2005 Testimony
Testimony Before the House Appropriations
Human Resources Subcommittee
Representative Delzer, Chairman
HB 1012 - DHS Budget - Long Term Care - Medicaid Budget Area
January 13, 2005
Chairman Delzer, member of the committee, I am David Zentner, Director of Medical Services for the Department of Human Services. I appear before you to provide information on that portion of the Long Term Care budget that the Medical Services Division exercises administrative responsibility.
Programs
The three long-term care services that are the direct responsibility of the Medical Services Division include Nursing Facilities, Basic Care Facilities and the personal care option.
Nursing Facility services account for about 87% of Medicaid expenditures for the long term care continuum and this budget item continues to increase each biennium.
In 2001, the Department received approval for a state plan amendment from Centers for Medicare and Medicaid Services (CMS) that permitted the Medicaid program to claim the time spent by basic care staff in caring for residents, as an allowable cost through the personal care option. Prior to this time all payments made to Basic Care Facilities were paid using all state funds.
In 2003, the Legislature required the Department to expand the personal care option to include services provided in a home setting. As a result, the Department was required to prepare a new state plan amendment that was submitted in August 2003 with an effective date of September 1, 2003. As of today the state plan has not yet been approved by the federal government. The major stumbling block has been the payment of personal care in a Basic Care Facility. Initially CMS was going to deny the amendment because of this issue even though they had previously agreed that we could include personal care services provided in a Basic Care Facility, in the previous state plan amendment approval. While we were able to convince them that those services were legitimate personal care services, we argued for months over what costs could be included as personal care services. After months of negotiations, we believe we have come to a tentative agreement, and are confident that the plan should be approved no later than February. In the meantime we have not been able to claim on personal care services for individuals living in their own homes. When the plan amendment is approved we will be able to claim federal funds back to September 1, 2003.
In November 2004 a total of 111,152 nursing facility days were paid through the Medicaid program, which is the equivalent of 3,585 individuals occupying a bed for the entire month. These payments include services provided in the 80 licensed nursing facilities in North Dakota, swing bed hospitals, and out of state facilities. At the same time a total of 490 individuals had payments made for them through the basic care assistance program. We have been unable to implement in-home personal care because the federal government has not approved the state plan amendment.
Trends
The number of individuals entering nursing facilities has declined over the past few years. Many elderly and disabled individuals wish to receive long term care services in their homes and communities for as long as possible. We see this trend continuing, and must make an effort to ensure that home and community based services are available at a reasonable price for those individuals who wish to access services in the community, rather than seek them in an institution.
While the number of individuals entering nursing facilities is declining, the costs of providing services to this group of Medicaid recipients continues to increase. Attachment A (108kb gif) shows the increase in expenditures, and the proposed appropriation for the next biennium. Based on current expenditure trends, which include the equalized rates provision and other mandated increases such as re-basing; we see continued growth in expenditures. At the present rate of growth, the cost of nursing facility services will double in 14 years. This rate could be accelerated if additional future funding is provided for re-basing and salary increases above indicated inflation increases, and if the number of individuals entering nursing facilities increases.
We will see an increased number of individuals in our aged population over the next 15 years. The number of individuals over age 65 will increase from 97,771 in 2005 to almost 150,000 in 2020. The number of individuals over 85, who are most likely to need long term care services will increase from 15,289 in 2005 to 24,258 by 2020, an increase of 9,000. This demographic will have a profound affect on service delivery in the future.
We continue to believe that a moratorium on the building of nursing facility beds should remain in place. While some areas of the state could experience shortages in the coming years, the transfer of beds from areas where there is excess beds should satisfy the need for some time to come.
While nursing facilities will continue to fill an important niche in the long term care continuum, it is likely that changes in the manner in which care will be provided and in the environment it will be provided in will change over the next two decades. There will likely be more flexibility in how care is delivered including changes in the way facilities are configured, and changes in the way care is delivered. This trend while important to provide the most flexibility to residents could have an affect on future expenditures for facility upgrades and staffing patterns.
Once the issue of the state plan amendment is resolved with the federal government, we believe the Basic Care Program will remain relatively static into the near future. We believe that personal care services will expand as individuals begin to access home based services without the need to qualify for Medicaid waivers in order to access the service.
Budget Changes
The following information details the proposed appropriation for nursing facility, basic care, and personal care for the 2005-2007 biennium, as compared to the current biennium appropriation.
| 2003-2005 Budget | 2005-2007 Request | Increase / (Decrease) | |
|---|---|---|---|
| Nursing Homes | 318,444,621 | 348,777,523 | 30,332,902 |
| Basic Care | 8,395,725 | 12,812,722 | 4,416,997 |
| Personal Care | 2,800,273 | 14,661,108 | 11,860,835 |
| Total | 329,640,619 | 376,251,353 | 46,610,734 |
| General | 103,718,283 | 132,930,815 | 29,212,532 |
| Federal | 223,637,974 | 241,036,176 | 17,398,202 |
| Other | 2,284,362 | 2,284,362 | 0 |
Budget Highlights
- The budget request for nursing facilities totals $348.8 million, of which $122.6 million is state funds. The current budget for nursing facility services is $318.4 million, of which $102.1 is general funds.
- The total increase for nursing facility care is $30.3 million, and the general fund increase totals $20.5 million.
- The request is based on Medicaid occupancy of 3,631 beds per month. During the eight-month period ending October 31, 2004, the average number of individuals for which a nursing facility payment was made averaged 3,572. In addition we have moved the portion of the hospice service for payment of nursing facility room and board payments to the long-term care appropriation. Previously, this cost was budgeted under the hospice option, even though the payments were for nursing facility care when an individual had elected the hospice option. During the last year the average number of individuals with the hospice option in nursing facilities was 40 recipients. Given the increased numbers of individuals over 85, which are expected to increase by 3,100 in the next five years, we believe this estimate is conservative.
- The primary reason for the increase in state funds is the result of the change in the Federal Medical Assistance Percentage (FMAP) that I detailed in my previous testimony. The change will result in an additional $10.5 million just to maintain the current nursing facility services.
- The Executive budget includes funds to re-base current nursing facility limits to the 2003 fiscal year reporting period. The limits are based on the 1999 cost reporting year. Currently, limits are based on the 99th percentile for direct care, 85th percentile for other direct care, and the 75th percentile for indirect care. This proposal also changes the method of setting the limits to a median plus 20% for direct and other direct care, and median plus 10% for indirect care. Under this proposal, all facilities have the ability to stay under the limits, whereas the percentile process will guarantee some facilities will always be in excess of the established limits. The proposed cost of re-basing and converting the payment limits the median plus 20/20/10 is $8.8 million, of which $3.1 million are general funds. This change if included in state law, will effectively remove flexibility for the Department to control the costs for nursing facilities. All rates will be automatically established and the only variables will be the number of recipients that will access the service in the future, or the level of care criteria used to establish the need for nursing facility care for Medicaid recipients.
- The remaining increase of $6.9 million in general funds is due to statutory requirements that establish the inflation rate, the operating margin, the indirect incentives, and the increase in costs permitted by the present payment system, including a pass through for new or remodeling construction if it does not exceed established limits. This amount takes into consideration a $3 million decrease of which $1 million is general funds due to an anticipated reduction in the number of recipients accessing nursing facility services.
- The Basic Care Assistance program budget totals $12.8 million of which $5.2 million are general funds and $2.3 million are retained funds. The current appropriation totals $8.4 million, of which about $.75 million are general funds and $2.3 million are retained funds. The Department underestimated the need for basic care assistance in the current biennium. We are expected to expend $11.0 in the current biennium for this service. In addition, due to the required changes in how we claim federal funds through the personal care option, the anticipated amount of federal funding has not been realized. We anticipate expending $2.75 million in general funds this biennium, an increase of $2 million.
- The budget for basic care was further complicated because we did not know what CMS would allow for federal matching purposes. We are uncertain as to how much of the projected federal funds will be realized because the federal government has not provided us with a definitive response as to what they will allow as a personal care expense. We know the amount will not increase, and it is more likely that the amount of projected federal funds may be overstated.
- The basic care budget is based on serving 457 individuals per month. For the eight-month period ending in October, an average of 468 individuals had a basic care payment made on their behalf. We project that the use of basic care services will remain static during the new biennium.
- We project that personal care services will increase during the next biennium as we encourage individuals in need of long term care to access home and community based care services. The budget anticipates that the number of persons receiving personal care services will increase about 5 recipients per month over the course of the biennium. It includes personal care services for individuals who were receiving these services through the home and community based care Medicaid waivers, through the Expanded SPED program and those Medicaid eligible recipients receiving SPED personal care services. In addition other Medicaid recipients who meet established criteria may also access personal care services through this optional service.
- The estimated appropriation of $14.7 million, of which $5.2 million is general funds, is based on the estimated average monthly cost of providing personal care services as experienced through the waivers and the SPED and Expanded SPED programs, times the number of recipients anticipated to receive these services. The actual usage is difficult to gauge because we have no experience to know how many individuals will actually access this service once it becomes a Medicaid entitlement.
I would be happy to respond to any questions you may have.
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