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Nursing a level playing field

Published (4/8/2010)
By Lauren Radomski
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Al McAfee thought he and his wife of 61 years, Alice, were doing everything they were supposed to.

They worked for decades: he as a teacher and small business owner, she as a legal secretary, accountant and federal program officer. They invested their money and skipped extravagances. When Alice was diagnosed with dementia in retirement, their long-term care insurance, pensions, savings and Social Security kicked in to cover her nursing home costs.

Now McAfee is concerned a proposal to lift restrictions on nursing home fee-setting could disrupt their delicate payment balance.

Rate equalization is the Minnesota policy that prohibits nursing homes from charging private pay residents more than residents on Medical Assistance, except in certain circumstances. Minnesota is one of only two states with a rate equalization law, which was adopted in the early 1980s.

Gov. Tim Pawlenty and some House members support repealing rate equalization and gradually allowing cash-strapped nursing homes to set their own rates for private pay residents. While providers say the repeal is long overdue, some residents and their families claim it would punish people who saved for their long-term care.

“I’m just saying I thought most people did that,” McAfee told the House Health Care and Human Services Policy and Oversight Committee March 11. “…Tell me what I should do. Buy a Cadillac? My neighbor went to Hawaii three times on his credit card. I went once — in World War II.”

Help for nursing homes

Under the governor’s supplemental budget proposal, rate equalization would be phased out over the next three years. Beginning in July, nursing homes could increase private pay rates by up to 2 percent. Incremental increases would be permitted until October 2013, when nursing homes could charge private pay daily rates at whatever amount they choose. The repeal is intended to help providers manage anticipated cuts in Medical Assistance, the state’s Medicaid program.

Proponents of the phase-out say it is not unreasonable to ask people who can afford it to contribute more to their own cost of care, especially when some nursing homes are struggling.

Christine Bakke is the administrator of St. Benedict’s Senior Community in St. Cloud, where cuts to Medicaid reimbursement have strained finances. It’s to the point where Bakke is considering reducing staff wages and benefits.

“We all know that when you cut your staff in a health care setting, the only people that impacts are your residents and the quality of the care that they receive,” she said.

St. Benedict’s is not alone. The Long-Term Care Imperative, a partnership between Minnesota’s two long-term care provider associations, estimates nursing homes lose an average of $20 per resident per day as a result of the gap between state rates and actual costs of care.

“People should pay what it costs us to provide a service,” Bakke said. “We have watched our nursing homes deteriorate because we can’t make a profit.”

Not everyone agrees repealing rate equalization would be the best solution. Michele Kimball, director of AARP Minnesota, is concerned shifting costs would hit private payers hard. She predicts the repeal would drive state costs up in the long term, as private payers run out of money and wind up on Medical Assistance.

Others say rate equalization is an important protection for low-income residents who could otherwise face discrimination in obtaining housing.

“Of greatest concern in eliminating rate equalization is the looming possibility that nursing homes will pick and choose from the waiting list for admissions based on the ability to pay,” said Jane Ochrymowycz, president of the Seniors and Workers for Quality Coalition.

That should not happen, Bakke said, as such discrimination is prohibited in the regulations governing nursing homes’ participation in Medicare and Medical Assistance.

Taking responsibility

The debate over rate equalization is ultimately about personal responsibility. People who favor the repeal say the current system does not offer Minnesotans incentives to purchase long-term care insurance or save for their own long-term care costs. Opponents claim that repealing rate equalization would only exacerbate the problem.

It is already common for seniors to transfer assets to family members or to a favorite cause in order to qualify for Medical Assistance and avoid paying for long-term care costs out-of-pocket, said Rep. Diane Loeffler (DFL-Mpls). She believes this practice would grow should rate equalization be eliminated.

“We’re going to give more people who are uncomfortable with this whole discussion more justification in their own mind to feel like they’re just playing the game like everyone else and they’re not going to get ripped off by having to pay more than the person who is on, quote, ‘welfare,’” she said.

Kari Thurlow, vice president of advocacy for Aging Services of Minnesota, says the aversion to paying for long-term care is a real problem. But she maintains that repealing rate equalization would be part of the solution and “the start to a conversation” about significant reform.

“We view it as a step toward changing the entire paradigm and the way we approach financing long-term care,” she said. “Part of it is changing mindsets.”

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