Washington State

House of Representatives

Office of Program Research

BILL

ANALYSIS

Appropriations Committee

HB 2515

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

Background:

General.

The Washington Medicaid program includes long-term care assistance and services provided to individuals who meet functional and financial eligibility criteria. The Department of Social and Health Services (DSHS) administers Washington's Medicaid long-term care program in compliance with federal laws and regulations and is jointly financed by the federal and state government. Clients may be served in their own homes, in community residential settings, or in skilled nursing facilities (nursing homes).

Assisted Living Facilities.

Assisted Living Facilities (ALFs) are one community setting in which individuals who are Medicaid-eligible for nursing homes may choose to be served. The ALFs are licensed by DSHS to provide housing and basic services to seven or more residents, and may provide assistance with activities of daily living or intermittent nursing services. Some ALFs contract with DSHS to provide specific packages of services and are known as Adult Residential Care (ARC) or Enhanced Adult Residential Care (EARC). Medicaid rates paid to ALF are not set through the collective bargaining process.

In the enacted 2017-19 budget, $198 million total funds ($93 million General Fund-State) is budgeted for licensed ALFs, including ARC and EARC, to serve approximately 6,600 Medicaid clients on average per month.

History and Current ALF Medicaid Rate Methodology.

Current ALF rates originated with work done in the early 2000s to establish an acuity-based payment system that would incentivize serving lower-acuity clients in less-costly community settings rather than in nursing homes. In 2001, DSHS conducted a time study to determine the average amount of staff time to serve clients of varying acuity levels. Using the results of the time study, DSHS developed an acuity-based assessment system known as the Comprehensive Assessment Reporting and Evaluation (CARE) classification system, and a corresponding payment methodology that weighted rates against estimated client care needs. Since inception of the CARE system and corresponding rate levels, the number of rate levels have remained lower than the number CARE levels (currently there are 17 CARE levels and 13 payment levels). Rates vary based on three geographic service areas for King County, Metropolitan Statistical Area (MSA) counties, and non-MSA counties. The current ALF rate methodology is not prescribed in statute or rule, and there is no schedule for re-basing or updating it with current data.

The enacted 2017-19 budget directed DSHS to convene a group of stakeholders in a collaborative effort to redesign the Medicaid payment methodology for ALFs including ARC and EARC. The work group submitted its recommendations to the Legislature in December 2017.

Summary of Bill:

The DSHS must establish, in rule, a Medicaid payment methodology for ALFs, including ARC and EARC, and must make payments under the new methodology beginning July 1, 2019. The new payment system must have three core components: Client care, operations, and room and board.

Client care.

Client care represents the labor component of the payment system, and must include variables to represent staff time, wages, and fringe benefits.

The time variable is used to weight staff time against client acuity as represented in DSHS' client classification system (CARE). The time variable must initially be established using the 2001 time study and DSHS' estimates of average staff hours per client by job position.
The wage variable recognizes the staff positions needed to perform the functions required by the AL, ARC, and EARC contracts. The wage variable must be adjusted according to service areas based on actual labor costs, and so that no baseline wage is below the state minimum wage at the time of implementation. There must be no less than two service areas, including a high labor cost service area.
The fringe benefit variable represents employee benefits and payroll taxes. The percentage of fringe benefits must be established using the statewide nursing facility cost ratio of benefits and payroll taxes to in-house wages.

Operations.

The operations component represents costs that are reimbursable under federal Medicaid rules, and must be calculated at 90 percent or greater of the statewide median nursing facility cost for supplies, non-labor administrative expenses, staff education and training, and occupational overhead.

Room and board.

The room and board component reimburses providers for costs, primarily raw food and shelter costs, that are not reimbursable under federal Medicaid rules. Beginning July 1, 2020, the room and board component must be updated annually subject to DSHS and Health Care Authority rules related to client financial responsibility.

Rebase schedule.

Rates paid on July 1, 2019, will be based on data from 2016. The client care and operations components will be re-based in even-numbered calendar years using data from two years prior, beginning July 1, 2020.

Review of physical plant contract requirements.

By October 30, 2018, the DSHS shall review physical plant contract requirements for each ALF residential care setting (regular AL, ARC, and EARC) to determine if adjustments to the room and board component are necessary in order to reflect relative differences in costs between settings.