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Updated March 20, 2020
Who Pays for Long-Term Services and Supports?
Long-term services and supports (LTSS) refers to a broad
Program (CHIP), among others. It is important to note that
range of health and health-related services and other types
the eligibility requirements and benefits provided by these
of assistance that are needed by individuals over an
public programs vary widely. Moreover, among the various
extended period of time. The need for LTSS affects persons
public sources of LTSS financing, none are designed to
of all ages and is generally measured by limitations in an
cover the full range of services and supports that may be
individual’s ability to perform daily personal care activities
desired by individuals with long-term care needs. Some
such as eating, bathing, or dressing. The probability of
Medicare spending is similar to Medicaid LTSS spending in
needing LTSS increases with age. As the nation’s
that both payers cover stays in institutional settings, such as
population aged 65 and older continues to increase in size,
nursing homes, as well as visits by home health agencies,
and individuals continue to live longer post-retirement, the
although the service type and scope of coverage differ.
demand for LTSS is also expected to increase. In addition,
advances in medical and supportive care may allow
In the absence of public funding for LTSS, individuals must
younger persons with disabilities to live longer. For more
rely upon private funding. In 2018, private sources
information, see CRS In Focus IF10427, Overview of Long-
accounted for 29.2% of LTSS expenditures. Within the
Term Services and Supports.
category of funding, out-of-pocket spending was the largest
component (over one-half of private sources), comprising
CRS analyzed data by the Centers for Medicare &
14.9% of total LTSS expenditures. Second was private
Medicaid Services (CMS) National Health Expenditure
insurance (8.2%), which includes both health and long-term
Account (NHEA) to examine LTSS spending by payer.
care insurance. Other private funding, which largely
This analysis includes Medicare post-acute care spending
includes philanthropic contributions, comprised 6.1% of
for home health and skilled nursing facility care in an
total LTSS. The following provides a brief discussion of the
expanded definition of LTSS spending. Using this
various public and private sources of LTSS funding.
definition, total U.S. spending on LTSS is a significant
component of all personal health care spending. In 2018, an
Figure 1. Long-Term Services and Supports (LTSS)
estimated $409.2 billion was spent on LTSS, representing
Spending, by Payer, 2018
13.3% of the $3.1 trillion spent on personal health care.
(in bil ions)
LTSS payments include those made for services in nursing
Total LTSS
facilities and in residential care facilities for individuals
Spending
with intellectual and developmental disabilities, mental
$409.2B
health conditions, and substance abuse issues. LTSS
Medicaid $180.5B (44.1%)
(2018)
spending also includes payments for services provided in an
individual’s own home, such as personal care and
Public
Medicare $83.7B (20.4%)
homemaker/chore services (e.g., housework or meal
$289.8B
preparation), as well as a wide range of other community-
(71%)
Other Public $25.6B (6.2%)
based services (e.g., adult day health care services). Given
Private
Out-of-pocket $61.1B (14.9%)
that a substantial amount of LTSS is also provided by
$119.5B
Private Insurance $33.4B (8.2%)
family members, friends, and other uncompensated
(29%)
Other Private $25.0B (6.1%)
caregivers. Thus, formally reported spending on LTSS
underestimates total expenditures, as spending data do not
Source: CRS analysis of National Health Expenditure Account
include uncompensated care provided by these caregivers.
(NHEA) data obtained from the Centers for Medicare & Medicaid
This report provides information on who the primary LTSS
Services, Office of the Actuary, prepared December 2019.
payers are and how much they spend.
Note: This analysis of NHEA data also includes Medicare post-acute
care spending in an expanded definition of LTSS spending.
Who Pays for Long-Term Services and Supports?
Over the past 20 years, the share of public funding for
LTSS are financed by a variety of public and private
LTSS has increased (from 62.8% in 1998 to 70.8% in
sources. Figure 1 shows LTSS spending by payer for 2018.
2018), largely due to an increase in the share of Medicaid
Public sources paid for the majority of LTSS spending
LTSS funding. In addition, the share of private LTSS
(70.8%). Medicaid and Medicare are, respectively, the first-
funding, primarily related to out-of-pocket spending, has
and second-largest public payers, and in 2018 accounted for
decreased from 37.2% to 29.2% over the same 20-year time
nearly two-thirds (64.6%) of all LTSS spending nationwide.
period.
Other public programs that finance LTSS for specific
populations are a much smaller share of total LTSS funding
(6.2%). These public sources include the Veterans Health
Administration (VHA) and Children’s Health Insurance
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Who Pays for Long-Term Services and Supports?
Medicaid
home health under CHIP. In addition, some public LTSS
spending includes two types of programs that capture
Medicaid is a means-tested health and LTSS program
federal health care funds and grants to various federal
funded jointly by federal and state governments. Medicaid
agencies and Pre-existing Conditions Insurance Plans.
funds are used to pay for a variety of health care services
Collectively public spending from these sources totaled
and LTSS, including nursing facility care, home health,
$707 million, or 2.8%.
personal care, and other home and community-based
services. Each state designs and administers its own
Out-of-Pocket Spending
program within broad federal guidelines. Medicaid is the
largest single payer of LTSS in the United States; in 2018,
Out-of-pocket spending was 14.9% of total LTSS spending,
total Medicaid LTSS spending (combined federal and state)
or $61.1 billion, in 2018. Expenditures in this category
was $180.5 billion, which comprised 44.1% of all LTSS
include deductibles and copayments for services that are
expenditures. In 2018, Medicaid LTSS accounted for 33.9%
primarily paid for by another payment source as well as
of all Medicaid spending, which represented about 5.9%
direct payments for LTSS. While there are daily
(4.2 million) of the enrolled population receiving LTSS in
copayments for skilled nursing services after a specified
FY2013 (the most recent year for which data are available).
number of days under Medicare, there are no copayments
for Medicare’s home health services. In addition, some
Medicare
private health insurance plans provide limited skilled
nursing and home health coverage, which may require
Medicare is a federal program that pays for covered health
copayments. Moreover, private long-term care insurance
services for the elderly and for certain non-elderly
(LTCI) often has an elimination or waiting period for
individuals with disabilities. Medicare covers primarily
policyholders that requires out-of-pocket payments for
acute and post-acute care, including skilled nursing and
services for a specified period of time before benefit
home health services. Medicare-certified nursing homes are
payments begin. Once individuals have exhausted their
referred to as skilled nursing facilities (SNFs). Unlike
Medicare and/or private insurance benefits, they must pay
Medicaid, Medicare is not intended to be a primary funding
the full cost of care directly out-of-pocket. With respect to
source for LTSS. These post-acute Medicare benefits
Medicaid LTSS, individuals must meet both financial and
provide limited access to personal care services both in the
functional eligibility requirements. Individuals not initially
home care setting and in SNFs for certain beneficiaries.
eligible for Medicaid, and not covered under a private LTCI
While Medicaid nursing and home health benefits are
policy, must pay for LTSS directly out-of-pocket.
available to eligible beneficiaries for as long as they
Eventually, these individuals may spend down their income
qualify, Medicare benefits are generally limited in duration.
and assets and thus meet the financial requirements for
In addition, Medicare SNF and home health benefits
Medicaid eligibility.
include coverage of rehabilitation services that will,
presumably, prevent a decline in the beneficiary’s physical
Private Insurance
condition or functional status. In 2018, Medicare spent
$83.7 billion on SNF and home health services combined,
Private health and long-term care insurance plays a much
which was about one-fifth (20.4%) of all LTSS spending,
smaller role in financing LTSS; 8.2% of total LTSS
under the expanded definition. These expenditures include
spending, or $33.4 billion, was funded through these
Medicare Parts A and B (also referred to as “Original
sources. Private insurance expenditures for LTSS include
Medicare”) and estimated Medicare Part C (Medicare
both health and LTCI. Similar to Medicare LTSS funding,
Advantage) payments attributable to SNF care and home
private health insurance funding for LTSS includes
health care. Of total Medicare LTSS spending, in 2018,
payments for some limited home health and skilled nursing
50.3%, or $42.2 billion, was paid to home health agencies,
services for the purposes of rehabilitation. Private LTCI, on
and 49.6%, or $41.5 billion, was paid to SNFs.
the other hand, is purchased specifically for financial
protection against the risk of the potentially high costs
Other Public Payers
associated with LTSS. In addition, a number of hybrid
products that combine LTCI with either an annuity or a life
Of all LTSS expenditures in the United States, a relatively
insurance policy have emerged. The Medicaid Long-Term
small portion of the costs are paid for with public funds
Care Insurance Partnership Program offers a LTCI policy
other than Medicare or Medicaid. Collectively, these payers
that is linked to Medicaid eligibility.
covered 6.2% of all LTSS expenditures in 2018, totaling
$25.6 billion. Among these public payers, over half of
Other Private Funds
spending ($14.5 billion, or 56.9%) was for LTSS provided
in residential care facilities for individuals with intellectual
Other private funds generally include philanthropic support,
and developmental disabilities, mental health conditions,
which may be directly from individuals or obtained through
and substance abuse issues. Spending in this category also
philanthropic fund-raising organizations such as the United
includes LTSS paid for or operated by Veterans Health
Way. Support may also be obtained from foundations or
Administration ($6.4 billion, or 25.0%). Another $3.8
corporations. In 2018, other private funding accounted for
billion, or 14.9%, includes state and local subsidies to
6.1% of total LTSS spending, or $25.0 billion.
providers and temporary disability insurance. A smaller
percentage was spent on general assistance, which includes
Kirsten J. Colello, Specialist in Health and Aging Policy
expenditures for state programs modeled after Medicaid, as
IF10343
well as federal and state funding for nursing facilities and
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Who Pays for Long-Term Services and Supports?
Disclaimer
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