Medicaid Rate Setting for Nursing Homes (2001)

The Legislative Program Review and Investigations committee's study of Connecticut's Medicaid rate-setting system for nursing homes examined the efficacy and equity of the current system. The study also explored whether other rate-setting methods, such as a case-mix system, might provide a better approach.

The committee found there is:

• a gap between the rates provided to nursing homes and the costs incurred by homes;
• no relationship between Medicaid rates paid or nurse's aide hours worked, and the level of care needed by residents;
• a growing number of facilities requesting and receiving special adjustments to rates (about 20 percent per year) and/or facing bankruptcy;
• a case-by-case approach to decision-making because no long-term care plan exists to guide program and financing decisions; and
• inadequate staff resources within the Department of Social Services to oversee financial stability of the nursing home industry.

The committee proposed 11 legislative recommendations, which were raised into sHB 5469. The recommendations would have modified the rate-setting structure by: requiring rebasing (i.e. readjusting) costs every three years to set rates; establishing an inflation index more reflective of nursing home cost increases; and introducing a case-mix approach to rate setting that begins to tie rates to the resident acuity of a facility. The bill also would have strengthened the state's long-term care planning efforts by transferring the long-term care planning function from the Long-Term Care Planning Committee to the Office of Policy and Management (OPM), and added resources and focus to the Department of Social Services' (DSS) role of overseeing the financial stability of the nursing home industry. The bill, however, was not adopted.

The committee asked the Medicaid Rate-setting Unit of DSS whether it had initiated any efforts administratively to correct the deficiencies the study found in two areas: 1) absence of standards for requesting and granting of interim rates and special adjustments; and 2) lack of verification of nurse and nurse aide hours when audits are conducted. The department responded that no standards have been developed for requests or approvals of interim rates, but that it continues to set the conditions of waivers through rate letter agreements between the department and individual nursing facility owners. Secondly, DSS indicates that, because of additional demands on auditing staff due to the 2001 strike-cost reimbursement reviews, the department has not yet been able to add verification of nursing hours worked to field audit procedures.

A broader long-term care planning requirement, Special Act 02-7, was adopted. This act requires that the Office of Policy and Management conduct a comprehensive needs assessment of the unmet long-term care needs in the state and project future demand for services. The assessment also must include a review of the Department of Mental Retardation's waiting list. In response to the committee's inquiries on the implementation status of the act, OPM notes that the act did not specify a date by which OPM must complete the needs assessment. Therefore, OPM intends to conduct the assessment in conjunction with the Long-Term Care Planning Committee's next comprehensive long-term care plan which must be submitted to the General Assembly by January 2004. In addition, OPM indicates that because no new resources were appropriated, it may rely on already completed studies and assessments, rather than conduct original research.