Who Pays for Long-Term Services and Supports?

Who Pays for Long-Term Services and Supports?

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Updated September 19, 2023
Who Pays for Long-Term Services and Supports?
Long-term services and supports (LTSS) encompass a wide
assistance, which was 1.3% of total LTSS spending in
range of health and social services, as well as other types of
2021. In addition, 2021 spending in other categories reflects
assistance (e.g., medical devices and technology), that are
the net effect of any changes in LTSS utilization and costs
needed by individuals over an extended period of time. The
related to the pandemic, as well as relevant regulatory and
need for LTSS affects persons of all ages and is generally
statutory changes made during the COVID-19 public health
measured by limitations in an individual’s ability to
emergency. LTSS spending for other public programs (e.g.,
perform daily personal care activities such as eating,
Veterans Health Administration [VHA], Children’s Health
bathing, or dressing. The probability of needing LTSS
Insurance Program [CHIP]) was 6.0% in 2021.
increases with age. As the U.S. population aged 65 and
older continues to increase in size, and individuals continue
It is important to note that the eligibility requirements and
to live longer post-retirement, the demand for LTSS is
benefits provided by these public programs vary widely.
expected to increase. Furthermore, advancements in
Moreover, among the various public sources of LTSS
medical and supportive care may allow younger persons
financing, none are designed to cover the full range of
with disabilities to live longer (see CRS In Focus IF10427,
services and supports that may be desired by individuals
Overview of Long-Term Services and Supports).
with long-term care needs. Some Medicare spending is
similar to Medicaid LTSS spending in that both payers
CRS analyzed data from the Centers for Medicare &
cover stays in institutional settings, such as nursing homes,
Medicaid Services (CMS) National Health Expenditure
as well as visits by home health agencies, although the
Accounts (NHEA) to examine personal health expenditures
service type and scope of coverage differ.
for LTSS by payer. This analysis includes Medicare post-
acute care spending for home health and skilled nursing
In the absence of public LTSS funding, individuals must
facility (SNF) care in an expanded definition of LTSS
rely upon private funding. In 2021, private sources
spending. This is due to NHEA data providing expenditures
accounted for 28.6% of LTSS spending. Out-of-pocket
by care setting (e.g., home health, nursing home, residential
spending remained the largest component, at 13.6% of total
care), which do not distinguish whether care provided in a
LTSS spending. Second was private insurance (8.0%),
given setting is for post-acute or LTSS. Using this
which includes both health and long-term care insurance.
definition, total U.S. spending on LTSS is a significant
Other private funding, which largely includes philanthropic
component of all personal health care spending. In 2021, an
contributions, comprised 7.0% of LTSS spending.
estimated $467.4 billion was spent on LTSS, representing
13.2% of the $3.6 trillion spent on personal health care.
Figure 1. Long-Term Services and Supports (LTSS)
Spending, by Payer, 2021 (in billions)
NHEA data for LTSS expenditures include payments made
for services in nursing facilities and in residential care
facilities for individuals with intellectual and developmental
disabilities, mental health conditions, and substance abuse
issues. LTSS spending also includes payments for services
provided in an individual’s own home, such as personal
care and homemaker/chore services (e.g., housework or
meal preparation), as well as a wide range of other
community-based services (e.g., adult day health care
services). However, the NHEA data underestimate the total
costs of providing LTSS because they do not reflect care
provided by family members, friends, and other
uncompensated caregivers. This report provides
information on spending among the primary LTSS payers.
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 2021.

Source: CRS analysis of National Health Expenditure Account
Public sources paid for the majority of LTSS spending
(NHEA) data obtained from the Centers for Medicare & Medicaid
(71.4%). Medicaid and Medicare are, respectively, the first-
Services (CMS), Office of the Actuary, prepared November 2022.
and second-largest public payers, accounting for a
combined 64.1% of all LTSS spending nationwide in 2021.
Notes: Analysis includes Medicare post-acute care spending in an
In response to the pandemic, NHEA data included a new
expanded definition of LTSS spending. Percentages may not sum to
category of spending for federal COVID-19 pandemic
100% due to rounding.

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Who Pays for Long-Term Services and Supports?
Over the past 20 years, the share of public LTSS spending
Medicare or Medicaid. Collectively, these payers covered
has increased (from 66.8% in 2001 to 71.4% in 2021),
6.0% of all LTSS expenditures in 2021, totaling $28.1
primarily due to Medicare funding. For 2021, the public
billion. Of this total, $16.1 billion, representing 57.4% of
share of LTSS spending decreased slightly relative to 2020
other public funding, was for LTSS provided in residential
(from 72.3% to 71.4%) and the private share of LTSS
care facilities for individuals with intellectual and
funding increased slightly (from 27.7% to 28.6%), due to
developmental disabilities, mental health conditions, and
decreases in federal COVID-19 pandemic assistance.
substance abuse issues. Spending in this category included
$7.5 billion (26.7%) for LTSS paid for or operated by the
Medicaid
VHA, $3.7 billion (13.2%) for state and local subsidies to
Medicaid is a means-tested health and LTSS program
providers and temporary disability insurance, and $740
funded jointly by federal and state governments. Medicaid
million 2.6%) for state programs modeled after Medicaid
funds are used to pay for a variety of health care services
and federal and state CHIP funding for LTSS.
and LTSS, including nursing facility care, home health,
personal care, and other home and community-based
Out-of-Pocket Spending
services. Each state designs and administers its own
Out-of-pocket spending in 2021 accounted for 13.6% of
program within broad federal guidelines. Medicaid is the
total LTSS spending, amounting to $63.6 billion.
largest single payer of LTSS in the United States; in 2021,
Expenditures in this category include deductibles and
total Medicaid LTSS spending (combined federal and state)
copayments for services that are primarily paid for by
was $207.0 billion, which comprised 44.3% of all LTSS
another payment source as well as direct payments for
expenditures. In 2021, Medicaid LTSS accounted for 32.1%
LTSS. Under Medicare, there are daily copayments for
of all Medicaid personal health care spending, which
SNFs after a specified number of days and no copayments
represented about 5.3% (4.4 million) of the enrolled
for home health services. In addition, some private health
population who received Medicaid-covered LTSS in
insurance plans provide limited SNF and home health
FY2020 (the most recent year for which data are available).
coverage, which may require copayments. Moreover,
private long-term care insurance (LTCI) often has a waiting
Medicare
period for policyholders that requires out-of-pocket
Medicare is a federal program that pays for covered health
payments for services for a specified period of time before
services for older adults (aged 65 and over) and for certain
benefit payments begin. Once individuals have exhausted
younger individuals with disabilities. Medicare covers
their Medicare and/or private insurance benefits, they are
primarily acute and post-acute care, including skilled
responsible for covering the full cost of care. With respect
nursing and home health services. Unlike Medicaid,
to Medicaid LTSS, individuals must meet both financial
Medicare is not intended to be a primary funding source for
and functional eligibility requirements. Individuals not
LTSS. These post-acute Medicare benefits provide limited
initially eligible for Medicaid, and not covered under a
access to personal care services both in the home care
private LTCI policy, must pay for LTSS directly.
setting and in SNFs for certain beneficiaries. While
Eventually, they may spend down their income and assets
Medicaid SNF and home health benefits are available to
to meet the financial requirements for Medicaid eligibility.
eligible beneficiaries for as long as they qualify, Medicare
benefits are generally limited in duration. In addition,
Private Insurance
Medicare SNF and home health benefits include coverage
Private health and long-term care insurance plays a much
of rehabilitation services that will, presumably, prevent a
smaller role in financing LTSS; 8.0% of total LTSS
decline in the beneficiary’s physical condition or functional
spending ($37.3 billion) was funded through these sources
status. In 2021, Medicare spent $92.6 billion on SNF and
in 2021. Similar to Medicare LTSS funding, private health
home health services combined, which was 19.8% of all
insurance funding for LTSS includes payments for some
LTSS spending, under the expanded definition. These
limited home health and skilled nursing services for the
expenditures include Medicare Parts A and B and estimated
purposes of rehabilitation. Private LTCI, on the other hand,
Medicare Advantage (Part C) payments attributable to SNF
is purchased specifically for financial protection against the
and home health care. For 2021, more than half of Medicare
risk of the potentially high costs associated with LTSS. In
spending was paid for home health services ($48.5 billion)
addition, there are a number of combination products that
and just under half for SNF services ($44.1 billion).
link LTCI with either an annuity or a life insurance policy.
Federal COVID-19 Pandemic Assistance
Other Private Funds
In 2020, federal funding included COVID-19 pandemic
Other private funds accounted for 7.0% of total LTSS
assistance from the Paycheck Protection Program (PPP)
spending ($32.9 billion) in 2021. These funds include
Loans and the Provider Relief Fund, which enabled
philanthropic support through individuals or philanthropic
federally certified LTSS providers (e.g., home health
fund-raising organizations, as well as support obtained from
agencies and nursing facilities) to cover expenses and
foundations or corporations.
recuperate lost revenue resulting from the pandemic. This
assistance represented $6.0 billion, or 1.3% of all LTSS
Kirsten J. Colello, Specialist in Health and Aging Policy
expenditures in 2021.
Isobel Sorenson, Research Assistant
Other Public Payers
IF10343
Of all LTSS expenditures in 2021, a relatively small portion
of the costs were paid for with public funds other than
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Who Pays for Long-Term Services and Supports?

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