._ _ .._ ...” ..“, I ._. ._l_” ._..,. _^“.-l--l”_. .“.l.. “. .“l_.l~ .^.. l”“. .“-“--.---l..------ -__ _.--I Human Resources Division B-232993 September 5, 1990 The Honorable Howard M. Metzenbaum United States Senate Dear Senator Metzenbaum: This report, prepared at your request, discusses problems Medicaid recipients face when trying to gain admission to nursing homes. It includes information on the types of reforms that have been implemented in various states and factors that influence states’ willingness to improve access for Medicaid recipients. We are sending copies of this report to interested congressional committees, the Director of the Office of Management and Budget, and the Secretary of Health and Human Services, and are making copies available to others on request. Please contact me on (202) 2756461 if you or your staff have any questions concerning the report. Other major contributors are listed in appendix I. Sincerely yours, Janet L. Shikles Director, Health Financing and Policy Issues Elxecutive To control Medicaid spending for nursing home care, states can limit Purpose their payment rates and restrict the supply of nursing home beds. Restricting bed supply can create an excess demand for nursing home care. When this occurs, nursing homes that participate in Medicaid have an incentive to select the most profitable applicants-such as higher paying private payers or Medicaid recipients needing relatively limited care. Medicaid recipients with greater care needs may have trouble gaining access to nursing homes. Responding to a request from Senator Howard Metzenbaum, GAO identi- fied the types of people having problems getting into nursing homes, factors contributing to those problems, the effects those problems have on health care costs, and state actions to improve access. Medicaid is a federally aided, state-administered medical assistance pro- Background gram enacted to provide the poor with access to health care. Intended initially as an acute-care program for the poor, Medicaid has become the principal public program financing long-term care for the elderly and disabled. Nursing home care is one of the largest components of Medicaid spending and is likely to grow as our population ages. Federal and state Medicaid spending for 1988 was $49 billion; over $14 billion of it went to nursing home care. GAO reviewed research and reports on nursing home access issues, inter- viewed long-term care experts, and visited nine states to obtain informa- tion on the types of elderly having access problems and state actions to improve access. Medicaid recipients have more problems getting into nursing homes than Results in Brief higher paying private payers. Equalizing payment rates for the two groups, or reducing the difference between their payment rates, can improve access for Medicaid recipients. Establishing rates that are scaled to the severity of Medicaid recipient care needs can also improve access for those needing more care, that is those with “heavy” care needs. Increasing Medicaid rates, however, obviously would cost more money, and some states believe they cannot afford to pay more due to limited financial resources and competing demands for those resources. In order to avoid higher Medicaid spending, some states have restricted the supply of nursing home beds, and, thereby, created a shortage. Page 2 GAO/H&Do-135 Medicaid Accessto Nursing Homes Executive Summary Faced with these shortages, some states have tried regulatory reforms, with uncertain effectiveness, to allocate existing beds so that Medicaid recipients and private payers have an equal chance of getting an avail- able bed. Principal Findings Wide Variation in Types Although consistent, quantitative state data on the extent and severity and Severity of Access of access problems and their effects on health care spending are lacking, the predominant views of those GAO visited were that certain types of Problems Medicaid recipients in the nine states have more problems getting into nursing homes than comparable private payers. In Minnesota and Ohio, for example, only Medicaid recipients with the heaviest care needs have more problems than comparable private payers, but those with light and heavy care needs have more problems in California, Massachusetts, and South Carolina. There are no generally accepted measures of access, but nursing home access problems are described in some states by the length of time it takes to be placed in a nursing home. A Massachusetts state office found, for example, that a Medicaid recipient waited an average of 101 days for admission to a nursing home compared to an average 66-day wait for private payers. (See pp. 14-19.) Nursing Home Access When Medicaid recipients unnecessarily stay in a hospital because a Problems Can Result in nursing home bed is not available, the care they receive is much more costly than that provided in a nursing home. In California, for example, Increased Health Care the days that patients spent in a hospital waiting for an available Medi- costs care or Medicaid nursing home bed increased 56 percent in 1 year, raising the cost of care for these days from $5.7 million to $10.5 million. (See pp. 19-22.) Payment Reforms to Minnesota required that Medicaid and private-pay rates be equal, thereby improving access for Medicaid recipients by removing the finan- Improve Access cial incentive nursing homes had to select private payers. Reducing dif- I ferences between Medicaid and private-pay rates or changing the payment system from one where the same payment is made for all Medi- caid recipients to one based on the level of care needed also improved Page 3 GAO/HlUWO-135Medicaid Accessto Nursing Homes Executive Summary access for Medicaid recipients in a number of states. For example, Ohio and Florida reported significant improvement in access to nursing homes for Medicaid recipients after implementation of Medicaid rate increases. Likewise, New York reported that implementation of a pay- ment system based on care needs improved access for Medicaid recipi- ents with heavy care needs. (See pp. 23-28.) States May Not Be Willing For financial reasons, states may not be willing to voluntarily improve to Improve Access Medicaid recipients’ access to nursing homes through payment reforms or other measures, such as expanding the supply of nursing home beds. In an environment of tight budgets and competing priorities for expanded services, some states have acted in ways that do not promote improved access, South Carolina, for example, placed a moratorium on new Medicaid nursing home beds in 1981, resulting in a decline in the percentage of Medicaid residents from over 80 percent to about 71 per- cent in 1988. California and Mississippi have imposed limits on the amount of Medicaid spending, effectively restricting their ability to expand the number of Medicaid nursing home beds or implement pay- ment reforms. (See pp. 29-33.) Regulatory Reforms to Regulatory reforms that remove the source of payment as a criterion for Improve Access admission can improve access for Medicaid recipients. Connecticut and Ohio established so called wait list laws essentially requiring nursing homes to admit applicants on a first-come, first-served basis. Four states (Massachusetts, New York, Ohio, and South Carolina) established census requirements- admissions must be on a first-come, first-served basis until a specified census of Medicaid recipients is achieved. Some officials, however, considered such regulatory reforms inappro- priate and ineffective. Some questioned the appropriateness of regula- tory reforms because they remove nursing home flexibility to select private payers over Medicaid recipients. They maintain that this flexi- bility is essential for financial viability; if states want equity of access, they must also provide equity of payment. Others felt census require- ments institutionalized discrimination in the Medicaid program by allowing nursing homes to openly discriminate against Medicaid recipi- ents after the home has reached a predetermined population of Medicaid recipients. Little data was available to evaluate the effectiveness of reg- ulatory reforms. (See pp. 33-36.) Page 4 GAO/HRD-90-136Medicaid Accessto Nursing Homes 1 J3xecutive summary This report contains no recommendations. Recommendations GAO did not obtain written comments on this report, GAO discussed the Agency Comments issues addressed in this report with HCFA officials. Their comments are included where appropriate. Page6 I Contents Letter 1 Executive Summary 2 Chapter 1 8 Introduction Medicaid Many Elderly Rely on Medicaid for Help in Paying for 8 9 Nursing Home Care Medicaid Is an Important Source of Revenues for Nursing 10 Homes Nursing Home Spending Strains State and Federal 11 Medicaid Budgets Objectives, Scope, and Methodology 12 Chapter 2 14 The Nature and Little Data Available on Extent and Severity of Access Problems 14 Effects of Problems in Wide Variation in Types and Severity of Access Problems 16 Getting Into Nursing Elderly in Hospitals Awaiting Nursing Home Placement 19 Increase Health Care Costs HomesVary Chapter 3 23 Payment Reforms Can States Have Considerable Flexibility in Setting Medicaid- Payment Rates 23 Improve Access to Reducing Rate Difference May Improve Access for Those 24 Nursing Homes Needing Light Care Basing Medicaid Payments on Care Needs Can Improve 26 Access for Those Needing Heavy Care Chapter 4 29 Factors Influencing Medicaid Spending for the Aged Varies by State Legislatively Imposed Controls Over Medicaid Spending 29 30 States’ Willingness to State Financial Condition May Influence Willingness to 31 Improve Access to Improve Access Competing Priorities May Influence Willingness to 32 Nursing Homes Improve Access Through Payment or State Actions to Control Bed Supply Have Mixed Effects 32 Regulatory “Reforms on Access Regulatory Reforms to Improve Access Under Medicaid 33 Page 6 GAO/HRD90-135Medicaid Accessto Nursing Homes Contenta Chapter 5 Concluding Observations Appendix Appendix I: Major Contributors to This Report 40 Tables Table 2.1: Bed Supply-Related Measures of Access in 15 Selected States Table 2.2: Predominant Types of Medicaid Recipients 16 Having Access Problems Table 2.3: Comparison of Average Medicaid Payment 22 Rates for SNFs and ANDs Table 3.1: Relationship Between Access Problems and 24 Medicaid Payments Table 4.1: Variation in State Medicaid Spending for Aged 30 Recipients Figure Figure 1.1: Source of Nursing Home Revenues (Calendar 11 Year 1986) Abbreviations AFDC Aid to Families With Dependent Children AND administratively necessary day DRG diagnosis related group GAO General Accounting Office HCFA Health Care Financing Administration ICF intermediate care facility SNF skilled nursing facility SSI Supplemental Security Income Page7 GAO/HRD-90-116Medicaid Access to Nursing Homes Chapter 1 Introduction People whose health care is paid through Medicaid-Medicaid recipi- ents-generally have more trouble getting into a nursing home than those who pay for their own care-private payers. State long-term care ombudsmen (state advocates for the elderly who resolve complaints about nursing homes) have consistently identified Medicaid recipients’ access to nursing homes as a significant problem. Moreover, we reported in 1988 that Medicaid recipients are among those most likely to wait for nursing home admission.’ Responding to a request from Senator Howard Metzenbaum, we identi- fied the types of Medicaid recipients and other elderly, including those thought to be suffering from Alzheimer’s disease,2 who have problems getting into nursing homes, factors contributing to those problems, the effects of those problems on health care costs, and state actions to improve access. Medicaid is a federally aided, state-administered medical assistance pro- gram intended, among other things, to provide the poor with access to mainstream health care. It became effective on January 1,1966, under authority of title XIX of the Social Security Act (42 USC. 1396). Each state designs and manages its Medicaid program within broad fed- eral guidelines administered by the Health Care Financing Administra- tion (HCFA) within the Department of Health and Human Services. Title XIX requires states to provide certain basic services to the majority of Medicaid recipients; these services include inpatient and outpatient hos- pital, home health, physician, and skilled nursing facility (SNF) services.3 States may also provide other “optional” services, including home and ‘Long-Term Care for the Elderly: Issues of Need, Access, and Cost (GAO/HRD-89-4, Nov. 28, 1988). Other groups likely to wait for nursing home admission include those with mental/behavioral problems and those whose condition requires extra nursing care. “Alzheimer’s is a cause of dementia. It is a degenerative disease of the central nervous system charac- terized by a gradual decline in intellectual functioning (memory, thought, and language) and behav- ioral problems, such as disruptiveness and wandering. Its diagnosis is exceedingly difficult and is usually made after other causes of dementia, such as alcohol intoxication, brain tumor, stroke, and depression have been excluded. The definitive diagnosis of Alzhelmer’s disease is made based on the examination of brain tissue taken at autopsy. “SNFs care for people whose need for daily professional nursing services is demonstrated and documented. Page g GAO/HRDBO-135Medicaid Accessto Nursing Homes chapter 1 Introduction community based long-term care services and services in intermediate care facilities (Ices).* The federal and state government shares of Medicaid spending are determined by a statutory formula that provides a minimum federal share of 60 percent and a higher share to states with low per capita incomes. During 1989, the maximum federal share was about 79 percent. Medicaid eligibility criteria are among the most complex of any assis- tance programs. At a minimum, states must provide Medicaid coverage to all people receiving cash assistance under the federal Aid to Families With Dependent Children (AFDC) program and to almost all people cov- ered by the Supplemental Security Income (SSI) program.b However, people in or attempting to gain admission to nursing homes can obtain coverage in other ways. Thirty-one states and the District of Columbia extend coverage to those whose financial resources, after deducting for medical expenses, meet Medicaid income and asset limits. The other 19 states extend coverage to those whose income is below 300 percent of the SSI payment level and assets are below state established limits. A substantial portion of a Medicaid recipient’s income is applied to the cost of care and Medicaid pays the remaining amount. The high cost of nursing home care-approximately $26,000 or more Many Elderly Rely on peryear -and the limited coverage available under Medicare and pri- Medicaid for Help in vate insurance force many elderly to rely on Medicaid’s assistance in Paying for Nursing paying for nursing home care.” Many elderly apply for Medicaid cov- erage when trying to gain admission to a nursing home. Nursing homes Home Care are generally reluctant to admit anyone without a guaranteed source of *ICFs care for people who do not require the degree of care and treatment a hospital or SNF provides but, because of a physical or mental condition, require supervision, protection, or assistance. Begin- ning October 1, 1990, the distinction between SNFs and ICFs will be ellllnated and all nursing facili- ties participating in Medicaid will have to meet a single set of quality standards for services, residents’ rights, and administration. “States can choose to limit Medicaid coverage of SSI recipients by requiring them to meet more restrictive eligibility standards that were in effect on January 1, 1972, before implementation of SSI. States choosing this option, however, must allow applicants to deduct SSI, optional state supplements, and medical expenses from income to establish eligibility. Fourteen states use the more restrictive standards option: Connecticut, Hawaii, Illinois, Indiana, Minnesota, Missouri, Nebraska, New Hamp shire, North Carolina, North Dakota, Ohio, Oklahoma, Utah, and Virginia. These states are commonly referred to as 209(b) states. “Medicare is a federal health Insurance program that covers most Americans 66 years of age or older and certain people under 66 years of age who are disabled or have chronic kidney disease. Only limited SNF services and no ICF services are covered by Medicare. Page 9 GAO/HRD-99-136Medicaid Accessto Nursing Homes Chapter 1 Introduction payment and, consequently, access to nursing homes can be limited while a state determines an applicant’s eligibility. Historically, about 40 percent of elderly nursing home residents enter as Medicaid recipients, about 60 percent as private payers, and the remaining 10 percent under private insurance, Medicare, or other public programs. Some of those who enter a nursing home as private payers, however, subsequently become Medicaid-eligible. One recent study found that about 11 percent of those entering as private payers spent down to Medicaid-eligibility levels during their stay.7 Overall, about two- thirds of nursing home residents are receiving Medicaid assistance at any point. Private payments from individuals and their families is the primary Medicaid Is an source of revenue for nursing homes, followed by Medicaid payments, Important Source of the primary public funding source. As shown in figure 1.1, these two Revenuesfor Nursing sources accounted for more than 92 percent of total national nursing home revenues in calendar year 1986. Medicare financed less than 2 per- Homes cent, with other sources, such as public agencies and private long-term care insurers, financing the remaining 6 percent. 7Korbin Liu, Pamela Doty, and Kenneth Manton, “Medicaid Spenddown in Nursing Homes,” The Ger- ontologist, Vol. 30, No. 1, 1990, pp. 7-15. Page 10 GAO/HRD90-135Medicaid Accessto Nursing Homes Chapter 1 Introduction Figure 1.1: Source of Nursing Home Revenues (Calendar Year 1986) 6% Other Medicaid - Private Payments Source: Congressional Research Service. Medicaid spending for nursing home care is likely to grow as the popula- Nursing Home tion ages8 further straining federal and state Medicaid budgets. Spending StrainS state Intended initially as an acute-care program for the poor, Medicaid has and Federal Medicaid become the principal public program financing long-term nursing home care for the elderly and disabled. Although not foreseen when Medicaid Budgets was enacted in 1965, spending for nursing home care is one of the largest components of Medicaid spending. Approximately $14.3 billion of the total $48.7 billion in federal and state Medicaid spending went for nursing home care in fiscal year 1988. Two ways that states can control increased Medicaid nursing home spending are restricting the supply of nursing home beds and limiting Medicaid payment rates for nursing home care. States can restrict the bed supply by limiting construction of nursing homes or by limiting the number of beds the states will certify for Medicaid payments. Restricting the supply of beds, in turn, can create a situation in which demand for nursing home care exceeds the supply of available beds. ‘Between 1987 and 2020, the Bureau of the Census estimates that the 66 and over age group will grow from 1 in 8 to 1 in 6 of the American population. People 86 and older, who are at the greatest risk of needing nursing home care, represent the fastest growing segment of the elderly population. Page 11 GAO/HRD-99-135Medicaid Accessto Nursing Homes chapter 1 Introduction When this occurs, nursing homes choosing to participate in the Medicaid program have more of an incentive to select those applicants who are most profitable-such as higher paying private payers or those Medi- caid recipients who need relatively limited cares9Other Medicaid recipi- ents with greater care needs may have trouble gaining access to a nursing home. Our objectives were to identify (1) the types of Medicaid recipients and Objectives, Scope,and other elderly who have problems getting into nursing homes, (2) the fac- Methodology tors contributing to those problems, (3) the effects of those problems on health care costs, and (4) state actions to improve access to nursing homes for Medicaid recipients and other elderly. To meet these objectives, we . reviewed, synthesized, and analyzed information from research and reports on nursing home access issues; l discussed factors that affect Medicaid recipients’ access to nursing homes with long-term care experts, including officials from nursing home industry associations, advocacy groups for the elderly, health policy organizations, and federal agencies; and l conducted structured interviews in nine states to gather and analyze information on (1) the types of elderly having problems getting into nursing homes, (2) the severity of access problems, (3) factors contrib- uting to the access problems and affecting the ability of the state to improve access, and (4) state actions to improve access.1o In each state we interviewed Medicaid and health department officials, long-term care ombudsmen, representatives from nursing home industry associations, advocates for the elderly, and a judgmental sample of hos- pital discharge planners and nursing home officials. We did not attempt to quantify the severity of Medicaid recipients’ problems in gaining access to nursing homes because of the lack of (1) generally accepted measures of access and (2) consistent quantitative “Seventy-five percent of all nursing homes voluntarily participate in the Medicaid program. “‘The nine states (California, Connecticut, Florida, Massachusetts, Minnesota, Mississippi, New York, Ohio, and South Carolina) were selected to provide diversity in (1) geographic location, (2) per capita income (which affects states’ ability to provide Medicaid services), (3) the number of nursing home beds per 1,000 elderly over age 66, and (4) the Medicaid payments to nursing homes. Page 12 GAO/HRDS@136Medicaid Accessto Nursing Homes . Chapter 1 Introduction data on access problems. Where available, however, we did obtain and analyze studies attempting to quantify the severity of access problems. We performed our work between September 1988 and May 1989 in accordance with generally accepted government auditing standards. Page 13 GAO/HRDW-135 Medicaid Accessto Nursing Homes Chapter 2 The Nature and Effects of Problemsin Get-tin; Into Nursing HomesVary There are no generally accepted measures of access. Frequently cited data used to describe nursing home access include such measures as the number of beds per 1,000 elderly over age 66, occupancy rates, waiting times, and the percentage of nursing homes participating in Medicaid. But evaluating access based on these measures can be misleading. Fur- ther, consistent quantifiable data on the extent and severity of access problems are limited. During our visits to nine states, we found a wide variation in the types of Medicaid recipients having access problems. Other than Medicaid recipients, those having problems gaining access to nursing homes were individuals awaiting approval of Medicaid eligibility and those with Alzheimer’s disease or behavioral problems. In some states, time spent waiting for a nursing home bed to become available is used as a measure of the severity of access problems. When the elderly spend that time in a hospital, health care costs increase. In some cases, these increased costs, however, are absorbed by the hospital or the Medicare program, giving the state little incentive to see that Medicaid recipients are placed in nursing homes because the state Medi- caid program does not assume liability until residents enter the nursing home. Although it is generally conceded that Medicaid recipients have more Little Data Available trouble getting into nursing homes than private payers, there are little on Extent and data available, either at the national or state level, on the extent and severity of access problems. Further, while there is a common under- Severity of Access standing of what is meant by the concept of “access to care” (that is, do Problems those who need health care gain entry into the system?), there are no generally accepted measures of access. Without any generally accepted measures, nursing home access problems are frequently described by such measures as how many nursing home beds there are per 1,000 elderly over age 65, how long is the waiting period to get into a nursing home, whether the nursing home of choice or in the desired location is available, how many nursing homes accept Medicaid recipients, how many nursing home beds are full (occupancy rates), how many elderly are going without needed services that are provided in nursing homes, and Page 14 GAO/HRDWl36 Medicaid Accessto Nursing Homes chapter 2 The Nature and Effects of Problems in Getthg Into Nursing HomesVary . how many patients remain in the hospital because they cannot get into a nursing home. Consistent quantitative data on the extent and severity of access problems that would permit comparisons among states are limited. Fre- quently cited data relate nursing home access to bed supply, comparing beds per 1,000 elderly and occupancy rates. Evaluating access based solely on such measures can be misleading. Referring to data in table 2.1, for example, Medicaid recipients would appear to have significant access problems in Florida based on the low number of beds per 1,000 elderly. The relatively low occupancy rates of Florida nursing homes suggests, however, that beds are available. A lower ratio of beds per 1,000 elderly may be adequate if the state pro- vides a wide range of alternative care services to allow them to remain in the community. Most of the officials we spoke with in Florida thought that the supply of nursing home beds was adequate. Table 2.1: Bed Supply-Related Measures of Access in Selected States Beds per 1,000 Occupancy State elderly0 rates California 41.7 93 Connecticut 64.3 94-97 Florida 26.7 90 Massachusetts 59.4 98 Minnesota 89.6 94 Mississippi 45.8 98 New York 43.4 98 Ohio 63.7 88-90 South Carolina 36.5 98 aHCFA, 1986 data. “As reported during visit A bed supply that appears adequate based on a high ratio of beds per 1,000 elderly may not be adequate if available beds are occupied by patients who do not really need to be in a nursing home or if the beds are not Medicaid-certified or not made available to Medicaid recipients. An ample bed supply may go unfilled if Medicaid payment rates are too low to make it profitable to admit most Medicaid recipients. Finally, measuring access based on the number of facilities participating in Medi- caid can be misleading in assessing access for Medicaid recipients because participating facilities may seek Medicaid certification for only Page 15 GAO/HRD-O-135Medicaid Accessto Nursing Homes chapter 2 The Nature and Effects of Problemain Getting Into Nursing HomeeVary part of the facility’s beds or may limit the number of Medicaid recipients admitted or both. Because of the limitations in the current measures of access, we visited nine states to obtain a better understanding of the nature and severity of access problems. Interviews with Medicaid officials, long-term care ombudsmen, hospital Wide Variation in discharge planners, nursing home operators, and industry association Types and Severity of representatives in each of the nine states visited revealed wide variation Access Problems in the types and severity of access problems for Medicaid recipients. In addition to Medicaid recipients, they frequently reported access problems for those with (1) no guaranteed source of payment (including those with Medicaid applications pending) and (2) Alzheimer’s or other behavioral problems. As shown in table 2.2, state official’s comments indicated variation among states in the predominant types of Medicaid recipients with access problems. Table 2.2: Predominant Type8 of Medicaid Recipients Having Accero Care needs’ Problems State Light Heavy California Yes Yes Connecticut No Yes Florida No Yes Massachusetts Yes Yes Minnesota No Nob Mississimi No Yes New York Yes Nob Ohio No Nob South Carolina Yes Yes aNursing home residents, including Medicaid beneficiaries, are usually categorized according to their care needs, ranging from light to heavy care. Contrasted with light care patients, heavy care patients are those needing more assistance in activities of daily living (eating, bathing, dressing, using the toilet, getting in or out of a chair or bed, and continence-i.e., bowel or bladder control) and also includes those who may need special nursing services. bAlthough heavy care patients in general did not have trouble getting into nursing homes, those with the heaviest care needs were still experiencing some access problems. In two states (Ohio and Minnesota) Medicaid recipients were said to experience few problems getting into nursing homes. Only those with the heaviest care needs, such as ventilator dependent residents, were said to be having trouble finding nursing home beds. The Ohio long-term care ombudsman said that in 1988 he received only 11 complaints Page 16 GAO/HRD-90-135Medicaid Accessto Nursing Homes cbaptm 2 The Nature and EXfec@of Problems in Getting Into Nursing HomesVary relating specifically to nursing home admission practices. He said that in the late 1970s he was receiving about 260 complaints a year. Hospital discharge planners in Minnesota cited their ability to place a Medicaid recipient in a nursing home within 72 hours or even directly from the emergency room, if necessary, as evidence that Medicaid recipients gen- erally do not have access problems. In contrast to Ohio and Minnesota, the severity of access problems was expressed in terms of waiting times by officials from five states: . The Massachusetts Executive Office of Elder Affairs found that Medi- caid recipients waited an average of 101 days for nursing home place- ment compared to 56 days for private payers. A study conducted by the University of Massachusetts also found longer average waiting times for Medicaid recipients. l Hospital discharge planners in Connecticut said that the severity of access problems varies across the state. In some areas, Medicaid recipi- ents can be placed as quickly as private payers, while in other areas placement takes an average of 4 weeks for Medicaid recipients but only 5 days for private payers. l Hospital discharge planners in New York told us that placement takes significantly longer for Medicaid recipients. One said it takes 88 days to place Medicaid recipients, 45 days to place private payers. Another said the difference at his hospital was 171 days for Medicaid recipients com- pared to 71 for private payers. Likewise, the New York Public Health Council reported that it took Medicaid recipients an average of about 41 days to find an available bed in 1984 compared to about 29 days for private payers. l A 1987 report by the Florida Statewide Health Council reported longer placement times for Medicaid recipients, particularly those with heavy care needs. Hospital discharge planners and the long-term care ombudsman also said that Medicaid patients must wait longer for place- ment but did not estimate how much longer. l Discharge planners in California reported average placement times for private payers of 1or 2 days and about 7 days for Medicaid recipients. Placement times for heavy care Medicaid recipients were said to average 4 to 6 weeks, with some remaining in the hospital 6 to 8 months awaiting a nursing home bed. A study by California’s auditor general concluded that from 8 to 12 percent of the Medicaid population have care needs so extensive that they have trouble getting into nursing homes. Several officials described access problems in terms of the recipients’ ability to get into the nursing home of choice. For example, in New York, Page 17 GAO/HRD-90-136Medicaid Accessto Nursing Homes chapter 2 The Nature and EfYecteof Problems In Getting Into Nursing HomesVary a representative from Friends and Relatives of the Institutionalized Aged said that Medicaid patients can eventually find a nursing home bed but generally cannot get into the nursing home of their choice. Fur- ther, many nursing homes were, he said, segregating Medicaid and private-pay residents within the nursing home. Advocates for the eld- erly in Connecticut similarly said that Medicaid recipients generally have fewer choices of nursing homes but, other than heavy care patients, do not have trouble getting into nursing homes. Elderly with behavioral problems thought to be caused by Alzheimer’s disease or other conditions may have trouble getting into nursing homes whether they are Medicaid recipients or not. Officials in all nine states indicated that access problems probably exist for these people, but none could estimate the extent of the problems. Residents with Alzheimer’s disease often disrupt other nursing home residents. In addition, some Alzheimer’s residents have a tendency to wander, making them difficult to manage in nursing homes not specifically designed to allow wan- dering in a controlled environment. Nursing homes specifically consider behavior during the admissions process, one California advocate explained, and determine how well the individual would fit in with the overall environment of the home. Discharge planners from the Ohio State University Hospital told us that they have trouble placing Alzheimer’s patients who are combative or wander. In Mississippi, Alzheimer’s residents are considered heavy care residents in a nursing home market oriented toward light care. Only one or two nursing homes in the state currently have special Alzheimer’s units. Other elderly identified as having problems getting into nursing homes are those who have too much income and assets to immediately qualify for Medicaid but too little to pay for care as a private payer for more than a few months. In states, such as South Carolina and Florida, that do not allow the elderly to spend down “excess” income to Medicaid eli- gibility levels, nursing homes may be reluctant to admit such patients Page 18 GAO/HRD-90-136Medicaid Accessto Nursing Homes Chapter 2 The Nature and Effixta of problems in Getting Into Nursing HomesVary because once their assets are gone they will have no guaranteed source of payment.’ When Medicaid recipients in need of nursing home care remain unneces- Elderly in Hospitals sarily in the hospital because a nursing home bed is not available, health Awaiting Nursing care costs increase. Although data on the number of days and costs Home Placement associated with such unnecessary hospital stays are limited, significant problems appeared to exist in several of the states visited. Many of the Increase Health Care costs of such stays are, however, shifted from Medicaid to Medicare or costs the hospital.” ‘While most states allow the elderly whose income and/or assets exceed Medicaid eligibility limits to qualify for Medicaid after spending those “excess” resources on health care, there are 19 states, including 3 we visited (Florida, South Carolina, and Mississippi), that do not allow the elderly to establish eligibility for nursing home care through spend down. In such states, the elderly with income slightly above the Medicaid-eligibility level may have trouble getting into nursing homes unless a family member is willing to guarantee payment. South Carolina, for example, uses the 300-percent rule to establish Medicaid eligibility for nursing home care. This means that the elderly with income above 309 percent of the SSI payment level cannot become Medicaideligible regardless of how much of their income they spend on their own care. For example, a person with a $1,066 per month pension during 1989 would have too much income to qualify for Medicaid but too little to pay higher monthly private-pay charges for nursing home care in South Carolina. Such people “fall through the cracks” unless they have a family member or other person willing to guarantee payment of the difference between charges and what the person can afford to pay. Included in this group, state officials said, are a number of retired teachers, state employees, and civil service retirees. ‘Other problems can also result. Medicaid recipients could be forced to remain in the community without getting all the care they need; the availability of home- and community-based long-term care was generally viewed as inadequate in each of the nine states visited. The recipients also are likely to become an excessive burden on family caregivers. Page 19 GAO/~90-136 Medicaid Access to Nursing Homes Chapter 2 The Nature and Effecta of ProblemaLn Getting Into Nursing HomeeVary Many Patients Stay in the Some patients cannot be discharged from acute-care hospitals as soon as Hospital Waiting for a physician indicates their readiness because a nursing home bed is not available or their Medicaid eligibility has not been established.3 The Nursing Home Placement days that patients spend in the hospital waiting for a Medicare or Medi- caid nursing home bed are commonly referred to as “administratively necessary days” (ANDS). National data on the number of patients waiting in hospitals for nursing home placement and the time spent waiting are very limited. We previ- ously reported, however, that ANDS are a serious problem in some states and can significantly increase health care costs.” Similarly, the Congres- sional Research Service reported that Massachusetts hospitals provided about 260,000 ANDS in 1985. ANDS continue to be a problem in some states. For example: . ANDSincreased 55 percent in California from fiscal year 1985-86 (80,340 days at a cost of $5.7 million) to fiscal year 1986-87 (124,903 days at a cost of $10.5 million), the state’s auditor general reported. Good data on the specific nature of ANDS were not available, but the auditor general reported most appear to be because placement cannot be arranged. . 4 12 Medicaid recipients were in Massachusetts hospitals awaiting place- ment in a SNF on the day surveyed by the Massachusetts Hospital Asso- ciation (April 27, 1989). In total, they had been waiting over 100,000 days on AND status, an average of 8 months per Medicaid recipient. . Mississippi patients are in a medically unnecessary status for an average of 91 days awaiting nursing home placement, a survey by the Mississippi Society for Hospital Social Work Directors found. :&cause they have no guaranteed source of payment, elderly who meet Medicaid income and asset limits and have applied for Medicaid find it difficult to get into a nursing home until their application is processed and eligibility established. Although almost all applications are eventually approved and Medicaid payments made retroactive to the date of the application, nursing homes can experience cash flow problems if they admit applicants who have not yet been approved for Medicaid. Therefore, elderly people awaking Medicaid eligibility may remain unnecessarily in the hospital because nursing homes are reluctant to admit them. For example, Connecticut officials said that the elderly with pending Medicaid applications frequently remain in hospitals for as long as 90 days awaiting placement in nursing homes; the cost of such care is paid by Medicare and the hospital. Hospital social workers in South Carolina made similar statements. A nursing home administrator in South Carolina said that, in her opinion, patients whose Medicaid applications are pending are the most difficult to place. A consumer advocate in New York said that nursing homes that admit patients with pending Medicaid applications arc “courting financial disaster” because of the cash flow problem. He said that the application process in New York, while typically taking 45 to 60 days, can take as long a9 3 years. “Ohio’s Medicaid Program: Problems Identified Can Have National Importance (GAO/HRD-78-98A, Oct. 23, 1978). Page 20 GAO/HRD-90-135Medicaid Accessto Nursing Homes Chapter 2 The Nature and Effects of Problems in Getting Into Nursing HomesVary Effect of ANDs on Health The net effect of ANDS on health care costs is difficult to estimate Care Costs because the costs may be paid by Medicare or Medicaid, absorbed by the hospital, or a combination of both. In addition, the alternative cost of caring for these patients in nursing homes, had they not been in hospi- tals, must be considered as well. It is clear, however, that they increase overall health care costs. Medicare Payments for ANDs Medicare covers most hospital stays for the elderly, including the stays of those who also qualify for Medicaid. Medicare pays hospitals for each beneficiary at a preestablished (diagnosis related group (DRG)) rate, regardless of the costs actually incurred for the beneficiary. The pay- ment system, however, does have a mechanism to recognize longer hos- pital stays. When a beneficiary has an extraordinarily long length of stay compared to other beneficiaries in the DRG, a hospital can qualify for an additional “outlier” payment. For each DRG, Medicare regulations establish the extent to which the hospital stay must exceed the average to qualify for payment as an outlier. The additional payment for a day outlier is a per diem amount based on 60 percent of the average Medicare per diem rate under the DRG. The payment is intended to approximate the marginal cost of care beyond the outlier cut-off criteria. The hospital must absorb the costs of any ANDS until the criteria for outlier payments are met. The number of days of outlier care can provide an approximate estimate of the number and cost of ANDS. It provides, however, only an estimate because (1) some patients qualifying for outlier payments still require hospital care, and (2) patients with ANDS will not have outlier payments associated with those days if they are discharged before reaching a stay long enough to qualify as an outlier. Medicaid Payments for ANDs While still in a hospital, some elderly lose their Medicare coverage because they (1) exhaust their Medicare benefit or (2) no longer require acute care or Medicare skilled care. When this happens, and the person is Medicaid eligible and needs a nursing home bed that is not available, the cost of ANDS is covered by Medicaid in some states. As shown by table 2.3, five states we visited pay for ANDS at rates ranging from $0 to $444 higher than the rates paid for skilled nursing home care. The other four states do not pay for ANDS under their Medicaid program, thus forcing hospitals to absorb the costs of ANDS not covered by Medicare. Page 21 GAO/HRD-90-136Medicaid Accessto Nursing Homes I Chapter 2 The Nature and Effects of Problems in Getting Into Nursing HomesVary Table 2.3: Comparison of Average Medicaid Payment Rates for SNFs and Does Medicaid cover Average Average and ANDs State ANDs? SNF rate rate California Yes $60 $184a Connecticut Yes 97 -b Florida No c c Massachusetts Yes 100 235-270 Minnesota No c c MississiDDi Yesd 50 402-494” New York Yes 89’ 89’ - _ Ohio ._ No c c .~. South Carolina No c c aMaximum; average not available. bNot available. CNot applicable “Limited to 30 days per hospital stay. ‘Rate depends on hospital size ‘In New York City, $114 Those states that do not pay for ANDS do not always have incentive to reduce ANDS by seeing that elderly patients who have exhausted regular Medicare benefits are placed in nursing homes. By allowing patients to remain in hospitals in an AND status, many of the costs may be absorbed by Medicare or the hospital or both. For example, South Carolina, which does not pay for ANDS under its Medicaid program, allows patients to become an uncompensated care burden on the hospital unless they qualify for day outlier payments under Medicare. Once they are placed in a nursing home, however, the South Carolina Medicaid program begins to incur a liability. In South Carolina, ANDS thus reduce state spending for Medicaid but increase overall health care spending. Page 22 GAO/HRD-99-136Medicaid Accessto Nursing Homes Payment Reforms Can Improve Accessto Nursing Homes States can improve access to nursing homes for Medicaid recipients by establishing payment reforms. States have considerable flexibility in setting Medicaid-payment rates and systems. They have used that flexi- bility to establish systems where rates are set in advance. States that have a wide difference between Medicaid and private-payment rates have more access problems than states with a smaller difference between rates. Reducing the differences between rates by increasing the Medicaid rate decreases the financial incentive nursing homes have to select private payers over Medicaid recipients, resulting in fewer access problems. However, unless payments are also adjusted for patient care needs, nursing homes have an incentive to select those Medicaid patients needing lighter care. Thus, reducing the difference between Medicaid and private payers may not help Medicaid patients needing heavy care. Conversely, basing Medicaid payments on care needs can improve access for heavy care Medicaid recipients, sometimes at the expense of light care recipients. Within broad federal guidelines, states have considerable flexibility to States Have design their Medicaid nursing home payment systems and set payment Considerable rates. Under provisions enacted in the Omnibus Reconciliation Act of Flexibility in Setting 1980, states must provide for payment for nursing home care through the use of rates that the state finds are reasonable and adequate to meet Medicaid-Payment costs. These are costs that must be incurred by efficiently and economi- Rates tally operated facilities to provide services in conformity with state and federal laws, regulations, and quality and safety standards. States must make satisfactory assurances to the Secretary of HHS that rates meet these criteria.’ Most states have used the flexibility provided by the 1980 act to estab- lish or modify prospective payment systems. Under these systems, per diem rates are set in advance and the nursing home may be permitted to keep all or part of the difference between the rate and actual costs. If ‘We concluded in Medicaid Methods for Setting Nursing Home Rates Should Be Improved (GAO/ HHD-86-26, May 9,1986), that, due to a lack of HCFA guidance and oversight, HCFA and the states do not know whether payment rates are reasonable and adequate. HCFA disagreed with our recom- mendation to establish guidelines for states to use in making assurances that rates are reasonable and adequate. Since 1980, lawsuits have been brought in numerous states challenging Medicaid nursing home rates on the basis that rates are not reasonable and adequate as required under Medicaid law. The Supreme Court recently held, in Wilder v. Virginia Hospital Association that such suits are proper, and expectations are that they will continue to proliferate. Page 23 GAO/HRL%99-135 Medicaid Accessto Nursing Homes Chapter 3 Payment Reforms Can Improve Accessto Nursing Homes the home’s costs are more than the prospective payment rate, it suffers a loss2 States that have a small difference between Medicaid and private-pay Reducing Rate rates generally reported fewer access problems for light care Medicaid Difference May recipients. Reducing the difference can improve access by decreasing the Improve Access for financial incentive to select private payers over Medicaid recipients. State actions to reduce the rate difference could include increasing Medi- Those Needing Light caid rates, setting equal rates for Medicaid recipients and private payers Care or setting a limit on private-pay rates. Relationship Between As shown in table 3.1, the types of Medicaid recipients having the most Access Problems and trouble getting into nursing homes depends on the difference between Medicaid and private-payment rates and the extent to which Medicaid Payment Rates and rates are adjusted based on care needs. Methods Table 3.1: Relationship Between Access Problems and Medicaid Payments Medicaid payments Types of r;okEem”sfshaving Much lower P than private I3~3~~~on care State --___-- Light care Heavy care pay? California Yes Yes Yes No Connecticut __--___--. No Yes No No Florida No Yes No No Massachusetts Yes Yes Yes No Minnesota -__- .~_ No No No Yes Mississippi .____-.. No Yes No No New York YeS No Yes Yes Ohio No No No Yes South Carolina Yes Yes Yes No In each of the three states where Medicaid recipients with light and heavy care needs had problems getting into nursing homes, the state did “Although specific methods used to establish prospective payment rates vary, states generally (I) establish allowable nursing home costs for some specified base period using actual cost data sub- mitted by nursing homes on annual cost reports, (2) assign the state’s nursing homes to various sub- groups (such as urban vs. rural, SNF vs. ICF) to reflect differences in their operating costs, (3) establish a maximum or “cap” on costs to be reimbursed so that inefficient or uneconomical nursing homes will not be “rewarded” for their high costs, and (4) apply indices to the base-year costs to account for economic inflation since that year. Page 24 GAO/HRD-90-136Medicaid Accessto Nursing Homes Chapter 3 Payment Reforms Can Improve Access to Nurdug Homes not have a payment system based on care needs, and the Medicaid pay- ment was much lower than the private-pay rate. States where Medicaid recipients with light care needs did not have problems getting into nursing homes, the Medicaid payment was not much lower than the pri vatc-pay rate. Equal Rates Removes Requiring that Medicaid and private-pay rates be the same removes a Financial Incentive to nursing home’s financial incentive to select private payers over Medi- caid recipients. Advocates for the elderly generally support equal rates Select Private Payers as a way to eliminate access problems for Medicaid recipients, asserting that the financial incentive to select private payers must be eliminated before access problems can be eliminated. Industry representatives, on the other hand, usually do not support equal rates because nursing home revenues would then be controlled by the states because they would set the payment rates nursing homes could charge for private payers and Medicaid residents. Minnesota equalized Medicaid and private-pay rates in 1978 at the impetus of private payers, who argued that the difference between the Medicaid and private payments was a form of taxation on them or their families because the higher private payments were subsidizing the Medicaid-payment rates. In addition, advocates favored equal rates because they realized it would improve access for Medicaid recipients. Most of the nursing home industry did not oppose the law primarily because the difference between the Medicaid and private payments was small, and the Medicaid payment was based on costs incurred. With Medicaid and private-payment rates being equal, Medicaid recipients in Minnesota generally do not have problems getting into nursing homes. Access problems for Medicaid recipients in Minnesota, however, were not significant before the adoption of equal rates. Increasing Medicaid Rates Two of the states included in our review (Ohio and Florida) increased Can Improve Access their Medicaid-payment rates in an attempt to improve access to nursing homes for Medicaid recipients. Both states reported significant improve- ment following the increases. Ohio increased its Medicaid payment, providing a financial incentive to nursing homes to admit more Medicaid recipients. The difference between the Medicaid and private-pay rates was decreased from $10 to $16 per day in the mid-1970s to $6 per day in 1989. The state’s long- term care ombudsman said that nursing homes often chose to keep Page 25 GAO/HRD-90-136Medicaid Accessto Nursing Homes Chapter 3 Payment Reforms Can Improve Accessto Nurshg Homes nursing home beds empty rather than admit Medicaid recipients before the rate increase. State officials report that since the state increased the Medicaid rate, the statewide Medicaid census in nursing homes has increased from 60 to 66 percent without displacing private payers; beds once kept empty are now occupied by Medicaid recipients. Florida, like Ohio, significantly increased Medicaid nursing home rates, decreasing access problems. Before 1983, Florida had one of the lowest Medicaid-payment rates in the country. As a result, Medicaid recipients were having significant problems in getting into nursing homes. The state increased Medicaid nursing home rates after the settlement of a nursing home association lawsuit claiming that Medicaid-payment rates were too low to allow nursing homes to recover the costs of caring for Medicaid residents. At the time of our review, Florida’s Medicaid rate was in the top 60 percent. Most state and industry officials and advo- cates agree that the higher rates have improved access to the point where problems are limited primarily to heavy care Medicaid patients. Connecticut Sets Limit on Rather than increasing Medicaid rates, Connecticut, in 1980, placed a Rate Difference cap on private-pay rates that limits the difference between Medicaid and private-pay rates. Private-pay rates can be no more than 12 percent higher than the Medicaid rate for a triple occupancy room; 26 percent higher for a double occupancy room; and 60 percent higher for a private room. State and industry officials, advocates, and hospital discharge planners generally agreed that the Medicaid rates were adequate overall. They said that the payment system, however, made it difficult for heavy care patients and patients with behavioral problems, such as some Alzheimer’s patients, to get into nursing homes. Problems for light care patients appear to be limited to difficulties or delays in getting into the nursing home of choice. Frequently, the Medicaid recipients having the most trouble getting into Basing Medicaid nursing homes are those with the heaviest care needs. Basing Medicaid Payments on Care payments on the care needs of the individual can improve access to Needs Can Improve nursing homes for those needing heavy care. Nursing homes are not likely to admit a patient if the cost of caring for the patient is likely to Access for Those exceed the payment received. For example, Connecticut and Florida Needing Heavy * Care improved access for light care Medicaid recipients by decreasing the dif- ference between Medicaid and private-pay rates; heavy care patients, however, continued to have trouble getting into nursing homes. Minne- sota, New York, and Ohio, on the other hand, minimized this problem by Page 20 GAO/HRD-90-135Medicaid Accessto Nursing Homes Chapter 3 Payment Reform.9Can Improve Access to Nursing Homes setting Medicaid payments based on the individual Medicaid recipient’s care needs. Minnesota implemented a needs-based payment system in 1986. Under the system, individuals are classified into 11 levels of care based on their dependencies in the activities of daily living,3 special nursing needs (for example, tube feeding, intravenous therapy), and behavioral problems (for example, wandering, physically or verbally abusive). Although the needs-based payment system has, officials told us, improved access for most heavy care recipients in Minnesota, those with the heaviest care needs still have trouble getting into nursing homes; this is because the upper limit of the case mix payment is too low to cover the cost of caring for these recipients. Likewise, discharge plan- ners from the Ohio State University Hospital told us that, although under the state’s needs-based payment system most Medicaid recipients going from acute-care hospitals to nursing homes have few problems gaining admission, those with the heaviest care needs may still have trouble getting into a nursing home. Again, this is because the upper rate level under the payment system is too low to cover the cost of caring for these types of Medicaid recipients. Similar views were expressed by state and industry officials in Ohio. New York’s needs-based payment system was implemented in 1986 to improve access for those with heavy care needs. Its goal was to address access for both private payers and Medicaid recipients needing such care, not to improve access for other Medicaid recipients. Under this system, a nursing home’s Medicaid payment is based on the average case mix of all the nursing home’s residents. Therefore, admitting private payers or Medicaid recipients needing heavy care increases a nursing home’s Medicaid-payment rate. State officials told us that nursing homes are admitting more people with heavy care needs since the needs-based system was implemented. A New York State Public Health Council study reported that the number of Medicaid recipients (expressed as a percentage of all nursing home applicants) being admitted to nursing homes has remained the same, 50 percent. However, the Medicaid recipients now being admitted to nursing homes are recipients needing heavier care. Like Minnesota and Ohio, however, those needing the heaviest care were still having “Getting in and out of bed, dressing, getting around inside the house, bathing, eating, and using the toilet. Page 27 GAO/HRJS90~13S Medicaid Accessto Nursing Homes Chapter 3 Payment Reformn Can Improve Accessto Nurslng Homes problems getting into nursing homes in New York. Reasons cited were lack of equipment and staff to care for these types of residents. Page 28 GAO/IIlZDflO-136Medicaid Accessto Nursing Homes . Chapter 4 Factors Influencing States’Willingnessto Improve Accessto Nursing HomesThrough Payment or Regulatiry Reforms States’ willingness to voluntarily improve access to nursing homes for Medicaid recipients through changes in Medicaid-payment rates and sys- tems can be influenced by financial conditions within a state and com- peting demands for limited funds. Some states have l set controls over Medicaid spending that prevent states from supporting an expanded bed supply or higher Medicaid payments; l budget deficits that strain their ability to meet current Medicaid pro- gram costs; or . placed a higher priority on other programs, such as education, or on other Medicaid services, such as those for pregnant women. One of the primary methods states have used to contain Medicaid spending is to control the supply of nursing home beds. Faced with the resulting shortage of nursing home beds, severely limited financial resources and competing priorities for those resources, some states have attempted to improve access for Medicaid recipients through regulatory reforms that are intended to give Medicaid recipients and private payers an equal chance of obtaining a nursing home bed. As shown in table 4.1, per capita state spending, including spending for Medicaid Spending for long-term care, for aged Medicaid recipients varied from $2,014 in Mis- the Aged Varies by sissippi to $11,303 in New York in 1986. Even though Mississippi had State the lowest payment per aged recipient of the nine states visited, nearly 40 percent of its Medicaid payments were for aged recipients. Each of the states’ Medicaid payments per aged recipient was disproportionately large compared to the percentage of aged Medicaid recipients. Page 29 GAO/HRD-90-136Medicaid Accessto Nursing Homes Chapter 4 Factors Influencing States’ Willingness to Improve Accessto Nursing HomesThrough Payment or Regulakx-y Reforms Table 4.1: Variation in State Medicald Spending for Aged Recipients Medicaid payments Aged recipient as a for aged recipients percent of all a8 a percent of all Payment per recipients payments aged recipient California 13.6 23.7 $2.221 Connecticut 16.4 49.3 __---- 9,366 Florida 19.6 43.5 3,790 -.-...- Massachusetts 19.6 41.3 -- 6,649 Minnesota 16.5 43.2 7,923 Mississippi 19.6 39.8 __---2,014 New York 15.2 48.6 -__ -__11,303 Ohio 8.8 29.2 -.- 6,331 South Carolina 17.4 30.6 2,638 Source: HCFA data for fiscal year 1986. Legislatively imposed controls over Medicaid spending can be taken as Legislatively Imposed one indication of the willingness of a state legislature to improve access. Controls Over These controls effectively prevent states from supporting an expanded Medicaid Spending bed supply or increased Medicaid rates. A constitutional amendment limits state spending in California. Referred to as “Gann limits,” spending authority, including that for the Medicaid program, can only be increased beyond adjustments for inflation and total population growth by voter approval. State officials said that because of the spending limit, no initiative could be taken that would increase Medicaid spending. Others generally shared this view, stating that the highest pri- orities in California are currently education, law enforcement, and transportation. California’s auditor general reported that California ranked 38th out of 50 states in Medicaid expenditures for nursing home care per elderly resident in 1980. A comparison completed in 1987 showed similar results; California’s Medicaid expenditures on nursing home care for the elderly averaged $423 per recipient compared to $86 1 in Massachusetts, $1,128 in Minnesota, and $1,653 in New York in 1985. Mississippi, at the time of our visit, had a limit on its Medicaid budget of $96 million. Individual components of the program, such as nursing home care, could not increase without a corresponding decrease in another component. For example, an increase in Medicaid coverage for pregnant women and infants was accomplished by cutbacks in other services. Page 30 GAO/HRD-90-136Medicaid Accessto Nursing Homes Chapter 4 Factore Influenciug States’ Willingness to Improve Accessto Nursing HomesThrough Payment or Regulatory Reform8 Industry representatives cited Mississippi’s spending limits and tax base (the lowest per capita income in the nation) as the primary causes of the low Medicaid nursing home payment rates and the limited bed supply, but recognized that there were many other programs competing for the state’s available tax revenues. A state’s financial condition may influence its willingness to support State Financial actions that would improve Medicaid recipients’ access to nursing Condition May homes. Connecticut and Massachusetts have among the highest per Influence Willingness capita incomes in the nation and long-standing commitments to long- term care. Their current financial condition, however, may influence to Improve Access their willingness to improve access to nursing homes for Medicaid recipients. Connecticut’s commitment to long-term care may be waning because of large budget deficits. There has been little legislative interest in expanding long-term care services. Industry representatives, advocates for the elderly, nursing home officials, and hospital discharge planners said that at present the state’s overriding objective is cost containment. Massachusetts’ budget problems affect not only its willingness to improve access but also to meet existing commitments. If no new taxes are imposed, the state budget for fiscal year 1991 may have to be cut by $1.3 billion, with the Governor proposing that about 60 percent of the cuts ($736 million) come from Medicaid. Massachusetts has also delayed making Medicaid payments to nursing homes.’ The delay, industry rep- resentatives, advocates for the elderly, and state officials agree, has caused cash flow problems for nursing homes, making them more reluc- tant to admit Medicaid applicants. The cash flow problems have made banks reluctant to approve loans for nursing homes that want to main- tain or expand their bed supply, industry sources said. ‘Massachusetts makes nursing home payments baaed on an interim rate established at the start of the rate year; it adjusts those payments at the end of the year to compensate for cost increases during the year. The state has fallen behind in making these payment adjustments, and, according to industry officials, owes nursing homes $260 million in final rate settlements. Although it disagrees with the amount it owes (the state maintains it owes $200 million), the state agrees that it has fallen behind in making payments. Page 31 GAO/HRD90-135Medicaid Accessto Nursing Homes Chapter 4 Factors InPluencIug Stat& Willhguees to Improve Access to Nursing HomesThrough Payment or Regulatory Reforms Competing priorities, both within the Medicaid program and from other Competing Priorities state programs, such as education, can also influence a state’s willing- May Influence ness to improve access for Medicaid recipients. For example, officials in Ohio and California said that education was a higher priority in their Willingness to states. Improve Access Competing priorities within the Medicaid program can also affect a state’s willingness to improve access by expanding long-term care ser- vices. South Carolina Medicaid officials reported that the state’s budget was being stressed by federally mandated expansions of Medicaid eligi- bility. The Medicare Catastrophic Coverage Act of 1988 made manda- tory a previous Medicaid option that states cover pregnant women and infants with family incomes at or below the federal poverty level.’ The National Governors’ Association recently called for a moratorium on further expansions of Medicaid, saying that the expansions have forced states to make tradeoffs within the program. Even though, as discussed in chapter 3, increased payment rates can State Actions to help improve access, state efforts to control Medicaid spending by Control Bed Supply restricting the supply of nursing home beds could exacerbate access Have Mixed Effects on problems. Each of the states visited has either directly (through mora- toria on construction of new nursing home beds) or indirectly (through Access the certificate-of-need programs3 or other requirements) controlled the growth of nursing home beds. While excess bed supply can encourage overuse of nursing homes, controls that are too strict may limit access to nursing homes, especially for Medicaid recipients. Concerns were expressed by some of those interviewed in South Carolina, Mississippi, California, Massachusetts, Connecticut, and New York that the controls over bed supply were budget driven, not based on demand, and were adversely affecting Medicaid recipients’ access to nursing homes. For example, South Carolina placed a moratorium on the approval of certificates-of-need for new Medicaid nursing home beds in 1981 due to a concern about the growth in state spending for nursing home care under Medicaid. The nursing home population of Medicaid residents declined from over 80 percent before the moratorium went into effect to “This provision was not - repealed by the Medicare Catastrophic Coverage Repeal Act of 1989. “State regulatory mechanisms for reviewing and approving or disapproving hospital-related or other capital expenditures (e.g., for nursing home beds) or the provision of certain new services. In a state with this program, a health care provider cannot initiate construction unless a certificate-of-need is obtained from the state. Review of each project is baaed on certain preestablished planning criteria, and approval requires a finding of community need. Page 32 GAO/HRD-90-135Medicaid Accessto Numing Homes Chapter 4 Factors Influencing States’ Willingness to Improve Access to Nursing HomesThrough Payment or Regulatory Reforma about 71 percent in 1988. Also, data provided by the state showed that the number of beds per 1,000 elderly underwent a similar decline during this time. South Carolina Medicaid officials told us that the moratorium was a major factor in the declines4 State officials in New York and Connecticut said that they use the certificate-of-need program to restrict the development of nursing homes and to encourage the development of alternative care services. Industry representatives and advocates, however, felt that the states were using the certificate-of-need program as a cost-containment tool. At the time of our review, New York was projecting a shortage of over 11,000 nursing home beds by 1993 (based on its certificate-of-need program). Although California no longer has a certificate-of-need program, Cali- fornia Association of Health Facilities officials said that little new con- struction is taking place because Medicaid-payment rates are considered inadequate, capital investment costs are high, and administrative requirements for the approval of new beds are expensive. An associa- tion official said that most of the newly constructed nursing homes are exclusively private pay. A study by California’s Attorney General found that the number of beds per 1,000 elderly declined from 63 to 40 between 1976 and 1986. In an environment of severely limited financial resources and competing Regulatory Reforms to priorities for those resources, some states have attempted to improve Improve Access Under access to nursing homes for Medicaid recipients through regulatory Medicaid reforms. These reforms include (1) wait list laws that require nursing homes to admit applicants on a first-come, first-served basis or (‘2) census requirements that require admissions on a first-come, first- served basis until a specified census of Medicaid residents is achieved. By removing the source of payment as a criterion for admission, these reforms are intended to give Medicaid recipients and private payers an equal chance of obtaining a nursing home bed. There is disagreement, however, over the appropriateness and effectiveness of such reforms. Of the nine states visited, two (Connecticut and Ohio) had established wait list laws. Four states (Massachusetts, New York, Ohio, and South Carolina) had established census requirements. 4Although South Carolina lifted the moratorium in 1986, no new Medicaid-certified beds had been completed at the time of our visit; 300 had been approved for construction. Page 33 GAO/~90-136 Medicaid Accessto Nursing Homes Chapter 4 Factors Influencing States’ Willingness to Improve Access to Nursing HomesThrough Payment or Regulatory Reform8 Appropriateness of Wait There was considerable disagreement concerning the appropriateness of List and Census wait list and census requirements. The American Health Care Associa- tion stated that wait list laws and census requirements do not allow Requirements Disputed nursing homes the flexibility to select private payers over Medicaid recipients, which they maintain is essential for financial viability. Asso- ciation officials believe that if states want equity of access, they must also provide equity of payment; the Medicaid rate should be comparable to the private-pay rate. The National Senior Citizens Law Center, an advocacy group, supports wait list laws because, in their opinion, they promote equity of access. Advocacy groups for the elderly do not, however, support census requirements because, in their view, these laws institutionalize discrimi- nation in the Medicaid program; that is, they legitimize open discrimina- tion against Medicaid recipients after the home has reached a predetermined population of Medicaid residents. Further, nursing homes can easily meet census requirements when, as often happens, private payers convert to Medicaid and are counted as part of the Medicaid census the nursing home must maintain. Effectiveness of Wait List In those states that had established wait list or census requirements, and CensusRequirements there were little data on the effectiveness of the requirements. Some of those we spoke with, however, questioned their effectiveness as the fol- Questioned lowing examples illustrate. Connecticut A first-come, first-served wait list law was implemented in 1980, state officials told us, after the state had capped private-pay rates to control spending. By capping these rates, the state could effectively control the time it takes private payers to spend down to Medicaid eligibility. Still, the difference between the Medicaid and the capped private payment provided a financial incentive for nursing homes to select private payers over Medicaid recipients. To overcome that incentive, the state enacted its wait list law. The effect of Connecticut’s law on access is unclear. We were unable to obtain data on the extent of access problems either before or after the law was implemented. State officials assert that the law has been effec- tive, citing the 17 nursing homes fined for violation of the law between 1984 and 1988. In the state’s view, these fines sent a message to the industry that the law will be enforced. The state’s long-term care ombudsman also stated that the wait list law has improved access for Page 34 GAO/HRJSBO-136 Medicaid Accessto Nursing Homes . Chapter 4 Factors Influencing States’ Willingnea~ to Improve Accessto Nurebg HomeaThrough Payment or Regulatory Refonw Medicaid recipients, citing a reduced number of complaints concerning nursing home admission practices for these recipients. The nursing home industry, however, stated that Connecticut’s wait list law has had little effect on access for Medicaid recipients. The per- centage of nursing home residents with care paid by Medicaid has not changed since implementation of the law, according to the Connecticut Association of Health Care Facilities. In addition, the association main- tained that nursing homes continue to attract residents from the same geographic area: nursing homes in poor areas predominantly admit Medicaid recipients. The association’s representative noted, however, that the law may have improved access for Medicaid recipients seeking admission to nursing homes located in middle-income areas. Hospital discharge planners and a Connecticut nursing home director of admissions said that nursing homes may be circumventing the intent of the wait list law, Nursing homes are (1) refusing to admit Medicaid recipients because, as they claim, they cannot provide the level of care needed and (2) offering assistance in completing lengthy and complex applications to private payers but not to Medicaid recipients. Applicants are not placed on the wait list until they have a substantially complete application. Ohio Ohio’s wait list law differs from Connecticut’s in that it also includes a census requirement; facilities with a Medicaid census of less than 80 percent must admit all applicants on a first-come, first-served basis. Once a nursing home’s Medicaid census is 80 percent, it can select pri- vate payers while refusing admission to Medicaid recipients. With a statewide average Medicaid census of 67 percent, the wait list provi- sions apply to the majority of nursing homes in Ohio. Because the state increased the Medicaid-payment rate and established a needs-based pay- ment system at the same time the wait list law was established, its effect on access to nursing homes is unknown. Medicaid access problems decreased significantly, but the improvement has been attributed prima- rily to the higher Medicaid-payment rates. (See p. 26.) Massachusetts A census requirement was established in 1981 as part of the certificate- of-need program; new facilities and facilities adding more than 12 beds must have a 60-percent Medicaid recipient admittance during the first year of operation. In subsequent years, the nursing home must maintain a Medicaid census equal to the average Medicaid census for nursing homes in the community in which it is located. Page 36 GAO/HRD-99-135Medicaid Accessto Nursing Homes Chapter 4 Factors Influencing States’ Willingness to Improve Accessto Nursing HomesThrough Payment or Regulatory Reforms The census requirement may have had limited effect on Medicaid recipi- ents’ access to nursing homes because it applies only to new or expanded facilities (50 of 522 Medicaid-certified nursing homes at the time of our review). The effect is difficult to determine because, as state officials told us, the requirement is difficult to monitor. Finally, as long as there is a shortage of beds, to the extent the requirement improves access for Medicaid recipients, it merely shifts access problems to other elderly. Although industry officials said that the census requirement was not effective, they differed on why. Representatives for the for-profit industry said that the census requirement is a disincentive to developers because nursing homes cannot survive financially on Medicaid payments in urban areas with a high ratio of Medicaid recipients. Representatives for the nonprofit industry, said, however, that the census requirement does not affect access because most of the existing nursing homes already have a high Medicaid census; as long as the new or expanded nursing homes meet the census requirement, they are free to refuse access to additional Medicaid recipients. New York Like Massachusetts, New York requires that new nursing homes admit a given percentage of Medicaid recipients in the first year of operation and maintain a specific Medicaid census after that. Because this require- ment was recently implemented (Nov. 1988), its effect on Medicaid access is unclear. However, state officials, industry representatives, and advocates predicted that the requirement will have little effect on access because it only applies to new nursing homes, lacks enforcement provisions, and does not address the underlying causes of the access problems, namely a shortage of nursing home beds and a difference in the payment rates between private payers and Medicaid. South Carolina A census requirement was implemented in 1988. Under the program, nursing homes must declare at the beginning of the year how many Medicaid patient days they expect to provide in the coming year. Nursing homes can be penalized for exceeding or coming in under their approved estimates by more than 10 percent. Although the program was established to improve access to nursing homes by allowing the state to better plan for future funding needs and encouraging nursing homes to accept Medicaid patients, concerns have been raised by HCFA and others that the penalties for exceeding the anticipated Medicaid ceiling could have a negative effect on access. Page 36 GAO/HRD-!IO-136 Medicaid Accessto Nursing Homes Chapter 6 ConcludingObservations Medicaid recipients have more trouble getting into nursing homes than private payers. For the most part, the reasons are financial; nursing homes prefer private payers because they pay more. Although there are little quantitative data on the extent or severity of access problems for Medicaid recipients, our visits to nine states revealed a wide variation in the types and severity of access problems for these recipients. Individ- uals awaiting approval of Medicaid eligibility and those with Alzheimer’s disease also had problems getting into nursing homes. If a Medicaid recipient remains in the hospital awaiting a nursing home bed, health care costs are likely to be higher than if the individual had been discharged to the nursing home at the appropriate time. In those states that do not pay for ANDS through their Medicaid program, the higher costs are likely to be absorbed by the hospital or the Medicare program, leaving the state little incentive to see that Medicaid recipients get into nursing homes. There are no easy solutions to the access problems Medicaid recipients face. Many factors come into play, including the Medicaid-payment rate, the system used to make payments, the bed supply, and the state’s will- ingness or ability to increase Medicaid spending. Actions in some states to narrow or eliminate the difference between the Medicaid and private-pay rates or basing the Medicaid rate on the care needs of nursing home residents appear to have improved access for Medicaid recipients. Requiring equal rates for Medicaid recipients and private payers eliminates the financial incentive for nursing homes to select private payers. Increasing the Medicaid rate, without adjusting for patient care needs reduces the incentive to select private payers but leaves nursing homes with an incentive to select Medicaid recipients who are less expensive to care for (that is, those needing lighter care). Basing Medicaid nursing home payments on care needs improves access for those with heavier care needs but, unless the needs-based rate is suf- ficient to cover the cost of all needed care, those with the heaviest care needs continue to experience access problems. Although improving access for Medicaid recipients, payment reforms, such as changing the Medicaid-payment rate or system, will also increase Medicaid nursing home spending. A state’s financial condition, coupled with competing demands for services that increase costs, may influence the state’s willingness to voluntarily improve access through payment reforms. Some states impose controls over Medicaid spending Page 37 GAO/HRB90-136Medicaid Accessto Nursing Homes b Chapter 5 Concluding Observations that effectively limit the state’s ability to improve access through pay- ment reforms. In an environment of limited financial resources and heavy competition for those resources, state regulatory reforms, such as wait list laws or census requirements, have been adopted as options to improve access for Medicaid recipients. Where these types of reforms have been imple- mented, however, there are little data on their effectiveness, which has been questioned by some. In the case of wait list laws, some of those we spoke to noted that some nursing homes may be taking actions to cir- cumvent their intent. Census requirements appear to shift access problems to other elderly in states with a shortage of nursing home beds. Page 38 GAO/HRD-W-136Medicaid Accessto Nursing Homes Page 39 GAO/~90436 Medicaid Accessto Nursing Homes Appendix I Major Contributors to This Report Jane L. Ross, Senior Assistant Director, (202) 276-6196 Human Resources James R. Linz, Assistant Director Division, Donald J. Walthall, Assignment Manager Washington, DC. Jacquelyn Reid, Evaluator Eric Anderson, Social Science Analyst Donald B. Hunter, Regional Management Representative Boston Regional Office Vincent J. Forte, Evaluator-in-Charge Melissa P. Read, Evaluator Y (101131) Page 40 GAO/HRIHO-136 Medicaid Accessto Nursing Homes .._ ll”.._lll “, 111” ..“**,“,,‘ ,l_“,““l.. I ..-....--.- -- -- -.---.- --L_m”_I*“l.“l,l”,l--“.- ----. ()rclt~riug Iuf’ortua Con ‘I’htb I’irsl I’ivt* copiths of tm+h (;A() rtqmrt, art’ free. Arlditioual copies art’ $2 tac*h. Orders shoi~lcl ht* sen1. t.0 t,he following adtlrpss, acctm- panitvl hy a chchck or motrt*y orcIt!r made out t.o t,he SuI~c~rint~ntit~r~~, ol’ I)o~uuu~nt.s, whwr necessary. Ordtbrs for 100 or mort~ copies Lo be uuiilcvl t,o a siuglt* address are discounted 26 pt~rceut,. I I.S. Gtv~t~ral AccounCng Of’Iict~ I’.(). Hex 6016 1 (;ai thtvslu~rg, MI) 20877 Ortit~rs may also IW Idactd by calling (202) 275-624 I. .
Nursing Homes: Admission Problems for Medicaid Recipients and Attempts to Solve Them
Published by the Government Accountability Office on 1990-09-05.
Below is a raw (and likely hideous) rendition of the original report. (PDF)