New study says Medicaid's long-term care services could decimate state budgets

From The Fiscal Times:

A new study claims the costs of Medicaid’s long-term care services could cripple states’ already-fragile budgets.

The Deloitte Center for Health Solutions study, “Medicaid Long-Term Care: The Ticking Time Bomb,” runs through worst and best-case scenarios: the best being that Medicaid costs as a percentage of state budgets will nearly double by 2030, from the current 20 percent to 35 percent in some states. The worst? These costs will nearly triple, rising to 50 percent of the operating budget in one state — with long-term care accounting for 25 percent of that. “Obviously, this is not sustainable,” write the authors.

Long-term care is particularly cost-prohibitive; services include nursing home care, and treatment for chronic diseases like diabetes, arthritis, cancer and hypertension. 60 percent of Americans suffer from at least one chronic disease; for those over 80 years old, 80 percent have two or more chronic diseases. For the nearly 9 million patients that are eligible for both Medicare and Medicaid services, 98 percent of expenditures are for chronic diseases. Long-term care accounts for 32 percent of total Medicaid spending. “Even with the level of growth in Medicaid, long-term care costs are forecasted to grow even faster,” says Robert Campbell, who serves as the state government leader at Deloitte LLP and who contributed to the study.

With so many states already mired in budget problems, and with unemployment contributing to a 6.5 percent increase in Medicaid enrollment in 2009, it’s no wonder the authors of the study compare the scenario to a ticking time bomb. Their solutions range from making long-term care services more “community focused” to “exploring new public and private financing.” But in the end, solutions remain vague. Separate proposals to curve the state Medicaid conundrum include one that imposes a new tax on hospitals and managed care plans. Some companies, like Walgreens, are simply dropping their Medicaid patients altogether.

New York State has the highest Medicaid spending in the country, with currently 30 percent of the state budget devoted to the program, and the study illustrates the problem all too acutely, predicting a 50 percent increase in the next twenty years. When asked to comment on the report, spokesperson Jeffrey Hammond with the New York State Department of Health said, "The department is reviewing the report. With that said, the department understands that long-term care costs are growing exponentially in Medicaid."

“States shouldn’t wait for the crisis to hit, given how clear it is what’s coming,” says Campbell. The authors of the study conclude, “[This] is one of the most urgent health care problems for most states. Failure to innovate with medical and administrative management initiatives will likely result in increasing costs, voter discontent, poor quality and fiscal challenges.”