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Seniors in Long-Term Care Harmed If Proposed Medicaid Cuts Take Effect November 4, 2011 in Assisted Living, CCRC, Home Care / Home Health, Hospice, Independent Living, Nursing Home / Rehab / SNF by Vladimire Herard Seniors in long-term care will be negatively impacted if President Obama carries out proposed cuts to Medicaid over the next decade, senior citizen rights and long-term care advocacy groups say. Apart from long-term care insurance, Medicaid is the prime source of payment for health care services for seniors. In summer 2011, as part of a larger deficit reduction package, Obama offered to cut $100 billion in Medicaid in ten years – a figure that has changed to $72 billion under a new administration proposal calling for $320 billion in cuts to both Medicare and Medicaid as of late September – to raise the debt ceiling from $14.2 to $18 trillion. Among the advocacy groups watching action on Medicaid in the White House and in Congress are the National Senior Citizens Law Center and the Center on Budget and Policy Priorities (CBPP), two of many of which are critical of the current administration’s plans to cut the program. Efforts to reach leaders of CBPP about expectations for cuts to Medicaid failed. “Any Medicaid service provider is apprehensive,” says Eric M. Carlson, executive director of National Senior Citizens Law Center. “It is not good for providers or beneficiaries. It depends on where the money is coming from. [Any action on Medicaid] will be done on the state level. If you talk about Medicare, they will have to reimburse the providers. It is bad news. It has an effect on Medicaid beneficiaries.” In a statement released April 6, the Center argued against the Medicaid cuts and block-granting outlined in the then-controversial and unsuccessful health care reform proposal by Rep. Paul D. Ryan (R-Wisc.), citing Medicaid as the only source of long-term care and support for 14 million seniors and people with disabilities. The Center added that, under Ryan’s plan, seniors would be denied coverage and face health risks; that their families will exceed their long-term care expenses and plunge into bankruptcy, and; most seniors in home and community-based care would be institutionalized. It urged Congress to come up with practical solutions without the cuts and jeopardizing care for lowincome seniors and the disabled. Aside from the National Senior Citizens Law Center, leaders of the National Academy of Elder Law Attorneys, National Consumer Law Center and Community Catalyst are also anxious about the proposed cuts. “The President’s deficit reduction proposal is expected to include $72 billion in savings to Medicaid,” says Brian Lindberg, public policy advisor of the National Academy of Elder Law Attorneys, Inc. “Generally, NAELA has opposed proposals that would reduce Medicaid funding because we are concerned that this will lead to less and poorer quality care for those who need long-term care. Cuts in reimbursement to long-term care facilities could lead to poor quality care.” Leaders of Community Catalyst, a national advocacy group pushing for fundamental changes to the country’s health care system, find that there is a stark lack of consensus between the Obama administration and Republican lawmakers in particular in Congress , which stakeholders should take note of as they closely watch federal action on Medicare and Medicaid, including long-term care service providers to seniors. “Obama is making proposals that the White House [seem to be] prepared to embrace … ,” says Michael Miller, director of policy of Community Catalyst. “[The President believes that revenue as well as cuts are the solution to the problem]. Boehner says he [only] wants the cuts. The lack of overlap between those two [is the main element to watch.] It does not leave room for a resolution. If you are a long-term care service provider, and you are looking at what has happened in the past week and what it means for you in the future, you should be looking at the sequester.” In response to the various federal agency regulations and proposed legislative measures that address Medicare and Medicaid and were supported this year and over the past decade by national lobbying groups representing the assisted living, nursing home, home health care and hospice industries as well as senior long-term care in general, Miller says the main focus should be on the “sequestering of funds” of Medicare and Medicaid, Obama’s budget proposals and action in Congress, but … “There are some other things that can be taken from [Obama’s proposal] that are relevant to the long-term care industry,” he says. “There is a view in the White House that [the public] is not getting the best value for the buck [for health care service]. They are concerned that the cost for the same care varies with the different types of health care settings whether that would be a rehabilitation hospital or a skilled nursing facility. “ Aside from the proposed $72 billion in cuts, in a statement released earlier this year, CBPP leaders are concerned about the president’s plans to achieve the savings by switching to a calculation method known as the “blended rate” in reimbursing states for their share of Medicaid. The leaders fear that it will decrease the amount of state funds paid for indigent health care. The federal government pays states a different rate for different populations such as seniors because they are more expensive to cover than others. Under the blended rate, states would get the same rate for all Medicaid patients. The new blended rate would be set at a level providing the state with less federal funding than it receives. Additionally, a fair and accurate blended rate for each state is hard to determine, the CBPP says. “Anything is more rounded off that focuses on particular costs,” says Carlson of the National Senior Citizens Law Center. “To the extent that you blend rates, it will not cover costs that are incurred. It is the anticipation that it would cost less. It may be attractive for those concerned with expanding the corporate bottom line [but it is not beneficial for providers or the quality of care.]” The cuts could be lead to a decrease in the benefits the states offer, CBPP says. The states would seek waivers to cut benefits or reduce their low payments to hospitals and health care providers and the cuts are likely to get the elderly and disabled because most of the Medicaid money is spent there. While only 23 percent of people enrolled in Medicaid in 2010 were elderly and disabled, they made up 64 percent of Medicaid spending, the Congressional Budget Office (CBO) says, and seven out of 10 nursing homes residents are on Medicaid. Most residents use their savings to pay for nursing care unless they use long-term care insurance or must rely on Medicaid. Nursing home care costs between $35,000 to $150,000 annually. MEDICAID: ITS COMPONENTS Medicaid is a joint federal-state program providing health insurance coverage to seniors and covering nursing homes for the eligible. Without an alternative long-term care insurance program, Medicaid is the primary nursing home insurance program of the middle class. For home health care, Medicaid offers little except in the state of New York where home care is covered for all Medicaid recipients in need with home health costing less than nursing home care. Few other states such as Hawaii, Massachusetts, Oregon and Wisconsin are working to provide Medicaid coverage for those who stay at home. Congress and the federal agency the Centers for Medicare and Medicaid Services (CMS) pass laws and craft regulations – respectively – to oversee Medicaid but each state runs its own program. Consequently, regulations differ in each state although the structure is the same nationwide. The main Medicaid regulation for nursing home residents is that they must pay all of their income, minus certain deductions, to the nursing home. Deductions include $60-a-month personal-needs allowance – with this amount being higher or lower in some states – a deduction for any uncovered medical costs (including medical insurance premiums) and in the case of an applicant, an allowance for the spouse who continues to live at home if he or she needs income support. Eligibility for Medicaid is prohibited if the nursing home residents’ income exceeds $12,022 a month for 2011 unless the excess is paid under a “(d)(4)(b)” provision of the federal law, also known as the Miller test. NEW MEDICAID RULES On Feb. 8, 2006, President Bush signed into law the Deficit Reduction Act of 2005 (DRA), which cuts nearly $40 billion over five years from Medicare, Medicaid and other entitlement programs. The law restricts the elderly from transforming assets before qualifying for Medicaid coverage of nursing home care. “DRA is a big piece of the legislation,” says Carlson of the National Senior Citizens Law Center. “That is the reality we are dealing with. That was legislated five or six years ago. It is simply part of the legislation.” The DRA changed Medicaid’s long-term care regulations, including the look-back period that involves revisiting a senior’s past means; the transfer penalty start date; an undue hardship exceptions; the treatment of annuities; community spouse income rules; home equity limits; the treatment of investments in continuing care retirement communities (CCRCs); promissory notes; and state long-term care partnership programs. Senior citizens rights and health care advocacy groups have come out strongly against the law. “NAELA opposed the final version of the DRA because it included harmful eligibility rules for those seeking long-term care,” Lindberg says. “We believe it should be repealed. Some of the provisions in the DRA actually make it more difficult for facilities to receive payments.” ISSUES WITH THE BLENDED RATE The Center for Budget and Policy Priorities (CBPP) says the blended rate proposed by President Obama — to be applied across the states – is problematic. The proposal would replace the various matching rates at which the federal government reimburses states for their costs in insuring people through Medicaid. The CBPP argues says the costs shift in those states rather than being constrained and this does not produce administrative cost or other efficiency savings. States, facing budget woes, would make up for the reduction in federal funding by cutting Medicaid. Some beneficiaries have little access to physician care, particularly from specialists, due to Medicaid’s low reimbursement rates. The Center also says the federal government would find it difficult to calculate each state’s blended rate fairly and accurately with the DRA law. The federal government will pay a higher matching rate to cover large numbers of low-income persons the new law makes eligible for Medicaid starting in 2014. To measure a blended rate for each state, CBPP says federal officials would have to assume much about each state’s future Medicaid enrollment and expenses, including how many people in each state who become eligible will enroll and how healthy or sick they will be. Additionally, federal officials would have to estimate how many people in each state who are eligible for Medicaid will enroll after health care reform’s coverage expansion and insurance mandate occur as well as what the state of their health would be, the Center says. These assumptions would be difficult to reach because they would not be based on state expenses, it states. Officials would also make other estimates for which, the CBPP argues, hard data is not available and that would affect the blended rate assigned by a state. As a result, the blended rate would cause controversy because states would challenge the federal estimates and complain that their blended rate was set too low, the Center concludes. The original $100 billion in savings in federal Medicaid in ten years is said to stem from three sources: (a) a series of small but influential measures in President’s Obama’s fiscal 2012 budget to increase Medicaid efficiency and reduce costs in medical equipment, prescription drugs and other items, amounting to $10 billion to $15 billion; (b) a proposal to restrict states from raising part of their matching contributions for Medicaid by taxing health care providers, which would save $25 billion to $45 billion depending on the breadth of the proposal; and (c) the blended-rate proposal. By limiting how states raise funds to cover Medicaid, the “provider tax” proposals represents a cost shift to states. The Congressional Budget Office (CBO) and the Office of Management and Budget (OMB) estimate these proposals would decrease Medicaid costs because states could not find other income to replace provider tax revenues – and would have to cut Medicaid as a consequence. The federal government pays a fixed percentage of each state’s Medicaid costs, known as the Federal Medical Assistance Percentage, or FMAP. This percentage cuts across states from 5 percent to 15 percent and average 57 percent nationwide. The federal government covers a larger share of the costs – 70 percent. Under President Obama’s Patient Protection and Affordable Care Act (PPAC), the federal government will fully cover the costs that state Medicaid program incurs in providing health care to beneficiaries the new law makes newly eligible for Medicaid for the first three years that the law’s Medicaid expansion takes effect, 2014 to 2016. The federal government will cover between 93 percent to 95 percent of these costs in 2017 through 2019. The U.S. Department of Health and Human Services (HHS) announced that states will not have to determine applicants’ eligibility twice. Instead, HHS will enable states to use other methods to ensure proper training such as statistical sampling and determine the percentage of a state’s Medicaid beneficiaries that falls into each matching rate category. The costs to states of sampling would be modest, CPBB says. The administration savings from a blended rate would represent only a small fraction of the amount of federal Medicaid that states would lose if the federal government shifted to blended rates and set those rates at levels to produce sizable federal savings. “There are a lot of places [in which the administration could make changes.]” says Miller, policy director of Community Catalyst. “They are going to make changes in Medicaid payments. Those are things to watch but the greatest part of the debate is the sequestering of funds. We can come up with an agreement. “We will get the debt ceiling expiration. We have Bush cuts. If we don’t deal with the budget cuts now, the cuts will take effect in 2013.] There is a nexus [between what is occurring with the Obama administration and Congress and the different federal regulations, healthcare-industryspecific federal measures and provisions of Obama’s health care reform law]. Moreover, a year from now where is all of this going to land? It is likely to be dealt with in the lame duck session and they will go into 2013.“ Congress has assembled a deficit reduction package as the Obama administration’s spending or tax proposals have triggered opposition from powerful interest groups. Community Catalyst leaders say the position that the package – combined with myriad federal regulations that add and subtract funds from Medicare and Medicaid and aspects of Obama’s health care reform law – reflects that the president is actively seeking savings from every conceivable source and to improve the delivery of care overall. “Clearly, they are interested in achieving savings and better health care,” Miller says of the Obama administration. “There are conditions [in which] a patient [becomes ill] and ends up in the hospital with a condition that could have been prevented with ambulatory care. They are interested in financial incentives to cut back on (or reduce) those events. It does not mean that they will happen soon. These things are on the (Obama) administration’s mind.“ The National Senior Citizens Law Center does not support the rates or cuts of any kind. “Medicaid is a safety net program for those who need health care and need help paying for it,” Carlson says. “It is not a good place to cut. We should look for ways to move seniors out of nursing homes and into community-based or home care. You want to make changes that are smarter or better or coordinating [coverage], not cutting here or there. We need consistency and efficiency in a method that is more rational [than what is being proposed on the federal level].” NAELA, too, opposes cuts, seeking more specific alternatives. “First, work to reduce the waste, fraud and abuse in both the Medicaid and Medicare programs is justifiable and necessary,” Lindberg says, referring in part to a legislative measure, also known as the Community Living Assistance Services and Supports (CLASS) program, created by the late Sen. Edward Kennedy (D-Mass.). Never passed in its entirety but instead having its parts interspersed with that of President Obama’s Patient Protection and Affordable Care Act (PPACA—Public Law 111-148), CLASS was meant as a long-term care insurance plan, backed by premiums, not taxpayer money. Under the original measure, workers would pay $100 a month or less in return for a daily cash benefit of about $50 in the case of disability in the future. Recipients could utilize the funds for home health care or nursing home services. The duty of setting premiums and benefit levels would fall to the HHS. “Second, use of innovations like the use of care coordination and medical homes, and other techniques to reduce unnecessary hospitalizations and nursing home stays are important steps to lower costs and improve quality of care,” Lindberg adds. “Provisions in the ACA to promote home and community based care have good potential as well. Because dual-eligibles are an especially expensive, high-care cadre, these care coordination strategies and innovations that better align Medicare and Medicaid benefits are particularly important. “Third, in the future when the CLASS program is implemented, individuals will have an opportunity to better plan and prepare for their long-term care needs. Individuals could use CLASS as a foundation to build upon and purchase additional long-term care insurance.” Community Catalyst leaders say President Obama must consider how best to go about reducing federal health spending. “It is very important that the Obama administration approach it in the right way,” Miller says. “First and foremost, if you make reductions, you have to be smart about it. You have to reduce low value health spending by, for example, reducing re-admissions to hospitals. You have to focus on where we are not getting value from the nation’s health care system and its services as the President did in his proposal to reduce prescription drug prices.” It is also important to cast the net more broadly. “If you want to moderate cost growth, you cannot focus on federal healthcare spending alone,” Miller says. “If you don’t control private spending, you cannot control federal spending either. You also have to address public health. If we don’t address diabetes and other health conditions, they will have a disproportionate effect on spending. President Obama [must not] cut back on public health care dollars. We need to improve the health of the public. On the other hand, [to do it right], you don’t support rules like the blended rate. You [don’t] make states pay more [in Medicaid payments]. The federal government is financially much stronger than the states. How reasonable is it for the federal government to try to solve its fiscal problems by shifting costs to the states?” Vladimire Herard is a freelance writer in Chicago. She was a health writer and online publication freelancer for the Guidance Channel, Longtermcare.com and States News Service for five years. For Community Development Publications, a publication chain in Silver Spring, Md., Ms. Herard wrote and edited newsletter articles about senior health and housing (Housing the Elderly Report and Aging News Alert); substance abuse prevention and treatment funding (Substance Abuse Funding Newsletter); health care financing (Inside HCFA); and food and product safety issues (Inside FDA) for four years. She has written articles about public education reform, county affairs, crime and community development for the Chicago Defender daily newspaper, the Syracuse Post-Standard and Syracuse Herald-American daily newspapers in New York state and the Pride of Syracuse monthly newspaper in New York state for five years. A print journalist for 18 years, Ms. Herard holds a master’s degree in newspaper from Syracuse University and a bachelor degree in liberal arts from Loyola University in Chicago.