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Explainer: Medicaid Comprehensive Waiver Deploys Managed-Care Model

Program shifts long-term care for elderly and disabled away from fee for services, stresses home- and community-based care

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What it is

Medicaid -- the joint federal-state healthcare program for residents with low incomes – is the principal source of funding for long-term care in the state. This includes nursing homes; community-based and home care for the elderly and disabled; and inpatient mental-health care. The federal government traditionally required the state to pay for Medicaid long-term care through a fee-for-service model, in which providers were reimbursed for each service they furnished.

In 2012, the federal Centers for Medicare & Medicaid Services (CMS) approved the state’s application for the New Jersey Comprehensive Waiver, which shifts long-term care toward the same managed-care approach currently used to meet Medicaid patients’ acute and primary healthcare needs. In managed care, the government pays insurers to manage all of the patient’s needs, rather than paying for each service separately. The managed-care insurers are aiming to provide more services in residents’ homes and in community centers, and the waiver will give them more flexibility to do so.

Why the state wanted it

The state was looking for more flexibility and lower costs so that residents capable of living at home or in the community could do so. Managed-care providers believe that funding services needed by an individual -- even if they are nonmedical such as minor home construction -- can keep that individual out of a nursing home, which is almost always more expensive for the government than home- or community-based care. State Human Services Commissioner Jennifer Velez has said that the change would provide more financial resources to fund home and community care.

The amount of money involved is substantial. From October 2011 to September 2012, of a total of $10.39 billion in Medicaid spending in the state, $3.54 billion -- or 34.1 percent -- went toward long-term care.

What else it does

In addition to shifting toward managed care, the waiver also changes other aspects of Medicaid in the state.

For one thing, it allows federal funding to support several programs, including treatment for low-income residents with mental illness and an opioid addiction, as well as services for low-income children up to the age of 21 with a serious emotional disturbance.

For another, the waiver increases support for community-based care for residents with developmental or intellectual disabilities who are eligible to live in one of the state’s developmental centers.

Why nursing homes are concerned about funding

While the state has been preparing to enact the shift to managed care, it has made a series of funding cuts and freezes in Medicaid funding for nursing homes.

But nursing-home operators have warned that facilities will go bankrupt and close if they do not have enough money to operate. While these facilities expect a rising number of residents as the population ages, these patients will be more costly because the waiver’s increased emphasis on home and community care will mean that patients with conditions like dementia will not be moved to a nursing home until their condition is severe.

The nursing homes’ concern has gained the attention of some legislators, including Assemblyman Gary S. Schaer, who grilled administration officials about the changes during a budget hearing in April.

Velez, however, said the system of funding for care has been biased in favor of nursing homes, but the waiver allows Medicaid funds to be used to meet patients’ individual needs.

What is happening now

The waiver lasts for five years, from July 2012 to June 2017, but if it’s judged to be successful it will likely be extended.

The residents who are already receiving home- and community-based care are scheduled to be shifted into managed care in January, while those who live in nursing homes are scheduled to move to managed care in July 2014. It is unclear whether any current nursing-home Medicaid patients will move to home-based care.

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