can’t afford them. 

An average American turning 65 today is expected to face $120,900 in future LTC costs.⁴ Yet half of adults ages 65 and older say they have not put any money aside for future living assistance expenses. An overwhelming majority of adults say that it would be impossible or very difficult to pay the estimated costs for one year in a nursing home (90%) or the estimated costs for one year of assistance from a paid nurse or aide (83%).⁵  The prohibitive cost of these services — and the absence of private resources to pay for them — underscores how critical Medicaid is to ensure a safe, dignified and quality life for people as they age. 

Why are LTC services at risk? 

As our Manatt Health colleagues explained in last week’s 80M Medicaid Madness: What States and Providers Need to Know About Budget Reconciliation, President Trump and the Republican-majority House want to cut $2 trillion to $2.5 trillion from the federal budget. Of this amount, $880 billion and counting is expected to come from Medicaid — a 10 percent reduction in federal funding over the next decade. The only way to reach this $880 billion target is to make major changes to Medicaid program funding to states, shifting the burden of Medicaid program costs, including LTC costs, to state and local governments.  

States could be forced to alter Medicaid eligibility, eliminate benefits, reduce services or reduce payments to providers, and because LTC costs make up a disproportionate share of Medicaid spending, LTC is unlikely to be spared. 

Cutting back eligibility for LTC services and reducing benefit service levels would be among the impossible choices states could face if they needed to reduce LTC costs in light of federal Medicaid funding cuts. States could also reduce Medicaid payment to nursing homes and home-care providers. Given that Medicaid makes up two-thirds of revenues for these providers, some may need to significantly scale back services or close their doors. If people lose access to LTC services funded by Medicaid, their needs and care will, by necessity, fall to the responsibility of their families and friends — even more than it does today. 

The Bottom Line

The demand for long-term care services is growing, and Medicaid's foundational role in funding these services is more critical than ever. By 2060, 23% of the population will be aged 65+ (up from 15% in 2016), and 19 million Americans will be aged 85+ (a 198% increase from 2016).⁶ Federal Medicaid funding cuts could be devastating to these and other Americans who need LTC services, shifting costs to states and forcing Medicaid programs to alter eligibility, eliminate benefits, reduce services or reduce payments to providers. As a result, millions of Americans, including older adults, children, and adults with disabilities, chronic conditions, and functional impairments, will be hurt. 

Help shape The 80 Million: What should we write about next?