1. Spence, Denise A, and Wiener, Joshua M. Medicaid Spend-Down in Nursing Homes: Estimates from the 1985 Nursing Home Survey. The Brookings Institution, February, 1989. Burwell, Brian; Adams, E. Kathleen; Meiners, Mark. Spend-Down of Assets Liu, Korbin; Doty, Pamela; Manton, Kenneth. Medicaid Spenddown in Wallack, Stanley S; McGuire, Thomas; Cohen, Marc A; and Kumar, Nanda. Mr. WAXMAN. Thank you very much, Mr. Goldberg. Mr. Willging. STATEMENT OF PAUL R. WILLGING Mr. WILLGING. Good morning, Mr. Chairman and Mr. Scheuer. We thank you also for the opportunity to testify today with respect to the recommendations from the Pepper Commission. I am the executive vice president of the American Health Care Association, the Nation's largest long-term care association which represents over 10,000 nursing facilities across the country with over 1 million residents in those facilities. The Commission certainly deserves high marks for having continued to direct public and social attention to these most critical issues of access and long-term care, particularly with respect to the topic of today's testimony, the need for long-term care services and the financing mechanisms available to fund them. Clearly, in focusing on that as one of its two areas of primary concern, the Pepper Commission recognized that the catastrophic issue most concerning the elderly today is, indeed, long-term care. The data make that absolutely clear. The catastrophic expenses incurred by the elderly are 81 percent related to long-term care-not hospitals, not physicians, not drugs, not dental services, but longterm care. The Pepper Commission is also to be commended on recognizing, as is recognized generally throughout the country today, that longterm care is a continuum of services. It is not just nursing homes. It is not just home care. It is not just congregate living. It is that entire continuum of services across the spectrum of the elderly's needs. I think also we particularly would emphasize how important it was that the Pepper Commission recognized that there is indeed a nexus between resources and quality. We have too often in this town denied the reality of that basic fact. It is true that resources are not a sufficient condition for high quality care in America's nursing homes, but it is clearly true that they are a necessary condition. For having recognized that basic reality, we would commend the Commission. I think our biggest concern, however, Mr. Chairman, relates to the questions you directed to the previous panel; that is, the issue of the nature of the public/private partnership in terms of frontend funding or back-end funding. There we have some serious questions. We think front-end funding flies in the face of two or three basic realities. The first is that it seems to deny what is, indeed, the catastrophic risk faced by the elderly. It is not that first 3 months in a nursing home that creates the problem. It is clearly the extended stay, and we have seen that more and more in some of the data that has been recently published. I refer primarily to the Urban Institute's study conducted by Josh Weiner which shows that, in fact, the spend-down issue is not as serious as had once been thought. In fact, of private pay patients entering a nursing home, only 10 percent spend down over the course of their stay. We further find tha that percentage is most pronounced when the stay extends past 2 years. So, again, to cover the front end of a nursing home stay which is not catastrophic seems to deny the reality of the spend-down process itself. Further, that leads to the issue of resource expenditures on the part of the funding mechanism-in this case, the Federal Government. A $44 billion program is, indeed, inevitable if we take on what is the burden that most of the elderly could carry on their own rather than taking on the burden that most of the elderly cannot deal with-that is, the catastrophic stay. A program with that level of expenditure gives us pause to reflect on what we have today when we have, perhaps, overpromised and have not been able to follow up with funding. You are to be commended, Mr. Chairman, for having spearheaded the enactment in 1987 of the Nursing Home Reform Act within the Omnibus Budget Reconciliation Act. For the first time in many years, it looked as though we would finally be able to provide to Americans in need the kind of quality long-term care services in institutions that they deserve. You made it clear in that legislation, Mr. Chairman, that States in their Medicaid rates were going to have to fund this new level of quality. Unfortunately, Mr. Chairman, almost 3 months after the States were to have submitted their plans for that funding, not one has been found acceptable by the Health Care Financing Administration. In your own State, Mr. Chairman, it has been publicly stated that not one dollar of additional funds will be made available for OBRA. My concern, Mr. Chairman, is, what happens when we promise too much? What happens when we launch possibly new programs where we have not yet adequately funded existing programs? I think the Pepper Commission, again, is to be commended for having focused on this issue, but I would strongly urge this committee and the Congress to look at the degree to which we have to do what it is we promised to do in previous programs. We have not yet done that. We would urge we make sure that we do well what we have set out to do before we set out to do major new initiatives. Thank you very much. [Testimony resumes on p. 189.] [The prepared statement of Mr. Willging follows:] STATEMENT OF AMERICAN HEALTH CARE ASSOCIATION Thank you Mr. Chairman and members of the Committee. We appreciate the opportunity to testify here today regarding the Pepper Commission recommendations on long term care. My name is Dr. Paul Willging, Executive Vice-President of the American Health Care Association. AHCA is a non-profit federation of fifty one state affiliates which represents approximately 10,000 individual nursing and allied health care facilities who provide care to more than 1,000,000 Americans. We would like to commend the dedicated efforts of the members of the Pepper Commission for addressing the very difficult issues surrounding the provision of quality long term care services to our nation's elderly and disabled population. Overall, AHCA appreciates the emphasis throughout the Pepper Commission recommendations to provide the highest possible quality of care to our nation's citizens who are in need of long term care services. We also recognize and support the need for an array of quality care providers within the health care continuum, ranging from nursing facilities to settings within the individuals' own homes. The Commission has laid the foundation to address the problems of funding long term care services for persons in need. AHCA would like to offer the following perspectives about the current status in achieving quality of care for nursing facilities, as well as offer constructive modifications that we believe will provide the best possible solutions for the future. Quality of Care and Reimbursement Levels: Current Status We applaud the recommendations of the Pepper Commission designed to further enhance the quality of care within nursing homes. Specifically, the Pepper Commission has recommended that $6 billion be provided during the implementation of the project to increase nursing home rates to improve the quality of care. AHCA appreciates the recognition of the Pepper Commission that quality care and resource allocation are inseparable components. This is especially significant in light of the current situation of increasing the expectation of performance in nursing facilities. Today, the nursing home industry is working with patients, families, consumer groups, and government officials to implement the prescriptions of the 1987 OBRA Nursing Home Reforms. AHCA strongly supports the goals of this important legislation to provide the highest level of individualized services that our patients may require. However, given that a majority of patients in nursing homes depend on government funding to pay for their care, quality of patient care is inextricably linked to how much the government is willing to pay to achieve it. 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