The Crumbing State of Long Term Care Funding in the United States

This may be a bit of a downer, so be warned. However, I plan on following this post with a more uplifting, upbeat analysis of the state of home care alternatives to LTC placement (stay tuned!) – so just keep that in mind.

In the news recently was a conference of some high-level policy experts from the SCAN (Senior Care Action Network) foundation – which is a think-talk spinoff of the SCAN Health Plan, which is a modest-sized health plan with a number of beneficiaries mostly in southern California and Arizona.

At the conference these experts basically groused about something we all kind of know at this point – in the United States our ability to save for our own retirement is of course poor, but it’s downright terrible when it comes to saving for the cost of long term care. Which is unfortunate, because if you live past the age of 65 there’s apparently around a 70% chance you’ll need to stay at least temporarily in a skilled nursing facility (SNF).

The problem is that nursing home costs have soared over the past decade or so, and are projected to double within the next 15 years if current trends continue. Currently the cost of a nursing home bed in the United States costs between 50,000 and 100,000 annually – which is a cost structure that puts even college tuition and fees to shame (another sector of the economy in crisis due to near-hyperinflation).

At the SCAN conference the policy they noted several distressing issues, which we’ll review here. From the Forbes article linked to above:

“The existing system for funding paid long-term supports and services is built on a wobbly three-legged stool: low private savings, an underfunded Medicaid program, and a hobbled private long-term care insurance market.

 For whatever reason, the long term care insurance market has basically crumbled in this country. This may have something to do with the current financial crisis – insurance companies need to grow their premiums via investments in order to make a profit and also pay off beneficiary claims. In the current financial environment, basically at the same time their investments have tanked (recent stock market rally aside) and interest rates on savings have been basically set at subzero by the Federal Reserve, their costs have gone through the roof. Typically, insurance companies are rather risk-averse when it comes to their investments – they aren’t hedge funds. So, they’ve been investing in bonds. And they’ve been getting hammered.

Regarding “low private savings” – I think that this is somewhat of an unfair point, when you think about it. How in the name if all that is Holy can an family not in the privileged 1% even hope to afford to save up the tens (if not hundreds) of thousands of dollars one might need to pay for the cost of a year or two in a SNF? And mind you, again, if costs double in 15 years, it strikes me that it’s impossible, practically speaking, to put away enough unless one is essentially functionally super-rich.

Finally, they note Medicaid. In California, we have something called Medi-Cal, which is our state’s version of Medicaid. It’s generally the way everyone else pays for their skilled nursing care (everyone aside from the super wealthy, that is, and aside from those that require 30 days or less of skilled nursing, who can tap their Medicare benefits for this).

This is how Medicaid / Medi-Cal it works, from what I understand. First, you have a person (typically an older adult) who needs SNF care. Then they see the cost of private care, which is astronomical – this older adult may have a home, a car, and a savings account, and maybe some retirement money and a pension – but they realize that this money would be very quickly wiped out of they tried to do private pay. So, this older adult may try to do home care for awhile, or see if they can hack it in an Assisted Living Facility (ALF) – a less expensive, but still very expensive option. They may have already tried these things. They visit a financial planner and an attorney to discuss how to qualify for Medi-Cal.

In order to qualify for Medi-Cal, you have to prove that you are indigent and that you deserve to have the government pay your SNF tab. So, in this situation the older adult has to find a way to do what’s called “spending down” – which refers essentially to the process of getting rid of all of your ‘excess resources’ so that you can  meet the legal definition of being indigent. Then, Medi-Cal will pay for your long term care. Note there are a lot of exemptions (e.g., you can keep one car for transportation, one home, et cetera) but if you get any of it wrong the mistake can be financially ruinous (people have been pursued for five and six-figure nursing home bills due to not properly following spend-down rules).

Getting on Medi-Cal / Medicaid can be a lifesaver, however, as SCAN participants noted, the Medicaid program is underfunded and we can assume that it will continue to be so (at least, I will).

In the way of a personal anecdote, a social worker that I work with has let me know of an informal test she did of how nursing homes in California tend to treat “Medi-Cal beds.” She calls up Nursing home X and says, “I have this patient who needs placement at your facility – Medi-Cal is his funding source. Do you have any room?” Nursing home X says no. She calls Nursing home X back a half hour later, disguises her voice, and says, “I have this patient and he can pay privately. Do you have room?” She gets an enthusiastic yes. From what I am aware,  Nursing home X may be breaking the law here (e.g., nursing homes are not allowed to deny a patient admission based on their funding source), but I have a feeling this is a rampant problem. Medi-Cal pays at best an anemic, discounted rate to SNFs, and private pay (and Medicare) are much more generous, so they want to avoid it where possible. In the end, this means that the low-quality nursing homes that tend to be on probation with surveyors, provide poor care, and get frequent complaints are likely the ones with a number of “Medi-Cal beds” whereas the higher quality nursing homes that can attract private pay patients simply have a couple of token Medi-Cal beds just for appearances sake.

I’ve worked in nursing homes in California. We have a two-tiered system of skilled nursing in our state, at best.  And it’s getting worse.

What the SCAN participants suggested was a variety of reforms which focused on funding mechanisms almost exclusively. They suggested that people shouldn’t be inflexibly forced to spend down in order to qualify for Medi-Cal (which in many, but not all cases involves essentially sheltering assets so they don’t have to go towards paying for the exorbitant costs of nursing care). Unfortunately, that may have the downside of confounding what the actual point of Medicaid / Medi-Cal, which is reserving the program for the indigent.

Also brought up amongst the SCAN conferees, apparently, was the idea of “universal long term care,” basically a mandatory long term care insurance plan for all Americans. While this idea probably has some currency in the current political ethos, this was one of the areas that conferees didn’t agree on – probably because it’s not clear that it would do anything to address the problem of upward-spiraling costs in long term care.

Otherwise I wasn’t impressed with their proposed fixes, at least how they were represented in the Forbes article – it was all quite status quo. Other than discussions of nips and tucks in how to address affordability (none of which I think will work, politically or logistically), there was no discussion of implementing wide ranging innovation or reform in the business of skilled nursing care, or ways of encouraging competition as a way to bring down costs.

Regarding the issue of political will to start trying to address the sorry state of long term care in this country, my wife recently sent me this link. You ever heard of the “Class Act”? Well, you won’t – because it’s dead. This was a half-hearted attempt on the part of the Obama administration (and opposed by the Republicans) to implement a national, voluntary long-term-care insurance plan as part of the Affordable Care Act (ACA, also known as Obamacare). To be fair – it was hard to support it. The premiums were projected to be far too large to be affordable, and the program was generally thought to be unsustainable otherwise, so it was scrapped as part of the “fiscal cliff deal” from a few months back (As an aside, as far as the ACA goes – it’s a pretty good deal for older adults overall; apparently the way some of the law is structured, it essentially provides a subsidy for older workers over younger ones. While that’s great – at this point the ACA does nothing to address the downward spiral in the long term care market).

My take is that for the long term care industry to survive and be relevant in the future for the majority of Americans (as opposed to being just a niche specialty care market for the 1% and an inhumane warehousing system for the indigent), the LTC industry and the regulatory and funding structures surrounding  it need to innovate and evolve.

Let’s be clear – innovation is happening in long term care – but from where I’m standing it seems to be happening most intensively in home care. So, in a future article (or articles), I’d like to discuss and feature some innovative businesses that are capitalizing on the fact that more and more older adults are staying in the home rather than going into skilled nursing care (which doesn’t mean that demand for SNF care is going down, unfortunately – it just means there’s more older adults out there), and showcase them as examples. I personally believe that even with the coming ‘demographic tsunami’ we can innovate a long term care infrastructure that can serve the needs of this country’s growing older adult population – but we’re going to need to innovate, and fast – and we’re going to have to start fostering an environment where that innovation can happen.

Psychotropics in Long-Term Care

There have been a variety of public policy initiatives designed to reduce the use of psychotropic medications in skilled nursing facilities, the most well-known is the so-called Omnibus Budget Reconciliation Act of 1987 (e.g., OBRA-87), which sets comprehensive guidelines for training nursing home staff and guidelines for prescribing psychotropic medications in nursing homes.

OBRA-87 required a number of changes to prescribing habits in nursing homes, all in the name of reducing the use of powerful medications as “chemical restraints.” It required prescribers to carefully document medications to be used for specific problems (e.g., as opposed to prescribing a resident Haldol for “dementia” it had to be for a specific behavioral issue). It asked providers to consider the use of shorter-acting medications rather than longer-acting ones, and to avoid other troublesome medications in older adults, such as cholinergic medications. The law also recommended providers regularly institute dose-reduction trials to see whether patients could function on less medications.

It appears OBRA-87 has had an effect on prescribing habits in nursing homes. According to research by Borson and Doane, prescribing habits have changed substantially over the years (Borson and Doane looked at ’89-’92), presumably due to the pressure brought to bear by the federal government’s purse:

  • Prescriptions for antipsychotics (e.g., Haldol, thorazine, etc.) in LTC fell by 34.8%.
  • Prescriptions for long-acting benzodiazepines (anxiolytics) fell by 70.1%.
  • Antihistamines, lithium, and psychostimulant prescriptions also fell significantly (40%, 24.1%, and 17.1%, respectively)

This all looks good. After all, antipsychotic use in the elderly, particularly the so-called “first generation” antipsychotics, poses particular dangers. Many, if not most of the older adults in nursing homes are prescribed antipsychotics for the purpose of controlling behavior issues secondary to dementia – I personally am very concerned about use of these agents with patients, given the issues related to tardive dyskinesia and how prone a demented older adult might be (particularly as their dementia advances in severity) to developing such issues. Avoiding long-acting benzodiazepines and antihistamines in older adults also seems like a good outcome, given the high risk of falls in the long-term care population.  Lithium, while effective, tends to have a very narrow therapeutic window (it tends to be toxic, particularly to the kidneys – which also are often compromised in older adults).

However, certain drug classes began to be prescribed more, apparently  – particularly short-acting anxiolytics like lorazepam and alprazolam (up by 7.9% and 11.5%, respectively) – and clonazepam prescriptions rose precipitously, up by 368%. While it’s an improvement over longer-acting benzodiazepine meds (like diazepam), in my opinion it’s never a good thing to be prescribing ‘benzos’ of any sort to patients who by their nature are prone to falls and mental confusion.

Prescriptions for buspirone, also known as Buspar, rose by a staggering 557.7%. Buspar is an interesting medication – typically when one wants to use medications to treat anxiety or agitation in anyone, older adult or no, a physician can use the benzodiazepine class of medications. While effective, these have the side effects of increasing confusion and fall risk (particularly in older adults, mentioned above) and of course, are also habit forming. In particularly difficult cases, one can use more powerful first or second-generation antipsychotic medications, but using those with older adults creates the risk of additional problems, such as metabolic side effects and even increased risk of death; this is why the FDA has issued one of it’s rare black box warnings for the entire class of drugs when used with older adult populations with dementia.

Buspar generated a lot of excitement when it was first released on the market in 1986 due to the fact it did not seem to lead to addiction or mental confusion in its users. However, anecdotally (just based on my experience) it doesn’t seem particularly effective, although to be fair it’s supposedly as effective as benzodiazepines for treating anxiety.

Finally, the antidepressant drugs doxepin and amitriptyline also dropped by 24.5 and 35.8 percent, respectively, presumably due to the fact that doxepin is contraindicated for use in people with so-called organic brain syndrome (of which most dementias would qualify).  Amitriptyline isn’t recommended for older folks because of its anticholinergic effects (older adults tend to produce less acetylcholine anyways – so they are more prone to unpleasant side effects from drugs with this tendency).

There continue to be periodic initiatives from governmental and regulatory bodies regarding psychotropic use in long-term care facilities, often with a focus on dementia patients. The latest is a push that began in March of 2012 and ended in December of 2012, which aimed to reduce the use of antipsychotic medications in dementia patients by 15% in all nursing homes.

What’s the alternative to using medications in long-term care facilities to treat behavior issues in dementia patients? In one of my next posts I’ll take that on (the subject of behavior management) – there’s actually lot that can be done, but it’s not as straightforward as giving people a pill or a shot – which is probably why it’s not as easy to do.

Paying For Long-Term Care

As a nation, saving money just isn’t something we’re very good at. Causes could include stagnant wages, or possibly our love of shopping, but the result is undisputed: 45% of people age 46 to 64 have less than $25,000 saved for retirement. Between the decline of pensions and the housing crash, it is unlikely that number will improve in the future.

Despite this, about 70% of people age 65 or older will need long-term care services at some point in their lifetime, and the median annual rate for a private nursing home room was $81,030 in 2012. My math skills aren’t the greatest, but these figures tell me there’s a huge (and growing) gap between need and ability to pay when it comes to long-term care.

One solution, perhaps more popular ten years ago than today, is long-term care insurance.  However, the recent low-interest rate environment (combined with rapidly escalating long-term care costs) has resulted in premium hikes many older adults cannot afford to pay.

Unfortunately Medicare only covers the first 100 days of skilled nursing care per illness, provided various requirements are met; Medicare does not cover “custodial care,” designed to help with activities of daily living. Increasingly, even middle-income seniors are turning to Medicaid to cover the cost of long-term care.

Eligibility guidelines for Medicaid vary state by state. In California, Medicaid (known as “Medi-Cal“) covers nursing home care with prior authorization from a health care provider if you qualify.

Determining whether you qualify for Medicaid or Medi-Cal is an extremely complex task. As noted by Disability Benefits 101, there are over 90 eligibility categories, each with its own rules and requirements. An elder law attorney is the best person to contact if you or someone you know may need Medicaid assistance. The National Academy of Elder Law Attorneys (NAELA) has a “find an attorney” feature on its website; this is a very good place to start.

A person may be automatically eligible for Medi-Cal if he or she receives aid from one of the following programs:

  • SSI/SSP (Supplemental Security Income/State Supplemental Program)
  • CalWORKs (California Work Opportunity and Responsibility to Kids). Previously called Aid to Families with Dependent Children (AFDC).
  • Refugee Assistance
  • Foster Care or Adoption Assistance Program.

A person with income above the eligibility levels of no-cost Medi-Cal programs may also qualify as “medically needy” if he or she is, for example, 65 or older, blind, or disabled. This program usually requires the person to pay a monthly share of cost, similar to a co-payment.

We Can Build It… We Have The Technology

One thing is certain – over the next 10-20 years, regardless of what other economic or political events sweep the USA, this country will have far more older adults, as a proportion of the overall population, than we do now. This is sometimes referred to in the media as the “graying of America” or the “demographic tsunami” which has already been sweeping Japan and Europe.

On the one hand (as the linked article above accurately reports), members of this newer generation of older adults tend to be in better shape than counterparts of previous generations – and it appears that this trend will continue in the forseeable future; consequently the older adult of the future will be less likely to depend on long-term care than the older adult of today or yesteryear.

However – here’s the rub: we will be utterly groaning, bursting at the seams with older adults as a nation within the next few decades. Within the next 15 years, the number of people over the age of 60 in the U.S. will nearly double. By 2050, the numbers will nearly triple. That means that regardless of how much healthier the “baby boom” generation may be than previous generations of older adults and how much less prone to physical debility (and that’s also debatable, apparently), there will be much greater numbers of older adults requiring long-term care (as in skilled nursing care and assisted living) and even more older adults will require some sort of assistance in their home with basic activities of daily living (ADLs). So, while the proportion of the total number of older adults requiring nursing homes and intensive personal care arrangements may go down in the next 10-20 years, the overall number of older adults demanding nursing care will be skyrocketing.

And nursing care is absurdly expensive and getting more so. In California, nursing home beds at minimum fetch $60,000 per year and costs can go far north of that into the six figures. Hyperinflation of healthcare costs, for whatever the reason, has not excepted nursing homes (we’ll cover the challenge of affording nursing home care in an upcoming post).

So, with the costs so high and the “demographic tsunami” so clearly poised to swamp our system, what can be done? It’s worth imagining what the nursing home of the future will be faced with, and what they’ll need to do to accommodate these changes. Nursing homes of the future will be faced with patients with far more complex needs than the past – and that includes behavioral needs. Patients who make it into nursing homes today will be “triaged” to home care tomorrow so that nursing home beds can be saved for the neediest of the needy.

Long term care nursing staff, already working for one of the most heavily-regulated sectors of the US economy, generally have little time to spend providing and caring for patients’ psychosocial needs; tasks generally relegated to Recreation Therapy (RT) staff, volunteers, and the few-and-far-between mental health consultants who serve community facilities. So what are nursing homes to do? Modern long-term care facilities now offer cable television, and increasing numbers of nursing homes are offering wireless Internet capabilities to allow their increasingly-savvy residents to communicate with the outside world, but these kinds of technological innovations are cold comfort.

Some nursing homes have active “therapy dog” programs where residents are regularly exposed to animals for their well-recognized therapeutic purposes. Some nursing homes (particularly ones that subscribe to the “Eden Alternative” philosophy) even have animals that live in-house with the residents. Unfortunately, there are a number of issues with animals that make them impractical for use in many nursing homes in any widespread manner. First, there are the ever-present concerns about zoonoses (animal-to-human infection) and bites – no matter how vigilant a handler may be or how carefully veterinarian visits are documented, human error and the unpredictability of animals are always at play. Also, dogs and other animals need to be fed, toileted, cleaned, and with visitation therapy dogs need handlers to manage them – which make them a labor-intensive affair for an environment that tends to be starved for labor.

Meet the Paro Robot.


What is the Paro? Specifically, it’s what the developer has called a “mental commit robot” – a robot designed to elicit feelings of relaxation and happiness in the user (as opposed to the more traditional use of robots; e.g., for accomplishing specific tasks). Initially, the developers attempted to create these therapeutic robots using cats and dogs as models. However, they found that despite the cat and dog ‘paros’ being sophisticated machines, people were much too familiar with dogs and cats – they had far too well-developed prototypes of these animals in their heads to be fooled by a robotic cat or dog simulacrum.  So the developers hit upon using the ever-so-cute baby harp seal as their model – and it worked, simply because average consumers in the industrialized world have never encountered harp seals in their lives (and so had no prototypes in their minds to compare to).

I first discovered the Paro Robot approximately two-and-half years ago after I had spent some time struggling with a difficult case of an older woman in my VA nursing home who had severe dementia. This woman was in her 80s, had severe chronic pain (from arthritis), some previous issues with depression and anxiety that predated her dementia, and now spent much of her day in her bed screaming inconsolably. As the staff psychologist at my VA nursing home, they looked to me to address this issue (psychiatric medications were also being tried). The only thing I noticed about her is that she quieted only when the therapy dog volunteers visited her – unfortunately these visits were few and far between. The Paro Robot seemed an ideal solution.

Although this woman died before I was able to make full use of the Paro Robot with her, I have since used it on multiple patients and have encouraged other staff to use it at our neighboring geropsychiatric facility in Menlo Park. Since then we have collected data that suggest the Paro Robot is indeed an effective intervention for use with agitated and distressed older adults. When offered to these (frequently demented) older adult VA nursing home patients, we found that they significantly calmed and brightened in their demeanor, and that use of the Paro Robot often resulted in psychotropic medications not being used with our patients – which is an outcome of enormous value in and of itself.

Detecting and Preventing Elder Financial Abuse

The ever-present threat of elder abuse and neglect is always a concern for professionals who work with older adults. Elder abuse can be physical, psychological, and financial. Like many other healthcare professionals, as a psychologist I am a mandated reporter: if I suspect an adult over the age of 65 is being physically abused or denied food, hygiene, or medicine, I must report my suspicions in a timely manner to my local county Department of Health (via Adult Protective Services or APS). Failure to do so could subject me to civil or criminal penalties. Conversely, the law protects providers who make reports in good faith from lawsuits.

In California, the primary law that protects older adults from abuse is the Elder Abuse and Dependent Adult Civil Protection Act (EDACPA), codified at Welfare & Institutions Code §§15600 et seq. There are many reasons to be particularly concerned about financial abuse when one is working with this population. Older adults simply by virtue of their age are at higher risk of dementia compared to the general population. Additionally, contemporary research has suggested one of the early warning signs of dementia is increasing episodes of poor financial decision making. Older adults tend to also have higher incidences of physical frailty, and therefore often depend on others for physical care. Combine all of these factors, and you have a recipe for financial disaster.

Often older persons or their families will see the need to hire a home health aide. Unfortunately, these services are particularly expensive if the home health aides are well-trained, licensed, and bonded. Costs can be reduced by hiring home health aides from less reputable sources; however, cost-cutting in such a manner can impart some significant risk.

In my career working with outpatient, homebound older adults, I’ve at times seen geriatric clientele paired with young family members, often a young grandniece, nephew, or grandchild. On the surface this may seem like a good idea, particularly when the younger family member is unemployed or out of school. Unfortunately, the same factors that make this younger family member ideal to “keep an eye” on grandpa or grandma (for example, the younger family member has lots of free time) may be the same ones that make them a risk: older adults, even close family members, may be an irresistible source of income to fund a younger family member’s drug or gambling addiction.

After a report has been made to adult protective services (APS), it’s sometimes found that the best plan for the older adult is to be admitted to long term care, such as an assisted living or a community nursing home. Typically, at this point, APS considers its work over. This doesn’t seem an unreasonable position to take; after all, once the older adult is under the care of a licensed facility that provides 24/7 care and supervision, the responsibility for safeguarding the welfare of the older person has shifted to the facility.

Of course, we all know that residing in long term care facility doesn’t automatically provide an older adult with iron-clad protection against abuse. I’m sure we’ve all seen the occasional lurid news story documenting the rare instances where nursing staff engage in overtly abusive acts, ranging from out-and-out violence to criminal neglect. However, this is in my experience an exceedingly rare event. Not only does the training and hiring process for nursing home providers tend to weed out abusers, it’s also not a particularly convenient environment for an abuser to commit their acts undetected by their fellow employees. Also, nursing homes are, without a doubt in my mind, some of the most highly regulated category of healthcare facilities in the country. Consequently, there is an enormous amount of oversight and considerable incentives for nursing homes to prevent and, if necessary, detect and respond to abuse by staff when it happens.

But what happens when a fellow resident victimizes a vulnerable older adult? This is a particularly sticky problem for a number of reasons. First, patient privacy is at issue here – how do you document that resident X seems to be targeting resident Y in their chart? Given the laws governing patient privacy (for example, HIPAA), this is impossible. Second, although nursing staff are technically responsible for the welfare of their residents, it’s impossible for nurses at a sweeping majority of facilities to be able to keep tabs on their residents all of the time. In the evening hours (what nurses call the “off shifts”) the number of nurses on the floor typically shrinks even further.

I’ll cover this particular issue in more detail in my next post. Suffice it to say, at many nursing homes an underground economy operates: even the most watchful nursing staff do not always detect residents covertly trading contraband and desirable items like cigarettes, food, candy (possibly even drugs and alcohol). What does it mean when one-half to three-quarters of the potential participants in this trade are demented or otherwise have diminished capacity? A number of extremely thorny liability and management issues are potentially in play here.