Who Pays for Long-Term Services and
Supports? A Fact Sheet
Kirsten J. Colello
Specialist in Health and Aging Policy
Scott R. Talaga
Analyst in Health Care Financing
April 16, 2014
Congressional Research Service
7-5700
www.crs.gov
R43483
Who Pays for Long-Term Services and Supports? A Fact Sheet
ong-term services and supports (LTSS) refer to a broad range of health and health-related
services and supports that are needed by individuals over an extended period of time. The
Lneed for LTSS affects persons of all ages and is generally measured by limitations in an
individual’s ability to perform daily personal care activities (e.g., eating, bathing, dressing,
walking) or activities that allow individuals to live independently in the community (e.g.,
shopping, housework, meal preparation). The most recent published data estimating the number
of Americans in need of LTSS indicate that about 10.9 million individuals living in the
community need LTSS, or 4.1% of the community-resident population. It was estimated another
1.8 million individuals needing LTSS live in an institutional setting, such as a nursing home.1
Total U.S. spending on formal or paid LTSS is a significant component of all personal health care
spending. In 2012, an estimated $324.2 billion was spent on LTSS, representing 13.7% of the
$2.4 trillion spent on personal health expenditures.2 Spending for LTSS includes payments for
services in nursing facilities, and in residential care facilities for individuals with intellectual and
developmental disabilities, mental health conditions, and substance abuse issues. Spending also
includes LTSS provided in an individual’s own home, such as home health, personal care, and
homemaker or chore services (e.g., housework or meal preparation), as well as a wide range of
home and community-based services (HCBS), including adult day health services. A substantial
amount of LTSS is also provided by informal caregivers––family and friends––who provide care
without compensation. As a result, spending on LTSS may be underestimated, as spending data
do not include uncompensated care provided by informal caregivers. This report provides
information on who the primary LTSS payers are and how much they spend.3
Who Pays for Long-Term Services and Supports?
Formal LTSS are paid by a variety of public and private sources. Figure 1 shows LTSS spending
by payer for 2012. Public sources account for the majority of LTSS spending (71.6%). Medicaid
1 H. S. Kaye, C. Harrington, and M. P. LaPlante, “Long-Term Care: Who Gets It, Who Provides It, Who Pays, And
How Much?” Health Affairs, vol. 29, no. 1 (January 2010), p. 13.
2 LTSS expenditure data are from the National Health Expenditure Accounts (NHEA) published annually by the U.S.
Department of Health and Human Services (HHS). NHEA data represent aggregate health care spending. Data reported
are for 2012 and are for personal health expenditures, which is a subcategory of national health expenditures, and
excludes the following expenditure categories: government administration, net cost of health insurance, government
public health activities, and investment. NHEA LTSS expenditure data analyzed in this report include the following
expenditure categories: home health, nursing care facilities and continuing care retirement communities, and residential
intellectual and developmental disability, mental health, and substance abuse facilities. Some LTSS expenditures are
not captured in the NHEA, such as certain community or residential care facilities that primarily provide social
assistance or services rather than health care.
3 Medicare and Medicaid both cover stays in nursing homes as well as visits by home health agencies, yet the service
type and scope of coverage are generally different. Medicare skilled nursing facility (SNF) and home health benefits
are considered post-acute care and should not be considered LTSS. However, estimating LTSS spending is challenging
as national data, such as the NHEA, capture spending by payer (e.g., Medicare, Medicaid) and not service type. Thus,
post-acute care and LTSS spending are combined. Some argue that Medicare is an important payer in the continuum of
LTSS, since many nursing facility residents start with Medicare paying for the cost of the services; but after the
Medicare coverage period ends, Medicaid may pay for these expenditures. In addition, many elderly and disabled
beneficiaries are dually eligible for Medicare and Medicaid. Because the Medicare program is often an area of policy
debate in broader LTSS reform conversations, this report includes Medicare post-acute care expenditures as part of
LTSS. Excluding Medicare spending on home health and SNFs, total LTSS spending was $251.6 billion or 10.7% of
U.S. personal health expenditures in 2012. For a discussion of various approaches in estimating national LTSS
spending, see Bipartisan Policy Center, America’s Long-Term Care Crisis: Challenges in Financing and Delivery,
April 2014, p. 26.
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Who Pays for Long-Term Services and Supports? A Fact Sheet
and Medicare are the first- and second-largest public payers, respectively, and accounted for
nearly two-thirds (64.4%) of all LTSS spending nationwide in 2012. Other public programs that
finance LTSS for specific populations provide a much smaller share of total LTSS funding
(7.1%). These public sources of funding include the Veterans Health Administration (VHA) and
Children’s Health Insurance Program (CHIP), among others.4 It is important to note that the
eligibility requirements and benefits provided by these public programs vary widely. Moreover,
among the various public sources of LTSS financing, none is designed to cover the full range of
services and supports that may be desired by individuals with long-term care needs.
In the absence of public funding for LTSS, individuals must rely on private sources of funding. In
2012, about 28.4% of LTSS expenditures were paid by private sources. Within private sources of
funding, out-of-pocket spending was the largest component (over one-half of all private funding),
comprising 16.8% of total LTSS expenditures. Second was private insurance (6.0%), which
includes both health and long-term care insurance. Finally, other private sources, which largely
include philanthropic contributions, comprised 5.7% of total LTSS. The following provides a
brief discussion of the various public and private sources of LTSS funding.
Figure 1. Long-Term Services and Supports (LTSS) Spending, by Payer, 2012
(in billions)
Source: CRS analysis of National Health Expenditure Account (NHEA) data obtained from the Centers for
Medicare & Medicaid Services (CMS), Office of the Actuary, prepared December 3, 2013.
4 LTSS expenditure data from the NHEA do not include federal funding provided under the Older Americans Act
(OAA) or Title XX of the Social Security Act (SSA), the Social Services Block Grant Program (SSBG).
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Who Pays for Long-Term Services and Supports? A Fact Sheet
Medicaid
Medicaid is a means-tested health and LTSS program funded jointly by federal and state
governments. Medicaid funds are used to pay for a variety of health care services and LTSS,
including nursing facility care, home health, personal care, and other home and community-based
services. Each state designs and administers its own program within broad federal guidelines.
Medicaid is the largest single payer of LTSS in the United States; in 2012, the program paid
42.0% of all LTSS expenditures at $136.3 billion. In 2012, Medicaid LTSS accounted for over
one-third (35.3%) of all Medicaid spending despite the fact that LTSS recipients represent a
relatively small share of the total Medicaid population. The most recent data available estimated
that 6.7% of Medicaid recipients (or 4.2 million beneficiaries) received LTSS in FY2009.5
Medicare
Medicare is a federal program that pays for covered health services for the elderly and certain
non-elderly individuals with disabilities. Medicare covers primarily acute care benefits; however,
it also provides some coverage for two types of LTSS: skilled nursing facility (SNF) services and
home health services. However Medicare, unlike Medicaid, is not intended to be a primary
funding source for LTSS. These Medicare benefits provide limited access to personal care
services both in the home care setting and in skilled nursing facilities for certain beneficiaries on
a short-term basis. While Medicaid SNF and home health benefits are available to eligible
beneficiaries for as long as they qualify, Medicare’s SNF and home health benefits, in general, are
limited in their duration. In addition, Medicare SNF and home health benefits include coverage of
rehabilitation services that will, presumably, prevent a decline in the beneficiary’s physical
condition or functional status. In 2012, Medicare spent $72.6 billion on SNF and home health
services combined, which was over one-fifth (22.4%) of all LTSS spending. These expenditures
include Medicare Parts A and B (also referred to as “Original Medicare”) and estimated Medicare
Part C (Medicare Advantage) payments attributable to SNF care and home health care.6 Of total
Medicare LTSS spending, 49.3%, or $35.8 billion, was paid to home health agencies, and 50.7%,
or $36.8 billion, was paid to SNFs.
Other Public Payers
Of all LTSS expenditures in the United States, only a small portion of the costs are paid for with
public funds other than Medicare or Medicaid. Collectively, these payers covered 7.1% of all
LTSS expenditures in 2012, totaling $23.2 billion. Among these public payers, over half ($12.7
billion, or 54.8%) of spending was for LTSS provided in residential care facilities for individuals
with intellectual and developmental disabilities, mental health conditions, and substance abuse
issues. Spending in this category also includes LTSS paid for or operated by VHA ($5.4 billion,
or 23.2%). Another $4.3 billion, or 18.4%, includes state and local subsidies to providers and
temporary disability insurance. A smaller proportion was spent on general assistance, which
includes expenditures for state programs modeled after Medicaid, as well as federal and state
funding for nursing facilities and home health under CHIP. In addition some public LTSS
spending includes other federal spending on two types of programs that capture federal health
5 Medicaid and CHIP Payment and Access Commission (MACPAC), Overview of Medicaid and CHIP, January 31,
2013, pg. 67.
6 “Original Medicare” home health expenditures include payments to home health agencies for hospice services.
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Who Pays for Long-Term Services and Supports? A Fact Sheet
care funds and grants budgeted to various federal agencies and Pre-existing Conditions Insurance
Plans. Collectively public spending for these programs totaled $847 million, or 3.7%.
Out-of-Pocket Spending
Out-of-pocket spending was 16.8% of total LTSS spending, or $54.4 billion, in 2012. These
expenditures include deductibles and copayments for services that are primarily paid for by
another payment source as well as direct payments for LTSS. While there are daily copayments
for skilled nursing services after a specified number of days under Medicare, there are no
copayments for Medicare’s home health services. In addition, some private health insurance plans
may provide limited skilled nursing and home health coverage, which may or may not require
copayments. Moreover, private long-term care insurance (LTCI) often has an elimination or
waiting period for policyholders that requires out-of-pocket payments for services for a specified
period of time before benefit payments begin. Once individuals have exhausted their Medicare
and/or private insurance benefits, they must pay the full cost of care directly out-of-pocket.
Furthermore, to be eligible for Medicaid LTSS, individuals must meet both financial and
functional eligibility requirements. Individuals not initially eligible for Medicaid would have to
pay for LTSS directly out-of-pocket. Eventually, these individuals may spend down their income
and assets over a period of time and meet the financial criteria for Medicaid eligibility.
Private Insurance
Private health and long-term care insurance plays a much smaller role in financing LTSS. In
2012, 6.0% of total LTSS spending, or $19.4 billion, was funded through these sources. Private
insurance expenditures for LTSS include both health and LTCI. Similar to Medicare funding for
LTSS, private health insurance funding for LTSS includes payments for some limited home health
and skilled nursing services for the purposes of rehabilitation. Private LTCI, on the other hand, is
purchased specifically to provide financial protection against the risk of the potentially high costs
associated with LTSS. Additionally, a number of hybrid products that combine LTCI with either
an annuity or a life insurance product have recently emerged. Moreover, the Medicaid Long-Term
Care Insurance Partnership Program is also a LTCI product that is linked to Medicaid eligibility.
Other Private Funds
Other private funds generally include philanthropic support, which may be directly from
individuals or obtained through philanthropic fund-raising organizations such as the United Way.
Support may also be obtained from foundations or corporations. In 2012, 5.7% of total LTSS
spending, or $18.4 billion, was funded through other private funds.
Author Contact Information
Kirsten J. Colello
Scott R. Talaga
Specialist in Health and Aging Policy
Analyst in Health Care Financing
kcolello@crs.loc.gov, 7-7839
stalaga@crs.loc.gov, 7-5956
Congressional Research Service
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