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Low Medicaid Payment Rates Decrease Residential Care Quality

Lower Medicaid payment rates for residential care quality affect healthcare costs and quality for beneficiaries.

Lower Medicaid payment rates affect cost and quality for beneficiaries

Source: Thinkstock

By Thomas Beaton

- Low Medicaid payment rates discourage providers to serve Medicaid beneficiaries in residential care services (RCS) that in turn can cause beneficiaries to purchase more expensive long-term support services (LTSS) according to a new study from RTI international.

Findings from the study indicate that providers deeming Medicaid payments for RCS care inadequate led to a diminished provider count in the RCS field and decreased care quality for beneficiaries within RCS settings.  

“The Medicaid payment rate for RCS services is the factor most often identified by case study respondents as influencing Medicaid beneficiaries’ access to RCSs,” the report states.

“Providers in all case study states and some consumer advocates reported that Medicaid rates for RCS services are low, which discourages RCSs from serving Medicaid beneficiaries and thereby limits Medicaid beneficiaries’ access to RCSs.”

RCSs are community-based homes or facilities that offer room, board, and essential care services. Regulation of RCSs is a state rather than federal responsibility, with all states licensing at least one category of these services. The most commonly used licensure category across states is assisted living. Other commonly used categories include residential care facilities and personal care homes.

The study’s authors analyzed case studies across the country to determine payment limitations in Medicaid for RCS and found that policy, state authority, and beneficiary eligibility were strong determinants in lowering care quality.

Current Medicaid policy states that payments to RCSs can cover the cost of medical services but not room and board, which resulted in a shortage of low-income beneficiaries that could occupy a RCS and insufficient inducement for providers to work in RCS environments.  

“Medicaid payment rates only cover services in residential care settings; they do not cover room and board,” said lead author and RTI health policy and health services researcher Michael Lepore, PhD.

“One of the access barriers is the difficulty that Medicaid beneficiaries have paying for room and board in residential care settings because of their low incomes.  This situation dissuades residential care providers from serving Medicaid beneficiaries.”

The home and community-based services (HCBS) rule under CMS creates another payment roadblock to RCS. The rule requires that home and community facilities need to have adequate transportation and care access, which is problematic to under-funded rural RCS.

“Medicaid officials in Colorado, Florida, and Washington reported that the HCBS rule will be challenging for small and rural RCSs and RCSs co-located with nursing facilities,” the study reads. “Small and rural RCSs may have difficulty complying with the rule’s community integration provisions because many are geographically isolated and lack transportation services.”

Since RCSs are state-run, the Medicaid authorities within a state may restrict or expand eligibility criteria for potential beneficiaries. These limitations may include a beneficiary's income percentage over the federal poverty line (FPL) and geographic location to a RCS.

The study’s authors outline several steps that can be taken by state officials and healthcare leaders to improve Medicaid payments to RCS and other steps to enhance beneficiary care.

States have several strategies to help make room and board costs affordable for Medicaid beneficiaries, such limiting the amount RCSs can charge beneficiaries, offering an income supplement, or allowing family supplementation of beneficiary payments. States can also support access to RCSs by using higher income standards for financial eligibility and less stringent institutional level-of-care criteria.

Opening the number of beds allowed in an RCS, increasing provider Medicaid rates, and decreasing room-and-board costs can promote RCS use among beneficiaries and increase the number of quality providers in an RCS.

The study suggests that healthcare stakeholders need to further analyze beneficiary experiences in RCSs and community health settings so that they have ample access to needed care facilities.

“Ultimately, this study highlights factors that can influence Medicaid beneficiaries’ access to RCSs and indicates the need for future research on several issues,” the report concludes.

“Research is needed that helps elucidate how Medicaid rates affect access to RCSs. Examining how the HCBS rule is affecting Medicaid beneficiaries’ access to RCSs is another important issue, as is the extent to which Medicaid beneficiaries receive quality, person-centered services.


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