When Congress began looking at rolling back some of the Medicare reimbursement reductions imposed by the Balanced Budget Act of 1997, the nursing home lobby pushed for more reimbursement as loudly as any provider group.
It's no wonder. Many nursing facilities have become dependent on Medicare revenues despite the fact that most of their patients are Medicaid recipients.
Consider the situation in Virginia, which ranks 42nd in Medicaid reimbursement for nursing homes, according to industry data.
"Nobody likes to talk about Medicaid," says Charles Rehnborg, president of Agape Healthcare in Lynchburg, Va. "Everyone is more familiar with Medicare, and many seniors are under the impression that Medicare is going to take care of their long-term-care needs. They don't realize that's not the case until they're faced with the prospect of financial devastation."
Virginia's Medicaid program paid an average of only $73.54 per day per beneficiary in 1997. On top of that, nursing homes in Virginia use stringent admission criteria. So when patients are admitted, they have very acute long-term-care needs, says Steve Morrisett, president of the Virginia Healthcare Association, which represents about 260 nursing homes.
Revenues from Medicare and private-pay patients have helped buoy the bottom line in the past, Morrisett says.
"Why we stayed in business in the past was that Medicare was a better payer (than Medicaid)," Morrisett says.
That's despite the fact that Medicaid beneficiaries make up 70% of nursing home patients in Virginia, while Medicare patients make up a mere 5%. Privately insured patients account for the difference.
"Medicaid is prohibited from paying above cost," Morrisett says. "But (the government) is the one that determines how much the cost is, not the provider."
For example, nursing homes would like to provide malpractice insurance to nurses, but in Virginia, Medicaid does not reimburse for that cost.
Morrisett, Rehnborg and their colleagues continue to needle the state for more funds. Last year, Virginia's Legislature passed a measure that provided extra funds for nurse aide salaries. It was the first time in at least 17 years that the Legislature passed more than a nominal increase to cover inflation, Rehnborg says.
In the next year, nursing home providers are also hoping to get a piece of Virginia's tobacco settlement. But they are competing with other healthcare and nonhealthcare interests, including supporters of more roads for commuters, and the competition is stiff, they say.
Medicare skilled-nursing payments have declined in recent years thanks to more-restrictive Medicare reimbursement through a prospective payment system. At the same time, assisted-living facilities are draining off privately insured patients.
That's why the two nursing facilities operated by Rehnborg's Agape-one in Lynchburg and the other in Amherst, Va.-don't participate in Medicare. One participates in Medicaid, and the other accepts only private paying patients.
"That decision reflects the foresight and vision of the original owners of the facilities," Rehnborg says. "At the time Medicare and Medicaid came into being, the owners said it wasn't worth the trouble of participating, and that decision has paid off over the years. We're not hindered by all the paperwork requirements that participating facilities are. And after PPS, we're really glad we didn't become Medicare-dependent."
Virginia providers are not alone in their angst over Medicaid.
Natalie Hooper, operations manager for the Dallas office of the Corridor Group, a consulting firm that specializes in long-term care, says Texas nursing homes are in the same bind as their peers elsewhere.
"Even with the PPS, Medicare still pays better than (Texas') Medicaid program," Hooper says. "The best source of income, of course, is private insurance."
The 1997 repeal of the federal Boren amendment, which took effect earlier this year, dealt a potentially devastating blow to Medicaid payments to nursing homes. The amendment required states to pay "reasonable costs" to providers under the Medicaid program.
Nursing home providers say the repeal is like an unfunded mandate, requiring facilities to provide high-quality care without requiring the states to pay for it.
"With the repeal of the Boren amendment, there's no longer a federal role to make sure there are adequate (Medicaid) resources," says Robert Greenwood, a spokesman for the American Association of Homes and Services for the Aging. "Yet the federal government still has a role in determining quality standards. There's nothing there to close the loop."
The effect of the repeal hasn't hit yet. Many states are enjoying the economic boom but will face a Medicaid crisis when the next recession erupts, Greenwood says.
Private long-term-care insurance will become more important as a revenue stream.
On a trip to Washington several months ago, Morrisett met with lawmakers but unlike many of his colleagues, he did not discuss Medicare payments. Instead, he talked about developing a system to make it easier and less expensive for Americans to buy long-term-care insurance, which likely would cover costs better than Medicare or Medicaid.
The idea is certainly catching on in the private marketplace.
"I take a lot of calls from financial planners who have clients in their 50s and early 60s," Rehnborg says. "They want to know how they can wisely prepare their clients for the golden years."
"Long-term-care insurance is more visible than it was in the past," Hooper says. "There are definitely more people selling it now than there were three years ago."