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A new paradigm for long-term care

March 1, 2007
by JEFF A. PETTY
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Healthcare and housing programs designed for seniors were created in the early part of the 20th century at a time when someone who was 65 could expect to live just another three years. Today, in an era when a 65-year-old can expect to live 18 additional years, those programs have not been adapted to address the huge and growing gap in vital services for seniors. Moreover, public policy and funding strategies fall short and do not reflect the new realities we face as a nation with a significant aging population.

There is no doubt that the current state of funding methodologies for healthcare and housing programs will bankrupt society over the coming 50 years and/or services for seniors will deteriorate to a deplorable level, with only the wealthiest families having viable options. While the precarious future of Social Security has gained a considerable amount of attention, perhaps the real “ticking time bombs” are Medicare and Medicaid. The number of people 65 and older is projected to more than double by 2050, while the number aged 90 and older will grow by 500%—and little attempt has been made to wring out the exorbitant costs of the Medicare/Medicaid system as they apply to long-term care for this group.

Current government healthcare and housing programs addressing the needs of seniors, and especially low-income seniors, are fragmented and confusing. Most funding is for service-oriented programs, such as skilled nursing (both Medicare and Medicaid), home healthcare, and basic housing, such as Section 8 vouchers. There are also capital-oriented programs, such as grants for low-income housing from the Department of Housing and Urban Development (HUD) and federal tax credits for income-qualified seniors administered by the states, as well as other federal and state grant programs. Along with this fragmentation, the approach to meeting the healthcare needs of the aging in this country is episodic and crisis-oriented, rather than coordinated and holistic.

Because residents in continuing care retirement community (CCRC) settings are supported with a full spectrum of healthcare and housing services, CCRC developers are in a distinct position to offer a new solution for broadly supported, coordinated long-term care. This should initially be explored as a way to address the housing and healthcare needs of the middle and lower-middle income strata, a segment in which the widest income-to-need gap exists.

The New Model

Programs for All-inclusive Care for the Elderly (PACE) is a model that could potentially be adapted to a broader constituency. After 45 years, PACE has evolved into a mainstream program. At its simplest, PACE is a day care–based model that incorporates all aspects of seniors’ needs and permits them to remain in the community.

What PACE does exceedingly well is manage the care of its clients in the “best” environment, which usually equates to the “least expensive.” Significant improvements have been reported by several states operating PACE programs, with Texas claiming to have reduced its average length of hospital stay from 6.6 to 4.1 days, and Hawaii reducing its average length of Medicare stay from 6.0 to 2.8 days. Providers offer clients a focused array of services three to five days a week for up to eight hours a day.

Why not expand the PACE model to include a housing compo-nent that would combine payment streams within a CCRC-type setting? The facility would receive a capitated payment per client (i.e., a fixed amount per client per month) that would consist of Medicare Parts A and B, Medicare Part D, Medicaid based on individual income and asset levels, private funds if applicable, and a capital contribution derived from the HUD grant programs for very low income, federal tax credit programs for low income, as well as HUD and Community Development Block Grant funds.

ith this capitation, the CCRC provider would be responsible for all medical and housing services, including hospitalization, physician services, skilled nursing and therapies, assisted living services, home health, room and board (amenities varying based on payments), and prescription drugs. The provider would have maximum flexibility to provide all needed services in the least restrictive or costly environment.

The provider would be able to use the capitated streams in ways deemed most productive for the individual. For example, if the provider believes that a health club would result in the healthiest resident at the lowest cost, he can pursue that option.

The outcomes of this model could be significant. For example:

  • The provider has the flexibility to spend funds in a manner that reduces overall cost by optimal delivery of services to the individual.

  • More effective chronic disease management and/or a deferral of the onset of chronic and fatal disease states can be changed through effective prevention programs.

  • Elders’ isolation, nutrition, and depression are addressed.

  • As with PACE and Medicare HMOs, the capitated payment would be set at levels that are less than payments for an equivalent group under fee-for-service.

  • This model offers the possibility of a “means test” for Medicare Part A, which would represent substantial savings to the system (although this is not a necessary component of the program design).

Ultimately, in this type of proposed structure, everyone's incentives are aligned to find and offer the most cost-effective and comprehensive package of services, resulting in more affordable options, as well as healthier, more purposeful senior years.

Jeff A. Petty is President and CEO of Wesley Enhanced Living, a progressive aging services provider based in Philadelphia.

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