Long-Term Care (LTC): Financing Overview and Issues for Congress

Julie Stone
Specialist in Health Care Financing

Most long-term care (LTC) received by people with disabilities and/or other limitations in their capacity for self-care due to a physical, cognitive, or mental disability or condition is provided by informal providers—family and friends—who give care without compensation. Formal LTC services in the United States, however, are financed by a wide variety of public and private sources. The largest public payer of LTC in the country is, by far, the Medicaid program, paying for almost half (48.5%) of all formal LTC services. Medicaid is intended to provide a safety net for those who cannot afford to pay for LTC services. Because Medicaid is administered and partially financed by each state, there is wide variation in eligibility and benefits across the nation. Medicare and other federal and state programs finance an additional quarter (24.8%) of formal LTC services. Each program has distinct eligibility criteria and, thus, distinct target populations, and each covers a different set of services. Multiple programs may also serve persons with long-term care needs simultaneously. 

Private financing, including out-of-pocket spending, pays for just over a quarter (26.8%) of formal LTC services. Of this, about 7% of LTC services are financed by private LTC insurance (LTCI). These policies are intended to provide financial protection to individuals and families to insure against the potentially high cost of care. 

People who do not have access to private LTC insurance and who are not immediately eligible for Medicaid or other public programs must pay for LTC services out-of-pocket, rely on family and friends, or forgo care. The out-of-pocket costs of LTC services can be catastrophic for some individuals and families, often exceeding annual income and, in some cases, personal savings and assets. 

Concern about the way LTC is financed and delivered has drawn congressional attention for several decades. Exacerbating this concern is the potential for increased demand on the nation's LTC system as a result of the aging U.S. population. At the same time, disability among the current cohorts of working-age Americans has been increasing over the past few decades. Congress continues to be concerned about the following issues: (1) barriers to public and private coverage; (2) strains on federal and state Medicaid budgets; (3) coordination of care across Medicaid, Medicare, and other public programs, as well as across provider settings; (4) spending on institutional care versus home and community-based services; (5) challenges facing consumers of LTC; (6) the supply and quality of the LTC workforce; (7) access to affordable housing; and (8) the quality of publicly funded LTC services. 

This report provides an overview of LTC and an explanation of the nation's complex financing system of public and private payers. It also describes some of the major challenges facing Congress as it contemplates LTC reform and whether and how to include LTC in health reform legislation. 


Date of Report: February 1, 2010
Number of Pages: 22
Order Number: R40718
Price: $29.95

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