Print Friendly, PDF & Email

The Future of Long-Term Care: Saving Money by Serving Seniors

Senate Special Committee on Aging
April 18, 2012
2:00 p.m.

Statement for the Record
Toby S. Edelman
Senior Policy Attorney
Center for Medicare Advocacy
1025 Connecticut Avenue, NW, Suite 709
Washington, DC  20036

The Center for Medicare Advocacy suggests that huge savings in the cost of care in nursing facilities could be achieved if facilities eliminated the inappropriate use of antipsychotic drugs and provided sufficient staff to meet their residents’ needs.  The Center commends the Senate Special Committee on Aging for holding a hearing on April 18, 2012 – The Future of Long-Term Care: Saving Money by Serving Seniors – to call attention to the connection between high quality of care and lower costs to the Medicare and Medicaid programs.

Antipsychotic Drugs

Each day, hundreds of thousands of nursing home residents are given antipsychotic drugs,[1] even though, as documented by the Department of Health and Human Services’s Office of Inspector General in May 2011,[2] these drugs are inappropriate and life-threatening for the vast majority of residents to whom they are given.  Antipsychotic drugs are also extremely expensive.  The Inspector General reported that for the six-month period, January 1-June 30, 2007, erroneous drug claims for atypical antipsychotic drugs for nursing home residents cost $116 million.[3]  This report underestimates the costs of antipsychotic drugs because it looked only at atypical antipsychotic drugs (not conventional antipsychotic drugs as well) and because it looked only at nursing home residents (not other care settings, such as hospitals and assisted living).

The harm that antipsychotic drugs can cause people for whom they are inappropriate is well-established.  In 2005 and 2008, the Food and Drug Administration issued Black Box warnings about atypical[4] and conventional[5] antipsychotic drugs, advising that these drugs can cause the death of older people who have dementia.  Antipsychotic drugs are also included on the Beers List of drugs that are inappropriate for most older people.[6]

There is no dispute that these drugs provide little or no benefit to most nursing home residents[7] and that they can lead to many poor resident outcomes, such as hospitalizations and falls. 

High Cost of Poor Care

The single most important predictor of high quality of care and high quality of life for nursing home residents is nurse staffing.  Since 1990, federal law has required, and paid, nursing facilities to have sufficient numbers of staff to meet the needs of their residents.[8]  Yet more than a decade ago, the Centers for Medicare & Medicaid Services reported that more than 90% of nursing facilities did not have sufficient staff to prevent avoidable harm to nursing home residents or to meet their residents’ needs in compliance with federal standards of care.[9]

There is a widespread belief that the United States cannot afford to pay for adequate staffing at nursing facilities.  The truth is that the United States pays enormous amounts for nursing home care, but that too much of the money is misspent.  Redirecting payments to care would result in better care at lower cost.

The Centers for Medicare & Medicaid Services (CMS) pays skilled nursing facilities very high Medicare rates[10] – so high that the Medicare Payment Advisory Commission, which reports that margins exceeded 10% for the tenth consecutive year (in 2010, margins exceeded 18.5% for freestanding nursing facilities and were 20.5% for for-profit facilities),[11] recommended again in March 2012 that skilled nursing facilities not receive any increase in their Medicare rates this year.[12]

Nursing facilities have not spent Medicare reimbursement specifically intended for staffing on staffing.  When Congress increased Medicare rates by 16.6% in 2000, specifically for the nurse staffing component of Medicare rates,[13] the Government Accountability Office found that skilled nursing facilities increased their nurse staffing by less than two minutes a day[14] – virtually no change at all. 

The common claim that Medicaid rates are too low should also be viewed with skepticism.  An investigative report by U.S. News & World Report, “The New Math of Old Age; Why the nursing home industry’s cries of poverty don’t add up,” found considerable related-party and self-dealing transactions in the nursing home industry, involving facilities’ sending profits to their corporate parent, paying rent to related companies, and paying management or consulting fees to related parties.[15]  Many “costs” are actually profits by another name.

The problem is not low reimbursement rates, but that government payment programs allow nursing facilities to spend their reimbursement in whatever way they choose.

When they permit nursing facilities to divert their reimbursement from care of residents to corporate overhead and profits, facilities are understaffed.  The human toll is enormous.  Residents suffer terrible health care outcomes and deaths that could have been avoided with better care. 

The health care system also incurs enormous financial costs as it tries to undo the bad outcomes that were avoidable and should have been avoided.  For decades, research has documented the high cost of poor care,[16] including the following:

            Avoidable hospitalization

Large percentages of the hospitalizations of nursing home residents are considered avoidable.  In March 2010, the Medicare Payment Advisory Commission (MedPAC) reported that in 2005, "potentially avoidable readmissions cost the [Medicare] program more than $12 billion" and that "In 2007, more than 18 percent of SNF stays resulted in a potentially avoidable readmission to a hospital."[17] A primary cause  of hospitalizations from nursing homes, discussed in the research literature for more than 20 years, is the inadequate nurse staffing levels in nursing facilities.[18]

Many emergency department visits are also avoidable.  The Centers for Disease Control and Prevention reported in 2010, that in 2004, 8% of nursing home residents nationwide – 123,600 individuals – had an emergency department (ED) visit in the prior 90 days and that 40% of the ED visits, involving 50,300 residents, were preventable.[19]

            Pressure ulcers

The Agency for Health Care Research and Quality reported in January 2009 that in 2006, 2604 patients were admitted to hospitals from nursing homes with primary diagnosis of pressure sores and that the cost to treat them was almost $44 million; that in 2006, 40,056 people were admitted to hospitals from nursing homes with secondary diagnosis of pressure sores and that the cost to treat them was more than $800 million.[20]


Eliminating the inappropriate use of antipsychotic drugs and improving nurse staffing in nursing facilities would go a long way towards saving money and improving care for residents. 

The Center for Medicare Advocacy is a private, non-profit organization, founded in 1986, that provides education, analytical research, advocacy, and legal assistance to help older people and people with disabilities obtain necessary health care.  The Center focuses on the needs of Medicare beneficiaries, people with chronic conditions, and those in need of long‑term care.  The Center provides training regarding Medicare and health care rights throughout the country and serves as legal counsel in litigation of importance to Medicare beneficiaries nationwide.


[1] The New York Times reported that approximately one-quarter of all nursing home residents regularly take antipsychotic drugs – nearly 350,000 people.  Duff Wilson, “Side Effects May Include Lawsuits,” The New York Times (Oct. 2, 2010),
[2] Office of Inspector General, Department of Health and Human Services, Medicare Atypical Antipsychotic Drug Claims for Elderly Nursing Home Residents, OEI-07-08-00150(May 2011),
[3] Id. ii.
[4] In April 2005, the FDA issued “black box” warnings against prescribing atypical antipsychotic drugs for patients with dementia, cautioning that the drugs increased dementia patients’ mortality.  FDA, "Public Health Advisory: Deaths with Antipsychotics in Elderly Patients with Behavioral Disturbances" (April 5, 2005),
[5] In June 2008, the FDA extended its warning to all categories of antipsychotic drugs, conventional as well as atypical, and directly and unequivocally advised health care professionals, "Antipsychotics are not indicated for the treatment of dementia-related psychosis."  FDA, "Information for Healthcare Professionals: Conventional Antipsychotics," FDA Alert (June 16, 2008
[6] The American Geriatrics Society 2012 Beers Criteria Update Expert Panel, “American Geriatrics Society Updated Beers Criteria for Potentially Inappropriate Medication Use in Older Adults,” Journal of the American Geriatrics Society (2012).
[7] See Clive Ballard, M.D., Professor of Age Related Diseases, King’s College, London, England, and Director of Research, Alzheimer’s Society (United Kingdom) (speaker, CMS’s Technical Expert Panel, April 10, 2012) (powerpoint attached); testimony of Toby S. Edelman before Senate Special Committee on Aging, “Overprescribed: The Human and Taxpayers’ Costs of Antipsychotics in Nursing Homes” (Hearing, November 30, 2011),
[8] 42 U.S.C. §§1395i-3(b)(4)(A), (C), 1396r(b)(4)(A), (C), Medicare and Medicaid, respectively; 42 C.F.R. §483.30. 
[9] Centers for Medicare & Medicaid Services (CMS), Appropriateness of Minimum Nurse Staffing Ratios in Nursing Homes, Phase I (Summer 2000), Phase II (Winter 2001), found 97% of facilities failed to meet one or more staffing requirements (1.15-1.3 hours licensed staff; 2.4-2.8 hours aide), and 52% failed to meet all staffing requirements, to prevent avoidable harm to residents.  Simulation found 91% lacked sufficient nursing staff to meet five key care processes required by Reform Law (dressing/grooming, exercise, feeding assistance, changing wet clothes and repositioning, toileting). .More than 40% of facilities would need to increase aide staff by 50% or more; more than 10% of facilities would need to increase aide staff by more than 100%.
[10] Medicare rates for skilled nursing facilities fiscal year (FY) 2012 are 3.4% higher than FY 2010 rates, even with an 11.1% reduction that corrected the “unintended excess payments” that occurred in therapy-related reimbursement for FY 2011.  For FY2012, the highest rates per resident per day are $737.08 for urban facilities and $754.11 for rural facilities.  76 Federal Register 26,364, at 48,501, Tables 4 and 5, respectively (Aug. 8, 2011).
[11] Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment Policy page 183 (March 2012).
[12] Id. page 170, Recommendation 7-1: “The Congress should eliminate the market basket update and direct the Secretary to revise the prospective payment system for skilled nursing facilities for 2013. Rebasing payments should begin in 2014, with an initial reduction of 4 percent and subsequent reductions over an appropriate transition until Medicare’s payments are better aligned with providers’ costs.”
[13] Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000, Pub.L. No. 106-554, App. F, §312(a), 114 Stat. 2763, 2763A-498.
[14] Government Accountability Office (GAO), Skilled Nursing Facilities: Available Data Show Average Nursing Staff Time Changed Little after Medicare Payment Increase, GAO-03-176 (Nov. 2002),, found that although Medicare rates were increased 4-12% (on top of prior increases), staffing remained virtually stagnant (1.9 minutes increase in nurse staffing, but less RN, more LPN and aide time).  The GAO concluded, “increasing the Medicare payment rate was not effective in raising nurse staffing” (page 4).
[15] Christopher H. Schmitt, “The New Math of Old Age; Why the nursing home industry’s cries of poverty don’t add up,” U.S. News & World Report (Sep. 30, 2002).
[16] More than 20 years ago, the Subcommittee on Aging of the Senate Committee on Labor and Human Resources identified the high cost of poor care.  Nursing Home Residents Rights: Has the Administration Set a Land Mine for the Landmark OBRA 1987 Nursing Home Reform Law?, 102nd Cong., 1st Sess. (June 13, 1991) described "what happens if we don't give good care."  “Explosively expensive care is required to redress the effects of poor nursing care for residents in nursing homes.  Inadequate numbers of nursing assistants, poorly supervised by licensed nurses, lead to breaks in care or inappropriate care.  Basic care, food, fluids, cleanliness, sleep, mobility and toileting, when not carried out, leads to devastating outcomes for residents and additional expense for the government.”   Subcommittee on Aging of the Senate Committee on Labor and Human Resources, Nursing Home Residents Rights: Has the Administration Set a Land Mine for the Landmark OBRA 1987 Nursing Home Reform Law?, 102nd Cong., 1st Sess., page 175 (June 13, 1991). The Staff report identified a few of the poor care outcomes, their causes and their estimated costs:  "Lack of toileting leads to urinary incontinence," which leads to "skin irritation, decubitus ulcers, urinary tract infections, additional nursing home admission and hospitalization" and is estimated to cost $3.26 billion annually; "Poor hydration, nutrition, mobility and cleanliness lead to pressure ulcers," whose treatment costs are estimated to range between $1.2 and $12 billion; Use of chemical restraints is a major cause of falls, including hip fractures, which are estimated to cost $746.5 million’ and "Poor care leads to excess hospitalizations," costing nearly $1 million.   In 2011, the National Consumer Voice for Quality Long-Term Care updated its earlier work on the high cost of poor care, which it originally issued in 2001.  The High Cost of Poor Care: The Financial Case for Prevention in American Nursing Homes (April 2011),


[17] Medicare Payment Advisory Commission, Report to Congress: Medicare Payment Policy 167 (March 2010),
[18] J.S. Kayser-Jones, Carolyn L. Wiener, and Joseph C. Barbaccia, “Factors Contributing to the Hospitalization of Nursing Home Residents,” The Gerontologist (1989).  See also two recent papers for the Kaiser Family Foundation, Henry Desmarais, “Financial Incentives in the Long-Term Care Context: A First Look at Relevant Information,” (Oct. 2010),, and Michael Perry, Julia Cummings (Lake Research Partners), Gretchen Jacobson Tricia Neuman, Juliette Cubanski (Kaiser Family Foundation), “To Hospitalize or Not to Hospitalize? Medical Care for Long-Term Care facility Residents; A Report Based on Interviews in Four Cities with Physicians, Nurses, Social Workers, and Family Members of Residents of Long-Term Care Facilities (Oct. 2010),
[19] Christine Caffrey, CDC, "Potentially Preventable Emergency Department Visits by Nursing Home Residents: Untied States, 2004," NCHS Data Brief, No. 33 (April 2010),  CDC found that 104,900 residents (85%) had one ED visit in the prior 90 days and 18,400 residents (15%) and two or more ED visits.
[20] Agency for Health Care Research and Quality: “Pressure ulcers are increasing among hospital patients,” Agency News and Notes (Jan. 2009),; AHRQ, “Hospitalizations Related to Pressure Ulcers among Adults 18 Years and Older, 2006,” (Statistical Brief #64, Dec. 2008),



Comments are closed.