Charles Milligan

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					Strategies to Balance Long-Term Care Spending
August 9, 2005 Charles Milligan NASHP

Mission Statement
Our Center’s mission is to work with public and non-profit community-based agencies, in Maryland and elsewhere, to improve the health and social outcomes of vulnerable populations in a manner that maximizes the impact of available resources.


Preview of Presentation
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Brief Background on Medicaid Philosophical Underpinnings of State Systems Change State Budget Concern: the Woodwork Effect Selected State Efforts: Reducing Nursing Facility Utilization and Expenditures to Expand Home and Community-Based Services


Brief Background on Medicaid

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Federal law: State Medicaid plans are based on setting – nursing facilities and home health are entitlements, home and community-based service (HCBS) waivers are not Federal law: absent a freedom of choice waiver, all qualified providers may participate in Medicaid Federal law: absent a waiver, the nursing facility (NF) entitlement must directly link to a given state’s NF level of care criteria


Brief Background on Medicaid (con’t)
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States may set their own NF level of care criteria In general, states may set their own payment rates A word about waivers:


HCBS – authorized under Section 1915(c) Managed care (freedom of choice) – authorized under Section 1915(b) Demonstration – authorized under Section 1115


Philosophical Underpinnings of State Systems Change
Eligible individuals should have the right to choose the setting in which they are served  Money should follow the person across settings  The policy bias for nursing facilities, related to the entitlement status under federal law, should be removed


State Budget Concern: the Woodwork Effect
Developing new community-based services may cause eligible but unenrolled individuals to seek services (Woodwork Effect I)  Creating policies to allow funding to follow a person from a NF to the community may result in backfilling of NF beds (Woodwork Effect II)


Selected State Efforts: Reducing Nursing Facility Utilization and Expenditures to Expand Home and Community-Based Services

Continuum of Selected State Efforts
Rate setting Assisted living conversion Selective contracting


Tested new business models

Major untested reforms

Voluntary bed closure

Managed LTC

Remove entitlement To nursing facility



Alter NF Reimbursement and Place Savings in a Transition Fund
Many NF reimbursement changes are possible:
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Allowable direct and indirect costs Occupancy Rates New fees and taxes Bed hold policy Require Medicare certification Rate for crossover claims


Use savings and new revenue for dedicated NF Closure/Conversion Fund
Reference State: Indiana -10-


Voluntary Conversion of Nursing Facility Beds to Assisted Living

Identify source of “venture capital”
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Tobacco Fund Closure/Conversion Fund Other Develop program specs (AL room requirements; AL service requirements; geographic location of NF) Provider matching requirement Identify state breakeven point


Use fund for voluntary conversion to AL
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Reference States: Nebraska and Iowa -11-


Voluntary Planned Closure of Nursing Facility Beds
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NFs may apply to AAA to voluntarily close beds
Permanently “Layaway”


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Remaining beds receive higher per diem (per formula) Avoidance of licensure fees, loss of revenue due to minimum occupancy standards or bed-hold rules

Reference State: Minnesota -12-

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Managed Long Term Care


State pays capitation to managed care organization That organization then has an incentive to serve enrollees in the least expensive appropriate setting Medicare Modernization Act may provide momentum to state Medicaid planning

Special needs plans for dual eligibles and NF residents

Reference States: Arizona, Florida, Wisconsin, Minnesota, Massachusetts and Maryland -13-

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Selective Contracting of Nursing Facility Beds


States may pursue Medicaid “freedom of choice” waiver This waiver, used in managed care, allows for selective contracting (bidding process) Selective contracting could:
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Limit the number of NFs Limit the number of beds Include price competition

Reference State: South Carolina -14-


Major Structural Reform Through a Demonstration Waiver


A Medicaid demonstration waiver could be used to delink the entitlement from the NF level of care, and place NF and HCBS on equal footing One version (Vermont):



“Highest Need”: Establish “entitlement” at a threshold above NF level of care – and provide that people who meet the higher threshold would be entitled to be served in any setting “High Need”: People who meet the NF level of care but not the higher threshold would be served only to the extent of available funding (i.e., no entitlement); the people who receive a slot get to choose the setting in which they’ll be served “Moderate Need”: People at-risk for NF level of care. Eligible for narrow services only if funding exists.

Reference State: Vermont


States continue to pursue Systems Change  States continue to worry about the woodwork effect  In the current budget climate, states will continue to look for ways to avoid net new expenditures, in part by reducing dollars to and utilization of NF
The complete paper may be found on our website: -16-


Charles Milligan 410.455.6274 -17-

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