A Kaiser Family Foundation report indicates that long-term care consumed more than a third of the nearly $320 billion spent on Medicaid services during the 2007 fiscal period. The majority of the ~$109 billion spent on long-term care services and care went to nursing homes ($47.8 billion), followed by home and personal care ($43.6 billion), ICF-MR services ($12.4 billion), and mental health facilities ($4.8 billion). According to the report, 57% of the total spending was from the Federal government with the remaining 43% paid for by state programs. Nearly $195 billion or 61% of all Medicaid funding was used to cover acute care services, while another $15.9 billion (5%) was reimbursed to hospitals related to disproportionate share payments.

The following summaries are provided reflecting recent activity affecting individual state programs, in particular changes to reimbursements and provider tax assessments:

Florida has modified its QAF assessment to SNFs, with new rate letters recently issued reflecting rates effective 7/1/09 that includes a revised Quality Assessment Medicaid Share benefit and Supplemental Rate Add-on (increased from $4.31 to 7.14 PPD). The assessment has increased from $10.62 to $15.89 per non-Medicare day retrospective to July 1. Some analysts estimate that on average Florida SNF rates have increased approximately $6.00 PPD. The actual impact depends on facility-specific costs in relation to component targets and limits, as well as influences of prior year cost report data, inclusive of patient day volumes. Based on Intel from the Florida Health Care Association, CMS has still not granted approval of the QAF waiver program - but the state is so confident that it will be approved (similar to the 4/1/09 rate reset) that the July rates have been adjusted accordingly. It is also noted that the required CNA staffing level of 2.9 hours is being restored effective July 1.

In the state of Texas, updated RUG rates, proposed to become effective 9/1/09, have been issued for prospective payments to nursing homes. The proposed rates have been published but are subject to public hearing. A comparison of the proposed “base” rates to last years’ per diems by RUG category indicates that most of the higher acuity RUG categories will experience rate reductions ranging from $0.55 to $5.41 PPD, with all others increasing by varying amounts (but no more than $2.43). Accordingly, depending on the actual Medicaid CMI of an individual facility, the overall weighted-average impact will vary. For high acuity nursing homes with substantial utilization in the upper 10 Texas RUG categories, average payments are likely to decline whereas if the distribution of days by RUG level is uniform, increases and decreases would essentially offset and the average payment would appear to be stable (i.e. for a CMI of 1.0). It is also noted that the staffing level enhancement add-on is proposed to increase from $0.34 to $0.39 per day, which is incrementally added to each of the 27 staffing levels over the base rate.

Colorado has recently adopted a provider tax that became effective retrospectively to 7/1/08 through the rate period ended 6/30/09. The assessment is $6.43 per non-Medicare day, and the 7/1/09 – 6/30/10 rates have not yet been released. Facilities that are part of a CCRC are exempt from the assessment, and despite the Federal Stimulus and the additional dollars generated from the provider tax, the State’s Budget is reflecting a shortfall and it is expected that Medicaid providers will likely experience rate cuts, as recently announced by the Governor, of about 2.3%. Such cuts have not been approved or formally announced, but could likely take effect as early as September 1. It is also noted that the Colorado Department of Health Care Policy and Financing, has been notifying nursing home providers of changes to the reimbursement payment system to SNFs. The new rules and policy changes will impact rates retrospective to 7/1/08, and include, amongst other changes, the classification of related party home office and management fees and limits of such costs to the cost of the related party. Other defined costs will be required to be classified within defined cost centers, and the overall impact of these and other payment modifications could influence the per unit cost of the individual cost components comprising the overall Medicaid per diem rates paid to nursing facilities in the state.

The Quality Assurance Fee (i.e., provider tax) assessed to nursing homes in Wisconsin increased effective 7/1/09 pursuant to Assembly Bill # 75, with rates increasing from the previous assessment of $75/month per licensed bed to $150/month per bed (from $900/bed to $1,800/bed on an annual basis). It is possible that the provider tax could be further raised to $170/month for 2011. On August 17th, the Division of Long-Term Care in the Department of Health Services held its final reimbursement formula meeting for the purpose of establishing July 1 and August 1 Medicaid rates. July 1 rates will include an increase of $4.83 per Medicaid day from the current add-on level of $3.69 bringing the add-on to $8.52 per day, and the targets for the direct care nursing, direct care other, and support services will each increase retrospective to July 1.

The August 1 rates incorporate changes made to the nursing home formula from the DHS Reform Project, which includes $25.8 million in Medicaid cuts and reductions for SNFs in the 2009-2011 biennium. The cut for 2009-2010 lowers the previous stated rate hike of 2% to a 1.4% increase in rates, and nursing homes will now also be required to complete quarterly RUG assessments using MDS items contained on the Medicare PPS Assessment Form – this change is expected to reduce payments by $15.2 million due to the resultant acuity adjustments, and other changes include reduced payment for bed hold days, elimination of certain incentive payments, and a decrease in the inflation adjustment in the property tax allowance.

The Pennsylvania Quality Assurance Fee, or provider tax, for the 2009-2010 assessment period have been proposed but have not yet been approved. The August 15th Pennsylvania Bulletin announced the proposed QAF rates, which would be retroactive to 7/1/09 and extend through 6/30/10. The proposed rates have will increase from $23.75 to $25.00 per non-Medicare patient day for non-exempt facilities; and from $2.30 to $3.55 per non-Medicare day for county-owned SNFs, CCRCs, and facilities with less than 50 beds. It is expected that the supplemental revenue benefit reimbursement add-on of $10.18 per Medicaid day may increase slightly, although the proposed amount has not yet been listed.

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