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Economic Impact of Long-Term Care

$372 Billion Pumped Back Into Economy

By

Economic Impact of Long-Term Care

Nursing homes have a positive ripple effect on the economy.

Jeffrey Coolidge

A report by the American Health Care Association (AHCA) shows that the nation’s nearly 16,000 nursing homes provide $153.8 billion of direct economic impact to state economic activity (1.1%) and $371.9 billion of total impact (2.7%) to state economic activity. Clearly the economic impact of long-term care is large.

According to the AHCA, there are:

  • 15,691 Nursing Facilities
  • 1,784,016 Nursing Home Employees
  • 1,401,295 Patients Cared for Daily

Who Pays

There are many misconceptions about payment for long-term care services.

  • 14% of patients rely on Medicare
  • 64% rely on Medicaid
  • 22% pay for care with private or other funds

Industries Most Benefited

According to the AHCA the following industries benefit most from long-term care.

  • Health and Social Services gains $170,340.7 (in millions) in economic benefit employing 3,156,900 people.
  • Manufacturing Services gains $162,569.4 (in millions) in economic benefit employing 891,400 people.
  • Real Estate and Rental Companies gain $11,981.2 (in millions) in economic benefit employing 186,900 people.
  • Finance and Insurance Services gain $5,894.3 (in millions) in economic benefit employing 6,700 people.
  • Scientific/Technical Services gain $4,366.9 (in millions) in economic benefit employing 36,900 people.

In all, there is an economic benefit of $371,852.9 million or $371.9 billion dollars and an employment gain of 4,441,800.

Aging Trends Support Future Growth

Aging trends would support the notion that the economic impact of long-term care facilities will grow.

Someone turns 50 every 8 seconds. Each year more than 3.5 million boomers turn 55. By 2012, America's 50 and older population will reach 100 million.

According to the Administration on Aging of The Department of Health and Human Services:

  • The number of Americans who will reach 65 over the next two decades increased by 31% during this past decade.
  • If you reach 65 you can expect to live almost 19 more years.
  • No surprise that women outnumber men by almost 6 million.
  • Seventy two percent of older men are married; 42% of women are married.
  • About 31% (11.2 million) of older persons live alone.
  • Almost a half of a million grandparents have primary responsibility for their grandchildren.
  • The population of 65+ will increase from 35 million in 2000 to 55 million in 2020.
  • The 85+ population is projected to increase from 4.2 million in 2000 to 6.6 million in 2020.
  • Minority populations are projected to increase from 5.7 million in 2000 to 12.9 million in 2020 representing 23.6% of the elderly.

More Impact

Long-term care facilities support $161.4 billion in labor income. The direct economic impact on U.S. represents:

  • 1.1% of economic activity
  • 1.1% of labor income
  • 1.7% of employment

Long-term facilities’ total economic impact on U.S.supports:

  • 2.7% of economic activity
  • 1.8% of labor income
  • 2.5% of employment

Facilities generate $56.1 billion in tax revenue; $19.0 billion in state/local taxes and $37.1 billion in federal taxes.

Economic Impact Definitions

Direct Effect represents the impact (e.g., change in employment or revenues) for the expenditures and/or production values specified as direct final demand changes.

Indirect Effect represents the impact (e.g., change in employment or revenues) caused by the iteration of industries purchasing from industries resulting from direct final demand changes.

Induced Effect represents the impacts on all local industries caused by the expenditures of new household income generated by the direct and indirect effects of direct final demand changes.

Total Impact is the sum of the direct, indirect and induced effects.

Labor Income is the sum of employee compensation and proprietary income that facilities supports in other industries and sectors nationwide

As MDS 3.0 continues to both challenge the industry and make it better, you can be sure that the old perceived notions of long-term care will fade and people will see the value that facilities offer to loved ones. And that in turn will fuel more economic growth for the industry and the economy.

Industry/Sector Source: AHCA

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