The recently enacted healthcare reform legislation and the recession are among the factors that will slow growth in the nursing home market, according to a new report.
Market research firm Kalorama Information's report estimates that, while the $104 billion nursing home market will grow, it will increase by just 3 percent this year – as opposed to the 5 percent predicted by Kalorama prior to the recession a few years ago.
"There are three main forms of payment for nursing homes – Medicaid, Medicare and equity loans," said Bruce Carlson, publisher of Kalorama Information. "All are under pressure with the economic situation and healthcare reform."
With the average nursing home costing more than $75,000 per year, Carlson said some patients resort to equity loans or home sale proceeds to cover the costs, a funding source that has been put under strain by the decline in the housing market.
But more than half of nursing home costs are paid by Medicaid or Medicare. This funding will change with the Patient Protection and Affordable Care Act, which will cut more than $500 billion in planned Medicare payments to nursing homes, hospitals, hospices and other providers over the next 10 years.
Carlson said the law also requires the Health and Human Services Secretary to submit a report on the appropriateness of establishing a healthcare-acquired condition (HCAC) policy related to nursing homes, and it creates financial incentives for states to shift Medicaid beneficiaries from nursing homes to home and community based services (HCBS) by providing Federal Medical Assistance Percentage increases to states to rebalance their spending between nursing homes and HCBS by October 2015.
"These two changes don't represent direct cuts, but they strongly suggest cuts," Carlson said. "An HCAC policy could potentially decrease payments, while encouraging Medicaid patients to receive home care will likely mean fewer paid patients for nursing home providers."
In 2009, approximately $104 billion was spent on nursing home care in the United States, up from $86.4 billion in 2005, according to the report. Only about 28 percent of this is paid out-of-pocket by patients, while Medicaid or Medicare pays more than half.