AARP Study Shows Home and Community Based Services More Cost Effective Than Nursing Homes

The AARP Public Policy Institute released a new state-by-state report last week entitled, Across the States 2009, Profiles of Long-Term Care and Independent Living, that shows nursing home residents, beds, and occupancy rates have remained nearly constant in the last five years, even though the older population has increased. The population age 85 or older—the age group that is most likely to need long-term care services—is expected to increase by 74% between 2007 and 2030. As the baby boomers turn age 85 between 2030 and 2050, the age 85+ population will skyrocket by another 118%. Specifically, the report finds that spending for long-term care services is not a primary force behind escalating Medicaid costs and shows that on average, Medicaid funds spent on home and community-based services (HCBS) can serve three older people or adults with disabilities for each resident in a nursing home. The report emphasizes that family caregivers remain the main providers of long-term care services in all the states and nationwide. By providing personal care and even health care, family caregivers help to contain costs by delaying or preventing the use of nursing home and hospital care.

Among other highlights of the report:

  • From 2007 to 2030, the population age 65+ is projected to grow by 89%, more than four times as fast as the population as a whole. The states with the greatest projected age 85+ population growth in this period are Alaska, Nevada, Arizona, Wyoming and New Mexico.
  • About 1.44 million Americans live in nursing facilities, occupying 85% of a total of 1.7 million nursing home beds. Although people tend to associate long-term care with nursing homes, the great majority of people with disabilities live in community settings.
  • The number of older people and adults with physical disabilities receiving Medicaid-funded HCBS increased by about one-third from 2000 to 2005, to a total of nearly 1.4 million beneficiaries.
  • In 2007, nine states—Tennessee, Indiana, North Dakota, Utah, South Dakota, Kentucky, Alabama, Connecticut, and Delaware—spent 10% or less of their Medicaid long-term care funds for older people and adults with disabilities on HCBS – far below the national average of 27%. In fact, roughly two-thirds of the states fall below this national average.
  • Older people with disabilities have a growing array of service options, but the services are costly and can deplete the life savings of older households. Assisted living has emerged as a major option for many older people, for example. The average private-pay base rate for assisted living services is about $3,000 per month, though this rate typically does not include skilled nursing or other intensive health-related services that are add-ons.

Across the States 2009 is available online at

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