SENIOR LIVING
Assisted Living
How Medicaid Reimbursement Can Pay Off
for Providers
R
eimbursement for assisted-living providers historically
has been private pay. While that continues to be the case,
over the last decade there has been an expansion in the number
of states that contribute Medicaid dollars for some services.
Currently, 44 states offer some form of Medicaid
reimbursement for assisted living (AL), according to the
Paying for Senior Care website. Most of these states use
one or more combinations of Medicaid waiver programs to
provide AL coverage. It is important to note that this coverage
varies because Medicaid options vary from state to state and
are administered at the state’s discretion.
One such program is the home and community-based services
(HCBS) waiver, which allows for the reimbursement of
long-term-care services provided in a community setting. An
HCBS waiver allows the state to test new methods of care
delivery on a limited and temporary basis. This differs from a
Medicaid plan amendment, which creates an entitlement and
a permanent change to the program. An entitlement means
that any person who meets the eligibility criteria is entitled
to receive the benefit and the state cannot cap the number of
beneficiaries.
Last spring, the Centers for Medicare and Medicaid (CMS)
implemented the Medicaid Community First Choice option,
which is a new state-plan option created as part of the Patient
Protection and Affordable Care Act (ACA). The rule is final,
but CMS is revising its definition of what constitutes “home
and community-based” settings. The ruling is expected at any
time regarding AL’s role in community-based care.
Who’s Eligible and What’s Covered by HCBS
Waivers?
In general, participants must be elderly, require a level of
care that typically is provided by a skilled-nursing facility
(SNF) and meet financial eligibility requirements. Programs
generally pay for personal-care services, such as medication
assistance, housekeeping, laundry, social/recreational
activities, transportation and supervision. Room and board is
paid for by the resident.
To help pay for room and board, residents can use the
Housing Choice Voucher (HCV) program as a supplement.
This program is funded by the Department of Housing and
Urban Development (HUD) and administered by local
public-housing agencies. Assuming a resident qualifies for
both an HCV and an HCBS waiver, these programs can be
used in conjunction with one another. In order to accept HCV
residents, certain HUD restrictions will apply.
An HCBS waiver is assigned to the resident, not the provider.
So while a facility must be approved to serve Medicaid
residents, the waivers themselves are not “project based.”
The waiver will stay with the beneficiary if she or he decides
to move. This gives the resident more control and allows for
greater choice.
Reimbursement methods vary by state. They include flat
monthly rates, tiered rates based on level of activities of daily
living (ADLs) required, case-mix rates based on the acuity of
the resident, fee-for-service rates or negotiated rates. The most
common reimbursement schemes are tiered rate or flat rate.
Usually, Medicaid reimbursement is less than the available
private-pay rate, but some states pay near market rates.
HCBS waivers allow the state to cap the number of beneficiaries
and limit services to specific geographies or groups of people;
an authority that is not otherwise allowed under Medicaid.
Additionally, the average cost per beneficiary must not exceed
the average Medicaid nursing-home cost; it must be budget
neutral. The preference toward HCBS waivers is expected to
continue in the near term as states focus on short-term cost
containment.
Political Environment
States are increasingly looking to stretch the dollars they have
and allowing Medicaid recipients to receive care in assistedliving facilities (ALF) is a way to achieve that goal in the
long-term. It costs significantly less to care for a resident in
an ALF as opposed to a SNF. Lower-acuity residents who do
not need the level of care offered by a SNF can be served in a
lower-cost setting. In the long term, this would cause loweracuity Medicaid residents to live in ALF’s, while higher-acuity
residents would be served by SNF’s. It appropriately matches
the resident’s acuity with the level of care. A well-crafted state
plan could be a budget-reduction mechanism.
However, expanding Medicaid reimbursement of AL services
could create a surge in the number of residents in the near
term. Seniors who delayed seeking care because they did
not want to live in a SNF may decide to enter an ALF. With
intense pressure to cut government budgets in the near-term,
anything that expands the Medicaid program could be viewed
negatively by voters and be a nonstarter for politicians. While
per-resident costs of providing care in an ALF are lower,
adding more people to the system has the potential to increase
total Medicaid expenditures in the near term. Further, there is
concern that fiscal belt tightening at the state level may lead to
cuts in overall Medicaid spending.
However, there are tailwinds supporting the expansion of
Medicaid reimbursement for AL. The ACA created an incentive
for states to spend a higher proportion of their Medicaid longterm-care funds on home and community-based services.
This program, known as the Balancing Incentive Payment
Program, provides a higher federal matching payment if a
state uses more of its resources to increase access to HCBS.
There also are societal benefits. Some argue that AL is a
more suitable setting to provide long-term care to the frail
elderly and that living in a home-like environment may carry
psychological benefits. States can help provide access to
assisted living for those who otherwise could not afford it.
A greater number of individuals could receive the care they
need.
But there are drawbacks as well. While reimbursement varies
by state, Medicaid rates are typically below the available
private-pay rate. They also are subject to change at the whim
of legislators, whereas private-pay rates are determined by
the market. Additional regulatory and reporting requirements
will accompany Medicaid residents. For example, facilities
would have to meet quality-assurance standards, keep resident
records and have a mechanism for feedback. A facility may be
required to set aside a certain number of units for Medicaid
residents. There also may be physical-plant requirements,
such as a kitchenette, adequate common space and singleoccupancy units. But many of these requirements will be met
by default.
Serving Medicaid residents is not for every provider, but
may be very beneficial to some. New, high-end facilities with
waiting lists would not see the benefit that a mature facility
with lower occupancy might. Facilities with lower occupancy
have the most to gain by serving Medicaid residents. Units
that otherwise would be vacant could be filled, albeit at a
lower margin. In states where Medicaid reimbursement is
competitive with private-pay rates, the benefit is even greater.
This is an ever-evolving topic, but the trend seems to be
moving in the direction of expanding Medicaid reimbursement
for AL. It is state specific, so providers should evaluate the
programs in the states where they are located. Agile providers
who position their facilities to accept Medicaid residents could
stand to benefit from more stable occupancy and consistent
revenue.
Kevin Tholke is an associate with Lancaster
Pollard in Los Angeles. He may be reached at
[email protected].
What’s the Upshot for Providers?
On a macro level, expanding Medicaid reimbursement for AL
will result in higher demand across the board. Residents who
previously had no other option but to live in a nursing home
may now choose assisted living instead. As a result, some
demand is shifting from SNFs to ALFs.
This is positive for the entire AL industry. Most state HCBS
waiver plans have long waiting lists of residents looking to
participate, so there is strong demand. The effect will be even
greater in states that amend their Medicaid programs to create
an entitlement as this makes the pie even bigger.
Providers who accept Medicaid stand to benefit from more
stable occupancy. A Medicaid resident’s ability to pay is not
dependent on income or assets. Medicaid demand is driven
solely by the need for assistance with ADLs. While privatepay demand decreases in a down economy for financial
reasons, Medicaid demand should remain steady. Consistent
demand leads to less volatile occupancy and, therefore,
lowers risk. Revenue diversification can soften the blow in the
event of another shock to the real-estate market or the broader
economy.
To learn more:
•
Paying for Senior Care—www.payingforseniorcare.
com/medicaid-waivers/assisted-living.html
•
Sec. 1915(c) Home and Community-Based Services
Waivers—www.medicaid.gov/Medicaid-CHIPProgram-Information/By-Topics/Waivers/Home-andCommunity-Based-1915-c-Waivers.html.