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Reform of Long-Term Care System Could Save Billions

Contact: Lindsey Spindle, 202.207.1337, lspindle@avalerehealth.net

04.21.09

Washington, DC – The federal government could save upwards of $35 billion over ten years if it enacted a policy proposal to reform financing of long-term and post-acute care, said Avalere Health in a new report released today. 

Avalere built a new proprietary model to assess the federal costs of change in long-term care policy, using methods and assumptions similar to those employed by the Congressional Budget Office.  Using the model, Avalere assessed a proposal developed by the American Health Care Association, the National Center for Assisted Living, and the Alliance for Quality Nursing Home Care.  The focal points of the proposal are:

• 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 (LTC) 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. 

Reforming the Medicare post-acute payment system in this way would likely generate $81 billion in savings over 10 years of operation due to more cost- effective placement of Medicare patients in post-acute care settings.  Those savings would offset the new costs of launching a consistent federal LTC program, which by Avalere estimates would cost $46 billion over 10 years.  The total 10-year program savings is $35 billion.  A full set of assumptions and methods is published in the report. 

Current Medicare payments for post-acute medical care – the kind of care given immediately after a stroke or major fall – are first based on where the care is provided, not on the actual patient’s condition and needs.  Additionally, in 2006, the nation spent about $230 billion 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 become increasingly unstable.

“The health reform goals debated today – achieving greater efficiency and value for the healthcare dollar, adding discipline to Medicare spending, and better use of evidence to improve patient experience – are inextricably tied to improving long-term and post-acute care in the U.S.,” said Anne Tumlinson, a vice president at Avalere Health and lead author of the firm’s new report.  “Any meaningful reform effort will involve a careful analysis of choices, policy options, and trade-offs.” 

Avalere Health is an advisory services company whose core purpose is to create innovative solutions to complex healthcare problems. Based in Washington DC, the firm delivers research, analysis, insight, and strategy for leaders in healthcare business and policy. Avalere's experts span 125 staff drawn from the federal government (e.g., CMS, OMB, CBO, and the Congress), Fortune 500 healthcare companies, top consultancies, and nonprofits. The firm offers deep substance in areas ranging from healthcare coverage and financing to the changing role of evidence in healthcare decision-making. Its focus on strategy is supported by a rigorous, in-house analytic research group that uses public and private data to generate quantitative insight. Through events, publications, and interactive programs, Avalere also translates real-time healthcare developments into actionable information.

Learn more at www.avalerehealth.net.

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