Public-Sector Approaches to Financing Long-Term Services and Supports

The major source of public financing for long-term services and supports (LTSS) is the joint federal and state Medicaid program. Medicaid pays for nursing facility care and increasing (but still limited) amounts of home and community-based services. However, to qualify for Medicaid, people must have extremely low assets and income or spend almost all their assets and income to pay for their health care and LTSS.

Medicare generally does not pay for LTSS. It funds medically necessary home health care, but consumers must be homebound and need skilled nursing or therapy to receive the benefit. Medicare also pays for postacute care in a skilled-nursing facility if an individual has had a prior hospital stay of at least three days (see also Health Care Coverage: Medicare).

Smaller public programs provide LTSS, including the Department of Veterans Affairs program, the Social Services Block Grant program, and Title III of the Older Americans Act. Each program has its own eligibility criteria and covers only limited amounts of LTSS (see also The Older Americans Act). In addition, most states have LTSS programs paid for out of general revenue. Still, they serve only a limited number of people.

Several recent legislative efforts in Congress have included proposals that would cap the federal contribution (overall in a block grant or per person in a per capita cap) to Medicaid. Both a block grant and a per capita cap would shift costs to the states and reduce the availability and quality of long-term services and supports in both nursing facilities and home- and community-based settings.