Long-Term Care Liability Costs Stable across U.S.

The study, conducted in partnership with the American Health Care Association, measures the frequency and severity of claims, tracks the loss cost as a percent of the Medicaid per diem reimbursement rate and calculates the overall loss cost per occupied long-term care bed.  

A press release said the study found the average annual loss cost per bed has decreased from $1,710 in 2001 to $1,270 in 2009. The frequency rate has slightly decreased from 1.05% in 2007 to .94% in 2009 and the severity rate has been stable since 2007 at $135,000. The loss cost as a percent of the Medicaid per diem reimbursement rate has also decreased – from 4.07% in 2001 to 2.09% in 2009.  

However, Aon found Arkansas, Tennessee, and West Virginia are experiencing exceptionally high expenses – known as loss costs – related to insurance claims.  

Arkansas is experiencing the highest loss cost per occupied long-term care bed, the most severe claim trend and the highest loss cost as a percent of the Medicaid per diem reimbursement rate. The estimated loss cost per bed in 2009 was $3,990, down from a peak of $6,800 in 2001.   

While Arkansas remains the highest loss cost of the profiled states, the state’s legislature enacted a $1 million cap on noneconomic damages in 2003, which may have had some impact on the downward loss cost trend, according to the press release. In 2009, the average claim severity in Arkansas was $380,000, down $110,000 from 2005. The loss cost as a percent of the Medicaid per diem reimbursement rate was down from 23.98% in 2001 to 7.63% in 2009.  

Since 2001, the loss cost per occupied long-term care bed in West Virginia has increased from $1,380 to $3,770 in 2009 – the second highest of the profiled states. At $290,000 per claim, West Virginia’s average claim severity was the third highest as was the loss cost as a percent of the Medicaid per diem reimbursement rate at 5.51%.  

Tennessee had the third highest loss cost per occupied long-term care bed at $3,070 and the second highest average claim severity at $357,000. Increasing severity per claim was the driver behind loss cost increases. The loss cost as a percent of the Medicaid per diem reimbursement rate was flat over the past several years, but at 5.83%, it was still the second highest of the profiled states.