Editor's Note: Medicaid is the single largest payer for healthcare services in every state. With nearly 10 million people enrolling in 2014 alone, total enrollment now tops 68 million. But Medicaid is not just undergoing soaring growth. It's also experiencing unprecedented change, fueled by its expanding ranks of participants, as well as new federal dollars available to encourage innovation.

In a recent two-part webinar series, "Medicaid Trends to Watch: Driving Transformation in 2015 and Beyond," Manatt Health revealed the top trends shaping Medicaid's reinvention, how they are contributing to achieving health reform's goals, and what to expect into the future. Part 1 of the series, summarized below, focuses on how states are thinking about LTC reform, adopting new models for LTC populations, and linking Medicaid payments for those populations to performance outcomes and cost containment. If you missed the webinar or want to view it again, click here to access it free on demand. To download a free PDF of the program, click here. (Watch for your next issue of "Manatt Health Update" for Part 2 of the series, "Medicaid Growth and Marketplace Convergence: Surging and Merging to Optimize the Coverage Continuum.

How Do Long-Term Services and Supports (LTSS) Differ from Post-Acute Care?

LTSS include a broad range of services that individuals require on an ongoing basis to meet their personal care and daily routine needs, such as bathing, dressing and preparing meals. They help people with disabilities or chronic conditions across the life span—from children to adults to seniors—live independently and participate in community life. LTSS are mostly nonmedical but can include medical services, such as skilled nursing care and home healthcare. Medicaid is the primary payer of LTSS, although informal caregivers, such as family members and friends, provide the bulk of services.

LTSS differ from post-acute care, which typically includes short-term use of nursing facility, rehab and home care services upon discharge from an acute in-patient setting. Post-acute care services support an individual's continued recovery from illness or management of a chronic disease. Medicare, versus Medicaid, is the primary payer for post-acute care services, although Medicaid and commercial plans cover these services as well.

LTSS Are a Vital Part of the Care Continuum

LTSS are provided in both facility-based and community-based settings across the care continuum. People who use LTSS regularly receive care in each of these settings—and often in multiple settings during a single episode of care.

Social support services—such as affordable and accessible housing, transportation assistance, and employment support—are critical for people with LTSS needs. The efforts under way in many states to integrate the care continuum through Medicaid accountable care organizations, integrated delivery networks, and other population health-focused care and payment models must incorporate LTSS to manage both patient care and overall costs effectively.

LTSS Are Distinct from Other Parts of the Care Continuum

Although LTSS are a critical part of the care continuum, they are quite different from medical care. Populations using LTSS services are unique. They tend to have higher rates of disabilities, chronic conditions, diseases and co-morbidities than people who do not use LTSS.

The goals of LTSS typically are not focused on medical recovery but optimal and independent functioning. LTSS populations' use of services is often longer and more intense than other groups—and therefore can be quite costly. Adding to the challenge is the fact that Medicaid eligibility, benefit coverage, and financing rules for both institutional and community-based LTSS are complex and difficult to navigate.

Who Uses LTSS?

People of all ages use LTSS. About half of the 12 million LTSS users are younger than 65, including more than half a million children. The diversity in the populations using LTSS is enormous with respect to types of disabilities or chronic conditions, service needs, service utilization, and spending. LTSS populations include individuals with physical disabilities; developmental disabilities or mental illness; progressive diseases, such as multiple sclerosis or Alzheimer's; or end-of-life needs, requiring palliative or hospice care. All of these services generate vastly different service use and costs.

Trend #1: LTC Is in Flux: Demand Is Increasing and Utilization Is Changing

The demand for LTSS has been growing and is expected to continue to grow based on changing demographic trends. The population is aging, and people with chronic diseases and disabilities are living longer. According to the Congressional Budget Office, by 2050, 20% of the population will be 65 or older, up from 12% in 2000—and 4% will be 85 or older, up from 1.5% in 2000.

Medicaid programs, which pay for the majority of LTSS costs, are starting to make some changes in how they deliver and purchase LTSS. Across the country, LTSS make up over a third of state Medicaid spending. Historically, these populations and services have remained in the unmanaged fee-for-service part of the Medicaid program in most states. Improving quality of care and managing costs for Medicaid beneficiaries who use LTSS is one of the last and most complex areas of focus for state policymakers.

Since the 1990s, we've seen a dramatic shift in LTSS utilization and spending from institutions to the community. About half of LTSS spending nationally is now on home and community-based services. This is particularly true for nonelderly LTSS users, about 80%-90% of whom receive services in the community.

Trend #2: Medicaid Is Footing (and Will Continue to Foot) the Bill

Medicaid now covers over half of all LTSS expenditures. Americans are uninsured for what is likely to be a costly eventuality in their lives. Even today, Americans are paying about 1 out of every 5 dollars that are spent on LTSS out of pocket. The total national spending on LTSS is now at $310 billion. Private insurance covers only 8% of expenditures.

It's important to recognize that Medicaid accounts for, on average, 23% of state budgets. A large part of those expenditures are attributable to LTSS. This high expense will continue to put tremendous pressure on state budgets.

The average cost of a nursing home in the United States is over $87,000 annually. The cost of a home health aide is almost $46,000 a year. For a very significant number of seniors, these costs are unaffordable. Over half of individuals who spend down assets and qualify for Medicaid do so by paying for LTSS.

In spite of the expense, most Americans do not prepare for long-term care. By the time they become cognizant of the need for long-term care (LTC) insurance, the premiums tend to be high and benefits tend to be limited. The average premium for LTC is over $2,000 a year. Therefore, it's generally an affluent segment that is purchasing LTC insurance.

From the insurance carrier's point of view, LTC is not an attractive marketplace. The risk is hard to gauge, and there is always concern about adverse selection. There has been low interest in LTC insurance, resulting in income streams that are less than expected, leading to two developments. One is increased underwriting and reduced benefits, and the other is a substantial exit of carriers from the LTC marketplace.

There has been an effort to target lower-income groups in the LTC insurance marketplace. The Deficit Reduction Act of 2005 created LTC partnership programs, enabling states to partner with private LTC companies. As of 2014, 45 states had approved or were planning to approve partnership plans. The attraction is that people who buy a plan can automatically qualify for Medicaid after they exhaust their benefits no matter what their asset level—and can protect those assets from Medicaid estate recovery after death. Nonetheless, the premiums vary and can be quite costly. These programs have not made a dent in the acquisition of private LTC insurance.

It's important to note that LTC financing was largely untouched by the Affordable Care Act (ACA). The ACA originally did include the Community Living Assistance Services and Supports (CLASS) Act, which established a government-run LTC insurance program based on voluntary payroll deductions. In 2013, however, the CLASS Act was repealed due to concerns about whether the premiums would be affordable and the risk pool would be sufficiently large. The repeal also established the Bipartisan Commission on Long-Term Care.

The Commission came out with the recommendation that we need a hybrid public and private financing system that will simplify insurance offerings and change the LTC insurance benefit. For example, if the insurance is for home care only or if it has a time limit, premiums will be reduced substantially.

The Commission also concluded that our current LTSS system is fragmented, uncoordinated and difficult to navigate. Therefore, it recommended that each patient have a point person to go to when he or she has a question or problem. In addition, it recommended:

  • Establishing a uniform assessment to ensure patients are receiving the right care at the right place.
  • Leveraging and building on family caregiving.
  • Investing in a well-trained workforce.
  • Adopting innovative technology to integrate LTC into healthcare systems.

Trend #3: States Are Leading the Way on Delivery System Reform. Is Payment Reform Next?

States have stepped up their efforts over the last decade to address LTSS cost, quality and access issues. LTSS costs were bankrupting states and imposing a crushing fiscal burden on their Medicaid programs. At the same time, advocacy efforts at the state level were forcing states to come up with innovative and cost-effective ways to address LTSS.

The states have been very focused on shifting care to the community, both in response to cost pressures and to consumers' demand for services that are close to home. When we look at Medicaid spending on LTSS, three benefits dominate:

  • Home health services, a mandatory Medicaid state plan service;
  • Personal care services, an optional plan service; and
  • 1915(c) home and community-based service waivers, designed to make it possible for people to receive services in noninstitutional settings.

Although the direction has been very much moving in the home and community-based services direction, Medicaid costs are still dominated, especially in some states, by institutional spending. In 2013, spending on home and community-based services accounted for 46% of the total spend, up from 32% in 2002.

To some extent the federal government has written the cookbook in terms of LTSS, and the states have gone about testing the recipes. While the ACA provided no real change in LTC financing, it wasn't silent on the subject. A host of initiatives to reshape the Medicaid and, to some extent, the Medicare programs to address the growing needs of the elderly either were given an additional boost in the ACA or were created by the ACA. Among the ACA's programs providing new opportunities for improving access to community-based LTSS are:

  • The Money Follows the Person Program, a rebalancing initiative to try to move persons from institutions back into the community.
  • The Balancing Incentive Program, intending to rebalance the LTC system with a greater emphasis on community-based services.
  • The Health Homes Option, creating coordinated care for persons with chronic conditions and allowing a "whole person" approach to their physical and behavioral health, as well as their LTSS needs.
  • The Home and Community-Based Services Option, providing a range of new Medicaid services for persons who are looking for home and community-based options.
  • The 1915(k) Community First Choice Option, offering statewide home and community-based attendant services for individuals who would otherwise require an institutional level of care.
  • The Medically Frail Accessing LTSS through State Plan or Alternative Benefit Plan (ABP), providing for alternative benefit plan coverage for persons who are newly eligible for Medicaid.

The other major initiative driven by the crushing cost that states were bearing under the Medicaid program was to move in the direction of managed care approaches to LTSS. States with a greater penetration of already existent managed care and with larger LTSS expenditures have mostly led the way.

Many states also have been engaged in a very significant initiative as part of the ACA to try to bring the Medicare and Medicaid programs into greater alignment. The idea was to meld Medicare and Medicaid into a seamless benefit package for people eligible for both programs. The "dual eligible" demonstration programs are meant to end 50 years of battles between Medicare and Medicaid on eligibility and benefit design and to let people have all their care needs coordinated, whether paid for by Medicaid or Medicare.

The "duals demonstration" has had a rocky beginning. Among the 26 states that applied to participate, 10 have dropped out or opted for different customized plans, and several others have delayed their start dates. The latest numbers show that of 1.7 million people eligible to participate in the 11 states that are still part of the program, only 26%, or 450,000, have signed up so far.

In New York the level of disenrollment and lack of interest by enrollees has driven the state to contemplate whether the program is going to continue. As far as the state has publicly stated, the program is alive and well, but there has been a very high rate of disenrollment.

We'll continue looking at New York as an example, because its Medicaid program—the largest on a per capita basis—spends close to 38% of its dollars on LTSS. In fact, LTSS are regarded as a major budgetary issue, and a major concern to federal regulators.

For decades New York has embraced managed care as an important element in addressing the issue of its high LTSS spend. In the 1980s and even more aggressively in the 1990s and the early 2000s, New York embraced a mandatory managed care enrollment program for the non-long-term population. More recently, it has required individuals who need more than 120 days of LTSS to enroll in a managed care plan.

Managed LTC began in the late 1990s as a voluntary program. It had relatively small enrollment until the last several years when the movement toward mandatory enrollment in managed LTC was fully implemented. The program went from just over 10,000 enrollees in around 2010 to 130,000 today.

In New York, and in many other states, efforts continue to revamp the payment program and contain costs. Among the current initiatives are the following:

  • New York's Delivery System Reform Incentive Payment (DSRIP) program incorporates LTSS providers in new safety net hospital-led integrated delivery systems (IDS). IDS ultimately will contract with health plans through value-based purchasing agreements.
  • Massachusetts is developing a comprehensive Medicaid payment reform strategy and road map, which will include developing payment models for members with significant utilization of LTSS.
  • On June 5 CMS released new proposed regulations for Medicaid managed care. The proposed regulations mark the first time LTSS provisions have been incorporated into Medicaid managed care regulations and include a formal definition of LTSS, a codification of 10 key principles for managed LTSS outlined in other Centers for Medicare and Medicaid (CMS) guidance, and specific managed LTSS network adequacy standards.

Other Key LTSS Trends

There are a few other key LTSS trends worth noting. The first has to do with quality. There has been considerable attention given to the Star system that is used to rate nursing homes. There are concerns that two of the three indicators underpinning the Star system are self-reported by nursing homes, and there have been reports in the media that some of the self-reports produce artificially high quality ratings. In addition, there is continued attention to the fact that more than 40% of nursing homes in 11 states in particular receive low quality ratings.

This attention is likely to continue, as the effort to develop meaningful quality measures across the states is in its infancy. The issues are compounded by the fact that there are multiple provider types with different ways of being paid and different requirements for Medicare and Medicaid. In addition, there are multiple assessment tools that capture similar information. But the key challenge is that clinical measures are often imported when what's really needed is to concentrate on nonclinical measures, such as patient goals and the patient and family experience.

We're also grappling with what the standardized metrics should be across different LTSS settings and where variation should be allowed. In addition, we're only in an early stage of connecting our efforts to the efforts around hospital admissions and readmissions.

Lastly, no matter what is achieved on the measurement front, there is still a need to determine how to increase organizations' ability to improve their quality performance.

The second trend to address is the continued existence of IT challenges. Unfortunately, the HI-TECH program in which the federal government invested to encourage electronic medical record (EMR) adoption in the healthcare system did not include LTC providers. Many of them struggle with being able to produce the capital needed to make IT investments. As a result, interoperability is still only an aspiration.

The third trend to keep in mind is the number of large national companies paying increased attention to more targeted chronic care management programs. They are trying to figure out better ways to coordinate and integrate care, to continue the care outside the LTC system, and to build partnerships with health plans and accountable care organizations.

Finally, a major trend in the LTSS arena is the pressure on the workforce. Though the formal workforce includes nurses, physical therapists, and occupational therapists, direct care workers perform 70% to 80% of the work. Turnover among these workers continues to be high, with almost half employed at more than one job in a two-year period.

All of the economic data indicates that personal care aides and home health aides are the second- and third-fastest-growing occupations in our nation. Over the next decade, it's estimated we will need more than 1 million new workers in this field. Yet, on average, a personal care aide in the United States earns about $9.50 an hour and often turns to Medicaid because of a lack of benefits.

The informal work force really carries the LTSS system on its shoulders. On any given day there are 42 million Americans providing care, and over 75% of adults who need help in the long-term care arena turn to their family or friends.

Conclusion

Key takeaways to consider as we seek to bridge the gap between aspirations and reality in the LTSS field are:

  • The number of Americans needing LTSS will continue to increase, and care will continue to shift to community settings.
  • Medicaid, by default, is the primary payer for LTSS. It was neither built for nor intended to serve this purpose and doing so threatens the sustainability of the program.
  • The federal government is paying increased attention to LTSS.
  • Regulations and policy must be more flexible to permit needed changes and innovation.
  • Technology will play an increasingly important role as the LTSS system evolves and integrates with the rest of the care continuum.
  • Informal care is the backbone of the LTSS system but is under pressure. Reform efforts must support and supplement this care.
  • States will continue to be "laboratories" for LTSS delivery and payment system reform.