Medicaid Spending for Long-Term Care: An Unsustainable Problem for Minnesota

Medical Assistance for Long-Term Care (MALTC) Spending in Minnesota

Medicaid is a funding partnership between the federal and state governments, and its purpose is to provide health care coverage for low-income individuals who otherwise would not be able to afford care. In 2009, all MA spending for Minnesota totaled roughly $7.4 billion, but over 40% of spending - $3 billion – went toward coverage for Minnesotans receiving long-term care.  

MALTC spending levels reflect the market costs of long-term care in Minnesota. Although costs vary depending on where care is received – metro area vs. rural – the average individual can quickly incur tens of thousands of dollars worth of care even if he or she does not reside in a nursing home:

Minnesota	Avg. Daily Nursing Home Rate : Private	Avg. Daily Nursing Home Rate : Semi-Private	Avg. Monthly Cost in Assisted Living Facility	Home Health Aide Average Hourly Rate	Homemaker Services Average Hourly Rate	Adult Day Services Daily Rate
Minneapolis/ St Paul	180.00	146.00	3,063.00	25.00	21.00	71.00
Rochester Area	140.00	124.00	2,909.00	30.00	25.00	54.00
Rest of State	150.00	131.00	2,829.00	29.00	21.00	67.00
State Average	154.00	134.00	2,961.00	28.00	22.00	66.00

(from www.longtermcare.gov.)

It is important to note that not all individuals receiving long-term care automatically qualify for MA. In order to be eligible for MA, an individual must meet an asset limit of $3,000. For income, the guidelines are much broader and require that the eligible person must have medical and long-term care expenses that exceed his or her countable income.

Minnesota’s MALTC Compared to Other Jurisdictions

            Minnesota ranks 9^th out of the 50 states and the District of Columbia in regard to percentage of Medicaid spending for long-term care. To put the state in perspective, North Dakota ranks 1^st (with 64% of all Medicaid spending directed toward long-term care) and New Mexico ranks last (with just 15% of its Medicaid spending going toward individuals receiving long-term care). When the ranking is based on dollars, Minnesota still ranks quite high: 12^th out of 51 jurisdictions. Minnesota’s $3 billion in spending ranks well below #1 New York, which spends about $22 billion each year on Medicaid-funded long-term care, but spends much more than #51 Hawaii which directs just $231 million toward long-term care.

            It is also useful to consider Minnesota’s MALTC spending relative to other states with similar populations, such as Wisconsin and Colorado:

Medicaid Spending for Long-Term Care	Minnesota	Wisconsin	Colorado
In Dollars	$3,062,068,199	$2,026,138,762	$1,314,979,261
As a Percentage of all Medicaid Spending	41.4%	33.3%	37.0%

(Data from the Kaiser Family Foundation, www.statehealthfacts.org)

Problems with the Current Financing Structure

            The most significant problem with Minnesota’s current MALTC spending is sustainability. After the Governor and legislature resolved their budget stalemate in July 2011 by passing a state operating budget of just under $34.5 million, a total of $11.4 billion was dedicated to Health & Human Services expendituresfor FY 2012-13. With about $3 billion spent annually on MALTC, about 9% of the state’s operating budget was allocated for this particular expenditure. However, with long-term care costs growing at a rate of 4.7% - 6.6% per year, we can only expect that MALTC will continue to take up a greater share of the state of Minnesota’s budget.

Compounding the problem is the coming influx of baby-boomers to the age group that most often needs long-term care – age 65+. Looking ahead to 2035, about 1.4 million individuals in Minnesota will be age 65 or older and it is likely that many of them will need long-term care as they get older. Unfortunately, many aging Minnesotans do not have the resources to pay for their own long-term care needs. Instead, they will need to rely on either help from family members or Medical Assistance as they spend down their assets.

Current Redesign Efforts & Recommendations

            Minnesota intends to respond to the anticipated increased demands on its MALTC funding system through the “Own Your Future” campaign, which launched in March 2012. The centerpiece of the campaign is personal responsibility as it urges Minnesotans to develop a financing plan for their long-term care needs. In order to accomplish this, the campaign takes a threefold approach.

1. Raise awareness about the need for long-term care planning.

2. Identify and develop long-term care financing products that are accessible for middle-income individuals before they begin to need long-term care services.

3. Collaborate with the federal government to change Medicaid’s/MA’s long-term care provisions to encourage private payment for long-term care.

            In order for MALTC spending reforms to be successful, Minnesota will need use the Own Your Future campaign to identify private financing options that can compete with the “free” care that Medical Assistance would otherwise provide. Additionally, it will be important for the campaign to identify products that are still useful even if an individual never needs long-term care. Products that offer individuals multiple ways to use their money, assuming they do not need long-term care services, may be more appealing to those whom the campaign targets. In any case, the Own Your Future campaign should target individuals well before they reach an age where they may need long-term care.