Hartford Business.com
May 18, 2008
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Connecticut is the second most expensive state in the country — after Alaska — for long-term care, according to a recent survey, and state budget pressures on Medicaid reimbursement for nursing homes could compound the problem.
Nationwide, the average cost for one year in a private nursing home is $76,460, while Connecticut’s average cost is $119,678, according to the annual Cost of Care Survey from Genworth Financial. The national average for a private one-bedroom unit in an assisted-living facility is $36,090. In Connecticut, the average is $42,126.
For in-home care, the average hourly rate for a non-Medicare certified, state-licensed home health aide is $19.18. In Connecticut, the average hourly rate is $22.36. That amounts to an annual cost difference of more than $7,000.
Medicaid Reimbursement
Connecticut’s high costs can be traced to its expensive real estate and to labor shortages, said Amy Venable, president of market strategy, long-term care insurance, Genworth Financial. Both factors affect costs for nursing homes, assisted-living facilities, in-home care and adult day health care.
But for the state’s 243 nursing homes, those cost drivers take a back seat to state Medicaid reimbursements, according to Toni Fatone, executive vice president of the Connecticut Association of Health Care Facilities.
Of the 27,123 state residents in skilled nursing facilities, 18,300 are eligible for Medicaid. And while labor, fuel and other costs — the price of petroleum-based medical products like adult diapers are up 11 to 12 percent — are surging, the state has proposed raising Medicaid reimbursements for nursing homes by 0 to 1 percent.
“That (Medicaid reimbursement) shortfall is also passed down to private-pay patients,” Fatone said. That’s one reason Connecticut is the second most costly state in the country for long-term care.
Roughly 10 percent of the state’s nursing homes are already in bankruptcy, Fatone said. “It’s a dire situation that’s about to get worse,” she added.
A 1 percent increase in Medicaid reimbursement, Fatone said, would mean an additional $13 million for the state’s nursing homes. That equates to an extra $35,000 per nursing home, which wouldn’t begin to cover standard 3 percent wage increases for labor, which will cost an additional $200,000 per home.
Last year, the legislature approved a budget that did not include an increase for Medicaid reimbursement this year. Fatone said all sides understood that the issue was to be revisited in the current legislative session.
Budget Squeeze
But Gov. M. Jodi Rell is under tremendous pressure to cut costs in light of the sudden deterioration on the state financial position. Within a few months, the state’s $282 million surplus has evaporated, and the state comptroller now foresees a $67.7 million deficit for the year.
That’s not a favorable climate for maximizing Medicaid reimbursements for nursing homes. “We’re in a fever-pitched battle with this legislature,” Fatone said.
“Realistically, we need 4 to 7 percent [more],” she added. “But there’s not a snowball’s chance in hell that’s going to happen.”
A lack of Medicaid funds will continue to push prices up, Fatone said. The state could also see more nursing home bankruptcies, more receiverships, more staff layoffs, more admission reductions.
The legislature has until May 7 to agree on budget adjustments for the next fiscal year, unless a special legislative session is ordered later. But state health care advocate Kevin Lembo doesn’t expect that to happen, nor does he expect the 0 percent increase set for this year to stand.
“I doubt it’ll be the same budget that they passed last time,” Lembo said.
He’s not necessarily predicting a net increase; there will be adjustments prior to final approval, he said.
Lembo also said that although increased nursing home bankruptcies would be a bad situation, the state will most likely protect patient quality of care. He cited the bankrupt New England nursing home chain Haven Healthcare. The state stepped in and kept the homes afloat and looked after the patients, he said.
“I don’t see a situation where homes go bankrupt and the state does nothing to intervene,” Lembo said.
Haven Healthcare has been riddled with financial troubles over the past six months, affecting virtually all its business entities. The chain was cited for numerous patient care violations and mismanagement.
According to The Hartford Courant, Michigan-based Lifehouse Retirement Properties Inc., which operates 21 nursing homes and assisted-living facilities in California and the Midwest, is looking to purchase Haven Healthcare for $105 million. The company said that the sale would salvage all 15 Haven homes in Connecticut. But the deal is contingent on Medicaid reimbursement rate increases from the state.
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