Health Care Reform and Assisted Living

In a bit of an indirect manner, Assisted Living got a boost from health care reform, albeit in a typical governmental fashion.  With the Feds willing to use Medicaid as the vehicle for expanded coverage programs for underinsured (those within 150% of the poverty limit with high-deductible plans) and the uninsured, coupled with additional funding for Home and Community Based Services, an expanded source of potential residents for AL providers comes forth.  Of course, this new source of residents is not wholly unfamiliar to some providers and as the providers already working within Medicaid waiver programs will attest, not without problems.

Over the past decade, the movement to deinstitutionalize certain at-risk seniors and the chronically disabled has continued to gain momentum initially at the state level, then through the federal level.  The first concerted efforts back in the late eighties and early nineties focused on moving the developmentally disabled and mentally ill from institutional settings to community based settings, typically group homes and residential facilities.  The dominant majority of this group was (and remains) Medicaid eligible and thus, the shift from an institutional focus for care to a community-based focus tied directly to savings for Medicaid.  Without question, tangible benefits in terms of quality of life were also achieved for the resident population.

Fast-forward through the nineties and up to 2009, the transitional movement of deinstitutionalization gained momentum.  The focus continued to be on Medicaid eligible individuals and dual-eligible individuals (Medicaid and Medicare) with moderate to minimal care needs placing them “at risk” of institutionalization (generally SNFs or Intermediate Care Facilities).  The “at risk” element wasn’t related to their care needs but to the benefit structure of Medicaid which without permissive changes made by the applicable state and the federal government, could only pay for care delivered in a federally certified care center (SNF or ICF).  As the Feds became more open to allowing states to “waive” the core requirements for benefit and service eligibility contained within state plans and still receive FMAP (Federal Medicaid matching dollars),  the migration of seniors from institutional care to community-based options (principally Assisted Living) picked-up pace.  During this period, the popularity of Medicaid waiver programs increased as more Assisted Living providers became willing to accept this source of residents, states enjoyed the benefit of reduced institutional care utilization (a savings) and various advocacy groups touted the quality of life improvements afforded to seniors living in residential care environments as opposed to nursing homes/institutional care centers.

Looking reflectively however, illustrates that this transitional period and the gain in popularity of Medicaid waiver and home and community based care options wasn’t without a series of problems.  First, states were often ill-equipped to care manage the targeted group of seniors.  As a result, systems for access, payment and ongoing certification of eligibility were often fragmented and ineffective.  Second, states and the Feds, under-estimated the demand for residential care.  Third, costs associated with these programs soared and providers, while still phasing in to accepting Medicaid waiver residents, encountered (in some cases) rate cuts, mounting paperwork, slow payments and in some cases, no payment.  Other problems also occurred such as access issues in various communities (insufficient services to meet the demand), spousal impoverishment qualifications under Medicaid that the Feds had not addressed, and insufficient additional federal funding to grow the waiver programs to meet the rising demand.

Understandably, the Federal government during the creation of health care reform legislation, sought to address some of the more pressing issues that the states encounter within Medicaid waiver programs and in delivering an expanded array of home and community based care options.  The result of the recent passage of the Patient Protection and Affordable Care Act is that to a reasonable extent, the issues noted above were addressed.  Like all major Federal social policy initiatives, the legislation also has flaws.  The benefit potential for Assisted Living providers and home health providers is fairly plain; at least for those provider groups that wish to continue to care for Medicaid waiver residents and/or are targeting an increase in their existing programs.  There are also potential opportunities for new service and care programs integrated within senior housing and affordable senior housing projects.  Below is a summary of the “pluses” I pulled from the legislation.

  • Community First Choice:  Allows states to cover the cost of attendant (non-skilled, non-CNA) services for a Medicaid beneficiary if doing so would prevent the individual from being hospitalized or residing in a nursing home.
  • Allow states to cover more home and community based services via a plan (state Medicaid) amendment as opposed to a waiver.
  • Extends the Money Follows the Person demonstration under Medicaid until 2016 (pays for more home and community based and residential services as needed by the individual rather than a payment targeted toward a specific provider care level such as SNF).
  • As of 2014, requires states to provide the same spousal impoverishment protection to a spouses receiving home and community based services (no longer limited only to SNF residents).
  • Provides an increased federal match to states that presently spend less than 50% of their Medicaid budget on non-institutional care alternatives provided the states submit plans to rebalance their Medicaid spending, increasing the resources provided to non-institutional care.
  • Eliminates the cost-share under Medicare D for dual eligible individuals receiving home and community based services (dual eligibles in a nursing home are already exempt from the cost share).
  • Funds the extended Medicaid match (FMAP) that was created under the ARRA (Stimulus Bill).  Beginning in 2014 and through 2016, provides 100% federal funding for additional Medicaid costs incurred as a result of expanded Medicaid coverage provisions for lower-income individuals

As I indicated earlier, the legislation does have its share of flaws or imperfections.  Below are some of the obvious issues.

  • Creation of the CLASS Program (Community Living Assistance Services and Support) which is touted as a voluntary form of taxpayer-funded long-term care insurance that provides payments to individuals to pay for necessary home and community based support and care upon evidence of a disability or disabilities.  Unlike traditional long-term care insurance plans, CLASS would cover a very broad array of formal and informal assistance, even on a non-licensed basis.  Benefit amounts are self-selected upon enrollment ranging from $50 to $100 per day.  The problems with CLASS are many including the fact that upon enrollment, an individual must pay into the program for five years prior to receiving any benefit.  Second, the benefit levels are rather paltry, especially at the $50 per day level.  Finally, and very unreported within the analysis of the reform bill to date, the premium levels are likely too low for the levels of benefits.  In other words, CLASS is actuarially, out of the gate, underfunded and necessarily, premiums will rise. In fact, CMS estimates that premiums, once utilization begins to steadily occur and enrollment levels-off, could rise as high as $180 per month.   Since it is in fact, a voluntary plan, it is likely that few will enroll and among those that do enroll, they are likely to already have some level of existing disability or a trend toward early disability – a problem of adverse selection.  CMS predicts that the CLASS participants will use benefits at an “exceedingly higher” level than a typical individual purchasing a long-term disability or long-term care plan.
  • The legislation maintains the existing Medicaid funding system which already is a convoluted and an economically unsustainable mess.  In as much as the Feds are ponying up some additional money and relaxing the bureaucracy on states to expand their Medicaid plans to offer more home and community based care support and options, they are doing so within the same idiotic paradigm that presently has state Medicaid budgets swimming in red ink.  In other words, the Fed’s money comes only after states commit to spending and thus funding, the expanded services.  Garnering additional FMAP is akin to getting five Big Macs after buying the first one, then being required to continue to buy the additional five to keep the match coming, etc.  On the back-end of course, having gorged on all the Big Macs, you now have to pay for the diet and the by-pass surgery.  States simply cannot sustain the level of expansion that the Fed is promoting (California is the classic example).
  • No one is quite certain how much of a burden the additional level of newly insureds will be under an expanded Medicaid program.  Dozens of states are already suing the Federal government over the expansion, primarily because of my point above but also from the perspective that they (the states) will get stuck with an enormous additional Medicaid cost item.  As the expanded Medicaid program will contain fairly lavish and generous benefits, including expanded home and community based care options, the risk of adverse selection is enormous (the risk that people with pent-up demand and existing uncared-for disability will now use the system and the benefits at a level far greater than was initially anticipated).  Personally, I believe the adverse selection risk is enormous and terribly misrepresented within the legislation.

Leave a Comment