As I look to the future of this industry, I see several inescapable trends:
- The number of people who will need care will explode as the Baby Boom generation ages.
- The number of people who are working and paying taxes to pay for Medicaid and Medicare will decline, relative to the older population, so the pool of money that will be available for Medicaid long term care will rise at a far slower rate than the increase in the older population.
- Many people who do have savings will exhaust most of their funds before they get to a nursing home, and most nursing homes will have 90-100% of their residents dependent on Medicaid, reducing the financial viability of the industry.
I think these trends will lead to the following potential scenarios:
- Governments will be forced to greatly restrict and reduce the amount of money they reimburse providers for each Medicaid long term care recipient, and long term care providers will have to develop a strategy to operate with a growing percentage of Medicaid recipients and a sharply declining Medicaid reimbursement rate.
- Nursing home operators will divide into two groups: Medicaid-only and non-Medicaid. The Medicaid-only facilities will shave every possible cost and find ways to provide only the bare minimum of services in a very cost-efficient operation. Although they will attempt to attract private pay residents, people with resources will not be attracted to their poorly-maintained buildings and low service levels. These facilities will become the "poor farms" of the future. Non-Medicaid facilities will accept only those who have the funds to pay for the cost of their care, providing a quality facility and a level of service commensurate with the amount the resident is willing and able to pay, and these facilities will become the facilities of choice for those who have the means to afford them.
- If nursing home operations remain unprofitable, or if operators are precluded from trying to make a profit by isolating private paying residents in facilities that have higher costs, many operators will exit the business entirely. If many providers exit the business, the supply of available nursing home beds will decline significantly. Ironically, this might finally allow the remaining operators to be more selective in determining how many low-paying Medicaid residents they will accept.
- Governments may encourage or require assisted living operators to accept Medicaid payments in an effort to control program costs by shifting Medicaid long term care recipients from nursing homes to assisted living facilities. That would force assisted living operators to take the same steps nursing homes have had to take to reduce their exposure to low Medicaid reimbursement.
- At some point, governments may have to reduce the number of people on Medicaid by increasing the eligibility requirements for Medicaid . They can do this by lowering the income and asset caps, increasing the "medical necessity" requirements, or requiring the personal residence to be included as an asset when determining Medicaid eligibility.
- Governments may also have to reduce the number of services they provide for those who do qualify and/or develop some sort of "rationing" program to allocate resources and services, perhaps by limiting availability of expensive procedures and services for people who are too ill or too old.
- Governments are also likely become more aggressive in looking to family members to help pay for care costs. They may regulate and enforce tighter restrictions on giving assets away to family members when those assets could have been used to pay for care for Medicaid recipients. They may try to recover assets retrospectively from those who received them, or require family members to make contributions toward the cost of care to supplement the government contribution.
- Medicaid will continue to exist in some form for the truly indigent, however Medicaid recipients will probably have to accept a lesser quality of services. They will probably have to go on waiting lists for services, and will find they are unable to use the providers they prefer. Some people who would be eligible for Medicaid under today's programs will not be eligible under the Medicaid programs of the future.
The implications in planning for future long term care needs are:
- Long term care recipients will be divided into the "haves" and the "have nots" -- those who can pay for it themselves and those dependent on the Medicaid system. Although this won't be a palatable or desirable situation, any attempt to make long term care costs universally available at taxpayer cost will quickly torpedoed when the costs are calculated, since neither the federal nor the state governments could possibly afford to provide a comprehensive long term care benefit to the huge numbers of Baby Boomers that will be entering the system.
- Medicaid will be available as a safety net when everything else is exhausted, but it will probably involve forfeiting any inheritance that would otherwise be left to other family members, may require supplementation from family members, and will probably leave the spouse with very limited financial resources. Medicaid recipients will have a limited ability to control where they receive services and what services are available to them.
- People who are able to pay for their care with savings or insurance will have the easiest access to services and the most ability to control what kind of care they receive and where they receive it, regardless of what happens to government reimbursement programs. They will be highly attractive to service providers who are likely to compete strongly for their attention.
Conclusion
My conclusion after looking into the future is that Baby Boomers should be saving and investing enough to be able to pay privately for whatever long term care they may need, and they probably need to investigate buying long term care insurance to supplement those investments to ensure they are able to avoid dependence on government long term care programs.
Regions: