Surges in senior population, health-care costs and home-based services for the frail elderly have combined to squeeze Pennsylvania's finances, putting unprecedented pressure on state officials to improve their long-term care strategy.

The Rendell administration has spent his two years in office expanding a Department of Aging program which uses federal-state Medicaid dollars, also known as Medical Assistance, to deliver more in-home services than the state's own lottery-funded system can provide to needy people older than 60.

The hope was that Medicaid expenditures for nursing home patients would stop climbing in excess of $100 million a year as more people received care in their homes.

The cost of aging care Combined state and federal Medical Assistance costs in providing long-term care to the elderly have grown at a rapid pace, causing the Rendell administration to seek a special $120 million allocation from the Legislature to cover needs. The state hoped expansion of in-home services in the Pennsylvania Department of Aging waiver program would reduce publicly funded nursing home use, but that has not occurred, except for a drop in 2003-04. PDA waiver clients and spending YEAR CLIENTS COSTS     (in millions) 2002-03 8,075 $104.1 2003-04 9,494 $161.6 2004-05 12,789 $239.5 2005-06* 14,949 $321.4 Nursing home medical assistance YEAR PATIENT COSTS   DAYS (in billions) 2002-03 19,427,233 $2.42 2003-04 19,140,468 $2.54 2004-05 19,454,694 $2.70 2005-06* 19,739,970 $2.82 *Projected data for current fiscal year Source: Pennsylvania Departments of Public Welfare and Aging

That equation turned out to be faulty math, involving a sum of more than $3 billion in Medicaid spending this year for Pennsylvanians' long-term care.

In the space of three years, the near-doubling of the number of such people receiving home services has boosted that program's cost by more than $200 million. In the same period, state spending for the two-thirds of nursing home residents who are covered by Medicaid has risen $400 million.

State officials find themselves in a double bind: They need an immediate $120 million budget fix to cover an unexpected gap in funds for long-term care, but admit a bigger challenge to reconfigure programs and policies so Pennsylvania's future senior citizens can be helped without swamping other budget needs.

The short-term Medicaid budget problem is expected to be covered by legislation tapping a surplus in overall state revenue this year. The Rendell administration foreshadowed the need for deeper-rooted solutions in the last half of last year by tweaking rules for home services and capping reimbursements to nursing homes.

The governor's 2006-07 budget presentation next month is expected to include bigger changes, although administration officials say it's still undecided what those will be.

"All the states face it. To meet the challenges ahead, we have to ensure we can manage as effectively as we can with existing resources. ... They're not infinite," said Mike Nardone, executive director of the Long Term Living Council, a new administrative office which coordinates planning among the departments of Aging and Public Welfare, the Office of Health Care Reform and the governor's budget office.

Advocates for the elderly and providers of their services worry about what's coming, based on the following developments in recent months:

A Harrisburg-level review is now required before low- to moderate-income applicants needing personal care services and additional home assistance are accepted into the Medicaid program, known as PDA waiver, instead of leaving decisions to county area agencies on aging.

The Department of Aging has delayed plans to take statewide a program called Community Choice, which in 10 counties has marketed the PDA waiver program aggressively and sped up the process of starting home services to applicants.

Terminally ill people enrolled in Medicare-funded hospice programs are no longer able to qualify for additional PDA waiver services. They're to rely only on hospice services, with the federal government as sole payer instead of Pennsylvania's contributing 45 percent, as it does for the waiver.

In the case of couples who have one member in need of home services, rules pertaining to the assets a healthy spouse may hold were formerly more liberal than those affecting eligibility for Medicaid-funded nursing home care. Now they're the same.

When the above changes began in the fall, officials from area agencies on aging fretted that the state's intent was to block more people from receiving home help, reversing Rendell administration policies which boosted PDA waiver clients from 8,075 to 14,949 in three years. The state reviews, however, have resulted in few rejections of applicants.

Instead, according to Allegheny County AAA Administrator Mildred Morrison, caseworkers are not promoting the home waiver services as much with clients because the state does not seem committed to continue expanding them.

"It feels like they're trying to manage a plateau," Ms. Morrison said. "We have some uncertainty in talking to consumers. The last thing a family needs is a false promise that then gets taken back."

A little more than 1,000 people in Allegheny County who are 60 and older receive a monthly average of $2,065 in home services under the program. It is open to those with incomes of up to $1,809 monthly, 300 percent of the poverty level, and they must meet a level of frailty that would qualify them for nursing home assistance.

Rules are less strict for the lottery-funded Options home assistance program, used by about 4,500 people in Allegheny County, but their services average about $300 monthly and all but low-income participants have to share in the costs.

The thrust of the waiver expansion was to help people avoid nursing homes, as most people prefer, while confining government costs to perhaps $25,000 annually instead of twice that in a skilled-care facility.

One of the concerns for state officials with budget limits, Mr. Nardone said, is to focus enrollment in the program on those people who would clearly be in a nursing home if not for waiver services. Otherwise, new enrollees become costly instead of stretching dollars by reducing nursing home payments.

Ms. Morrison and others point out, however, that it's unrealistic to expect to avoid spending increases when the number of older adults with needs keeps climbing.

The commonwealth's population age 85 and older grew by 83 percent from 1990 through 2004. The increase is expected to slow to 13 percent from last year through 2020, according to a Legislative Budget and Finance Committee report, but the ranks of baby boomers in their 60s and 70s with their own needs will be swelling during that time.

The demographic shift has representatives of the nursing home industry contending that the state has to be prepared to help provide for people in all kinds of settings, especially when new nursing home residents are arriving in worse medical condition than ever, because in-home services helped them postpone it. They say a new reimbursement system unfairly capped Medicaid payment increases to nursing homes at 2.8 percent last year, instead of using a former formula which better reflected their true costs, and they fear more difficulties for them in the governor's upcoming budget.

"We have a lot more seniors needing services at all levels," said Ron Barth, president of PANPHA, a state group representing nonprofit long-term care providers. "We believe government has essentially stuck their head in the sand in many ways and said, 'No, no, we can't pay more, we can't spend more,' even when we see this balloon of more people needing these types of services."

Mr. Barth said state government might simply need some new tax levies to finance the future of Pennsylvania's seniors. With such maneuvers as diverting costs to Medicare programs and targeting who gets enrolled in the Medicaid-funded services, Mr. Nardone suggested, that type of solution is precisely what the governor hopes to avoid.