You asked (1) if the state eliminated the travel allowance for visiting nurses and (2) whether similar reductions are occurring in surrounding states.

We believe you are concerned about a trend of lower-than-inflationary increases in Medicaid reimbursements for home health care services, which would include payments the Department of Social Services (DSS) makes to visiting nurse agencies.

SUMMARY

Although we cannot say whether there have been widespread cuts in the perquisites provided to home health care agency employees, the state's Medicaid payments to these agencies have not kept pace with inflation over the last several years. Inadequate reimbursements could force these agencies to scale back on the benefits they offer their employees, such as travel allowances. The trade group representing the state' home health care agencies reports that its members' number one concern is low Medicaid reimbursements.

A number of bills have been proposed in recent years to increase home health care rates. In 2002, the Human Services Committee considered a bill (HB 5559) that would have required the DSS commissioner to (1) increase the home health fee schedule by 12% (which would have been passed on to direct care providers) and (2) establish a distress fund for home health care agencies having financial problems as a result of serving a disproportionate share of Medicaid patients. The bill died in Appropriations.

We contacted officials in New York, Massachusetts, Rhode Island, and Vermont. We are still waiting to hear from the latter two states.

In both New York and Massachusetts, the trade groups representing the state's home health care agencies identify inadequate Medicaid reimbursements as their number one concern. Unlike Connecticut, New York's home health care rates are tied to inflation, although rate ceilings have had the effect of limiting the degree to which these agencies can rely on Medicaid to meet their costs. In Massachusetts, rates have risen fairly substantially in the last few years. But the trade group representing the agencies there continues to argue for additional increases to meet costs.

WHAT'S HAPPENED IN CONNECTICUT

Medicaid Reimbursements

Since July 1, 1994, DSS has used a fee schedule to reimburse home health care agencies for the home health services provided to Medicaid-eligible individuals. (Previously, rates were cost-based. ) Although state law allows the DSS commissioner to increase these fees annually based on cost increases (CGS § 17b-242), the rates have not gone up each year. In fact, for the rate years (RY) (run from July 1 to June 30) of 1993-94 through 1996-97, rates were stagnant. Yet during that time, the Consumer Price Index (CPI), rose each year.

For example, the skilled nursing base rate that DSS paid agencies for providing skilled nursing services remained at $ 79 per visit from RYs 1993-94 through 1996-97. If CPI had been applied to the fee schedule, the DSS rate would have risen to $ 85. 49 by 1997, an 8. 2% increase or about a 2% rise during each of the four years. A comparable rate stagnation occurred for other home health care services, such as home health aides.

In subsequent years, these rates rose intermittently, with the largest increase (2. 1%) occurring between RYs 1996-97 and 1997-98. For the current rate year (which runs from November 1, 2002 to June 30, 2003), DSS provided a 1. 5% increase.

At the same time, the gap between actual rates and CPI has grown, with the 2001 DSS rate falling 12% short of a CPI inflated rate. Attachment 1 depicts the growing gap between actual DSS home health care rates and CPI for skilled nursing services and home health aides from RYs 1993-94 to 2000-01.

How Inadequate Reimbursements Translate To Cuts in Employee Perquisites

We were unable to call the state's home health care agencies to find out to what extent they have had to reduce benefits offered to their employees as a result of insufficient reimbursements. But we spoke with the industry's trade group president to get a sense from him how inadequate Medicaid rates have affected its members. A relative newcomer to Connecticut's home care industry, Brian Ellsworth, the President and Chief Executive Officer of the Connecticut Association for Home Care, told us that he has met with about one-third of the association's membership. He reported that the number one concern of these agencies is the inadequacy of Medicaid reimbursement.

Ellsworth also noted that many of these agencies have been able to continue to operate in large part because Medicare reimbursements for home health care services have improved since Congress changed the way that program pays for the services. The Medicare prospective payment system, which went into effect in October 2000, has, in Ellsworth's mind, subsidized Medicaid in many service areas, including home health care.

Testimony in support of last year's Human Services bill (HB 5559), which would have made across-the-board increases in Medicaid rates for home health care services, echoes Ellsworth's remarks, although none of it speaks specifically to cuts in employee benefits. Joanne Walsh, President of the Visiting Nurse Association of South Central Connecticut, asserted that the lack of regular cost-of-living adjustments for home health care providers has contributed to a growing wage and benefit gap between home health care workers and other health care workers, such as hospital employees. Most of the speakers talked about the importance of preserving these services as a less costly alternative to institutional-based care, including nursing homes.

SURROUNDING STATES' EXPERIENCES

New York

Unlike Connecticut and Massachusetts, New York uses a cost-based methodology when determining Medicaid home health care rates, although there is a two-year lag between costs and rates. (For example, the state used the 2000-01 cost reports to set rates for 2002-03). Once the rates are set, the department inflates them using the CPI for Urban Consumers. This is a result of legislation passed in 2000 that requires all cost-based rates to be inflated to the CPI. But the rates may not exceed ceilings that are established in law, which, according to Philip Mossman, Assistant Director of the state's Department of Public Health's Bureau of Health Economics, has prevented many homes from getting reimbursements that cover costs. For the last four years, the state has used the following inflation rates:

The home health care trade group, New York State Association of Health Care Providers, identifies inadequate reimbursements as a major problem in a recent publication. Part of the problem, the association says, is the state's wage and benefit and mandatory training and supervision requirements. These factors make it difficult to attract new employees or offer higher wage, benefits, or other retention strategies to their existing staff.

Massachusetts

A recent paper published by the Home and Health Care Association of Massachusetts points to Medicaid reimbursement as the top policy challenge for the state's home health care industry. It asserts that payment rates have been inadequate since 1993 "when the state set a single class rate for the industry, at amounts well below the cost of care in 1990. " Rates did improve in 1999 and 2001, the report notes. But it adds that nursing salary inflation and annual "pass-throughs" to paraprofessionals working in human services and nursing homes have made it harder for the home health care industry to stay competitive with other health care industry sectors.

Data provided by Michael Grenier of the Massachusetts Division of Health Care Finance and Policy (the rate setting agency) corroborates some of the trade group's assertions. It shows that Medicaid home health care rates have increased since 1997, with a fairly substantial hike in 2001. Table 1 provides per unit rate trends for six home health care services. Rates generally increased modestly in the first two years (about 3%). For certain services (e. g. , skilled nursing), they climbed significantly in 2000 and 2001 (13. 4% and 11. 1%, respectively, for skilled nursing).

Table 1: Medicaid Per Unit Payments for Certain Home Health Care Services in Massachusetts

RC: ts