Report Title:
Medicaid Reimbursement Equity
Description:
Delays requirement to eliminate distinction between hospital-based and nonhospital-based reimbursement rates for institutionalized long-term care under medicaid from 6/30/2003 to 6/30/2005.
HOUSE OF REPRESENTATIVES |
H.B. NO. |
1555 |
TWENTY-SECOND LEGISLATURE, 2003 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
relating to medicaid.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The State of Hawaii enacted legislation in 1998 requiring that by July 1, 2003, rates paid by medicaid for nursing facility services provided to the aged, blind, and disabled population shall be based solely on the degree of need of the individual patient for acute care, which is referred to as an "acuity-based reimbursement system." Currently, the medicaid program in Hawaii pays for institutional long-term care services through the use of facility-specific rates. As such, rates for hospital-based facilities are higher than those for freestanding long-term care facilities. In order to fulfill the legislative directive, the State contracted with the consulting firm of Myers and Stauffer to evaluate the feasibility of implementing an acuity-based reimbursement system in Hawaii. The State also sought input from individuals with an interest in Hawaii's nursing facility industry, including both long-term care associations.
Interested parties generally support the concept of transitioning to an acuity-based reimbursement system. In order to ensure a smooth transition, the long-term care industry recommended a four-year phase-in period with a four-year hold harmless provision for facilities that would have faced decreases in reimbursements. The hold harmless provision would prevent any reduction in rates for any facility for four years.
While some of the issues identified by the long-term care industry were incorporated into the final report by Myers and Stauffer, such as the four-year transition period, a few key components were not included, notably the hold harmless provision. The final report states that the lack of inclusion of a hold harmless provision was due to budget neutrality constraints placed upon the consultants by the department of human services. While budgetary concerns are understandable, it is important to note that the enacting legislation did not include this requirement. If the recommendations included in the final report are adopted, many facilities would experience dramatic changes in payment. For example, in the first year alone, hospital-based facilities would experience an overall reduction of $3,870,289, with one hospital alone incurring a reduction of $878,804. The impacts on freestanding facilities would be mixed. Overall, freestanding facilities would experience an increase of $4,042,646, with one facility gaining $717,681, but another facility losing $119,031. The size of the differences between facilities that gain and those that lose would be magnified each year until full implementation in the fourth year, when the size of the differences would be staggering.
Also excluded from the final report was language providing for the frequency of rebasing, stating that the costs be trended forward from the base year to the rate year by the full Nursing Facility Market Basket Index in non-rebasing years. Since the cost reports reflect a time period usually two or more years prior to the rate year, these costs must be inflated forward to the rate year period to accurately reflect nursing home cost increases during this time. Also excluded from the report was a move toward a "fair rental" approach for the property component to provide incentives for the construction of new facilities and for providers to improve and upgrade their existing facilities, which could have a positive impact on patient access. A fair rental approach establishes a payment to cover the costs of capital for construction, renovation, and maintenance of the facility. The effects of this approach varies depending on the age and condition of the facility, rewarding facilities that are better maintained and upgraded and those providers with substantial capital investment in their properties.
The report concludes with an estimate that it would take the State between eighteen and twenty-four months to fully implement the recommended system. Given the estimates on the time required for implementation of the legislation and the fiscal impact on the industry, a two-year implementation delay with annual inflation updates is recommended. A two-year delay should provide the State with the time necessary for implementation and provide an opportunity for the industry to address inefficiencies, alter cost structures, develop program and service alternatives, advocate for regulatory relief, and work to phase in a "fair rental" approach for the property component to provide incentives for providers to improve and upgrade their facilities. In addition, a solution for dealing with the significant losses that would be incurred by the public facilities in the Hawaii health systems corporation will have to be found.
Given the historical shortage of long-term care beds in Hawaii and the current financial condition of our long-term care facilities – which may be further exacerbated by the unusually high nursing salary settlements that will ripple down through hospitals, nursing homes, and home care – adequate time and careful consideration must be given to ensure that quality and access will not be compromised. A two-year delay in implementation of the acuity-based reimbursement system, coupled with related legislative remedies, will give both the State and providers a time frame to make necessary changes.
The purpose of this Act is to delay for two years the implementation of the acuity-based reimbursement system for services provided to the medicaid aged, blind, and disabled population.
SECTION 2. Section 346D-1.5, Hawaii Revised Statutes, is amended to read as follows:
"§346D-1.5 Medicaid reimbursement equity. Not later than June 30, [2003,] 2005, there shall be no distinction between hospital-based and nonhospital-based reimbursement rates for institutionalized long-term care under medicaid. Reimbursement for institutionalized intermediate care facilities and institutionalized skilled nursing facilities shall be based solely on the level of care rather than the location. This section shall not apply to critical access hospitals. "
SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 4. This Act shall take effect upon its approval; provided that the change made to section 346D-1.5, Hawaii Revised Statutes, by section 2 of this Act, shall not be repealed when that section is reenacted on June 30, 2004.
INTRODUCED BY: |
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