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Chronic Disease

Rate Cuts Threaten Dementia Care Facilities

Proposed cuts to the Medicaid rate paid for caring for people with Alzheimer’s disease and dementia threaten facilities’ ability to survive, say advocates.

By Rose Hoban

Arlawin Ladd’s bedroom is decorated with pictures of family and drawings made by her grandchildren, proclaiming Granny Laddy as the “best grandma.”

But Ladd’s bedroom is in a place where she didn’t want to end up, an adult care home located on a quiet side street in Raleigh. Ladd, 85, has had dementia for at least a decade, and she lives in a facility designed for people like her.

A resident walks in the hallway of Wake Assisted Living in Raleigh.

A resident walks in the hallway of Wake Assisted Living in Raleigh. Photo credit: Rose Hoban

In 2000, her daughter Jean Murphy first started noticing her mom was getting forgetful.

“Initially, she was repeating things. Then she left the stove on,” Murphy remembers. “And that got progressively worse, and then she had a stroke.”

While Ladd recovered from the physical deficits generated by the 2010 stroke, her memory was much worse. A short stay in a nursing home and then back home to Murphy’s house, and soon it became clear that Murphy could no longer care for her.

“I have stairs at my house; I couldn’t take care of her, and my sister was taking care of her husband, who was ill,” Murphy said.

But Ladd didn’t have much money, and the family needed to apply for Medicaid.

“It was traumatic. We’d never had to ask for help or assistance to that degree before,” Murphy said.

The real problem with Medicaid though was that her choices were limited when it came to adult care homes providing dementia care that would accept Ladd. Murphy and her sister visited more than 50 residences in the Triangle, looking for a place that would accept Medicaid, and where they could imagine leaving their mother.

That’s why Murphy and her sister were thrilled when they found Wake Assisted Living, where Ladd has been for three years. The place is clean, bright and cheerful. Murphy can’t say enough about the staff.

But that staff is worried about proposed cuts in the state’s Medicaid reimbursement for personal care services, the money that keeps adult care facilities such as Wake Assisted Living afloat.

On Oct 1, state Department of Health and Human Services officials informed the federal Centers for Medicare and Medicaid Services that they propose to cut the hourly rate for personal care by $2.40 per hour, down to $13.12 per hour.

And with a new, lower cap on the number of hours the state will reimburse for that care, facilities like Wake Assisted Living are wondering if their business model can remain viable into the future.

A ‘different feeling’

Wake Assisted Living houses 58 residents, all with varying degrees of dementia, said Peggy Smith, the facility’s administrator. Its capacity is 60.

Wake Assisted Living administrator Peggy Smith shows off one of the facility's shower rooms.

Wake Assisted Living administrator Peggy Smith shows off one of the facility’s shower rooms. Photo credit: Rose Hoban

As of this week, 44 of those residents were dependent on Medicaid for living there.

“Not every assisted living or special care unit would have such high Medicaid,” Smith said, “but there’s such a need. So that’s been our niche – to get Medicaid individuals into care.”

Wake Assisted Living is what’s known as a special care unit, a facility only for people with dementia. That means every door to the outside has a keypad lock that sounds a loud, beeping alarm when the door opens. State regulations require extra staff to be on duty at all times, higher levels of training for staff and other enhancements.

During a tour, Smith shows off shower and bathing rooms in the facility, rooms, she said, that get a lot of use due to the high number of residents who have become incontinent because of their disease.

“When they come into a bath or shower room, there has to be a staff supervising them,” Smith said.

Smith has also trained all of her staff – from the maintenance supervisor to the cooks, as well as the nursing assistants – in dealing appropriately with people with dementia.

All doors leading to the outside at Wake Assisted Living are alarmed and have keypad locks.

All doors leading to the outside at Wake Assisted Living are alarmed and have keypad locks. Photo credit: Rose Hoban

“Our maintenance director is just wonderful, because along with all he does he can connect and redirect people,” she said, referring to the fact that staff need to know how to deal with someone with memory loss who may have wandered where they shouldn’t be, and do that without creating agitation. “Not everyone can do that. It’s a skill.”

For that, and other enhancements, special care units get reimbursed by Medicaid for personal care services: assistance with the basics of daily living, such as bathing, dressing, toileting, eating and getting around.

That reimbursement is now $15.52 per hour of care up to a maximum of 130 hours of care per month, a little more than four hours per day.

That adds up to a maximum of $2,017 per month to care for Medicaid-eligible residents, on top of monthly Social Security payments of about $1,200 for each resident.

“What I do is give them a check for all but $66 of Mother’s Social Security,” said Murphy. “She’s got three little piddly life insurance policies, and [payments for those] come out of her check; that $66 is taken up with that.

“Anything extra for Mom – whether it’s clothes or a little treat, getting her hair done – I’m writing a check to Wake Assisted.”

In a Sept. 1 letter to the Centers for Medicare and Medicaid Services, DHHS Sec. Aldona Wos requested permission to drop the personal care rate to $13.12 per hour, retroactive to July 1, which means that if CMS approves it, DHHS would be able to reclaim money for services already rendered.

A resident at Wake Assisted Living gets her hair done.

A resident at Wake Assisted Living gets her hair done. Photo credit Rose Hoban.

“We’re really struggling right now because the reimbursement is not sufficient for the care we are providing and there is higher acuity here,” Smith said.

“Our owner is a very positive person, but this last week was the first time I saw him, you know, have a little different feel about all this,” she said. “We still don’t know when the rate will change, and we don’t know what the rate will be.”

Smith has already told her staff that they won’t receive turkeys this Thanksgiving, as the facility’s owner has done in the past.

She said it’s hard to maintain morale when there’s so much uncertainty about the future.

A problem building for a long time

The problem with personal care services dates back more than a decade. In an attempt to help adult care homes that provide assistance with dementia patients, the General Assembly provided an enhanced Medicaid rate for those facilities.

But federal laws such as the Americans With Disabilities Act of 1990 require that Medicaid payments to help people with disabilities apply to everyone – those living in institutional facilities and those who live with family. In 1999, the Supreme Court reaffirmed that the same rules should apply to everyone, no matter where they live.

CMS warned North Carolina for years that paying a different rate and for more hours for adult care home residents than for people living with their families was illegal, but no action was taken.

But a complaint filed in 2010 by Disability Rights North Carolina raised the issue again. In 2011, the U.S. Department of Justice investigated and found that North Carolina was indeed breaking the law by offering two payment schemes. The legislature had to respond.

Staff member TKTK dances with one of the residents at Wake Assisted Living in one of the day rooms.

Staff member Patricia Horton dances with one of the residents at Wake Assisted Living in one of the day rooms. Photo credit: Rose Hoban.

In 2012, legislators faced the prospect of raising the rates and maintaining hours for everyone: people in institutions and those at home.

But lawmakers worried about the “woodwork effect” – that many people living in the community would emerge to claim the benefit. So they tightened the standards around eligibility for personal care services for everyone, whether in adult care homes or in the community.

Now in order to qualify for the services, a person must need help with at least three activities of daily living (or two activities classified at a higher level). The legislature also limited the number of hours for reimbursement to 80 per month.

The 80-hour rule triggered a crisis in the adult care home industry for those residences that operate special care units. The special care unit operators said there was no way they could survive at that level of reimbursement, so in this past year’s budget, the General Assembly wrote language allowing for an additional 50 hours of care for people with dementia.

This means that special care units can get paid for a maximum of 130 hours of care, down from a 160-hour maximum before 2012.

“There was a suggested rate of $14-something in the statute,” said Janet Schanzenbach, executive director of the North Carolina Association, Long Term Care Facilities. “There were discussions that it’d be in the $14.70 range. And we were prepared for that. But not for $13.12.”

She also noted that come January 2014, the rate will tick down again to $12.73, when new “shared savings” rules written into the budget by the General Assembly go into effect.

Schanzenbach said North Carolina’s reimbursement for adult care homes has essentially plateaued in the past decade, while costs and requirements have increased.

Staff member Vida Baxter-Lewis checks the closed circuit television cameras that monitor residents at Wake Assisted Living.

Staff member Vida Baxter-Lewis checks the closed circuit television cameras that monitor residents at Wake Assisted Living. Photo credit: Rose Hoban

She also cited an annual national survey that found that the median monthly cost for caring for a resident in an adult care home in North Carolina is, at a minimum, about $2,900. That’s without the enhancements for residents with dementia.

“What they’re going to pay us is half,” Schanzenbach said.

She said that what stands out for her is legislators’ “concern with holding the budget down while not giving any consideration to what’s going to happen to the individuals in the facilities.”

Moratorium in the face of growing need

During this past session, legislators also set a three-year moratorium on the development of new special care units.

“The only way around it is if the secretary deems there to be need significant enough to waive the moratorium in a specific county,” said Hugh Campbell, board president for the N.C. Association, Long Term Care Facilities. He runs a company that provides management and operations services to adult care homes.

maps show the changing number of people over 65 in each county.

Map progression shows the changing number of people over 65 in each county. Although people under 65 can contract Alzheimer’s, age is the greatest risk factor for the disease.

“If you look at demographic information, we believe that the growth and need for theses services will continue to increase,” said Campbell, who said he believes the moratorium and the limits on payment are a bad idea.

Indeed, demographic data show that by 2025, one in four people in North Carolina will be older than 60. By 2030, 2.3 percent of North Carolinians will be above 85, and at that time, this “old-old” population will be the state’s fastest growing demographic.

Once past 85, the risk of dementia is about one in every two people.

Campbell said that if the state now makes it too difficult for providers interested in running special care units, people will avoid the business and there won’t be capacity when we need it.

“You can pay a little as you go or pay a whole lot down the road,” he said. “The need for the service is not going to go away just because we put artificial parameters on the budget.”

Campbell said he understands legislators’ need to control the state budget. But he said the current scheme will end up excluding people who rely on Medicaid.

“When you start cutting the hours and rates, you get high-end private-pay facilities that’ll stop taking Medicaid because the reimbursement is too low,” he said. “You’ll end up restricting access.”

“When you cut Medicaid reimbursement, you’re squeezing the availability of services at both ends and creating a smaller ability for access to care that more and more people will need,” Campbell said.

“How will they be cared for?” asked Peggy Smith, the Wake Assisted Living administrator.

“They’ll end up being picked up by the police,” she said, “and the costs will be higher in the long run than what we’re trying to fight for here.”

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