Nursing home self interest

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By Jon Shreve | 01 March 2008
It's a well-known fact—the U.S. population is not getting any younger. The U.S. census projections indicate that the percentage of Americans over the age of 65 will increase from 12.4% in 2000 to 19.6% by 2030.

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As the population ages, more and more people will require long-term care services. The aging population should create a great opportunity for nursing homes to increase profits, right? Wrong! In 2006, about 43% of nursing home expenditures were paid by Medicaid. Medicaid typically pays only 72%  of what private insurance does for a LTC plan. Therefore, nursing homes that rely on Medicaid alone often end up in bankruptcy.

Nursing homes clearly need more residents who are able to pay a higher rate in exchange for a better level of service. According to the Bureau of Labor Statistics, only 12 % of all workers in private industry have access to long-term care insurance . However, a much higher percentage than that will eventually receive some care in a nursing home. In an industry where profit margins are slim, increased use of group LTC insurance would be a great boon to nursing homes.

If the number of people who signed up for private LTC increased, not only would the number of individuals eligible to receive benefits at the nursing home increase, but the reimbursement rates would also rise due to a decrease in the percentage of patients covered by Medicaid. True Group LTC allows more people to get better LTC benefits faster.

Nursing homes can begin by offering true group LTC to their own employees. This would then allow their employees to receive necessary care in the same community or even the same facility that helped fund their LTC benefits. In this way, the nursing home's investment in LTC insurance would be returned to it as employees' eventually needed care. From there, nursing homes could help promote LTC insurance to other employees in their area (perhaps even offering a shared, self-funded pool arrangement).

As illustrated above, it is in the best interest of nursing homes to promote the adoption of private long-term care insurance. Not only would nursing homes reap financial benefits, but they would be able to provide care for millions who would otherwise not be able to receive long-term care benefits.

Why is true group long-term care so important?

  • Many Americans will have no way to pay for long-term care services when they are needed.
  • Insurance for long-term care will not become widespread if only available on an individual basis, which means that the change will need to come first from employers.
  • Group coverage needs to include employer contributions to make it affordable to employees and vesting to make it affordable to employers.

Why is true group long-term care so important?

  • Many Americans will have no way to pay for long-term care services when they are needed.
  • Insurance for long-term care will not become widespread if only available on an individual basis, which means that the change will need to come first from employers.
  • Group coverage needs to include employer contributions to make it affordable to employees and vesting to make it affordable to employers.
1U.S. Census Bureau. Table 2a. Projected Population of the United States, by Age and Sex: 2000 to 2050. http://www.census.gov/ipc/www/usinterimproj
2Centers for Medicare and Medicaid Services. National Health Expenditures by type of service and source of funds, CY 1960-2006. http://www.cms.hhs.gov/NationalHealthExpendData/02_National HealthAccountsHistorical.asp.  
3Centers for Medicare and Medicaid Services. Health Care Indrustry Market Update. (May 20, 2003)
4U.S. Bureau of Labor Statistics. National Compensation Survey: Employee Benefits in Private Industry in the United States, March 2007.  http://www.bls.gov/ncs/ebs/sp/ebsm0006.pdf.