Legislative Briefing Document
on Senate Bill 45/Assembly Bill 133:
The Governor's 1999-2001 Biennial Budget Bill

Family Care: Long Term Care Redesign
Mental Health and AODA Managed Care Demonstration projects
Criminal Background Checks
Licensing Fees
Community Options Program
Waiver of COP Assessment for CBRF Admissions
Medicaid Transfer to COP
Enhanced CIP Payments
Nursing Home Bed Moratorium
Property Tax Exemptions for Elderly Housing
Medicaid False Claims Act
Estate Recovery Program
Medicaid Drug Cost Containment
Medicaid Provider Rate Increases
Medicaid Nursing Home Rates
Volume Purchase for Incontinence Products
Nursing Facility Forfeitures and Assessment Use
Institutions for the Mental Diseases

The Governor's budget summary of SB 45/AB 133 indicates his bill would provide $20,724,800 all funds ($5.6 million state funds, or GPR) in 1999-00 and $37,505,600 AF ($5.7 million GPR) in 2000-01 to establish Family Care pilot programs for purposes of testing the Administration's proposed redesign of the current long term care system.  According to the Department of Health and Family Services (DHFS), the first year cost of the Family Care program would be $61.3 million and with a second year cost of $172.2 million. Most of the Family Care 1999-01 biennial budget would be created by reallocating existing state and federal funding for Medicaid, the Community Options Program (COP) and community aids.

The budget would create a 15-member Council on Long Term Care that would sunset on July 1, 2001. The purpose of the Council would be to assist DHFS in developing long term care policies and make recommendations concerning Family Care Resource Center and CMO contracts, monitor complaints and placement of persons on waiting lists, and patterns of enrollments and disenrollments from the program. The Council would be required to submit an annual report to the Legislature on the status, significant achievements and problems of the Resource Centers, CMOs and Family Care benefit, including the costs associated with this program.

The budget would authorize the creation of Resource Centers to provide information and referral services, determine the functional and financial eligibility for the Family Care benefit and provide other related services for persons in need of long term care. The budget assumes there will be twelve Resource Centers by July 1, 2001. The budget also would create Care Management Organizations (CMO) that would be required to conduct a comprehensive assessment and care plan for each person enrolled in Family Care and to provide or contract for the provision of necessary long term care/services for each enrollee. The CMO would receive a per enrollee monthly payment (capitation rated) from DHFS to finance the care and services for persons enrolled in Family Care.  The budget bill assumes nine CMOs would be operating by June 30, 2001.  The DHFS would be required to establish rules on the degree of financial risk CMOs would be required to assume under Family Care.

The budget bill would grant exclusive right of first refusal for counties to assume the role of the Resource Center and CMO for a 24-month period. The Department would be authorized to develop financial risk-sharing arrangements, consistent with state and federal provisions, and counties would be allowed to establish Family Care risk reserves equal to the lessor of $750,000 or 10% of a county's Family Care allocation.

Although the budget does not specify the counties that would pilot the Family Care Resource Centers and CMOs or limit the number of pilot sites, the budget materials indicate the following counties would participate in the pilots (by July 1, 2001, the budget bill projects that approximately 25% of the state's eligible population would be covered by the Family Care pilots):

According to DHFS officials, the number of elderly and disabled clients projected to be enrolled in Family Care would reach 3,927 by June 30, 2000 and 10,054 by June 30, 2001.

The budget bill recognizes the fact that the federal Health Care Financing Administration (HCFA) has expressed serious conflict-of-interest concerns over allowing counties to serve as both the Resource Center and CMO. To address these concerns, the budget bill would authorize counties to establish "Family Care Districts" which would operate/administer either the Resource Center or CMO, but not both. These Districts would be created by the county board of supervisors or by the county executive/administrator and would have a governing board comprised of at least 15 members. Districts would be granted many of the various powers of local governments, except they could not issue bonds or levy a tax. Employees of the District essentially would have the same status, seniority and benefits provided to county personnel. In addition to the District's governing board, each Resource Center and CMO must have a governing board that reflects the ethnic and economic diversity of the geographic area served by that entity and at least 25% of the board must be older persons or persons with physical or developmental disabilities or family members, guardians or advocates.

The DHFS would be directed to seek any federal waivers necessary to secure Medicaid funding for Family Care. However, regardless of whether these waivers are granted by the federal government, the Department may implement Family Care.

Any Family Care client may contest denial of eligibility or entitlement, the imposition of cost-sharing requirements, development of an unacceptable plan of care, reduction of services or support items, or benefit termination by filing a written request for a hearing within 45 days after being notified of the contested matter. The budget bill specifically grants appeal rights to any person who finds a plan of care "unacceptable because it requires the enrollee to live in a place that is unacceptable to the enrollee or the plan of care provides care, treatment or support items that are insufficient to meet the enrollee's need, are unnecessarily restrictive or are unwanted by the enrollee." It is unclear whether the CMO can implement the plan of care found unacceptable by the client prior to the administrative decision. The Board on Aging and Long Term Care would be required to contract with organizations to provide client advocacy services and to assist clients with the administrative hearing process.

The budget bill requires the DHFS Secretary to certify to each facility (including nursing homes, community based residential facilities (CBRF), adult family homes and residential care apartment complexes (RCAC)) the date on which a Resource Center is first available to conduct the functional and financial eligibility screen for clients or for residents residing in specified facilities. Once the Secretary has issued such a certification notice, facilities must inform prospective residents about the services of the Resource Center, the Family Care Benefit and the availability of the screening process. These facilities and hospitals must refer to the Resource Center any person, including private pay individuals, who seeks admission and who is at least 65 years or has a disability expected to last at least 90 days, unless the person has received a functional screen within the past six months, is entering the facility only for respite care (for a period of 28 days or less), or is enrolled in a CMO. Facilities that do not comply with these provisions could be subject to an administrative forfeiture of up to $500. The budget provisions appear to reinforce previous statements made by DHFS officials indicating that client placements within any facility (i.e., nursing home, CBRF or RCAC) should be reserved for short-term stays.

The DHFS would be required to establish and enforce Resource Center and CMO performance standards, conduct ongoing evaluations of Family Care, and require that quality assurance and improvement efforts be included under Family Care. The Department would be directed to utilize an external organization to review the quality of the management and service delivery of the Resource Centers and CMOs and to make their finding available to the public. The budget bill does not specifically charge the external organizations with the responsibility to review the cost-effectiveness of Family Care. 

The Governor's budget would authorize DHFS to conduct up to two demonstration projects in 2000-01 to provide mental health and alcohol or other drug abuse services under managed care programs. These programs are intended to implement the recommendations of the Governor's 1997 Blue Ribbon Commission on Mental Health which "provided for flexible, customer centered treatment services for Medicaid recipients and other individuals served in the s. 51.42 system."   

Modify current law to specify that entities would be required to conduct criminal background checks and investigations only on employees or contractors who "provide direct care that is more intensive than negligible in quantity." The intent of this provision is to limit the law to direct care workers and to exclude other staff such as housekeeping and dietary personnel (see WAHSA issue paper on this subject). The budget bill also would authorize DHFS to charge a fee, established by administrative rule, to persons who file a rehabilitation review application.

The budget bill would increase licensing fees for CBRFs from $170 base/$22 per unit to $323 base/$41.80 unit. Adult Family Home fees would increase from $75 to $142.50 and a new licensing fee for certified adult day care programs would be established at $100 base/$20 per client.

The budget would provide $3.9 million GPR in each year of the biennium to fully fund existing COP slots authorized in 1998-99. The budget would not fund any additional slots during the 1999-01 biennium.

Under current law, a CBRF must prepare and provide to a private pay CBRF resident a statement of financial condition which, among other things, must include a date, if any, by which the individual's assets and other funding sources will be depleted.  If that date is less than 24 months after the date of the individual's statement of financial condition, the CBRF must provide that statement to the county department of social services.

The budget bill would amend s.50.035(7)(e) to also require the CBRF to refer that same CBRF resident (whose funding will run out in less than 24 months) to the county department of social services to determine whether a COP assessment should be conducted.

Current law contains as one of the requirements for the use of COP funding in a CBRF that a COP assessment be completed prior to an individual's admission to a CBRF, whether or not the person is a private pay client at the time of admission.  The budget bill amends this further to allow a county to waive this condition in accordance with DHFS guidelines.  If the county does waive this condition, the county must meet with the person or the person's guardian to discuss the cost-effectiveness of various service options.  The same provision applies to COP-W and CIP II CBRF placements.

Under current law, DHFS must annually submit to the Joint Committee on Finance a report on Medicaid nursing home bed utilization for the previous year. If the DHFS report indicates that bed utilization has decreased over the amount projected for that year, the Department must submit a proposal to transfer amounts budgeted but not incurred for utilization to the Community Options Program. The budget bill modifies this provision to prohibit the transfer of Medicaid funds to COP beyond the level required to ensure that the overall Medicaid appropriation would maintain a positive balance during the fiscal year or biennium.

The budget would authorize DHFS to provide enhanced reimbursement under the Community Integration Program for persons relocated from an ICF-MR facility (including distinct-part units) that has filed a DHFS-approved plan for closure within the next 12 months. The bill does not specify the level (e.g., daily rate) of enhanced funding to be available under this provision.

The budget would maintain current law with respect to the nursing home bed moratorium. The Governor rejected a recommendation by DHFS Secretary Joe Leean to repeal the bed cap.

Property Tax Exemptions for Elderly Housing

The budget would maintain current law with respect to the property tax exempt status of benevolent retirement homes for the aged (no provision).

Medicaid False Claims Act

The budget bill would provide numerous changes related to prohibitions from submitting false claims or statements submitted by Medicaid providers. These provisions ostensibly modeled after federal false claims laws also would authorize DHFS to assess forfeitures and related surcharges against providers who submit false claims. The bill would authorize DHFS to require certain providers, as a condition of certification, to file a surety bond, payable to DHFS, under terms and in amount specified by DHFS by rule, that would be used to recover over-payments and reimburse DHFS for costs associated with its investigations and actions against providers. Several other provisions of the Governor's bill would provide DHFS authority to suspend a provider's certification pending a hearing and eliminate providers' right of fair notice and hearing. Current law provisions related to liability for repayment of improper or erroneous payments/over-payments would be modified to address transfers of ownership. Before a transfer or sale of a provider business could occur, the provider would be required to inform the prospective buyer of the extent of any liability resulting from improper Medicaid payments. Assuming proper notice is given to the buyer, liability would attach to the owner and buyer and any sale must be conditioned upon repayment to the Medicaid program. According to Department of Administration and DHFS officials, these budget provisions are directed at non-facility based providers with a history of questionable billing and service operations.

Estate Recovery Program

Reduce Medicaid costs by $1.1million AF annually to reflect additional statutory changes to the estate recovery program including, extending provisions to personal care services and the use of property liens against persons who utilize Medicaid hospital inpatient services. The bill also would provide DHFS greater authority to probate inactive estates and foreclose on liens, and extend the lien requirements to small estates that are settled summarily.

Medicaid Drug Cost Containment

Reduce Medicaid costs by $7.8 million AF in 1999-00 and $10.4 million AF in 2000-01 to encourage DHFS to adopt drug cost containment strategies. The Governor does not intend that these savings be achieved by lowering the Medicaid average wholesale price or dispensing fee. The savings likely will be sought by adopting new prior-authorization requirements.

Medicaid Provider Rate Increases

Medicaid HMO providers would receive a 3% annual increase and dentists would be awarded a rate increase of up to 10% in each year of the biennium. All other Medicaid providers would receive a 1% increase in the second year of the biennium.

Medicaid Nursing Home Rates

Re-base the Medicaid Reimbursement Formula: The budget bill would provide $15.0 million AF in each year of the budget to re-base the Medicaid nursing home reimbursement formula.  These funds would allow DHFS to take into consideration, for purposes of formula rate-setting, costs that have already been incurred by nursing facilities.  In the past, DHFS updated the nursing home formula for inflation by adjusting the prior year's cost report data to reflect projected actual cost increases above national inflation indices.  For example, the July 1, 1997 formula required $16.1 million for this inflationary increase. It would appear that the amount provided by the Governor to re-base the formula is (1) inadequate to maintain the current formula payment parameters and (2) is entirely funded by federal dollars generated under the Intergovernmental Transfer Program (ITP), not from State general-purpose revenues (GPR).

Rate Increase: The budget would provide for a 1% increase ($8.7 million AF) in the second year of the biennium.  Many WAHSA member nursing facilities undoubtedly would receive Medicaid rate cuts under the Governor's budget. According to DHFS Bureau of Health Care Financing (BHCF) officials, the Department also is planning to end the current formula's labor region "hold-harmless" provisions. Instead, DHFS intends adjust for labor cost variations similar to the methodology used under the federal Medicare PPS program. The BHCF intends to implement this change over a three-year period.

Medians:  The budget would repeal statutory provisions which require DHFS to base Medicaid payments on a percentage of the median costs incurred by facilities within certain cost centers. Instead, DHFS would be required to take these costs "into account" when setting rates. Department of Administration officials have indicated the intent of the budget is to change the reimbursement formula as little as necessary, preserve the primary focus on direct care, but to implement a "very tight budget."     

The Governor's budget summary indicates that funding "increases" for nursing homes would total $38.7 million over the biennium (excluding utilization adjustments - see below).

Intergovernmental Transfer Program: The budget assumes county nursing facility Medicaid losses will increase, allowing the State to capture additional FFP funds. County losses would increase with the projected rate cuts under this budget and the Administration's projected 4.3% annual increase in county facility expenses.  Under the Governor's budget, two-thirds of the additional federal funds generated by these losses would be used to fund the Medicaid program. Counties could receive additional ITP funds, over the $37.1 million currently available, of $2.4 million in 1999-00 and $8.9 million in 2000-01. The following chart shows estimated losses, FFP generated from these losses, estimated ITP payments and State GPR funds generated from the ITP program.

Intergovernmental Transfer Program
		FY 97/98		FY 98/99		FY 99/00		FY 00/01
Budgeted Loss		$63,627,000		$ 68,014,000		$76,900,000		$87,900,000
Actual Loss		$65,780,600		$66,700,000
FFP Generated From Loss		$94,033,400		$94,470,000		$108,500,000		$124,100,000
Payments to County Nursing Facilities		$40,178,700		$37,100,000		$39,500,000		$46,000,000
FFP Used for Medicaid GPR		$53,854,700		$57,370,000		$69,000,000		$78,100,000
Note: The FY 98/99 loss and the FFP generated from the losses for FY 98/99, 99/00 and 00/01 are estimates.

Nursing Home Patient Days Used for Nursing Home Utilization Calculations: The Governor's budget assumes a reduction in nursing home patient (resident) days of 1.43% in 1999-00 and 1.34% in 2000-01. As noted in the following chart, these reductions are projected to reduce Medicaid expenditures by $32.8 million over the biennium.

Nursing Home Patient Day Assumptions
		SNF	ICF	ICF 3/4	ICF-MR	IMD <21>65	Total
Estimate % Change	1999-00	0.00%	8.00%	10.00%	3.60%	19.07%
	2000-01	0.00%	8.00%	10.00%	3.60%	19.07%
Patient Days-Estimate	1998-99	8,514,735	1,519,685	28,228	697,187	26,451	10,786,286
	1999-00	8,514,735	1,398,110	25,405	672,088	21,407	10,631,745
	2000-01	8,514,735	1,286,261	22,865	647,893	17,325	10,489,079
Projected Fiscal Effect-Patient Day Changes	1999-00		$7,758,080	$ 9,921	$3,111,492	$336,050	$11,215,543
Patient Day Changes	2000-01		$7,064,294	$ 8,929	$2,986,195	$271,957	$10,331,375
			Note: Patient days associated with the Wisconsin Veteran's Home are excluded from the above totals.
Total Fiscal Effect
1999-00		$11,215,543
FY 00 Base		$11,215,543
2000-01		$10,331,376
Total		$32,762,462

Volume Purchase for Incontinence Products

The budget bill would delete $378,000 AF in each year from the Medicaid program to reflect implementation of a required volume-purchasing program for incontinence products. Under this program, all disposable diapers and other incontinence products would be provided by a single supplier and shipped to recipients statewide. The budget assumes a 10% cost reduction, based on the experience of a similar program implemented by the State of Michigan.

Nursing Facility Forfeitures and Assessment Use

Under current law, DHFS may use certain revenues generated from nursing home forfeitures and assessment surcharges to pay for certain costs associated with the violations, such as resident relocations or reimbursement for misappropriated property. The budget bill would permit DHFS to use a portion of these revenues for "innovative projects that aim to protect health and property of residents of skilled nursing facilities."

Institutions for the Mental Diseases

The budget would reallocate $473,000 GPR in each year to fund nonfederally matched active treatment services to individuals residing in IMDs.

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