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Life Health > Long-Term Care Planning

Liability costs drive up long-term care bills

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U.S. long-term care provider liability costs amounted to about 3 percent of what Medicaid paid for a nursing home bed in 2015, or $2,350 per occupied long-term care bed.

In Florida, the state with the second highest liability cost ratio, 2015 liability claims per bed averaged 8 percent of the daily Medicaid reimbursement rate.

In Kentucky, the state with the highest cost ratio, claims amounted to 10.6 percent of the Medicaid daily rate.

Analysts in the Columbia, Maryland-based office of Aon PLC have reported those findings in their latest U.S. long-term care provider claim cost report.

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The analysts asked for liability loss data from all sorts of long-term care providers, including nursing homes, assisted living facilities, rehabilitation services providers and home health care agencies.

The team had an easier time getting data from bigger providers, but it ended up with information for about 224,000 long-term care beds, or about 17 percent of all U.S. long-term care beds, Christian Coleianne, one of the Aon actuaries who worked on the report, said in an interview.

The actuaries found that liability losses amounted to an average of $218,000 per claim, or $2,350 per long-term care bed, with a claim frequency of 1.08 claims per 100 occupied beds.

The frequency of claims is increasing about 4 percent per year, and the severity of the claims reported is increasing about 2 percent per year.

Aon analysts defined “loss rate” as “the annual amount per occupied bed required to defend, settle or litigate claims in a given year.”

State-to-state variations

Although long-term care providers in some states see claims amounting to 5 percent or more of the average Medicaid nursing home bed rate, providers in other states are holding the loss rate to less than 2 percent of the Medicaid daily reimbursement rate.

In Indiana, for example, where Republican Vice President-elect Mike Pence has been governor, the 2015 loss ratio was just 1.6 percent of the average Medicaid daily reimbursement rate.

Kentucky, for example, has a high loss rate because its constitution bans limits on recoveries from suits seeking compensation from torts, or wrongful acts.

Texas has held its loss rate to just 0.9 percent by putting a $257,000 cap on recoveries, Coleianne said.

In Texas, filing a claim “is much less attractive to plaintiffs’ attorneys,” Coleianne said.

At acute care hospitals, loss rates tend to be lower and more stable, Coleianne said.

Coleianne said he wished Aon had been able to get more data from smaller care providers, and especially from providers in New York.

Chicago-based CNA Financial Corp., an insurer, has reported seeing some of its policyholders experiencing very large claims when patients confined to locked units elope from the units and get hurt, or die.

Coleianne said Aon, a broker and consulting firm, has found that the most severe incidents in its database tend to result from bedsores. Bedsores are seen as a sign of patient neglect. 


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