Horizon NJ Health Slashes Medicaid Reimbursements for Home Healthcare

Hank Kalet | September 5, 2012 | Health Care
Agencies argue that 10 percent cut may ultimately affect the quality of care they can deliver to clients

Fate of Medicaid Waiver Faces Budget Review
A 10 percent reduction in Medicaid reimbursements from Horizon NJ Health has caused an uproar in the home health community, which fears that the cut in reimbursements will hamper agencies’ ability to handle more clients just when demand is expected to soar due to a change in how Medicaid is administered.

Horizon NJ Health, the largest of four managed care companies that administer the state’s Medicaid system, sent a letter to agencies that provide personal care assistance saying that it would cut reimbursement rates by 10 percent, from $15.50 per hour to $13.95 per hour, beginning October 1. Providers were told they had until September 4 to agree to the changes or they would have to leave the healthcare network. The deadline was later extended to September 14.

Providers say current reimbursements of $15.50 an hour are barely enough to cover salary and administrative expenses and that reductions would have to be passed along to home aides in the form of lower per-hour wages. That, they say, could lead to increased personnel turnover in an industry that already experiences high turnover rates.

Wages now range from $9 to $10 per hour for most homecare workers in the state, says Ken Wessel, president of the Home Care Council of NJ and executive director of the nonprofit agency, HomeCare Options. There are about 30,000 personal care assistants working for about 170 agencies.

The state moved about 155,000 clients from the Medicaid fee-for-service program to the managed care system between July 1, 2011, and October 2011. Horizon represents 47.5 percent of these clients, who are part of the Medicaid/Children’s Health Insurance Program, according to the Department of Human Services. Amerigroup New Jersey, Healthfirst Healthplan of NJ, and UnitedHealthcare Community Plan represent the other 52.5 percent and are not cutting rates.

In September 2011, the state submitted a Comprehensive Medicaid waiver application to the federal Centers for Medicare and Medicaid Services seeking the ability to “bundle services that support integrated, coordinated health care to clients,” according to Nicole Brossoie, spokeswoman for the Department of Human Services. The application is pending.

Market Conditions

Horizon says market conditions have forced it to lower its reimbursements.

“Horizon NJ Health has carefully analyzed the experience with Personal Care Assistant [PCA] services over the last year,” George Ingram, director of provider contracting and strategy for Horizon, said in the letter. “Our findings indicate utilization has been significantly higher than anticipated and the trend is not abating.”

Thomas Vincz, spokesman for Horizon Blue Cross Blue Shield of New Jersey, the parent company of Horizon NJ Health, called the reimbursement reductions “difficult decisions,” but said that they “demonstrate the realities of today’s healthcare in having to do more with fewer resources.” Horizon is seeing a reduction in the rates it receives from the state to administer “various government health programs,” Vincz said, while “benefit utilization” and overall costs were growing.

“As a result, Horizon NJ Health must work within its budget and manage its costs responsibly to ensure that its resources are sufficient to protect its members, meet the needs of the provider community, and at the same time, ensuring financial stability of the plan,” he said. “Horizon NJ Health continues to work with the state and the provider community to ensure a sustainable program.”

Representatives from several homecare agencies said the cuts would force them to reduce wages to employees, which could leave patients with less experienced aides or agencies willing to cut corners to save money.

“As they push down the wages of the home health aides, the only agencies that are going to survive and service Horizon clients are the ones who will take people off the streets as aides, cut corners on services or cut corners on training,” said Ken Wessel, president of the Home Care Council of NJ and executive director of the nonprofit HomeCare Options.

Brossoie said via email that the state is speaking with both Horizon and representatives from the home-healthcare/personal-care industry “to learn more about the reimbursement decision.”

“While the state does not have to approve these reductions,” she said, “we do monitor closely all health plan changes to ensure that members’ care and access to the care is not disrupted.”

Disruptions Ahead

Industry officials, however, say that disruptions seem likely.

Robinson Joseph, president of HomeHealth First in Elizabeth, said the cuts will cause quality of care to suffer because they will drive the better-performing aides out of the industry — and possibly force some agencies to close. He said that even at $9 to $10 an hour in home health aide wages, it currently costs an agency about $13 per aide per hour in wages and state and federal taxes, which does not include administrative costs and other overhead.

“To stick with the plan, as proposed, the only way to do that is by reducing the salary of the aides,” Joseph said. “We will just have to pass it along by cutting the salary of the aides because everything is stretched to begin with.”

“If, at the end of the day, your reimbursements cannot cover your expenses, then it would be a no-brainer to get out of the business completely,” he said.

The reimbursement cut is the second one in just over a year, Wessel said. The first one — 65 cents per hour — came when the state outsourced Medicaid to the HMOs. His company and most of the state’s nonprofits did not pass that cut along to their employees, but he said it is unlikely they will be able to avoid doing it this time.

Justin Braz, political coordinator for 1199 SEIU-United Health Care Workers East, which represents about 830 personal care assistants in central and northern New Jersey, criticized both the Horizon cuts and the potential that agencies would pass them along to workers.

Overworked and Underpaid

“We’re talking about workers making less than $10,” he said. “They are already overworked and underpaid and this doesn’t make much sense to us. They are the most important assets to these companies.”

The money they earn — which translates into less than $20,000 a year for full-time work — rarely includes health coverage or other benefits, and most have to pay for their travel between clients out of their own pockets, Braz said.

“They are doing hard, backbreaking work. They are creating relationships with clients that mimic those of family members. They take care of family members and a lot of them are working second or third jobs. There is only so far you can cut their wages.”

Wessel agrees. Some nonprofits cover the cost of travel between clients, and some provide scholarships and vacation and sick time. That, plus the general overhead, “adds up to more than the new $13.95 rate,” Wessel said.

“Then you have to provide supervision by a registered nurse. You have to provide 75 hours of training,” he said. “To meet the regulations in New Jersey and pay a decent wage — and I’m not saying $10 is decent wage because you can’t live on it — it costs a lot.

“Not everyone is willing to go into people’s homes,” he added. “It is unpleasant. The people who want to do that are people who care about people. Horizon is literally taking money out of their pocket and they will be left with providers who, in a Darwinian way, will be left with agencies who are least common denominator.”

The Horizon cuts come at a time when the state is trying to move people from nursing homes into homecare to save money, an effort that could be placed in jeopardy by the cuts.

“The whole state strategy of keeping people at home and out of nursing homes comes down to the aides,” Wessel said “Once you cause them to go to McDonalds or Burger King for better wages, they won’t come back and agencies like ours might not be around.”

“They are messing with something the state rightly has pride in — reducing the number of people in nursing homes and keeping people at home in a quality way. The state has washed its hands of this by handing it over to a private enterprise and the patients are going to suffer.”

Joseph called the move away from nursing homes a “win-win” for the state.

“Instead of keeping clients with some needs in a nursing home, those folks can live in their house with some assistance for personal care and you are saving so much money,” he said. “You can’t compare the cost of a couple of hours of home services to cost of institutional or nursing-home living.”