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.