In “A Shift From Nursing Homes To Managed Care at Home”   (New York Times, February 24, 2012) Joseph Berger notes that shrinking Medicaid and Medicare funds are forcing closure of more and more nursing homes – 350 nursing home have closed over the past six years nationally.  For example, New York State plans to transfer 70,000 to 80,000 people needing over 120 days of Medicare-covered long-term care (LTC) to their homes.  Studies suggest that care at home can cost less than in a nursing home, so such a policy may stretch scarce Medicaid funds a little further.

Shifting Medicaid funding from nursing homes to in-home care sounds great. Caregivers really like this idea. The whole notion of avoiding nursing home stays is very appealing.

Many policymakers cling to the notion that such a shift will save money, but this is far from the truth.

I quote the following from Steve Moses of the Center for Long-Term Care Reform:

When compared to an elderly population for whom traditionally available care is offered, recipients of expanded community-based services do not use significantly fewer days of nursing home care.[1]

 An increasingly large number of studies, including the results of a national channeling demonstration program, have shown that non-institutional services typically do not substitute for nursing home care, but, rather, represent additional services most often to new populations.[2] 

Although community-based LTC programs proved beneficial to both clients and informal caregivers in the LTC demonstrations, they did not prove budget neutral or cost effective.[3]

For Medicaid to afford quality home health care for all recipients it must have fewer recipients. By tightening eligibility, closing eligibility loopholes, preventing Medicaid planning, and enforcing estate recovery, the program can do a better job for fewer genuinely needy eligibles. When middle class and affluent people understand their savings and home equity are at risk for LTC, they will avoid Medicaid dependency by paying privately from savings, home equity conversion and private insurance.

Here are the footnotes:

[1] General Accounting Office, “The Elderly Should Benefit From Expanded Home Health Care But Increasing Those Services Will Not Insure Cost Reductions” (Dec. 7, 1982) p. 43, http://archive.gao.gov/f0102/120074.pdf.
[2] John F. Holahan and Joel W. Cohen, Medicaid: The Trade-off between Cost Containment and Access to Care, (Washington DC: The Urban Institute Press, 1986), p. 106.
[3] Kenneth G. Manton, “The Dynamics of Population Aging: Demography and Policy Analysis,” The Milbank Quarterly, vol. 69, no. 2, 1991, p. 322.