Medicaid Looks Home

Alabama’s nursing home industry is taking a wait-and-see stance over a plan that promises to change the way the state’s Medicaid agency pays for long-term care.

In May, the Alabama Legislature passed Senate Bill 431, legislation that promises to transform the state Medicaid agency’s payment method for long-term care from a fee-for-service model to a managed care model. The goal is to slow the growth of Medicaid costs. Under the new law, the state will operate Integrated Care Networks or ICNs to provide long-term care that, when appropriate, lets beneficiaries receive services in their homes or through community-based programs instead of in nursing homes, which cost more. The ICNs are set to go into effect on Oct. 1, 2018, according to the state Medicaid Agency. 

“I think a lot of nursing homes are trying to figure out what the terms of engagement with the ICNs will look like, ” says Mark Traylor, who owns Arbor Springs Health and Rehab in Opelika. “We want to be as efficient as possible as the provider, but we don’t want to forsake the care of patients or end users. That’s the concern I think most providers have.” 

Kevin Ball, administrator for Ball HealthCare Services Inc., that operates 10 nursing homes around the state, says that while ICNs could offer some benefits, he also wonders how a managed care system will impact the quality of patient care.

“If set up in the right way, and it has checks and balances, ” says Ball, “then I believe there can be a compromise with what the residents of the state need and what allows us to provide the quality of care that’s expected.” 

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Alabama Nursing Home Association spokesperson John Matson says sponsors of SB 431 sought comments from his organization while writing the bill and he is optimistic that the ICNs will provide better case management to move patients more easily into the care options that best serve their needs.

“Someone may only need some assistance or light housekeeping chores done, ” says Matson, “but three years down the road, they may have more medical needs or less physical ability to take care of themselves. Then the ICN can transition that person from their home into the nursing home. And, on the nursing home end of it, if someone comes in and the nursing home rehabilitates them, over time, they can transition to another lower care setting and the nursing home is then freed up to care for those who truly need our high level of medical care.” 

Currently, elderly and disabled persons in need of long-term care through Medicaid can apply for a waiver that lets them receive care outside of a nursing home as long as that person meets certain medical and financial requirements. But enrollment for waiver programs is often limited and applicants may find themselves having to wait for approval.

A major problem for Medicaid today, says Matson, is that Alabamians are getting older, and, therefore, the need for nursing home care will continue to rise. 

There are 228 skilled nursing home facilities and 27, 121 licensed nursing home beds across Alabama, according to the Alabama Nursing Home Association. Many patients who opt for nursing home care today are older and sicker than they were in years past, with conditions that require a highly skilled nursing staff, Matson says. 

Also, Alabama’s elderly population is growing. The U.S. Census reports there were 660, 000 Alabamians age 65 and over in 2010. By 2025, the population could reach 955, 000, Matson says. 

“On the other side of that, in 2010 there were 76, 000 Alabamians 85 plus, ” Matson says. “By 2025, that number is expected to grow to 110, 000. So we can see that there is coming a silver tsunami in the next 10 years in Alabama.”

Sixty-eight percent of nursing home patients in Alabama rely on Medicaid to pay for their long-term care. Given the situation, Matson says, Medicaid, under its current structure, may not have the funding to meet the needs of those seeking long-term care in the future. 

Medicaid is a joint federal and state funded insurance program for low-income elderly and disabled individuals and children. It covers not only medical costs but also long-term care services, such as nursing home care, rehabilitation and hospice. The Alabama Medicaid Agency reports having nearly 517, 000 eligible adults on its rolls in 2013, up from 452, 644 in 2011.

“Medicaid is the dominant public insurance program for long-term care, ” says Nick Shimoda, an elder law and estate-planning attorney based in Dothan. 

Some pay for their long-term care out of pocket, he says. Others use long-term care insurance, life insurance with long-term care riders or veteran’s pension benefits. 

The federal government pays matching funds to state-run Medicaid programs as long as the programs meet certain standards of service and eligibility and cover benefits like skilled nursing care. But despite the matching funds, Medicaid still takes a large chunk out of Alabama’s General Fund budget. 

In fact, Medicaid expenditures were 11 percent of the state’s General Fund budget in 2013. With the federal match, the state’s Medicaid payments reached nearly $6 billion that same year.

During a second special session of the Legislature this past September, the Alabama Senate had to make a last minute correction to the proposed budget to give the state Medicaid Agency an additional $16 million just to keep the agency at level funding for the new fiscal year, which started Oct. 1. 

Alabama, however, is one of 22 states that have opted against the federal Affordable Care Act’s call for states to expand Medicaid to adults with incomes at or below 138 percent of the poverty line, even though the federal government would have paid 100 percent of the cost to add those new enrollees through 2016 and down to 90 percent by 2020. 

While the news organization has quoted Gov. Robert Bentley as saying that he might consider the idea of a federal block grant to expand Medicaid, he has only moved forward with his own Medicaid reform plan. 

He established a Medical Advisory Commission to review Medicaid’s financial health and services. Then in 2013, the Legislature passed the bill to create Regional Care Organizations (RCOs), local managed care entities designed to control rising medical costs under Medicaid. 

Under the plan, the state is divided into five regional districts, within which locally managed care entities will provide healthcare for Medicaid patients. Medicaid will contract with the RCOs to pay a set amount for covered medical services. The contracts will come with built-in incentives that place more value on the quality of care and patient outcomes instead of the number of services rendered, and the RCOs will assume the risk if patient care costs exceed the dollar amount specified in the contracts. 

The state Medicaid Agency reports that it is now conducting readiness reviews of 11 probationary RCOs to determine their financial solvency and to see if they can provide adequate services, including medical facilities and the minimum number of primary medical providers and specialists such as urologists and allergists. Medicaid expects to finalize contracts with the RCOs next spring and summer before they start operation on Oct. 1, 2016.

The law that created the RCOs also mandated an evaluation of long-term care in Alabama, which led to the creation of the Medicaid Long-Term Care Workgroup. Then, in May 2015, the Legislature passed SB 431 to establish the ICNs. 

State Senate Majority Leader Greg Reed, R-Jasper, a sponsor of SB 431, says 75 percent of those receiving long-term care are in nursing homes, while 25 percent are receiving care at home or in community-based programs. The ICNs, he says, will provide case management to move more people toward community and home-based care instead of the nursing homes and will save the state more than $1 billion over a 10-year period.

“The goal of this is to modify this to where we increase the number of in-home programs and hospice care programs that are available, to where we are moving to a 50-50 model rather than 75-25 model, ” Reed says. 

Shimoda says the ICNs, however, will contain the list of caregivers available for those who choose Medicaid, and their choices could be limited. In addition, because it is government controlled, the question remains whether ICN collaborators can provide quality service under the Medicaid payments. 

But ICNs, so far, have the support of the advocacy group Arise Citizen’s Policy Project, which serves on the Medicaid Long-Term Care Workgroup. 

“We know through our limited use of home and community-based service waivers that we can deliver effective quality care to patients in their homes and communities at a fraction of the cost of institutional care, ” says Arise Policy Analyst Jim Carnes. “It opens up state funding for a much stronger array of home and community-based health services. So we’re expecting that industry to take off in a new way.” 

Gail Allyn Short and Robert Fouts are freelance contributors to Business Alabama.  Short is based in Birmingham and Fouts in Montgomery.

Text by Gail Allyn Short • Photo by Robert Fouts

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