	Spending for the Elderly’s Long-Term Care Exceeded $90 Billion in 1995

Spending for the elderly’s long-term care was $91 billion, or about $12,000 per disabled elderly person, in 1995, the last year for which data on expenditures from all sources are available. The elderly and their families represent the largest single group of purchasers of long-term care, spending almost $36 billion dollars out of pocket, or almost 40 percent of the total $91 billion expenditures for long-term care. Studies have found that about 65 percent of disabled elderly living in the community rely exclusively on unpaid sources for their care. Public funding for long-term care comes primarily from Medicaid, which finances almost one-third of long-term care—$28.5 billion in 1995—and Medicare, which funds one-fourth—$22.7 billion. Aging Baby Boomers Will Expand Demand for Long-Term Care

The baby boom generation, about 76 million people born between 1946 and 1964, will contribute to rapid growth in the number of elderly individuals who need long-term care and the resources required to pay for it. Nonetheless, recent forecasts of the number of disabled baby boomers who will need long-term care have been developed but differ widely, ranging from 2 to 4 times the current number of disabled elderly. Shifts in Medicaid and Medicare Funding of Long-Term Care Complicate Projections

How the increased long-term care needs of the baby boom generation will be met or financed is uncertain. Most of Medicaid expenditures are for nursing home care, but in the past 15 years there has been a shift to home care. As states have become more experienced with the waivers and confident of their ability to manage these programs, they have expanded their financing of home and community-based care. Private long-term care insurance has been seen as a means of reducing the catastrophic financial risk for people needing long-term care, and relieving some of the financing burden currently falling on public programs. Nevertheless, a very small proportion of the elderly or near-elderly have purchased long-term care insurance during the past 10 years. Private long-term care insurance is a relatively new product with a growing market. In conclusion, even though we cannot know the exact numbers of the baby boom generation who will require long-term care services, we do know that the aging of the baby boomers will lead to a tremendous increase in the elderly population in the next 3 decades and an even larger increase in the 85-and-over population who are more likely to use long-term care services. Financing these services will be a challenge for the baby boomers, their families, and federal and state governments.
Why GAO Did This Study

Pursuant to a congressional request, GAO discussed the challenges the country will face in financing long-term care for the baby boom generation, focusing on: (1) the current spending for long-term care for the elderly; (2) the increased demand that the baby boom generation will likely create for long-term care; (3) recent shifts in Medicaid and Medicare financing of long-term care; and (4) the potential role of private long-term care insurance in help finance this care.

What GAO Found

GAO noted that: (1) spending for long-term care for the elderly totalled almost $91 billion in 1995, the most recent year for which expenditures from all sources were available; (2) almost 40 percent of these dollars were paid for by the elderly and their families and almost 60 percent by Medicaid and Medicare; (3) these amounts, however, do not include many hidden costs of long-term care, since an estimated two-thirds of the disabled elderly living in the community rely exclusively on their families and other unpaid sources for their care; (4) according to current estimates by the Congressional Research Service, nearly a quarter of the nation's elderly population--over 7 million elderly people--have some form of disability for which they require assistance, such as help with bathing, dressing, eating, preparing meals, or taking medicine; (5) as the 76-million-strong baby boom generation ages, so too will its demand for long-term care increase; (6) long-range predictions of the magnitude of the baby boomers' long-term care needs, however, vary, with estimates of the disabled elderly ranging from 2 to 4 times the current disabled elderly; (7) estimates of cost are even more imprecise due to the uncertain impact of several important factors, including who will be needing care, the types of care they will need, and who will fund it; (8) Medicaid and Medicare, which currently finance almost two-thirds of long-term care, have undergone significant changes in recent years; (9) while historically the majority of Medicaid long-term care expenditures were for nursing home care, in recent years there has been a shift toward more financing of home and community-based care; (10) at the same time, Medicare, the largest public payer for home-based care, has been paying for care that more and more resembles long-term care; (11) private long-term care insurance, seen as a means of helping reduce the catastrophic financial risk for people needing long-term care and some of the financing burden that falls to public programs, has contributed little to date; (12) it is a relatively new form of insurance with a growing market; and (13) nevertheless, after 10 years, a very small proportion of the elderly or near-elderly have coverage.