Keep Nursing Home Payments Flexible, PAR Says

A bill to protect the nursing home industry from certain types of budget cuts is nearing final passage this week. SB 613 would set in law the formula used to determine Medicaid reimbursement rates for nursing homes, limiting the state’s options for cutting payments when budget reductions are necessary. Current budgeting flexibility should be maintained, and this bill should be rejected.

The reimbursement formula is now set by administrative rule and can be altered to adjust payments when the budget needs to be cut or to promote policy changes. A recent adjustment to the formula, which was later rescinded, would have reduced payments for empty beds and saved the state $40 million.

The nursing home industry reports that setting the formula in law would stabilize revenues to homes and increase their creditworthiness. Presumably, this would encourage owners to make upgrades to their facilities. However, a substantial component of the reimbursement formula already funds capital improvements, so the additional incentive should not be necessary.

Louisiana has the 41st worst nursing home occupancy rate in the nation, 76 percent compared to the national average of 86 percent. This equates to more than 8,000 beds unoccupied in 2003, with the nursing home resident population continuing to decline between one and two percent annually.

A pattern of declining services and increasing spending in the Medicaid nursing home program in Louisiana is evident. Since 1996, service volume has declined by 20 percent from 10 million to 8 million patient days. During the same period, total spending has increased by 36 percent from $477 million to $650 million.

Louisiana needs a strategy to reduce inefficiency in its system of long-term care for the elderly. Adjustments to the reimbursement formula will have to be a part of that strategy. Setting the formula in law now would discourage progress in this key area of health care reform. SB 613 should be rejected.