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Nursing Home Advocates Hope to Restore Funding in NJ Budget

As budget battle comes down to wire, a resolution seeks $25 million more from state to boost Medicaid dollars for managed care and avert possible closings of nursing homes

Nursing home advocates believe they have a shot at persuading the Legislature to restore a portion of the $75 million in federal and state Medicaid nursing home funds cuts as decisions on the Christie administration’s proposed spending plan come down to the wire.

The timing is critical because New Jersey plans on Jan. 1 to have managed care companies begin serving Medicaid’s long-term care recipients, including nearly 28,000 nursing home residents. Nursing homes expect the shift to managed care to lower their reimbursements over time, and worry that if they enter managed care with funding already squeezed some will be forced some to close.

Assemblyman Gary S. Schaer (D-Passaic) is proposing a budget resolution to increase Medicaid funding for nursing homes by $25 million in 2013. With the federal match, that would yield a $50 million increase. Schaer’s proposal is a significantly more than the $5 million increase Gov. Chris Christie is proposing, or $10 million with the federal match.

Michele Kent, president of LeadingAge New Jersey, whose members are nonprofit long-term care facilities, said there is support in Trenton for a more generous Medicaid boost than Christie proposed but the outcome hinges on state revenues. “I would say both the legislature and the governor's office see our request as very valid and that nursing homes indeed are underfunded.”

Paul Lagevin, president of the Health Care Association of New Jersey, which represents for-profit nursing homes, is also hopeful for a Medicaid increase. “We have gotten incredible support from both houses and both parties and the governor’s office has told us they understand the issue, so it’s not a question of convincing them we need to put more money into the system. It’s a question of where the money will come from.”

The state Department of Human Services is waiting for federal approval of a comprehensive Medicaid waiver that would, among other things, shift all long-term care Medicaid recipients into managed care. Most of the state’s 1.3 million Medicaid members already get their services through one of the four managed care companies that deliver Medicaid through contracts with the state. New Jersey’s objective, which would be expanded via the Medicaid waiver, is to provide the elderly with more support services in their homes and help them avoid moving to nursing homes.

“I agree with the governor that much more needs to be done to maintain seniors in their homes,” said Schaer, a member of the Assembly budget committee. “It represents a better quality of life. Nonetheless, I think we need to recognize the tremendously important role that nursing homes play in society, especially with people living that much longer. The direction of this administration is to pour more money into the home environment and I support that -- however, not at the expense of nursing homes.”

Without more Medicaid funding, nursing homes, “are looking at closures, at services being lessened, at cutting staff, and quality will be compromised. And I don’t think that is what New Jersey wants or needs,” Schaer said.

Nursing home funding will undoubtedly join scores of proposals pushed by legislators as the fight over the budget to meet a June 30 deadline, and Schaer said his resolution has the support of other legislators. “I am very, very hopeful -- so much rests on it occurring. This is fundamental to the quality of life.”

The state’s revenue picture “is problematic at best. What needs to occur is some reprioritization in light of smaller [budget] numbers and that can only be helpful in terms of taking a second look or third look at how we fund our nursing homes,” he said.

The Department of Human Services has been meeting for months with stakeholders in the long-term care community to gather recommendations on how to roll out managed care, assuming that the Medicaid waiver is approved. Both Kent and Langevin have asked that managed care be phased in over several years to minimize disruption to the industry. Eventually each managed care company will create a network of nursing homes, and some nursing homes may wind up being excluded from those networks.

The industry has proposed that for a period of time, perhaps two or more years, that the managed care companies be required to deal with currently licensed nursing homes, Kent said. The industry also wants the state to continue setting Medicaid rates for nursing homes until the time when managed care companies will negotiate rates with each facility.

Medicaid serves low income New Jerseyans, and state regulations require nursing homes to have 45 percent of their beds occupied by Medicaid recipients as a condition of their license. Kent said nursing homes have not received a Medicaid rate increase since 2008, their rates were cut this year, and for many facilities, Medicaid pays less than the cost of delivering care.

The shortfall is generally covered from a number of sources, including Medicare, which pays higher rates than Medicaid and from non-Medicaid or private pay patients, and through fundraising. But Medicare also reduced nursing home rates last year, and the financial squeeze has gotten worse. So the industry has a lot riding on increased funding in the 2013 budget.

“We want as much [funding] restored as we can possibly get, because that in fact will constitute base rates for the time when managed care will be negotiating and setting rates,” Kent said. "The industry has been cut and is really hurting. We need to try to get as healthy as we can” before the advent of managed care.

“Our hope has been as we went into managed care, which ultimately has a goal of reducing costs, that we would go in with a more appropriate base of funding, and work from there,” said Martin Idler, executive director of the Diocese of Camden Division of Health Services, which operates four nursing homes. Unfortunately the state “took the money first and then we’re moving into [managed care] instead of moving into it and then working the money down over a period of time.”

To cope with the current Medicaid rates, which Idler said are inadequate, “we have gone from top to bottom and squeezed out costs. We thought we were efficient already, but we have gone out and squeezed out a few more positions.”

Idler said he recently switched to a less expensive company to provide rehabilitation therapy and made some changes to employee benefits to save money. Three of the facilities are nearly 80 percent Medicaid, and one is about 65 percent Medicaid.

“Nursing homes that have limited their Medicaid population are not feeling the pressure as much as those of us who are heavily focused on the poor,” Idler said. “Our mission is to provide long term care for the poor elderly. If we had to stop taking care of the poor in significant numbers, there would be no rationale for us to be in this work.”

Richard Goldstein, executive director of the Greenwood House in Ewing, said he loses about $17,000 a year on every Medicaid patient. The deficit is covered by private pay residents, Medicare and fundraising. He just reduced health benefits for his staff and “now we are looking at layoffs, reduced overtime and cuts in all departments.”

Nursing homes generally have a larger staff than required by state regulations, Goldstein said. “So theoretically all nursing homes could make large staff cuts, but practically, our patients are so sick that we can’t. So you do what will cause the least harm. You start with maybe a housekeeper, a bookkeeper, an assistant administrator. What I do is try not to affect patient care but I am getting to the point where I may have to cut my nursing staff. Even cutting a couple of nursing staff greatly affects the level of care.”

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