The Commission is also concerned that the longterm care system operate in way that ensures adequate access to quality care, without excessive costs. Case management budgets are designed explicitly to control expenditures and promote efficient allocation of services. Provider payment mechanisms would similarly be designed to promote efficient service delivery. As noted above, states' experience with nursing home payment provides considerable guidance on how to design payment mechanisms for this purpose, and experience on home care is developing.

Although the Commission does not endorse a specific payment mechanism for nursing homes, it recognizes that access to quality care would require higher rates than many Medicaid programs now pay. Prospective payment mechanisms could be employed to control rates of increase over time. In addition, adequate access could require some increase in the supply of nursing home beds. Over time, the Commission intends that payment methods or other mechanisms be used to ensure an adequate but not excessive supply of beds.

Integration with Existing Federal Long-Term Care Programs

The recommended new public program of longterm care for the severely disabled would overlap with current programs. The recommended nursing home benefits are intended to replace the Medicaid program for people who are severely disabled, as defined by the Commission. Nursing home care financed by Medicaid, however, may continue to be necessary for residents of intermediate care facilities for the mentally retarded who do not satisfy eligibility criteria.

By contrast with Medicaid, the recommended nursing home benefits would expand current Medicare benefits for nursing home care. Medicare would become the first payer for nursing home users who qualify for its skilled care. The recommended social insurance would cover stays lasting beyond the point Medicare pays for coverage, up to a total of three months of care.

With respect to home and community-based care, the proposed social insurance program would replace all the Medicaid programs that currently fund home health and home care services for those who are severely disabled as defined by the Commission. Medicaid programs would remain intact for the less severely disabled who meet the current financial standards, however. As with nursing home care, the

new program would not replace Medicare's role in covering skilled home health care.

The Commission recognizes that not all individuals who need long-term care would be eligible for benefits under its recommendations. In addition, it recognizes that some people who would be eligible for long-term care services might need specialized care that the program would not cover. Most notable in this regard are the developmentally disabled and chronically mentally ill, for whom assistance in basic functions addresses only some critical needs. Consequently, implementation of the Commission recommendations assumes the continuation of services provided by, for example, the veterans' health system, Title III of the Older Americans Act, the Social Services Block Grant, and numerous programs for the chronically mentally ill and developmentally disabled. The case manager would be responsible for coordinating services across programs.

Phase-In Schedule for the Public Program

The Commission recommends that the public program be phased in over a period of four years. The Commission recognizes that development of a new program, particularly the home and community-based care component, must inevitably take time. Incremental steps are necessary to allow the federal and state governments to move toward full implementation in an orderly fashion.

Year One-The home and community-based care program would begin by making a limited amount of care (200 hours per person per year, for instance) available to all severely disabled persons.

Year Two-The three-month, front-end nursing home care benefit would be made available to individuals entering nursing homes and coverage for longer nursing home stays would be put into place. Nursing home reimbursement rates would begin to be improved.

Year Three-The amount of home and communitybased care services available would be expanded (to 400 hours per person per year, for instance).

Year Four-The home and community-based care program would be fully implemented, and further improvements in nursing home reimbursement rates would take place.

The Commission's recommendations provide a blueprint for developing a national long-term care system. Home and community-based care, now limited in most communities and virtually nonexistent in many, would be available and affordable. The choice between care at home or care in an institution would increasingly depend on people's needs and preferences, rather than their resources. People who need nursing home care for short periods would have their resources preserved intact to return home. No one would have to fear impoverishment from ending life in a nursing home. People would contribute to the costs of care for all services subject to their ability to pay, and would have broader access to private insurance to cover those costs.

All Americans would be beneficiaries of the new public program, for it provides everyone-most especially the elderly and their families-peace of mind in the face of long-term care needs.

But we cannot build a system that ensures adequate service to people who need it merely by shifting around the dollars we spend today. Long-term care is expensive. Nursing homes cost over $2,500 per month, and home care can exceed $60 a visit. Substantial new expenditures would be required to provide more people better services. People likely to purchase care under current rules would face substantially lower out-of-pocket expenses, however. And new purchasers would share expenses with the public program, so that their burdens would be limited.

care and nursing home care ($15 billion and $16.8 billion, respectively). For nursing home care, the floor of protection against impoverishment would cost an estimated $11.3 billion; broader protection for short stays would cost an additional $5.5 billion. For younger severely disabled, most of whom live in the community, almost all new spending ($9 billion out of a total $11 billion) would go to home and communitybased care. The costs of phasing in the program are shown in Table 4-2.

•Cost estimates are presented as if each phase were fully implemented in 1990. Costs are not adjusted to reflect inflation or cost containment savings.

**The full costs of the home care benefit reflect a budget based on a per capita payment that varies with participants' disability levels. Cost estimates assume that per capita payment for the most severely disabled would cover 1,300 hours of service per year, with lesser amounts for less severely disabled categories. Benefits would be phased in by limiting the volume of services provided to eligible individuals to lesser amounts-to 200 and 400 hours in Year 1 and Year 3, respectively.

expected to increase. Under the recommended program, about 1.2 million people are expected to enter a nursing home in a year; all would receive some public support. People who would have used a nursing home. at their own expense or spent down to Medicaid in the absence of the new program would save $6.9 billion in out-of-pocket expenses, about $3,000 per user.

Figure 4-1 shows how coverage under the Commission's recommendations would improve nursing home protection, relative to protection current programs provide. Under the recommended new public program, all 1.2 million nursing home entrants would receive coverage for the first three months of nursing home care. For almost half of all entrants (528,000 people), the three-month social insurance benefit would cover their entire nursing home stay. Financial obligations would be limited to cost sharing requirements, subsidized for low-income people. People

would have their resources intact, should they be able to return home. Today, less than 20 percent of shortterm nursing home entrants (79,000 people) get equivalent coverage-the minority who satisfy Medicare's skilled care requirements and who receive the full Medicare benefit for the duration of their stays. Forty percent of people who enter nursing homes for short stays (175,000 entrants) receive no assistance from today's public programs. The rest get help from Medicare for part of their stay or are sufficiently impoverished to qualify for Medicaid support.

Short stays, though common and expensive for the elderly, are not the source of their greatest fears. What elderly people and their families most dread is that they will end their days in nursing homes, exhaust the savings of a lifetime, and be forced to rely on welfare. The Commission's recommendations for covering long stays would end that fear by establishing a floor of protection against impoverishment. Three-quarters of nursing home entrants who stay beyond three months (504,000 entrants) would benefit from this protection: an estimated 93,000 entrants who would have full income and asset protection; an additional 332,000 entrants who would have assets fully protected no matter how long they stayed; and 79,000 entrants who would acquire asset protection over the course of their stay. Another 168,000 entrants with stays exceeding three months would receive benefits only for the first three months of their stay (see Table 4-3).

This protection contrasts sharply with current programs. Today, protection for "long-stayers" is provided almost solely through Medicaid, and only after