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March 18, 2020

When Nursing Home Care is Denied

By Eric Carlson

Denials can be harmful to older adults.

The pdf for the issue in which this article appears is available for download: Bifocal, Vol. 41, Issue 4.)

A majority of states provide Medicaid long-term services and supports through managed care, and the number grows each year. But the shift to managed care leaves many Medicaid recipients susceptible to harmful coverage denials.

Last fall, news articles on Medicaid nursing facility evictions in California caught the attention of aging network professionals nationwide. According to an article in the Sacramento Bee, the managed care plan CenCal Health on one day issued notices to end Medicaid nursing facility coverage for three dozen residents, including a 68-year-old amputee receiving kidney dialysis, and an 82-year-old man with congestive heart failure and diabetes who did not have the strength to transfer himself from bed to wheelchair. The termination notices alleged that the residents no longer needed “skilled nursing facility services.”

When residents appealed, the facility explained its reasoning in more detail. Yes, the residents required nursing facility care, but because they allegedly did not require “skilled” nursing facility services, their nursing facility services were “intermediate care services” and not Medicaid reimbursable.

Your reaction may be the same as the residents’ — What?? How can a Medicaid program, as the payor of last resort, simultaneously assert that a beneficiary needs nursing facility care but that the beneficiary’s care needs are insufficient for Medicaid coverage? The short answer: It cannot. If a person meets Medicaid financial eligibility standards, and demonstrates the need for a covered service, Medicaid must pay for that service.

In this particular case, however, the complicating factor was a lingering glitch in California’s Medicaid regulations. Federal Medicaid law at one time distinguished between “skilled” and “intermediate” nursing facilities, but those categories were combined into the “nursing facility” category in 1990, when the federal Nursing Home Reform Law was implemented. California Medicaid regulations, however, have not reflected this change, continuing to refer to “skilled” and “intermediate” care. In accord, the regulations set fee-for-service payment rates for “skilled” and “intermediate” care, with the “intermediate” rate set at a significantly lower level.

Although the regulations have been out-of-date for years, the impact had been relatively muted under the previous fee-for-service model. The state routinely authorized care as “skilled,” essentially ignoring the “intermediate” category.  Rather than focusing on the formal definitions of “skilled” and “intermediate,” assessors seemed to make commonsense service authorizations based on whether the resident needed nursing facility services generally.

Skilled or Intermediate Care?

 In the case of the recently threatened terminations, however, CenCal took advantage of the dusty “skilled” versus “intermediate” distinction to deny coverage. The “skilled” category as defined applies only to a relatively narrow subset of nursing facility residents requiring more intensive care. By covering only “skilled” care, CenCal excluded coverage for the many other residents requiring “intermediate” care.  Notably, CenCal, although responsible for managing Medicaid coverage for each of its members, did not identify viable alternatives for the “intermediate care” members threatened with nursing facility eviction.   

The story has a reasonably happy ending. After advocacy by consumer representatives and nursing facility lobbyists, the California Medicaid program issued guidance clarifying that Medicaid covers “intermediate” care in nursing facilities. Then, in response to this guidance and to ongoing administrative appeals brought by members, CenCal reversed course and rescinded the bulk of the original termination notices.  (Special thanks to the local long-term care ombudsman program and legal services programs for their determined advocacy.) Now additional advocacy is needed for the state to expand and formalize this guidance through managed care contracts, payment rates, and other mechanisms.

 The nursing facility world has long been awash with misstatements and misconceptions about levels of care within nursing facilities.  Skilled care, custodial care, chronic care —all these terms are tossed around in ways that can confuse and exploit consumers.

As is demonstrated by the recent California case, a Medicaid program must be prepared to cover all financially-eligible persons who demonstrate a need for nursing facility care. By contrast, the Medicare program only covers skilled nursing facility care, which is defined as requiring the active participation of nurses (intravenous feeding, for example) or physical, occupational or speech therapists.

In order to prioritize Medicare reimbursement over the (less lucrative) Medicaid reimbursement, some nursing facilities give residents the misimpression that they must leave when their time-limited Medicare coverage ends, because the facility is not a “custodial” facility. This is false. Under federal law, a nursing facility cannot limit itself to a particular range of nursing facility care. As Medicare reimbursement ends, a resident is free to remain under private payment. If the facility is certified for both Medicare and Medicaid, as most facilities are, the resident also is free to remain under Medicaid reimbursement (subject to the limitation that, in some states, the facility may have a limited number of Medicaid-certified rooms).

 Managed Care Grows

Recent years have seen a stampede of states moving their Medicaid long-term services and supports (LTSS) programs into managed care.  From the state’s perspective, the move to managed care shifts risk from the state to health plans.  In general, the state pays the plan a capitated rate, and the plan then bears the responsibility and financial risk for providing legally-required care to Medicaid beneficiaries.

According to states and plans, however, the Medicaid beneficiary also benefits from the managed care model.  The fee-for-service model allegedly provides care in a somewhat scattershot manner.  In managed care, by contrast, the plan coordinates care for the member’s benefit.  For LTSS, the plan purportedly is better positioned to coordinate home and community-based services, allowing members to live in the community rather than nursing facilities or other institutions.

The recent California situation is only one example of a Medicaid managed care model yielding disappointing results.  Under fee-for-service, the dated regulatory references to “skilled” and “intermediate” care were not used to deny Medicaid coverage.  It was health plans that chose to exploit the limited definition of “skilled” care (although, to be fair, many plans did not).

Because of capitation, a plan may generally have an unhealthy financial incentive to deny coverage.  Also, care coordination often appears more robust in the state’s initial pitch for Medicaid managed care than it does in practice. Due to financial incentives or lack of institutional commitment, care coordination in too many plans is no more coordinated than the predecessor fee-for-service authorizations.

States hold at least two options for improving the quality of their LTSS systems.  One is to subject the managed care model to real scrutiny before moving from fee-for-service to managed care.  In the March 2019 Gerontologist, professors Larry Polivka and Baozhen Luo find little data that supports moving Medicaid LTSS to managed care, concluding that the recent trend is based more on ideology than evidence.  States considering managed care must look beyond the superficial sense that “everyone else is doing it, so we should too.”

A second option is to equip the state’s Medicaid managed care program with effective consumer protections.  The state could establish a managed care ombudsman program to both assist beneficiaries and advocate for systemic improvements.  In addition, managed care members should have easy access to an effective appeals system.  Furthermore, state monitoring should impose meaningful penalties when plans cut corners.    

According to the idealized version of managed care, a Medicaid health plan coordinates necessary LTSS, whether it be nursing facility care or a different form of LTSS.  In the California case, however, the health plan generally sought to terminate nursing facility care without covering alternative LTSS.  Responsibility for residents’ safety fell to a great extent upon nursing facilities, which in some instances kept residents without payment, when the resident had no adequate alternative.

Health plans should not be terminating services without regard for potential consequences. California’s Medicaid program has had policies that, in some circumstances, require a health plan to continue to pay for nursing facility care when discharge would be unsafe.  States would be well advised to incorporate similar principles into their managed care rules and contracts.  If care truly is managed for beneficiaries’ benefit, the health plan must take responsibility for beneficiaries’ well-being, rather than making siloed decisions regarding coverage or non-coverage of certain services.

Limited Residential Options

To be fair to the California health plan, part of its difficulties might be attributable to California Medicaid’s limited residential LTSS options.  Many of the affected residents, although clinically eligible for Medicaid nursing facility coverage, may well fare better in a less medicalized residential setting.  That “less medicalized residential setting,” however, is often only a theoretical concept under California Medicaid.  Medicaid assisted living coverage is subject to a low enrollment cap and a consequentially large waiting list.  The aging network is advocating to give health plans greater freedom to offer assisted living on an “in lieu of” basis, but much work remains to be done.

If plans are expected to manage LTSS appropriately, they must have the necessary tools.  Calamitous nursing home discharges become increasingly likely when a state’s Medicaid program provides inadequate residential options. 

Eric Carlson is a directing attorney for Justice in Aging. 

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