The growth in U.S. spending on nursing home care lagged behind gains in overall health expenditures — as well as the increase in cash spent on care at home and in hospitals — according to the most recent update to an annual analysis of American health care costs.
The United States spent a collective $172.2 billion on care at nursing homes and continuing care retirement communities (CCRCs) in 2019, the Centers for Medicare & Medicaid Services (CMS) determined in a study published Wednesday in the journal Health Affairs; that’s a gain of 3.3% from the $167.2 billion laid out in 2018.
But that increase pales in comparison to the 7.7% jump in spending on home health services during that time, from $105.4 billion in 2018 to $113.5 billion in 2019. Hospital spending, meanwhile, grew 6.2% to about $1.2 trillion.
All in, the health care landscape took in $3.8 trillion last year, representing 17.7% of the nation’s total gross domestic product (GDP).
Growth in overall Medicare spending (6.7%) outpaced private insurance (3.7%) and Medicaid (2.9%) — that worked out to $13,276 spent per Medicare beneficiary and $8,485 per Medicaid enrollee in 2019.
It’s important to note that the figures, compiled by CMS’s Office of the Actuary, do not include any of the impact of the COVID-19 pandemic, which the researchers warned will have a significant effect on the figures for this year.
“The relative stability in health care spending growth in recent years preceded the 2020 global COVID-19 pandemic, which dramatically affected health care and the overall economy,” they concluded. “Although the full impact of the pandemic on the health care sector is not yet known, it is certain that it will have profound consequences on the provision and consumption of health care goods and services, as well as on the payers, programs, and sponsors that fund that care in 2020 and perhaps beyond.”
The data would also not fully capture the effects of the new Patient-Driven Payment Model (PDPM) for nursing home care, which took effect in October of 2019. Early analyses showed that the structure, which the federal government intended to be revenue-neutral, produced far more reimbursement winners than losers, prompting pre-pandemic concerns about a looming downward adjustment.
Those fears were largely lost in the fog of COVID-19, with CMS limiting its PDPM updates to a handful of housekeeping items in a larger payment rule that brought a 2.2% Medicare payment increase to skilled nursing facilities in fiscal 2021.
But the rapid gains in home health spending, already a trend prior to COVID-19, could only accelerate as consumers — frightened by the stories of sickness and death in nursing homes — increasingly opt for home care in place of institutional post-acute services.
Multiple major home-health players have already expressed interest in siphoning off the slice of “jump-ball” patients who could either receive care at home or in a nursing facility.
“We think now, obviously, that business is going to shift into the home,” Paul Kusserow, CEO of home health heavyweight Amedisys Inc. (Nasdaq: AMED), said this past summer. “We also think there’s actually another 10% to 20% — probably close to 10% — that, if we could add some custodial care to it, we can take care of these patients quite well. We need to be able to figure out how to add that custodial piece, and there’s a big ability to steal share.”
And even with a vaccine rollout over the coming months, the perception of nursing homes in a post-COVID world may not recover so quickly.
“Even if everybody this time next year is on a vaccine, I think the idea of wanting to be home, to the safer, to be away from places of infection [will remain],” Kusserow said back in June. “It’s going to be a long haul back for the SNFs.”