US Health Care Spending: Who Pays?

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Over the past 56 years, there have been major shifts in how we pay for hospital care, physician services, long-term care, prescription drugs, and other health care services and products in the US. In 1960, Medicare and Medicaid did not yet exist. Only half of hospital care was covered by insurance, with the rest paid out of pocket and by a patchwork of sources, both private and public.

In 1960, almost all (96%) spending on prescription drugs came out of the consumer’s pocket, but a dramatic rise in private insurance, coupled with the implementation of Medicare drug coverage in 2006, dropped the out-of-pocket spending share to 14% in 2016.

This interactive graphic uses data from the Centers for Medicare & Medicaid Services (CMS) to show national spending trends from 1960 to 2016 for health care by payer. (Figures presented refer to personal health care, which, as defined by CMS, includes goods and services such as hospital care and eyeglasses but excludes administration, public health activity, and investment.)

The data visualization below is a companion to Health Care Costs 101, part of CHCF’s California Health Care Almanac.





Misconceptions About Health Costs When You’re Older

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Some significant expenses decline as we age: Most mortgages are eventually paid off, and ideally children grow up and become self-supporting.

But health care is one area in which costs are almost certain to rise. After all, one of the original justifications for Medicare — which kicks in at age 65 — is that older people have much higher health care needs and expenses.

But there are a few common misunderstandings about health costswhen people are older, including the idea that money can easily be saved by reducing wasteful end-of-life spending.

Half our lifetime spending on health care is in retirement, even though that represents only about 20 percent of a typical life span. Total health care spending for Americans 65 and older is about $15,000 per year, on average, nearly three times that of working-age Americans.

Don’t expect Medicare to provide complete protection from these expenses.

Traditional Medicare has substantial gaps, leaving Americans on the hook for a lot more than they might expect. It has no cap on how much you can pay out of pocket, for example. Such coverage gaps can be filled — at least in part — by other types of insurance. But some alternatives, such as Medicare Advantage, aren’t accepted by as many doctors or hospitals as accept traditional Medicare.

On average, retirees directly pay for about one-fifth of their total health care spending. Some spend much more.

One huge expense no Medicare plans cover is long-term care in a nursing home.

Over half of retirement-age adults will eventually need long-term care, which can cost as much as $90,000 per year at a nursing home. Although most who enter a nursing home don’t stay long, 5 percent of the population stays for more than four years. You can buy separate coverage outside the Medicare program for this, but the premiums can be high, especially if you wait until near retirement to buy.

Although Medicare is thought of as the source of health care coverage for retirees, Medicaid plays a crucial role.

Medicaid, the joint federal-state heath financing program for low-income people, has long been the nation’s main financial backstop for long-term care. Over 60 percent of nursing home residents have Medicaid coverage, and over half of the nation’s long-term care is funded by the program.

That isn’t because most people who require long-term care have low incomes. It’s because long-term care is so expensive that those needing it can frequently deplete their financial resources and then must turn to Medicaid.

recent working paper from the National Bureau of Economic found that, on average, Medicaid covers 20 percent of retiree health spending. The figure is larger for lower-income retirees, who are more likely to qualify for Medicaid for more of their retirement years.

A widely held view is that much spending is wasted on “heroic” measures taken at the end of life. Are all the resources devoted to Medicare and Medicaid really necessary?

First, let’s get one misunderstanding out of the way. The proportion of health spending at the end of life in the United States is lower than in many other wealthy countries.

Still, it’s a tempting area to look for savings. Only 5 percent of Medicare beneficiaries die each year, but 25 percent of all Medicare spending is on individuals within one year of death. However, the big challenge in reducing end-of-life spending, highlighted by a recent study in Science, is that it is hard to know which patients are in their final year.

The study used all the data available from Medicare records to make predictions: For each beneficiary, it assigned a probability of death within a year. Of those with the very highest probability of dying — the top 1 percent — fewer than half actually died.

“This shows that it’s just very hard to know in advance who will die soon with much certainty,” said Amy Finkelstein, an M.I.T. economist and an author of the study. “That makes it infeasible to make a big dent in health care spending by cutting spending on patients who are almost certain to die soon.”

That does not mean that all the care provided to dying patients — or to any patient — is valuable. Another study finds that high end-of-life spending in a region is closely related to the proportion of doctors in that region who use treatments not supported by evidence — in other words, waste.

“People at high risk of dying certainly require more health care,” said Jonathan Skinner, an author of the study and a professor of economics at Dartmouth. “But why should some regions be hospitalizing otherwise similar high-risk patients at much higher rates than other regions?”

In 2014, for example, chronically ill Medicare beneficiaries in Manhattan spent 73 percent more days in the hospital in their last two years of life than comparable beneficiaries in Rochester.

“There absolutely is waste in the system,” said Ashish Jha, director of the Harvard Global Health Institute. But, he argues, waste is present throughout the life span, not just at the end of life: “We have confused that spending as end-of-life spending is somehow wasteful. But that’s not right because we are terrible at predicting who is going to die.”

Of course, beyond any statistical analysis, there are actual people involved, and wrenching individual decisions that need to be made.

“We should do all we can to push waste out of the system,” Dr. Jha said. “But spending more money on people who are suffering from an illness is appropriate, even if they die.”



Healthcare M&A drops in volume, value for Q3, PwC says

Dive Brief:

  • Healthcare deal activity in the third quarter of this year continued the streak of at least 200 deals each quarter since the end of 2015 and at least 250 quarterly deals since Q3 of last year, PwC said in a new report.
  • However, the quarter saw the fewest number of deals in a quarter since Q1 2017. There were also declines in value compared to both the previous year and quarter.
  • Long-term care remained the most active sub-sector with 102 deals. Payers have increasingly seen potential in long-term care companies.

Dive Insight:

Healthcare M&A activity saw a dip in Q3, but that doesn’t mean it’s the start of a downward trend.

Thad Kresho, U.S. health services deals leader at PwC, told Healthcare Dive on Thursday that interest remains high among “historical acquirers.” Those purchasers are looking to “further their connection points with their constituents,” Kresho said.

“Further buoyancy is fueled by increasing private equity interest (with their available capital) as well as non-traditional entrants, such as retail and tech-enabled companies. Interest of these participants range across many sub-sectors,” he added.

There were 261 healthcare deals in Q3 of 2018, slightly lower than the average of the past seven quarters (264). Deal volume increased 0.4% compared to a year ago, but dropped almost 11% compared to Q2 2018.

The total deal value plummeted to $15.9 billion, which is a drop of nearly 36% compared to the previous quarter and 10.1% year over year. It’s also a far cry from Q4 2017 ($100 billion) and Q1 2018 ($72.6 billion). Of course, one or two megadeals, such as the proposed CVS-Aetna and Cigna-Express Scripts deals, can be the difference between an OK quarter and a blockbuster, so quarterly value isn’t always the best gauge.

Kresho said volumes remain strong across multiple sub-sectors. PwC expects that to continue through the rest of this year and into the next.

“The industry’s major ongoing themes of regulatory uncertainty, income pressure, technological innovation and consumer-centricity continue to drive interest in deals,” PwC said.

The largest deal of the quarter was the RCCH HealthCare Partners purchase of LifePoint Health. The $5.6 billion transaction continued the hospital sub-sector’s average of one megadeal per quarter, which stretches back to 2015.

Another billion-dollar transaction in the hospital sector was HCA Healthcare’s purchase of Mission Health for $1.5 billion. Hospital deal volume overall dipped about 12%, but its value increased by 4,711% thanks in large part to the billion-dollar deals.

A different recent quarterly report by Kaufman Hall also found that M&A activity is down for hospitals and noted 18 deals in the quarter. The total was a 38% decrease from a year ago. Transactions for the first nine months of the year were also down, though value was up, according to that analysis.

Meanwhile, in the PwC report, another notable transaction over $1 billion was UnitedHealth Group’s purchase of 80% of Genoa Healthcare. The deal will help OptumRx’s behavioral offerings.

The sub-sector that saw the most deals was long-term care with a volume increase of about 33%, but value fell by 35%.

On the other end, PwC saw the largest value declines in physical medical groups and managed care. Physician medical groups volume dropped 30% and value fell by 97%. The sub-sector saw its fewest deals since Q4 2016. PwC doesn’t think the slow quarter is the start of a downward trend in that sub-sector, though. It’s likely an outlier.

Managed care volume, meanwhile, dropped 25% and value plummeted 95%. The slowdown in managed care purchases come as health insurers explore vertical integration rather than merging with other payers. Regulators have been leery of horizontal mergers over the past couple of years, but there are fewer roadblocks for vertical deals.

The managed care M&A activity will likely be in growth areas, such as Medicaid and Medicare Advantage. Otherwise, expect insurers to continue to look beyond their sub-sector and seek out opportunities in areas like pharmacy benefit management and long-term care companies.



REITs Adopt Novel Approaches to Stay Relevant in Skilled Nursing

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The shifting skilled nursing landscape has forced the major real estate investment trusts (REITs) to change their game plans — and led some industry-watchers to question whether their time is coming to a close.

But there’s still a role REITs can play in the long-term care space, an industry that might actually be more attractive than the far larger and flashier world of private-pay senior living.

“The spread between the debt and cap rates on nursing homes lend themselves to a triple-net lease scenario, and I think that’s why it’s here to stay,” Jeremy Stroiman, CEO of the Chicago-based Evans Senior Investments, told Skilled Nursing News*.

Committed bedfellows

This year has so far seen one of the most significant commitments by a REIT to the skilled nursing space: Welltower, Inc.’s (NYSE: WELL) move to buy the SNF-heavy Quality Care Properties (NYSE: QCP) in a joint venture with non-profit hospital operator ProMedica.

The move raised eyebrows, as the REIT would be taking on a portfolio dominated by troubled operator HCR ManorCare — which filed for bankruptcy protection in March after nearly a year of missed rent payments and other turmoil with former landlord QCP. Under the terms of the Welltower deal, ProMedica also agreed to purchase ManorCare’s operations.

At the time, Welltower CEO Tom DeRosa blamed private equity for the industry’s woes; ManorCare had been owned since 2007 by the Carlyle Group, a Washington, D.C.-based alternative asset management firm.

“Anybody who knows the ManorCare real estate knows it’s really good-quality real estate in really good markets,” DeRosa told SNN in April. “It was just capital-starved, because the skilled nursing industry had been taken private by private equity firms, and what does a private equity firm do? They over-lever businesses in order to [take] cash out of them. The REITs got left holding the bag here when reimbursements changed.”

The counterpoint, of course, is that publicly traded REITs also played some role in the difficulties facing individual skilled nursing operators: In a world of changing reimbursements, staffing pressures, and regulatory scrutiny, the skilled nursing model has become increasingly difficult to reconcile with annual rent escalators and quarterly scrutiny from shareholders.

That’s why Stroiman sees an opportunity for smaller, private REITs that have a more intimate knowledge of the particular challenges and benefits of investing in the skilled nursing space — without the immediate pressure of needing to deliver returns to investors clamoring for information every three months.

For instance, private REITs would be more receptive to an operator that promised an 18-month turnaround period in exchange for lower up-front rents, Stroiman said.

“The operator says: I have $600,000 of upside within 18 months. I’ll pay you an additional rate [after 18 months], but out of the gates, will you give me a break so I can find the upside?’” he said. “And the privately-owned REITs say: ‘That’s a no-brainer.’”

That spirit of experimentation can also extend to different kinds of partnerships between REITs and facilities, according to Cambridge Realty Capital Companies chairman and CEO Jeffrey Davis.

In his senior housing and health care finance practice, Davis has increasingly seen operators buy back a portion of their real estate from REITs, which still maintain a presence going forward. One recent 10-facility deal saw an operator secure a $26 million acquisition loan to regain a stake in their facilities from a major national REIT, Davis said.

“All of a sudden, the REIT goes from having $40 million invested in those 10 buildings to having only $10 million invested in those buildings,” he said. “I think there’s different ways that the REITs can trim those [portfolios], and that, I think, is a way they can go about trimming their assets.”

Still a place for the smart ones

These new strategies don’t mean there isn’t a place for the major skilled nursing REITs that have an intimate knowledge of the business. Stroiman pointed to Sabra Health Care REIT (Nasdaq: SBRA) and CareTrust REIT (Nasdaq: CTRE) as examples of publicly traded REITs with a strong grounding in the industry, in part due to the skilled nursing experience of CEOs Rick Matros and Greg Stapley, respectively.

“They understand the operations behind the nursing homes, and they structure deals like that all the time because they can, because they understand it,” Stroiman said.

In addition, the favorable ratio of cap rates to lending rates means REITs might be more interested in SNFs than senior housing properties, where the upside isn’t as clear — despite the fact that the assisted and independent living industries come with significantly less regulatory scrutiny and the additional stability of private-pay residents.

“The difference between current debt rates and cap rates, it works,” Stroiman said. “It works so much better than senior housing.”

But Davis also emphasized the growing importance of the regional investor and operator in a landscape torn by local-level reimbursement issues and regulatory changes — especially in a narrow-margin environment where residents and investors want “Four Seasons service for the cost of a Holiday Inn.”

“It’s very difficult to run your business with all these different people’s oversight,” Davis said. “And I think the REITs have found that out, and let’s face it — this kind of environment really puts national players at a huge disadvantage, because you just can’t be as efficient as a national player as a regional [operator] or someone who focuses on one or two states. You just can’t.”


Health-Care Transactions Update: Deals Significantly Up in Third Quarter

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Stay ahead of developments in federal and state health care law, regulation and transactions with timely, expert news and analysis.

July, August, and September have been the most active deal months in 2017 so far, with over 299 recorded deals. That can be contrasted with the same quarter in 2016, during which only 167 deals were recorded, making it the slowest quarter that year.

The three most active sectors in summer 2017 were long-term care, health-care information technology, and physician practices, as strategic and financial buyers continued to actively shop for assets. The much-discussed market uncertainty—stemming from the political environment, regulatory uncertainty, and other factors—doesn’t seem to be hindering transaction activity.

Long-Term Care Has Been Most Active

Long-term care, including home health, continues to outpace the industry, with 215 transactions year to date. The sector remains attractive for many investors looking to position their portfolios for future growth, predominantly due to demand fundamentals such as an aging U.S. population and shifting preferences of seniors.

It is estimated that 10,000 U.S. residents turn 65 each day, adding to an already sizable population demographic that historically utilizes the vast majority of health-care spending. In particular, as the U.S. health-care system increasingly places emphasis on efficient outcomes and lowering cost of care, long-term care will offer a critical value proposition as an effective means of reducing the number of acute-care hospital visits and maintaining the overall health of seniors.

Of note in the third quarter was BlueMountain’s $700 million purchase of skilled nursing and assisted living assets from Kindred Healthcare. Continued interest and heightened activity are expected in this sector.

Physicians Have More Buyer Options for Transactions

Historically, large independent physician networks looking to partner with either a strategic or financial sponsor were limited in their options—mainly larger physician groups and local health systems. The landscape has quickly evolved as more organizations are seeing the value in controlling large patient populations.

Private equity buyers and insurance giants are increasingly interested in physician groups and are willing to purchase partial or complete interests at a premium. In the third quarter, Ares Capital invested $1.45 billion in DuPage Medical Group, a multi-specialty practice in Illinois previously owned by the private equity group Summit Partners.

Financial sponsors see an opportunity to leverage size and scale through acquisition and de novo growth, to increase patient populations and capture added revenues in a changing reimbursement environment. In April, Optum, a subsidiary of UnitedHealth Group, purchased American Health Network, a 300-physician practice in Indiana for $184 million. The insurer’s strategy is to control the delivery and cost of health care in all settings outside of the hospital.

Strategic buyers such as hospitals continue to actively recruit independent physicians, but are increasingly disadvantaged when forced to compete with the deep pockets of private equity investors and large insurers. Further compounding the problem for hospitals are the fair market value requirements that, by regulation, limit physician compensation options.

The single specialty provider space has experienced some of the highest activity in all of health-care services. With over 100 single specialty practices completing or announcing a transaction so far in 2017, independent physician groups are viewing an active mergers and acquisitions marketplace as an opportunity to secure future growth and viability.

A growing shift away from a hospital setting has increased the negotiating power of private practitioners and many are turning to private equity partners as a way to further increase their geographic footprint through aggressive growth strategies.

More and more groups are expected to pursue partnership and sale options as physicians continue to witness these large transaction values.

Size Is Attractive for Hospital Buyers

Bigger isn’t always better, but when it comes to hospital transactions, there is a market for sizable assets. In this quarter, Ascension Health, the country’s largest health system, emerged as the buyer of the struggling Presence Health in the Chicago area.

Despite Presence’s poor operations, it was able to align with a financially strong provider because it offered immediate scale in the Chicago market. With this transaction, Ascension, through its Amita Health joint venture with Adventist, vaulted up the market-share list from number four (8.1 percent) to number one (18.8 percent), according to Presence Health’s 2016 official statement. Acquiring and maintaining strong market share will continue to be a significant driver of financial success, thus the opportunity to immediately acquire scale through an acquisition will always be attractive.

Health-Care IT Remains Active

For many years, experts have thought that technology would be the key to driving value (high quality at a low cost). The activity in this space demonstrates the truth of that belief as there have been 133 transactions year to date. Notably, large private equity players have been active.

Clayton, Dubilier & Rice Inc., a private equity firm, acquired Carestream Dental in the third quarter, purchasing the dental imaging and practice management company with an eye toward growth, and expecting to leverage the technological expertise to grow the business.

Final Thoughts

While the summer months remained active, we believe the market will stay strong through the end of the year. Activity spawns more activity, and sellers are undoubtedly attracted to the high valuation multiples offered by buyers with tremendous access to capital and few investment options more attractive than health care.

Medicaid Has A Bull’s-Eye On Its Back, Which Means No One Is Entirely Safe

Medicaid Has A Bull’s-Eye On Its Back, Which Means No One Is Entirely Safe

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When high levels of lead were discovered in the public water system in Flint, Mich., in 2015, Medicaid stepped in to help thousands of children get tested for poisoning and receive care.

When disabled children need to get to doctors’ appointments — either across town or hundreds of miles away — Medicaid pays for their transportation.

When middle-class older Americans deplete their savings to pay for costly nursing home care, Medicaid offers coverage.

The United States has become a Medicaid nation.

Although it started as a plan to cover only the poor, Medicaid now touches tens of millions of Americans who live above the poverty line. The program serves as a backstop for America’s scattershot health care system, and as Republicans learned this year in their relentless battle to replace the Affordable Care Act, efforts to drastically change that can spur a backlash.

The latest Republican proposal — by Sens. Lindsey Graham (S.C.) and Bill Cassidy (La.) — is being pummeled by doctors, insurers, hospitals and patient advocates because it would scrap the health law’s Medicaid expansion and reduce federal funding for Medicaid. Senate leaders are trying to get a vote before Sept. 30, when special budget rules would allow the package to pass with only 50 votes.

Today, Medicaid is the nation’s largest health insurance program, covering 74 million, or more than 1 in 5 Americans. Over the next weeks, Kaiser Health News will explore the vast reach of the program. Twenty-five percent of Americans will be on Medicaid at some point in their lives — many are just a pink slip away from being eligible.

Medicaid funding protects families from having to sell a home or declare bankruptcy to pay for the care of a disabled child or elderly parent. It responds to cover disaster relief, public health emergencies and programs in schools that lack other sources of funding.

Millions of women who don’t qualify for full Medicaid benefits each year obtain family planning services paid for by Medicaid. These women have incomes as high as triple the federal poverty rate, or over $36,000 for an individual. And thousands of women, who otherwise don’t qualify for the program, get treated each year for breast and cervical cancers through Medicaid.

“Instead of cutting Medicaid, [lawmakers] increased public awareness of its value and made it even harder to cut in the future,” said Jonathan Oberlander, professor of health policy and management at the University of North Carolina-Chapel Hill and a supporter of the federal health law. The Medicaid cuts passed the House, but the ACA overhaul legislation fell short in the Senate in July.

Medicaid is the workhorse of the health system, covering:

  • 39 percent of all children.
  • Nearly half of all births in the country.
  • 60 percent of nursing home and other long-term care expenses.
  • More than one-quarter of all spending on mental health services and over a fifth of all spending on substance abuse treatment.

Unlike Medicare beneficiaries, who keep that insurance for life, most Medicaid enrollees churn in and out of the program every few years, depending on their circumstances.

Such numbers underline the importance of Medicaid, but also provoke alarm among conservatives and some economists who say the U.S. cannot afford the costs over the long run.

Bill Hammond, director of health policy of the fiscally conservative Empire Center for Public Policy in Albany, N.Y., said Medicaid has been a big help for those it was designed to cover — children and the disabled. But it has grown so big that the cost hurts state efforts to pay for other necessary public services, such as education and roads. “I can’t think of any other anti-poverty program that reaches so many people. … It’s too expensive a benefit.”

“We need to transition people to get coverage in the private sector,” he said, noting how millions on the program have incomes above the federal poverty level.

It May Be The Person Down The Block

Joana Weaver, 49, of Salisbury, Md., who has cerebral palsy, has been on and off Medicaid since birth. For the past few years, it’s paid for home nursing services for six hours a day to help her get dressed, bathed and fed. That’s kept her out of a nursing home and enabled her to teach English part time at a local community college.

“For me, Medicaid has meant having my independence,” Weaver said.

Like Weaver, many people getting Medicaid today are not easily typecast. They include grandmothers — one-quarter of Medicaid enrollees are elderly people or disabled adults.

Or the kid next door. About half of Medicaid enrollees are children, many with physical or mental disabilities.

Many of the rest — about 24 million enrollees — are adults under 65 without disabilities who earn too little to afford health insurance otherwise. About 60 percent of non-disabled adult enrollees have a job. Many of those who don’t work are caregivers.

“It’s the mechanic down the street, the woman waiting tables where you go for breakfast and people working at the grocery store,” said Sara Rosenbaum, a health policy expert at George Washington University in Washington, D.C.

While all states rely on Medicaid, it’s used more in some places than others because of varying state eligibility rules and poverty rates. As of August, about 44 percent of New Mexico residents are insured by Medicaid. In West Virginia and California, the rate is nearly 1 in 3.

peak or walk. It also covers costs for his wheelchair, walker and home health care. (Nick Krug/Lawrence Journal-World)

Jane and Fred Fergus, in Lawrence, Kan., said Medicaid has been a cornerstone in their lives since their son, Franklin, was born eight years ago with a severe genetic disability that left him unable to speak or walk. He is blind and deaf on one side of his body.

Although the family has insurance through Fred’s job as a high school history teacher, Franklin was eligible for Medicaid through an optional program that states use to help families let their children be cared for at home, rather than moving to a hospital or nursing home. Medicaid pays all his medical bills, including monthly transportation costs to Cincinnati Children’s Hospital, where for the past 18 months he has been receiving an experimental chemotherapy drug to help shrink tumors blocking his airway, Jane Fergus said. It also covers his wheelchair, walker and daily nursing care at home.

“We have such great health care for him because of Medicaid,” his mother said.

Jane Fergus was never politically active until this year, when she feared that the GOP plans to cut Medicaid funding would reduce services for her son.

“If there is a silver lining in all this debate, it’s that we have been given a voice, and people in power are being educated on the role of Medicaid,” she said.

Moving Beyond Its Roots

Medicaid was born in a 1965 political deal to help bring more support for President Lyndon Johnson’s dream of Medicare, the national health insurance program for the elderly.

Over the past 40 years and in particular since the 1980s, Medicaid expanded beyond its roots as a welfare program. In 1987, Congress added coverage for pregnant women and children living in families with incomes nearly twice the federal poverty level (about $49,200 today for a family of four).

In 1997, Congress added the Children’s Health Insurance Program to help cover kids from families with incomes too high for Medicaid.

And since September 2013, Obamacare allowed states to expand the program to anyone earning under 138 percent of poverty (or $16,394 for an individual in 2016), adding 17 million people.

In addition, more than 11 million Medicare beneficiaries also receive Medicaid coverage, which helps them get long-term care and pay for Medicare premiums.

“Medicaid is plugging the holes in our health system,” said Joan Alker, executive director of the Georgetown University Center for Children and Families, “and our health system has a lot of holes.”

But that comes at a steep price. 

A Blessing And A Curse

With increasing enrollments and health costs steadily rising, the cost of Medicaid has soared. Federal and state governments spent about $575 billion combined last year, nearly triple the level of 2000.

Those dollars have become both a blessing and a curse for states.

The federal government matches state Medicaid spending, with Washington paying from half to 74 percent of a state’s costs in 2016. Poorer states get the higher shares.

The funding is provided on an open-ended basis, so the more states spend the more they receive from Washington. That guarantee protects states when they have sudden enrollment spikes because of downturns in the economy, health emergencies such as the opioid crisis or natural disasters such as Hurricane Katrina.

The program is the largest source of federal funding to states. And Medicaid is often the biggest program in state budgets, after public education.

“Medicaid is the elephant in the room for health care,” said Jameson Taylor, vice president for policy for the Mississippi Center for Public Policy, a free-market think tank. He said states have become dependent on the federal funding to help fill their state budget coffers. While the poorest states, such as Mississippi, get a higher percentage of federal Medicaid dollars, that still often isn’t enough to keep up with health care costs, he said.

Extensive Benefits

Medicaid provides significant financing for hospitals, community health centers, physicians, nursing homes and jobs in the health care sector.

But the revenue stream flows further. Billions in annual Medicaid spending goes to U.S. schools to pay for nurses; physical, occupational and speech therapists; and school-based screenings and treatment for children from low-income families, as well as wheelchairs and buses to transport kids with special needs.

Medicaid also often covers services that private health insurers and Medicare do not — such as non-emergency transportation to medical appointments, vision care and dental care. To help people with disabilities stay out of expensive nursing homes, Medicaid pays for renovations to their homes, such as wheelchair ramps, and personal care aides.

Rena Schrager, 42, of Jupiter, Fla., who has severe vision problems, has relied on Medicaid  for more than 20 years. Although she often has difficulty finding doctors who will accept Medicaid’s reimbursements — which are often lower than private insurance and Medicare — she is grateful for the coverage. “When you do not have anything else, you are glad to have anything,” Schraeger said.

As it’s grown, Medicaid has become more popular, another reason why politicians are cautious to curtail benefits or spending.

A recent survey by the Kaiser Family Foundation showed three-fourths of the public, including majorities of Democrats (84 percent) and Republicans (61 percent), hold a favorable view of Medicaid. That’s nearly as high as Americans’ views on Medicare. (Kaiser Health News is an editorially independent program of the foundation.)

But it may still have a bull’s-eye on its back.

“The fact that the House passed a bill to cut $800 billion from Medicaid and it came one vote short to passing the Senate shows Medicaid is stronger than maybe many Republican leaders anticipated,” said Oberlander. “But politically it is still in a precarious position.”

Bipartisanship is Back: Congressional Cooperation Suggests Momentum is Growing for Aging Reforms

In a much-discussed early-morning vote on July 28, the U.S. Senate voted decisively to move in a different direction on health care, sending a clear signal that future reform efforts will likely have to be bipartisan. Affirmation came on August 1, when Sens. Lamar Alexander of Tennessee and Patty Murray of Washington, the Senate Health Committee’s top ranking Republican and Democrat, announced bipartisan hearings will begin this fall on possible policy solutions for American consumers and insurers participating in state exchanges.

Yet, beyond the fights over “repeal and replace,” a larger issue is looming: Our health care system is not prepared to care for the age wave—which will come with a surge in need for ongoing, daily assistance. Congressional representatives from both sides of the aisle must work together to plan for burgeoning numbers of  elders and individuals with disabilities, recognizing that there are diminishing numbers of family caregivers, and that the health services and delivery system as currently configured is poorly designed to meet  long-term care needs.

Combining Forces for Better Policy

Fortunately there are stirrings of interest and activity: Rep. Ileana Ros-Lehitnen of Florida, the most senior Republican woman in the House of Representatives, joined Rep. Michelle Lujan-Grisham, a Democrat who served as Aging Secretary in New Mexico before her election to Congress, to introduce the Care Corps Demonstration Act. HR 3494 is a thoughtful measure that is designed to galvanize communities by helping them train and deploy volunteers of all ages, whose mission would be to help aging neighbors, friends, colleagues, and family members thrive in their own homes. Rep. Ros-Lehitnen’s predecessor from the 27th District of Florida was one of Congress’ best-known champions of older adults, Rep. Claude Pepper. Rep. Ros-Lehitnen announced on April 30 that she would not be running for re-election, while Rep. Lujan-Grisham has said she will run for Governor of New Mexico in 2018. Before Reps. Ros-Lehitnen and Lujan-Grisham leave Congress, they are trying to recruit supporters from across the aisle and around the country for the Act, so that it can either find its way into a “must pass” bill, or attract widespread acceptance as a standalone measure.

Here’s what the Care Corps Demonstration Act would do:

  • Invite groups to apply for Care Corps grants and administer the program locally;
  • Train volunteers to support the achievement and maintenance of the highest level of independent living (but not provide professional medical services, administrative support services, or institutional care) and deploy them to communities in need; and
  • Award Corps members living allowances and benefits, including health insurance coverage, during their volunteer period, and offer tuition assistance or loan repayment after completion of their assignment.

“It’s clear that seniors want to remain in their homes and they want control over their own health care,” Rep. Lujan-Grisham noted on introduction. “Most of all, they want to remain as independent as they can, for as long as they can. The same is true for individuals with disabilities. Care Corps will allow them to keep that independence. Unfortunately,” she added, “we’re facing high costs, along with a shortage of direct-care workers, which results in the lack of access to these important services, especially for middle class families. A national Care Corps will help build the workforce, while building intergenerational relationships that allow seniors and young people to learn from each other.”

Addressing the looming shortage of direct care workers is exactly what Rep. Bobby Scott of Virginia’s third congressional district is setting out to do. Next month, the Virginia lawmaker will introduce the Direct Creation, Advancement, and Retention of Employment (CARE) Opportunity Act (or Direct CARE Opportunity Act), which will propose to give the Department of Labor funds to establish advanced care training and mentoring programs and establish career ladders and better job opportunities, for direct care workers in up to 15 parts of the country. Direct care workers are instrumental in supporting and assisting people across the country, particularly seniors and people with disabilities,” said Rep. Scott. “Moreover, if we invest in the direct care workforce, we invest in a rapidly growing and in-demand field. Growing the number of direct care workers is simply a win-win for investing in both the health of our communities and the jobs of tomorrow.”

PHI, a leading national organization representing and supporting direct care workers, is strongly backing Rep. Scott’s efforts: “Direct care workers are a critical part of delivering quality, person-centered long-term care, and we support this national effort to increase training, improve retention, and enhance the overall quality of jobs for this workforce,” noted Daniel R. Wilson, director of federal affairs.

Additionally, on July 27 Rep. Matt Cartwright of Pennsylvania’s 17th congressional district introduced the Improving Care for Vulnerable Older Citizens through Workforce Advancement Act. “This bill would improve both the quality of jobs for direct care workers nationwide, as well as the care they deliver, by helping to create expanded roles with sufficient training and compensation, and by helping them support people with increased complex conditions, such as Alzheimer’s and related dementias, congestive heart failure, diabetes, and other chronic conditions,”said PHI President Jodi M. Sturgeon.

Creating a System that Can Meet the Needs of Aging Americans

Together, these bills represent crucially needed investments in thinking through how to train more men and women who can serve on the frontlines of a multi-generational society in an era of mass longevity. With a majority of women now in the workforce and smaller and more scattered families quickly becoming the norm, the availability of traditional family caregivers—middle-aged women—is shrinking rapidly. This is giving rise to an urgent need to create a more flexible, community-focused workforce that is prepared to provide targeted supports in home settings on an as-needed basis to an increasing proportion of elders and individuals with disabilities.

Beyond the workforce, there is a need for more policy analysis and research to adapt and revamp existing social insurance programs that are still organized around delivering episodic medical services, and with financing protocols that are designed to pay providers and organizations without regard to the population’s need for ongoing services across a given geographic region or community. Making this shift—from provider-centric financing models to population health models—will also require tweaking payment rules to reward comprehensive, longitudinal services that include long-term care; adjusting performance metrics to emphasize population health and incorporate key social determinants of health factors; better information technology to foster communication across multiple providers and with individuals living at home and their family caregivers; and development of ways to accurately measure need, quality, and supply of services at a community level, with the help of local leaders and experts.

There are signs that lawmakers may rise to the challenge of helping to forge solutions to these issues. In the House, an ad hoc “problem solvers caucus” has surfaced with a set of initial ideas for fixing state exchanges, and the group of roughly 40 lawmakers may continue to hold discussions about other topics. There is solid bipartisan, bicameral work being done in the Assisting Caregivers Today (ACT) caucus on long-term care issues. Parallel caucuses focusing on Alzheimer’s and other types of cognitive impairment have already made excellent contributions to development of policy on “cure” and “care.” These and other budding efforts have the capability, if further developed, to begin contributing ideas necessary to address larger-scale systems challenges in ways that can inspire and complement the work of researchers, advocates, families, providers and stakeholders.

Between now and 2030, the U.S. will change profoundly as mass longevity becomes a central dynamic. To prepare, now is the time to invest and build for long-term care, not disinvest; to map existing assets and use current programs as platforms for improving and making more efficient; and to generally acknowledge gaps and focus work on addressing common goals in a long-lived society.

In summary, evidence-based, high-value health care reform is greatly aided by congressional bipartisanship, but more is needed. To create a value-based system requires the combined efforts of many. Now that bipartisanship is breaking out, let’s get to it!