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Equal rates in nursing-home care: A needed consumer protection

Both nursing-home residents and workers suffer when the state cuts its payments for long-term care. But changing Minnesota’s nursing-home rate equalization law is not the answer to Minnesota’s budget challenges.

Under the rate equalization law, nursing facilities must charge private-pay residents the same rate charged to Medical Assistance (MA) residents for services required by a resident’s plan of care. The law was passed in 1976 to overcome discrimination in nursing-home admissions and ensure access to care for people who exhaust their life savings and have to rely on public assistance. 

Once eligible for MA, nursing home residents continue to pay the nursing home all their income from Social Security or pensions, minus a small personal-needs allowance. MA pays the balance.

Without rate equalization, a two-tiered system
The “average” MA recipient is a resident with a chronic disease, like dementia, who has privately paid at home, in assisted living, and in a nursing home until his or her life savings are gone.

In states without rate equalization, a two-tiered system of Medicaid and private-pay homes has evolved. Despite federal laws prohibiting discrimination between the private-pay and MA applicants, ombudsman programs in states without rate equalization laws report that MA-eligible applicants for nursing home care may be told that the facility’s MA quota has been met or the facility does not accept MA at all, so the family should look elsewhere for care.

Nursing homes in the United States with predominantly MA residents also have fewer nurses and more health-related deficiencies than homes with mainly private-pay residents, according to a 2004 study. Some facilities transfer private-pay residents to a different wing or even require discharge to a different facility when residents’ private resources are exhausted and they become eligible for MA.

Without rate equalization, high prices
Phasing out or repealing the rate equalization law will mean that private-pay clients will exhaust their assets faster. According to an AARP report on the average daily pay rate for nursing homes across the country, Minnesota’s average daily pay rate of $156 compares to an average daily pay rate of $198 in Wisconsin, which does not have rate equalization, and $345 in Connecticut, which likewise does not have rate equalization.

A 2005 article in the Health Insurance Underwriter calls these higher private-pay rates “cost shifting” and sees it is a reason that people may seek to shelter assets rather than use them for their own care needs. Guaranteeing a fair and equalized rate supports personal responsibility.

Despite revenues generated by higher private pay rates, nursing homes around the country often do not target the extra dollars to staffing, programs or care-related expenses. By the same token, there is no evidence that the quality of care in states without rate equalization exceeds the quality of care in Minnesota, according to the Minnesota Legislative Auditor.

Solving financial woes
Although it is tempting to believe that repealing the state’s rate equalization law will solve financial woes for nursing homes, nursing homes are closing all over the United States, even in states that allow homes to charge private-pay clients more. The reasons are far more complex than rate equalization.

Moreover, Minnesota law does not stand in the way of private-pay residents buying additional services. Rate equalization permits marketing special services above the licensing/certification requirements to those who can afford extras. The law explicitly allows for those market options.

Workers in nursing facilities work hard and under increasing pressure for low pay and few benefits. For quality care and quality jobs, Minnesota must ensure sufficient MA reimbursement rates and maintain rate equalization, which ensures appropriate care for all residents of homes, not just those who have private funds to pay for it.

Jane Ochrymowycz is the president of the Seniors and Workers for Quality Coalition.

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Comments (2)

  1. Submitted by Greg Kapphahn on 04/23/2010 - 10:16 am.

    “For quality care and quality jobs, Minnesota must ensure sufficient MA reimbursement rates and maintain rate equalization, which ensures appropriate care for all residents of homes, not just those who have private funds to pay for it.”

    That’s the continuing problem, and the entire point. Nursing homes are, sadly, having to grasp at straws for any possible way they might gain sufficient income to be able to keep their doors open and care for their residents in appropriate, responsible and compassionate ways.

    With today’s reimbursement rates, the possibility of providing such care becomes increasingly limited. This has created a group of people with the ability to pay more who might like to do so, but state law prohibits this (as it should). The possibility of purchasing extra services described in this article, especially in smaller, rural, homes is quite limited.

    The de-funding of nursing homes would seem to me to be part of an attempt to emphasize home healthcare for as many clients as possible (whether appropriate or not), but I smell a rat.

    Just as closing the state hospitals and moving their residents into “community-based” care had the effect of rendering that population invisible and making the subsequent de-funding of care far easier to accomplish with the results that many of those who would have been housed in state hospitals now are homeless (and unmedicated) on the streets of our cities…

    So, moving elderly care from nursing homes to home healthcare will render that population invisible and allow those who would do so to further de-fund their care without notice.

    The underlying strategy is this: if residents of a nursing home lie in bed all day, are dirty, malnourished, and not otherwise well-cared for, if that facility is dirty and smells bad, the entire community realizes something is wrong. If all of those residents are living in the same circumstances in their own homes with minimal home health care, their misery is largely invisible and will go unnoticed except by their immediate family, who will always be a small minority of the general population and might even be blamed themselves by the general population for the sorry state of mom or dad’s elderly life.

    The rat I smell is the desire for those with large amounts of money and no compassion to avoid contributing to the spike in elderly care needs that are going to arrive with the aging of the baby boom generation by mostly moving that care out of the public eye and allowing our older folks to (figuratively) rot in their deteriorating homes where no one will notice and blame for their sorry state can be shifted from the public sector to their family members.

  2. Submitted by Joel Jensen on 04/23/2010 - 01:54 pm.

    You can’t just legislate quality. You have to pay for it. (ht D.N.)

    Average pay rates per day (per the article):
    Minnesota: $156
    Wisconsin: $198 (+$42)
    Connecticut: $345 (+189)

    For one person, Wisconsin’s rate gives over $15,000 more per year and Connecticut’s rate gives almost $69,000 more per year. That’s for just one person. What would that cover in increased staffing or increased wages? What would it cover for better living space and more modern equipment and technology?

    If you want to have quality care in nursing homes for your family and yourself and you also want to preserve a law that only one other state has chosen to adopt in the three decades since Minnesota embarked on its social experiment in equalized rates, you have to be willing to put your tax money where your mouth is.

    The ‘cost shifting’ referred to in the other 48 states is necessary because in many of those states nursing homes can’t cover the costs of care for Medicaid residents with the rates they are paid for Medicaid residents. These below-cost rates are driven by those states’ unwillingness to pay (tax) enough for those services to cover costs and provide enough margin for the businesses to continue to operate and evolve. At the same time, both state and federal regulations on quality care and documentation justifying the individual’s level of payment continue to change on an almost continuous basis – increasing both the complexity and cost of operations.

    So the nursing homes in those other states charge more to private paying residents and ‘shift’ the extra income from those residents to cover the losses from their Medicaid residents. For many homes in Minnesota these two categories of residents add up to over 70% of their income, so if they are locked into a rate that doesn’t cover their increasing costs it makes it impossible to survive unless they cut costs. If 70% of your costs are in staffing, it’s tough to make up the difference from other areas (utilities, mortgage payments, administration that deals with the increasingly complicated care and payment regulations), especially when the situation has continued to worsen over a period of years.

    If we are going to continue to tie private rates to Medicaid rates we have to be willing to pay Medicaid rates that cover the kind of quality care we legislate that nursing homes must provide.

    Quality care. Quality jobs. You cannot just say it. You have to pay it. That means you have to be willing to raise the necessary funds and that means you have to be willing to tax enough to pay those rates.

    Look back at the differences in rates referred to in the article. If we as a State want to hold on to a policy that addresses that difference in a different, more broadly distributed way, we must be willing to pay the cost of that choice – even when times are tough.

    Are we willing to advocate for specific tax increases, instead of just saying we don’t want that policy to go away?

    (Disclosure: I have provided services to nursing homes for over 20 years, have had friends, in-laws and parents cared for by nursing homes, and statistically have a 60%+ chance of spending time in one sometime before I die.)

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