The financial well-being of home- and community-based care providers often depends on Medicaid reimbursement, which has stagnated throughout much of the country in recent years. One state is trying to rebalance the equation with a first-of-its-kind annual inflation increase for all Medicaid home care and hospice direct fee-for-service rates.
Last June, the Rhode Island General Assembly officially approved a budget with a recurring inflation provision for home care and hospice services.
The first rate increase as part of that policy kicked in on Tuesday — a 1.9% bump.
“Last year, we pushed for a change in the way the Rhode Island Medicaid program goes about funding home- and community-based services, specifically Medicaid-contracted home care and hospice services,” Nicholas Oliver, executive director of the Rhode Island Partnership for Home Care, told Home Health Care News. “Until last year, No Medicaid home care or hospice provider had a cost inflation factor set in the statue. We asked, ‘Why not us?’”
States have a high degree of flexibility in running their own Medicaid programs.
In Rhode Island, hospitals and skilled nursing facilities (SNFs) had already operated with mandated, annual inflation increases.
No other state in the U.S. currently has a similar framework for Medicaid-contracted home care and hospice services, according to Oliver, whose organization represents roughly 30 provider members that combine to generate about $500 million annually to Rhode Island’s economy.
The enactment and implementation of the annual inflation increase comes after five successive increases in the four previous fiscal years for personal care attendant services at 7.5%, 7%, 10% and 1.9%, respectively, with a 20% fee-for-service increase for skilled nursing, therapeutic and hospice care services last year.
“We’ve gone through periods of not having rate increases — or having rate freezes — followed by dramatic increases, with the goal of trying to catch up on prior [years],” Oliver said. “If you’re under a rate freeze after many years and then have that dramatic increase, it’s not as if you’re catching up from the past. You’re trying to stabilize your current operations and project how that would impact you for the next series of years with uncertainty.”
Medicaid funding stability has developed into a major issue for providers, especially those in areas pressured by minimum wage hikes.
In 2019, 18 states started the year with higher minimum wages than the year before.
Stagnating Medicaid rates have even forced some providers to shift to private pay and other funding streams.
“Providers may say, ‘I’m just not going to do Medicaid anymore because the rates aren’t sustainable,’” Darby Anderson, chief development officer at Addus HomeCare Corporation (Nasdaq: ADUS), previously told HHCN. “‘I’ll provide private pay or work more primarily in other sources of funding and not work in Medicaid,’ which is going to leave a gap in the provider pool.”
In Rhode Island, the annual inflation increase for Medicaid-contracted home care and hospice services is determined each year by the New England Consumer Price Index for medical care, set by the U.S. Department of Labor.
Rhode Island — the smallest state in the nation — is unique in many ways, but Oliver hopes the inflation policy will catch on elsewhere.
“I believe that other states could replicate this model and — as much as we’re celebrating that this is a first — that it can be a model … our other 49 counterparts move toward,” he said. “It changed the atmosphere of [the Rhode Island Partnership for Home Care] and its members. It provided the opportunity for us to focus our attention on policy matters related to home care and hospice services delivery, instead of what most of my [colleagues] were previously focused on — Medicaid rates.”
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