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Updated August 22, 2018
Who Pays for Long-Term Services and Supports?
Long-term services and supports (LTSS) refers to a broad
There is some disagreement over the classification of
range of health and health-related services and other types
Medicare benefits in LTSS or post-acute (i.e., skilled care
of assistance that are needed by individuals over an
provided over a short-term, typically after a hospitalization)
extended period of time. The need for LTSS affects persons
categories. This is likely due to the fact that both Medicare
of all ages and is generally measured by limitations in an
and Medicaid cover stays in nursing homes as well as visits
individual’s ability to perform daily personal care activities
by home health agencies, although the service type and
such as eating, bathing, dressing, or walking, and activities
scope of coverage generally differ. Excluding Medicare
that allow individuals to live independently in the
spending on home health and skilled nursing facilities, total
community, including shopping, housework, and meal
LTSS spending in 2016 was $286.1 billion, or 10.1% of
preparation. The probability of needing LTSS increases
U.S. personal health expenditures, with Medicaid spending
with age. As the nation’s population aged 65 and older
paying for more than half (54.0%) of all LTSS spending (as
continues to increase in size, and individuals continue to
redefined).
live longer post-retirement, the demand for LTSS is also
expected to increase. In addition, advances in medical and
In the absence of public funding for LTSS, individuals must
supportive care may allow younger persons with disabilities
rely upon private sources of funding. In 2016, private
to live longer.
sources accounted for 29.7% of LTSS expenditures. Within
the category of funding, out-of-pocket spending was the
Total U.S. spending on LTSS is a significant component of
largest component (over one-half of private sources),
all personal health care spending. In 2016, an estimated
comprising 15.6% of total LTSS expenditures. Second was
$366.0 billion was spent on LTSS, representing 12.9% of
private insurance (7.5%), which includes both health and
the $2.8 trillion spent on personal health expenditures.
long-term care insurance. Other private funding, which
LTSS payments include those made for services in nursing
largely includes philanthropic contributions, comprised
facilities and in residential care facilities for individuals
6.5% of total LTSS. The following provides a brief
with intellectual and developmental disabilities, mental
discussion of the various public and private sources of
health conditions, and substance abuse issues. LTSS
LTSS funding.
spending also includes payments for services provided in an
individual’s own home, such as personal care and
Figure 1. Long-Term Services and Supports (LTSS)
homemaker/chore services (e.g., housework or meal
Spending, by Payer, 2016
preparation), as well as a wide range of other community-
(in billions)
based services (e.g., adult day health care services). A
substantial amount of LTSS is also provided by family
members, friends, and other uncompensated caregivers.
Thus, formally reported spending on LTSS underestimates
total expenditures, as spending data do not include
uncompensated care provided by these caregivers. This
report provides information on who the primary LTSS
payers are and how much they spend.
Who Pays for Long-Term Services and Supports?
LTSS are financed by a variety of public and private
sources. Figure 1 shows LTSS spending by payer for 2016.
Public sources paid for the majority of LTSS spending
(70.3%). Medicaid and Medicare are, respectively, the first-
and second-largest public payers, and in 2016 accounted for
nearly two-thirds (64.0%) of all LTSS spending nationwide.
Other public programs that finance LTSS for specific
populations are a much smaller share of total LTSS funding
(6.3%). These public sources include the Veterans Health
Source: CRS analysis of National Health Expenditure Account data
Administration (VHA) and Children’s Health Insurance
obtained from the Centers for Medicare & Medicaid Services, Office
Program (CHIP), among others. It is important to note that
of the Actuary, prepared November 2017.
the eligibility requirements and benefits provided by these
public programs vary widely. Moreover, among the various
Medicaid
public sources of LTSS financing, none are designed to
cover the full range of services and supports that may be
Medicaid is a means-tested health and LTSS program
desired by individuals with long-term care needs.
funded jointly by federal and state governments. Medicaid
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Who Pays for Long-Term Services and Supports?
funds are used to pay for a variety of health care services
to various federal agencies and Pre-existing Conditions
and LTSS, including nursing facility care, home health,
Insurance Plans. Collectively public spending from these
personal care, and other home and community-based
sources totaled $800 million, or 3.5%.
services. Each state designs and administers its own
program within broad federal guidelines. Medicaid is the
Out-of-Pocket Spending
largest single payer of LTSS in the United States; in 2016,
total Medicaid LTSS spending (combined federal and state)
Out-of-pocket spending was 15.6% of total LTSS spending,
was $154.4 billion, which comprised 42.2% of all LTSS
or $57.0 billion, in 2016. Expenditures in this category
expenditures. In 2016, Medicaid LTSS accounted for 30.6%
include deductibles and copayments for services that are
of all Medicaid spending, which represented about 5.9%
primarily paid for by another payment source as well as
(4.2 million) of the enrolled population receiving LTSS in
direct payments for LTSS. While there are daily
FY2013 (the most recent year for which data are available).
copayments for skilled nursing services after a specified
number of days under Medicare, there are no copayments
Medicare
for Medicare’s home health services. In addition, some
private health insurance plans provide limited skilled
Medicare is a federal program that pays for covered health
nursing and home health coverage, which may require
services for the elderly and for certain non-elderly
copayments. Moreover, private long-term care insurance
individuals with disabilities. Medicare covers primarily
(LTCI) often has an elimination or waiting period for
acute and post-acute care, including skilled nursing and
policyholders that requires out-of-pocket payments for
home health services. Medicare-certified nursing homes are
services for a specified period of time before benefit
referred to as skilled nursing facilities (SNFs). Unlike
payments begin. Once individuals have exhausted their
Medicaid, Medicare is not intended to be a primary funding
Medicare and/or private insurance benefits, they must pay
source for LTSS. These post-acute Medicare benefits
the full cost of care directly out-of-pocket. With respect to
provide limited access to personal care services both in the
Medicaid LTSS, individuals must meet both financial and
home care setting and in SNFs for certain beneficiaries.
functional eligibility requirements. Individuals not initially
While Medicaid nursing and home health benefits are
eligible for Medicaid, and not covered under a private LTCI
available to eligible beneficiaries for as long as they
policy, must pay for LTSS directly out-of-pocket.
qualify, Medicare benefits are generally limited in duration.
Eventually, these individuals may spend down their income
In addition, Medicare SNF and home health benefits
and assets and thus meet the financial requirements for
include coverage of rehabilitation services that will,
Medicaid eligibility.
presumably, prevent a decline in the beneficiary’s physical
condition or functional status. In 2016, Medicare spent
Private Insurance
$79.9 billion on SNF and home health services combined,
which was over one-fifth (21.8%) of all LTSS spending.
Private health and long-term care insurance plays a much
These expenditures include Medicare Parts A and B (also
smaller role in financing LTSS; 7.5% of total LTSS
referred to as “Original Medicare”) and estimated Medicare
spending, or $27.6 billion, was funded through these
Part C (Medicare Advantage) payments attributable to SNF
sources. Private insurance expenditures for LTSS include
care and home health care. Of total Medicare LTSS
both health and LTCI. Similar to Medicare LTSS funding,
spending, 49.2%, or $39.3 billion, was paid to home health
private health insurance funding for LTSS includes
agencies, and 50.8%, or $40.6 billion, was paid to SNFs.
payments for some limited home health and skilled nursing
services for the purposes of rehabilitation. Private LTCI, on
Other Public Payers
the other hand, is purchased specifically for financial
protection against the risk of the potentially high costs
Of all LTSS expenditures in the United States, a relatively
associated with LTSS. In addition, a number of hybrid
small portion of the costs are paid for with public funds
products that combine LTCI with either an annuity or a life
other than Medicare or Medicaid. Collectively, these payers
insurance policy have emerged. The Medicaid Long-Term
covered 6.3% of all LTSS expenditures in 2016, totaling
Care Insurance Partnership Program offers a LTCI policy
$23.1 billion. Among these public payers, over half of
that is linked to Medicaid eligibility.
spending ($12.8 billion, or 55.5%) was for LTSS provided
in residential care facilities for individuals with intellectual
Other Private Funds
and developmental disabilities, mental health conditions,
and substance abuse issues. Spending in this category also
Other private funds generally include philanthropic support,
includes LTSS paid for or operated by VHA ($5.7 billion,
which may be directly from individuals or obtained through
or 24.6%). Another $3.8 billion, or 16.4%, includes state
philanthropic fund-raising organizations such as the United
and local subsidies to providers and temporary disability
Way. Support may also be obtained from foundations or
insurance. A smaller percentage was spent on general
corporations. In 2016, other private funding accounted for
assistance, which includes expenditures for state programs
6.5% of total LTSS spending, or $23.9 billion.
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 two types of
Kirsten J. Colello, Specialist in Health and Aging Policy
programs that capture federal health care funds and grants
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Who Pays for Long-Term Services and Supports?
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