Health Forward Foundation

Reform Plan Would Divert Nursing Home Residents to Assisted Living Facilities

Left to right: Patricia Sedy

TOPEKA – The Kansas Medicaid program spends almost $1.2 million a day on care for people in nursing homes.

The state’s share alone is more than $370,000 a day.

Kansas Department on Aging Secretary Shawn Sullivan says that’s unsustainable.
“If we’re ever going to rein in our Medicaid spending, we’re going to have to lower our nursing home utilization rate,” Sullivan said while testifying before a legislative committee last month.

One of the best ways to do that, he said, is to get assisted living facilities to take in more Medicaid residents.

That won’t be easy, he said, because most assisted living residents pay $3,000 to $4,000 a month for the services from their own private funds, whereas Medicaid pays about $1,200 a month for the same services.

“The system that’s in place now doesn’t work well for assisted living,” said Jim Klausman, chief executive at Midwest Health Management, a Topeka-based company that manages more than 40 long-term care facilities in Kansas, Nebraska, Iowa and Oklahoma. “Its administration is way too complex and the payments are too poor. So typically, assisted living facilities don’t participate in Medicaid.”

To change that, Sullivan and an industry work group are trying to craft a payment system that would eliminate many of the program’s administrative hassles and offset more of the assisted living facilities’ costs.

Varied plans are being considered by the group, which will meet again next week with the goal of settling on something soon.

“We’re trying to make sure that they’re reimbursed correctly as quickly as possible,” said Sara Arif, a KDoA spokesperson.

One plan under consideration would create a three-tier payment system that would reimburse providers according to the level of care a client needed. The current system essentially distinguishes only between those in nursing homes and those receiving in-home care. One result of a three-tier system could be better payments for assisted living facilities.

“This is a great direction for Kansas to be headed in,” Klausman said. “The system we have now works great for home- and community-based services, but it doesn’t work for assisted living.”

Today, about 1,800 Kansas seniors in assisted living facilities are Medicaid clients.

“For the most part, these are private-pay residents who’ve gone through their resources and ended up on Medicaid,” said Cindy Luxem, executive director for both the Kansas Center for Assisted Living and the Kansas Health Care Association. “The facility hasn’t put them out because, again, in most cases, these are people who’ve lived there for five or 10 years, and frankly it wouldn’t be the right thing to do. The facility ends up taking a loss on every HCBS (Medicaid-covered, assisted-living) resident it has.”

About 4,400 seniors receive Medicaid-funded services in their own homes.
Currently, both in-home care providers and assisted living facilities are expected to keep track of the Medicaid services they provide in 15-minute increments.
They are paid between $3.38 and $3.73 for each 15-minute unit.

That time-keeping chore becomes complicated at assisted living facilities.

“Administratively, you can do that without too much trouble when you’ve got one person going into another person’s home,” Luxem said. “But just imagine how difficult that would be if you had several employees – caregivers – moving from room to room and you’re expected to keep track of all the different tasks they perform.

“Most (assisted living) facilities take one look at that and say, ‘We’re not interested,’” she said.

Under a proposal being considered, assisted living facilities would not have to keep track of each service they provide. Instead, they would be paid a flat rate tied to the needs of each Medicaid resident – the greater the need, the higher the rate.

Sullivan has said a three-tier system likely would save the state money because almost all of the Medicaid residents who would be taken in by assisted living facilities otherwise would have moved to a costlier nursing home.

In the three-tier scenario, rates paid to assisted living facilities would be less than those paid to nursing homes but more than those paid to in-home caregivers.

Another potential advantage of a three-tier system, Sullivan said, is that some current nursing home residents – it’s unclear how many – would be able to move to an assisted living facility.

Whether the agency’s final plan embraces the tiered approach or something else remains to be seen.

But whatever plan emerges will aim for greater incentives to assisted living providers.
“Assisted living facilities don’t get the proper reimbursement, so we’re trying to figure out a way that reimburses them in a better manner,” Arif said. “How do we close that gap but also entice people into being HCBS (home- and community-based services) providers.”

John Grace, a former executive director of the Kansas Association of Homes and Services for the Aging, said he welcomed the direction Sullivan is trying to take the system.

“He’s trying to replace existing nursing home residents with assisted living residents – and not increase the budget,” Grace said. “He can do that. It won’t be easy, and it won’t be good for some nursing-home providers that are already struggling, but he can do it.”

Grace, who’s now a long-term care consultant, said he’s encouraging his clients to embrace the change.

“Providers need to prepare for this, because it’s coming,” he said. “There’s no way to stop it, really. The fact of the matter is nobody wants to move to a nursing home.”

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