Spending Growth for Skilled Nursing Facilities to Lag Behind Home Health Care

Total spending on nursing care facilities will grow by 5.4% through 2027, according to a new analysis from the Centers for Medicare & Medicaid Services (CMS) — but that figure still lags behind the rate increase for home health agencies.

Overall spending on medical care at skilled nursing facilities and continuing care retirement communities (CCRCs) will top $270 billion in 2027, up from a projected $170.8 billion and $178.0 billion in 2018 and 2019, respectively. Officials from CMS’s Office of the Actuary, writing in a study published Wednesday afternoon in the journal Health Affairs, attributed the rise to steadily increasing prices for health care goods and services, as well as an aging America.

“As a result of economic and demographic trends, we expect health spending growth to increase over this next decade,” CMS economist Andrea Sisko, the study’s lead author, said in a statement announcing the results.

Advertisement

CMS conducts an annual outlook for health care costs, breaking out expenditures by care setting and payor type. Spending on home health agencies, for instance, will grow 7.0% over the next eight years, reaching $186.8 billion by 2027. CMS, Medicare Advantage plans, and other alternate payers have increasingly attempted to shift services typically provided in SNFs to the home setting, though the projections show that the gap between spending on the two sites of care will actually widen from $67.6 billion in 2013 to $83.9 billion in 2027.

Across all care settings, nearly $6 trillion will be spent on health care in the year 2027, representing 19.4% of the total gross domestic product. In 2017, the last year for which firm data was available, those figures sat at $3.5 trillion, or 17.9% of the GDP.

Among the three primary payors for health services in the United States — Medicare, Medicaid, and private insurance plans — Medicare is expected to see the largest growth over the coming eight-year period, with spending rising 7.4% to reach $1.4 trillion. Medicaid will see relatively slower growth at 5.5% through 2027, while private plans will experience the weakest increase at 4.8%.

“Medicare spending growth is expected to accelerate and be the fastest among the major payers, reflecting not only the continued enrollment shift of the baby-boom generation into the program but also the growth rate for use and intensity, which is projected to gradually increase toward the rates observed during Medicare’s long-term history,” the authors noted.

In perhaps positive news for skilled nursing providers, per-patient Medicaid expenses are expected to rise at a rate of 5% or more between 2022 and 2027, as the program weighs more heavily toward older beneficiaries and enrollees with disabilities, whose care costs more than services for younger Medicaid recipients and those without chronic conditions or disabilities.

Medicaid pressures have caused grave concerns in many states where per-day reimbursements for beneficiaries don’t cover the costs of providing long-term care. Contrary to popular perceptions outside of the skilled nursing industry, the Medicaid program is the single largest payor for nursing home services in the United States, covering about 62% of all residents as of a 2017 study by the Kaiser Family Foundation. While the coming reimbursement overhaul under the Patient-Driven Payment Model (PDPM) could create net Medicare gains for providers, paying for long-term services through Medicaid remains a serious problem for the industry in multiple markets around the nation.

Still, there’s a catch: CMS’s analysis assumes current law will remain the same over its projection period, and the Medicaid program could soon be subject to another fight over block granting and per-capita caps — a plan hat could substantially reduce overall federal funding of state-level Medicaid plans.

Companies featured in this article: