Issue: 2001-2003 Medicaid Nursing Facility Funding Increases

The Governorís 2001-2003 Budget would increase Medicaid (MA) nursing facility funding by $115 million in 2001-02 and by $157.2 million in 2002-03 (Note: the Governorís 2001-03 Executive Budget Summary indicates larger increases to reflect a technical adjustment in current IGT funding).
This presentation clarifies the funding level that would be provided under the Governorís budget and addresses the critical need for these increases.

Briefing Overview

Why do nursing homes need additional Medicaid funding increases?
What level of funding increases would be provided under the Governorís budget?
How would these increases be funded?
What happens if the expanded IGT Program isnít approved?

Why do Nursing Facilities Need Additional Medicaid Funding Increases?

Nearly 70% of all nursing facility residents are Medicaid recipients--When Medicaid doesnít provide adequate facility payments, the added burden on the facility/residents/staff is enormous.

Additional Medicaid Funding Increases Are Critical

Resident acuity, and related costs, continue to skyrocket.
Nearly 80% of all Residents are admitted directly from hospitals and require extensive care, services and supervision.

Additional Medicaid Funding Increases Are Critical

Admissions to nursing facilities have increased by 87% since 1990. These admissions require intensive assessment and care planning resources.
Contrary to popular belief, more residents (40%) receive restorative or rehabilitative care, and are discharged to home, than end-of-life care (31%).

Additional Medicaid Funding Increases Are Critical

Approximately 70% of facility costs are for personnel, primarily nursing staff.
Facilities are combating increasing turnover rates and this battle can not be won without additional Medicaid payments.
Non-profit and governmental homes have lower turnover rates but incur substantially higher Medicaid direct care losses because they generally staff higher and pay better.

September 2000 Report Documents Financial Crisis--BD0 Seidman, LLP

Facility Medicaid deficits (the difference between MA costs incurred and MA reimbursement) currently exceed $125 million.
In 1999, nearly 83% of all facilities were not fully paid for serving Medicaid residents. This number undoubtedly is higher today.
The average projected facility loss for the 2000-2001 is $300,000.
Taking into account all sources of payment, the average margin for all Wisconsin nursing homes in 1999 was a negative 4.79%.
Wisconsinís 2000-2001 Medicaid payment ceilings relative to costs are the lowest in the United States.
To improve the stateís present system to a level where only 40% (rather than the 83% in 1999) of the stateís facilities experience 2001 rates below their costs would require an appropriation of at least $120 million in new funds.
View full BDO Seidman study at:

Very Few Homes Receive
Medicaid Rates Equal to Costs

When only 17.4% (1999 figures) of all facilities receive Medicaid rates equal to their costs, the public is not well served. Such a system makes it impossible for many facilities to effectively address increasing staffing and resident care needs.
To help cover these losses, private pay residents are charged rates substantially above their actual care costs. The difference between Medicaid and private pay rates in many facilities exceeds $50/day!

Medicaid Payment Ceilings Decline

The Medicaid nursing facility formulaís Direct Care payment ceilings have been lowered dramatically over the past ten years. As facilities increase their wages, benefits and staffing hours, payments are capped and direct care deficits escalate.
The majority of WAHSA member facilities exceed the direct care cost ceilings, meaning that added nursing costs are not reimbursed by Medicaid resulting in higher losses.

Medicaid Payment Ceilings Decline

Medicaidís payment ceiling for support services (dietary, housekeeping, laundry, etc.,) is even lower than for direct care.
Mounting support services losses further stress facilitiesí ability to fund resident- related care.

FY 2001Medicaid Payments

†† Although the authorized 2000-01 Medicaid nursing home rate increase was 2%, the payment system actually delivered lower rates for many facilities. Approximately 20% of all homes experienced a rate cut, and 52% of the homes received an increase of 2% or less. The reason: Medicaid cost inflation (4.58%) significantly outpaced the 2% rate increase.

Governor's Medicaid Nursing Facility Recommendations--2001 SB 55/AB 144

Increase Medicaid nursing facility funding by $115 million in 2001-02 and by $157.2 million in 2002-03.
The entire increase would be funded from an anticipated expansion of the Intergovernmental Transfer Program (IGT). No New GPR State Dollars are authorized under the Governorís budget for nursing facilities.
IGT dollars also would entirely fund $50 million rate increases for other Medicaid providers over the biennium.

What Increases Would be Funded Under the Governorís Budget?

Although the Governorís Budget in Brief document indicates the 2001-02 Medicaid nursing home rate increase would be 13.5%, the increases facilities actually would receive under the MA payment formula would be substantially less. Funds would be allocated as follows:
$40.0 million: In separate IGT payments to counties for property tax relief, to pay for costs associated with serving hard-to-care for residents and to cover losses for county facility downsizings.
$25 million (est.): Required to restore Medicaid formula cuts implemented in 2000-01.
$40.0 million (est.): Required to pay for inflationary costs incurred by facilities, over the past 12-18 months but not recognized by the payment system.
$10 million (est.): To fund future inflationary costs and to achieve modest improvements to the current Medicaid payment system.
The IGT program also would fund a Medicaid
†††† nursing facility rate increase of 4% in 2002-03.

What Medicaid Formula
Changes Are Anticipated?

WAHSA members are appreciative of the Governorís efforts to increase the Medicaid nursing facility payment system and have agreed to fully support the funding increases contained in his budget. It must be understood, however, that the proposed 2001-03 budget would not dramatically improve the nursing facility payment system.
The BDO Seidman report recommended increasing the Direct Care ceiling to 115% (now 100.33 %) and the Support Services and Administration ceilings to 110% (now 95% and 91.2%, respectively), which would move Wisconsinís system closer to the nationwide averages. Under the Governorís budget these ceilings are projected to be set 104% for Direct Care and at 95% for both Support Services & Administration.
The proposed budget does not provide adequate funding to: rectify staffing shortages; meet optimal nursing staffing levels identified by the federal government; greatly increase staff wage/benefit packages; address provider concerns with the proposed elimination of the MA labor regions; or adequately fund a new payment system based on resident acuity.

Explanation of the Expanded IGT Program

The Governorís budget would replace the Stateís current IGT program, which uses county nursing facility losses to capture Federal Medicaid matching funds, with a new IGT program that relies on borrowed county dollars annually transferred to the State and matched by the federal government. Rock, Sheboygan and Walworth have agreed to serve as the transfer counties.
This change is necessary to address federal concerns with the current IGT program and to capture significantly more federal Medicaid funds.
An IGT program similar to that proposed by the Governor is used by approximately 26 other states.

Slide 16

Explanation of the Expanded IGT Program

The IGT funds would be deposited into a Medicaid Trust Fund. The Fund would entirely finance MA provider increases recommended by the Governor.
The IGT program will likely be phased-out as a funding option. The Federal government is working to eliminate the ability of States to obtain federal Medicaid matching funds using IGT mechanisms.
Securing the federal Medicaid matching IGT funds is not a certainty. The State has submitted a change to its Medicaid plan and the Federal government is expected to approve or deny this change some time prior to May 1, 2001. If this IGT program change is denied, substantial GPR increases for nursing facilities and other MA providers would be required.

IGT Expansion--A Delicate Partnership

Recognizing the Stateís GPR budget concerns, WAHSA, the Wisconsin Counties Association and the Wisconsin Health Care Association first suggested the expanded IGT option. These associations have signed an agreement to support the Governorís IGT budget and pledge not to seek additional 2001-2003 Medicaid Trust funds beyond the levels recommended by the Governor.
IGT expansion can not occur without county participation. Any substantive modification or expansion of the IGT agreement reflected in the Governor's budget could be viewed by counties as reason to opt out of the IGT program and not transfer funds after the first year, effectively
††† stopping the program.

The Partnership Continues

†††† Nursing facilities and counties have long been helpful partners in financing the Stateís long term care system. The nursing facility and ICF-MR provider assessment (tax) generates $39.2 million, saving the State $16.6 million GPR annually. The current IGT program funds nearly $73 million of Medicaid costs. According the the Legislative Audit Bureau, nursing facility GPR expenditures actually have declined in recent years and the Legislative Fiscal Bureau figures show that nursing facility all funds expenditures increased by only 0.8% from 1996 to 2000.

What if the IGT Expansion
Isnít Successful?

The well documented nursing facility funding crisis needs immediate attention and must be addressed regardless of whether the federal government approves the proposed IGT program expansion.
If IGT funding increases are not secured, it is estimated that GPR funding increases of $46 million in 2000-01 and $63 million in 2002-03 will be necessary to fund the Governorís nursing facility budget.
WAHSA and its members pledge to continue working with the Governor and Legislature in addressing the needs of Wisconsinís nursing facility residents, staff and communities.


WAHSA and its members are available to answer your questions on long term care services and funding matters.