Download Payment Reform January 2015 - Care Providers of Minnesota

Payment Reform
January 2015
Document1
General:
You know the statistics. Baby boomers are turning 65 at the rate of 10,000 per day.
Minnesotans age 85+ increased 150% over the next three years. There will be more seniors
than schoolchildren by 2020. The Age Wave has arrived, and it’s starting to impact state budget
decisions in the next biennium and beyond. The current funding system for long term care in
Minnesota is broken and does not serve the needs of seniors, caregivers or the state. Actions
we take this legislative session will create a permanent solution that ensures a high quality of
life for our seniors today and in the future.
Reform will provide better care for our aging population, ensure safe and quality care from
experienced caregivers and preserve access to long term care across the state.
Preserves Access
 Ensures seniors will have access to care in all the places they call home, near their
families and in their communities.
 Creates sustainable, stable funding model that covers the cost of quality care and
quality caregiving.
 Places priority on reliable, quality care for seniors by removing dependence on
unpredictable two year budget cycles.
Invests in Caregivers
 Provides livable wage for caregivers.
 Creates pathway to provide health care benefits for caregivers.
 Levels playing field to help recruit and retain qualified caregivers in competitive labor
market.
Ensures Quality
 Strongly encourages providers to participate in quality improvement programs to
ensure seniors are receiving the best care from experienced caregivers.
 Rewards improved quality of care.
Promotes Efficiencies
 Incentivizes efficiency in non-direct caregiving operations.
Values/Goals of Proposal:
 Employee standard of living and workforce needs
 Fund/incent/improve and reward quality
 Resident dignity/privacy
 Access throughout the state
 Improved settings and resident/employee environment
 Understandable for policymakers and providers
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Payment Reform
January 2015
Document1
One key part of reform is a new nursing facility payment system. Below is a summary of the
proposed calculation for each component of the rate in the new payment system proposal and
a preliminary review of the modeling results. At this time, the assumption is that the new
system will be implemented on October 1, 2015, with the exception of property rates which
would change on October 1, 2016. To perform these calculations, the proposal will use the
most recent statistical cost report and quality measures available. The year ending 9/30/2014
cost report will be used for establishing the October 1, 2015 rates.
The modeling results below are based on the most recent costs reports, for year ended
9/30/13. The model uses two geographic peer groups derived based on wage data, and facility
type and length of stay are not used to group facilities within those peer groups.
Care-Related Rate: This component is calculated using facility specific costs for nursing, social
services, raw food and activities.
 The nursing portion of this per diem is adjusted for case mix. The non-nursing care
portion is not adjusted for case mix.
 A facility’s care related rate is the lower of actual facility costs or a limit.
 The limit is determined by two components, percentage of peer group median costs and
quality score. The proposal uses quality scores from 10 (95% of median limit) to 90
(140% of median limit) with limit percentage being adjusted on a straight line basis for
quality scores between 10 and 90 (i.e., score of 50 equals limit of 117.5% of median).
Other Operating Rate: This component is calculated using costs for dietary staff, housekeeping,
laundry, utilities and administrative costs (including property and liability insurance).
 This portion is not based on individual facility costs and not adjusted for case mix.
 Each facility receives a price calculated as 105% of the median for their peer group.
External Fixed Rate: This component is similar to current practice, including bed closure
incentives, surcharge, property taxes, license fees and the surcharge exactly as in current rates.
 Proposal moves property insurance into other operating rate, and
 To add health insurance costs, which is defined as costs of employer plans, contributions
to HSAs and the cost of ACA mandate assessments.
Property Rate: A new, but yet to be developed property payment system will begin
implementation on October 1, 2016.
 In the development of rebasing several years ago, work was done to determine the
impact of a transition to a Fair Rental Value system. Data was collected in 2009. While
this data is likely still useful for analysis, other ideas are still under examination including
how to pay for new buildings.
 Cost and rate implications of a change are unknown and depend on a number of policy
decisions that would need to be considered.
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Payment Reform
January 2015
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Modeling Results: The model analyzes changes to the operating rates (including external fixed)
as described above to the extent possible based on current cost information. We have used the
2013 cost reports with the costs updated to reflect future cost increases, and have compared
the new rates against current facility rates. Full implementation of the new payment system
produces the following results:
Percent increase in
Revenue by Cohort
0% to 4.99%
Number of Nursing
Facilities
12
5% to 9.99%
14
10% to 14.99%
19
15% to 19.99%
55
20% to 24.99%
70
25% to 29.99%
83
30% to 34.99%
59
35% to 39.99%
26
40% or Greater
29
Additional facts of full implementation:
 Average rate increase of 25%
 More than 90% of facilities receive a rate increase of greater than 10%
 Average rate increases are slightly higher in rural peer group
 Annual costs of new operating payment system to state is around $110 million
 Fiscal note (state share costs) for upcoming biennium if there is no phase-in is $185
million
 40 facilities subject to care-related limit
 146 facilities whose costs exceed other operating price
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Payment Reform
January 2015
Document1
Another key part of payment reform is linking the Elderly Waiver budget caps to changes in nursing
facility rates.
Background
The Elderly Waiver (EW) program funds home- and community-based services (HCBS), including services
provided in assisted living settings for people age 65 and older who are eligible for Medical Assistance
(MA). To be eligible for EW, a participant must be age 65 or older, be financially eligible for Medical
Assistance, and meet the criteria for nursing facility level of care.
EW has successfully created opportunities for Medicaid recipients to access services in settings other
than nursing facilities. Since the program began, it has saved the State of Minnesota billions of dollars
by allowing for client choice and access to HCBS services.
Prior to 2011, the Elderly Waiver program budget caps were linked to increases in nursing facility rates.
This allowed for parity between the two programs, and made sure that clients were able to go to the
more cost effective HCBS setting. In 2011, this symbiotic nature of the EW and nursing facility programs
was removed, and the EW caps were no longer pegged to nursing facility increases.
The removal of the link between the EW budget caps and nursing facility rate increases has created
incentives that make community based EW services less feasible for some clients when compared to
nursing facility services.
Proposal/Goals
By re-joining the EW budget caps to nursing facility rate increases, the state will again insure that the
two programs operate in a way that allows Medicaid clients appropriate and efficient options and
choices.
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