SB 12-128 Alternative Care Facility Reimbursement Pilot

Alternative Care Facility Reimbursement Pilot

Senate Bill 12-128

Testimony to the Senate Health and Human Services Committee

Robert Semro, Policy Analyst

March 1, 2012

My name is Robert Semro, and I am a policy analyst with the Bell Policy Center. The Bell is a non-partisan, non-profit research and policy organization founded on progressive values and dedicated to expanding opportunity for all Coloradans.

The Bell Policy Center supports Senate Bill 12-128.  Colorado is facing an impending long-term care crisis, as a result of the state's aging population.  Unless the state legislature explores new and less costly ways of financing long term care support services the impact on future state budgets will be increasingly unmanageable.  Senate Bill 128 represents one small effort in meeting this much larger challenge.

According to the University of Denver Study, "Financing Colorado's Future, An Analysis of the Fiscal Sustainability of State Government," General Fund expenditures for the Department of Health Care Policy and Financing will triple by FY 2024-25, from nearly $1.8 billion to about $5.5 billion.[1] A very significant contributor to that budget expansion will be the increased number of older enrollees in Medicaid that will require skilled nursing facility or home and community care.

As dire as that projection is, it is still five years away from the point where the demographic curve reaches its peak in 2030.  Long-term care demand will expand significantly after 2025 when the baby boom generation moves into the very high-cost 80+ age range.[2]

Households in Colorado headed by an individual 65 or older will increase by 147 percent between 2010 and 2030.[3] By the year 2030, Colorado's population of people 65 or older will represent 18.5 percent of state's total population.[4] At that point approximately 930,000 to 975,000 Coloradans may require long-term care.[5] The average time span required for long term care is three years, with men averaging 2.2 years and women averaging 3.7 years.[6]

The demand that demographic trends will place upon Medicaid will be substantial.  Nationally more than one of every three seniors is economically insecure today.  The baby boomer population is also unprepared for retirement.  According to the Volunteers of America "Boomer Bust 2011" study, 27 percent of the workers surveyed indicated that they have less than $1,000 in savings and more than half of the workers surveyed (54 percent) reported that the total value of savings and investments, excluding the value of their primary home and any defined-benefit plans, is less than $25,000.[7] The median annual rate for a semi-private room in a skilled nursing facility in Colorado is $73,730 or about $202 per day.[8] That's about two thirds of the cost of the cheapest room in the Brown Palace Hotel. The bottom line is, a significant portion of the baby boomer population will run out of money and will ultimately be reliant upon the Medicaid safety net.

Senate bill 128 represents one way to determine whether assisted living facilities, if provided with a greater financial incentive, represent a cost-effective alternative for the state.  At the same time, assisted living may prove to be a better quality of life choice for the resident and their families.

We do not see this as a competitive issue between long-term care industries.  Given the overview that I have just laid out, there will be no lack of demand for the next two decades.  Market demand is not the issue -- infrastructure, consumer choice and cost-effectiveness are.

The assumption of this initiative by the Department of Health Care Policy and Financing will further ensure coordination with other efforts in this area and improve Colorado's ability to better address this demographic and budgetary challenge.  We would like to thank Senator Roberts for sponsoring this legislation and we urge this committee to support Senate Bill 128.  We thank you for the opportunity to testify today.

[1] University of Denver: Financing Colorado's Future: An Analysis of the Fiscal Sustainability of State Government, April 2011.

[2] Ibid.

[3] Ibid.

[4] Colorado Health Institute: Long-Term Services and Supports in Colorado, November 2011.

[5] Calculation based upon estimate provided in Volunteers of America: "Boomer Bust 2011:Still Unprepared and Unaware", April 2011, and population estimate in "Colorado Health Institute: Long-Term Services and Supports in Colorado, November 2011.

[6] Prudential Research Report, Long Term-Care Cost Study, 2010.

[7] Volunteers of America: "Boomer Bust 2011:Still Unprepared and Unaware", April 2011.

[8] Genworth 2011 Cost of Care Survey.