As Many Seniors Choose Alternatives to Traditional Long-Term Care, Demand For Nursing Homes Declines

29 January 2007 Publication
Authors: Nathaniel M. Lacktman

Legal News: Senior Living & Long-Term Care

A report published November 21, 2006 by the Lewin Group indicates that the percentage of very senior adults (aged 85 or older) in nursing homes has sharply declined over the past two decades. The report, titled "Nursing Home Use by 'Oldest Old' Sharply Declines," traces trends in nursing home admissions since 1985. The percentage of adults over 65 years of age in nursing homes decreased 0.6% since 1985, but the rate among those aged 85 or older dropped 7.2%. Meanwhile, the number of people in that age group nearly doubled. If seniors had continued to use nursing homes at the rate they did in 1985, the current nursing home population would be nearly 2 million. Instead, with a current nursing home population of 1.3 million, over 600,000 seniors have elected to not use nursing homes.

Where have these people gone? The report indicates several factors contributing to this decline. An increase in the health and financial wealth of seniors has reduced the need for nursing home care and permitted seniors greater flexibility to choose their preferred services. At the same time, nursing homes have changed, focusing their long-term care on Medicaid residents and their short-term post-acute rehabilitation care on Medicare residents. Furthering the decline in nursing home use has been the substantial increase in the number of alternative long-term care facilities (e.g. assisted living facilities, residential care facilities for the elderly, group homes, and home and community-based services). With a population of 1 million residents, these facilities nearly rival nursing homes. The report also identifies increased availability of private long-term care insurance and active efforts by state legislatures as additional factors contributing to the decline in nursing home use.

The decline in nursing home use has accelerated since 1999, when state and federal lawmakers imposed new initiatives to reduce the number of Medicaid recipients in nursing homes. One of these initiatives is the National Family Caregiver Support Program, part of the 2000 Reauthorization of the Older American's Act. The Program allows states to provide a continuum of caregiver services to best meet caregivers and individual needs, making it possible for seniors with disabilities to remain at home and in their community longer. Other initiatives include President Bush's New Freedom Initiative and Congressional funding for grants from Real Choice Systems Change, providing states seed money and assistance to shift the balance of senior care away from institutions and toward community living.

Nursing home operators should keep these trends in mind when planning for the influx of Baby Boomers. According to the report, "[I]f the demand for nursing homes continues to decline at just half the rate of the national average over the past 20 years, the use rate among older adults would drop from a projected 3.2 percent to 2.5 percent in 2030.” Because maximum bed capacity and an increase in resident census is not guaranteed, providers should carefully consider their business model and projected plans for the next 10 and 20 years, as well as the growing market for alternative long-term care options. On average, compared to a skilled nursing facility, it is easier and quicker to obtain a license to operate and assisted living facilities or residential care facilities for the elderly.

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This article is a part of the Legal News: Senior Living & Long-Term Care Winter 2007 Newsletter.

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