Rise of Managed Medicaid Could Deepen Skilled Nursing Financial Woes

Increasing numbers of states have begun exploring managed Medicaid programs as a means of achieving savings as their populations age. But unless officials provide crucial oversight, skilled nursing facilities could find themselves under even worse financial pressures.

It’s something that states and their legislators need to keep in mind as they weigh options for managing the health of growing LTSS populations, several experts told Skilled Nursing News.

Some states have adopted managed long-term supports and services (MLTSS) as a means of improving care integration, coordinating services, and establishing predictability in their budgets, according to a recent report from the National Governors Association Center for Best Practices.


But at least one report — commissioned by the nursing home trade group Health Care Council of Illinois (HCCI) on the Medicaid reimbursement landscape in the Prairie State — suggests that confidence is misplaced, or at the very least needs to be tempered.

“Policymakers in many states have become convinced that managed LTC (MLTC) programs administered by proprietary Health Maintenance Organizations (HMOs) are the best method for containing costs without sacrificing access and quality,” researchers from the Claude Pepper Center at Florida State University wrote in the report. “The evidence for this supposition is, at this point, slight at best.”

In fact, reports from some states that have implemented MLTSS suggest that leaders need to move carefully when considering Medicaid long-term care policies — particularly when evaluating which ones are the most cost-effective, the researchers added.


David Voepel, who serves as executive director at the Arizona Health Care Association — and who served for 12 years as executive director of the Illinois Health Care Association (IHCA) before that — expressed a similar view.

“I think a lot of states just look at managed care and say, ‘We’re going to write this check, because that’s what we can budget, and we’ll hand that to [the managed care organization] and we’re out of it, we’re done,'” Voepel told Skilled Nursing News. “And that is a recipe for disaster.”

MCOs as solution for long-term supports and services

Experts at a National Investment Center for Seniors Housing and Care (NIC) conference in February called out managed Medicaid as a growth area that could be a threat to SNFs. But the impact on providers is different across the country, Caroline Haarmann, associate vice president for Medicaid reimbursement and research at the American Health Care Association (AHCA), told SNN.

“With regard to states that have moved to MLTSS, I think it varies tremendously from state to state in terms of what the design considerations are that the state includes in its managed care plans, as well as which populations are covered,” she noted.

AHCA is a trade group that represents nursing homes in the U.S., with affiliates in different states.

One key point to note when trying to track nationwide trends is that managed Medicaid and MLTSS are not necessarily the same thing. The term “managed Medicaid” can refer to Medicaid administered through MCOs for a variety of populations, such as children or working-age adults, Haarmann noted.

MLTSS is generally for populations such as older adults or people with disabilities — groups with greater LTSS needs, she explained. And according to multiple reports, many governments are looking to expand MLTSS: The number of states with such programs grew from eight in 2004 to 24 in 2019, according to a January 2018 report from Truven Health Analytics commissioned by the Centers for Medicare & Medicaid Services (CMS).

The more recent report from the HCCI went even higher, placing the number of states that contract with MCOs to provide Medicaid long-term supports and services for older adults and people with disabilities at at least 29.

“A lot of states are looking to expand managed care to LTSS,” Haarmann said. “And certainly there are a lot of states that have adopted that in the last couple of years. With regards to what states might be considering making those changes … that’s something that can be very dynamic and change very quickly.”

The Truven Health Analytics report found that by August 2017, 24 states had implemented 41 MLTSS programs. The states that added such programs between 2013 and 2017 included Idaho, Iowa, Illinois, Kansas, New Jersey, Ohio, Rhode Island, South Carolina, and Virginia.

But it wasn’t all good news for those states. In fact, HCCI wrote in its report on the poor state of Medicaid reimbursement in Illinois that “perhaps nothing has had as devastating an impact as the state’s mandatory Medicaid-managed, long-term care program.”

Though Illinois faces a slew of issues related to the rollout of managed Medicaid and MLTSS, it’s not the only one, the Florida State University researchers said in their section of the report. Iowa and Kansas — both of which use proprietary HMOs for their managed long-term care programs — saw significant drops in their AARP rankings on comparative cost-effectiveness between 2011 and 2017, falling out of the top 10 states for that metric over that span.

“It is not clear that this drop in the AARP rankings is related to the comprehensive proprietary MLTC programs that each state has adopted over the last four to six years, but it would certainly be fair to raise questions about what role these models of financing and administering LTC services may have played in their declines in the AARP rankings,” the researchers wrote.

Illinois’s managed care struggles

For SNFs in Illinois, the MLTSS program represents one of several financial pressures that have put operators in dire straits. And though it wasn’t the worst-performing state in the group analyzed in HCCI’s report — which also included California, Florida, New York, Ohio and Texas — it featured some worrying trends, the researchers said.

The Land of Lincoln had the largest decline in the number of certified nursing facilities in recent years, dropping from 764 in 2013 to 740 in 2017. And it had steep declines in all but one MLTSS AARP Long-Term Care Scorecard measure.

For providers, the headaches have been numerous, Matt Hartman, executive director of the IHCA, told SNN.

Illinois had something of a piecemeal rollout of its managed care program, he explained. The initial model for the institutional care population was the integrated care program (ICP), rolled out some time around 2013 — which captured Medicaid-only residents in SNFs, Hartman said.

Then came the program for dual-eligibles — or patients eligible for both Medicare and Medicaid — called the Medicare-Medicaid Alignment Initiative (MMAI), bringing its own set of issues.

“Some of the first problems with it were as early as the contracting stage of things with the MCOs,” he said. “There was incredibly poor communication, there were refusals in regards to things that could be seen in the contract. There was a lot of haggling over the contracts, maybe more so than there should have been.”

The next phase was the Medicaid LTSS program. The federal government had told Illinois that residents had to have the option to opt out of managed Medicare, leading to the creation of the Medicaid LTSS program — an attempt to capture dual-eligibles who had opted out of having Medicare covered by the MCO and who the state hadn’t been able to capture under MMAI, Hartman told SNN. This left their Medicare under the federal government, and their Medicaid under an MCO.

After that came the HealthChoice Illinois program, which was the primary focus of the HCCI report. This was the attempt to go statewide with the Medicaid program, he explained, for most populations and not just those in SNFs. But it ran into the same problems that the had plagued the MMAI program — for the skilled sector this time. As a result, HealthChoice Illinois was delayed for the SNF space, though it’s likely to be cleared soon with a rollout possible for this spring or summer, Hartman noted.

IHCA has moved to delay the expansion because of the problems with the program overall, many of which are wide-ranging, he said.

Care coordination is the first major problem. Under the terms of the contract between MCOs and the state, the managed-care organizations are responsible for handling interactions between care providers, and the IHCA so far has found the efforts less than stellar.

“The issue with care coordination not being done is it means these individuals aren’t hitting the doors of the facilities, they’re not coming in, and they’re not seeing the residents,” Hartman said. “Which means they’re not doing the appropriate planning to A) make a determination if they’re in the right setting or not, and B) to understand what the care needs of the resident are that can then be a part of claims and billing.”

This leads directly to the next issue, which is claims, MCOs are obligated to pay a minimum of 90% of their claims within 30 days. But the MCO has approval rights over those claims, and any additional services that were part of a resident’s care — such as intravenous therapy — have to be authorized by the MCO.

SNFs, however, have an obligation to supply the level of care that any individual patient needs, or risk citations and fines from regulatory agencies, Hartman said.

“What we’re seeing is the managed care companies, if they don’t do the care coordination, they’ll come in, deny this service and either attempt to pay us the lower rate, below what the level of care provided was, or they go to an alternative service that doesn’t meet the resident’s care needs,” he said. “So the two things, claims and care coordination, are just deeply deeply integrated and tied together.”

Other issues included communication and transparency with the MCOs, he said. And when those issues are combined with the fact that Illinois’s Medicaid reimbursements rank lowest among the Midwest states — and among the lowest nationwide — the result is considerable financial pain for providers in the state.

State needs to ‘be the hammer’ in MLTSS

One of the problems with Illinois was that the state government to largely decided to step back and simply write a check to the MCOs each year, Voepel noted.

Arizona, by contrast, is more collaborative, he told SNN. The Arizona Health Care Cost Containment System (AHCCCS) has work-group meetings every couple of months with LTC providers and MCOs to discuss issues and anything that might be coming down the line from CMS or elsewhere.

“The state sometimes has to be the hammer,” he said. “You need an arbiter on some of these things because you have a difference of opinion or even a difference in nomenclature itself.”

This has worked well, but it’s taken the state’s leadership to accomplish the harmony, Voepel stressed. And according to the HCCI report, this is one area where Illinois fell particularly short. In fact, Illinois provided little to no guidance or assistance for SNFs during the transition to the new Medicaid program, Meredith Duncan, a shareholder at law firm Polsinelli, wrote in the HCCI report. Instead, Illinois consistently said it would not be involved in the contractual relationship between a provider and an MCO.

This was problematic because the state was in the best position to clarify how HealthChoice Illinois was meant to be administered, Duncan argued.

“Clarification from the state in the form of approving template contracts or arbitrating disputes about language would have reduced the time and resources spent by providers simply trying to enter into a fair contract to deliver care to Medicaid beneficiaries,” Duncan wrote. “When the MCOs were issuing contracts that did not include, or were contrary to, the provisions in the model contract, the state’s silence only created more expensive, time-consuming work for providers to negotiate a more fair contract.”

Think long-term for savings

Many states are looking to MLTSS as a means of saving money. In fact, Illinois’s rush to move into managed Medicaid was largely motivated by its need to achieve some sort of savings as soon as possible, Hartman noted.

In fact, when the managed care program was rolled out, it was done with so little input from SNF providers and so little education from the state that when MCOs took over the system, they were completely unfamiliar with the voucher system SNFs were using for their billing process, he said.

“I think cost savings was absolutely the biggest driver for [the state], and they were desperate to realize some cost savings, and so they tried really hard to roll the program out,” he said.

This type of thinking seems likely to be present in some other states; the NGA report showed that at least one felt that MLTSS was the “only way to make progress” in moving to a delivery system more focused on home and community-based services. That said, participants also emphasized that successful implementation of MLTSS takes time, and that states need to be realistic with their expectations.

Part of the reason for Arizona’s success — while it still has a Medicaid reimbursement shortfall, it’s only $9 per resident per day, compared with $20.63 at the lowest estimate for Illinois in HCCI’s report — is the fact that the program has been in place for roughly three decades, Voepel said.

While states can save money on administrative costs in the long term by moving to MLTSS, they have to be thinking beyond year-over-year budget concerns, he explained.

“Short-term-wise, you almost need seed money to get it going and to fund so that managed care companies can make a little bit of money,” he said.

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