Memo
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From
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Brian
Burwell, Kate Sredl, and Steve Eiken
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To
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Distribution
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Date
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May 13,
2003
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Copies
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Subject
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Medicaid
Long Term Care Expenditures in FY 2002
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This memorandum presents data on Medicaid long term care
expenditures in Federal Fiscal Year 2002 (September 2001 through September 2002). Total Medicaid long term care expenditures
in FY 2002 equaled $82.1 billion, approximately 34% of total Medicaid
expenditures, which equaled $243.5 billion.
Long term care expenditures increased by 8.5% from FY 2001.
Medicaid spending for nursing home expenditures increased by
8.9%, from $42.7 billion to $46.5 billion.
Nursing facility expenditures increased at a slightly higher rate than
in the previous year. Expenditures for services
provided in ICFs-MR increased by 5.1%, from $10.4 to $10.9 billion.
Expenditures for community-based long term care services
continued to increase at a greater rate than expenditures for institutional
services, but the difference was not as great as in previous years. Total expenditures for community-based
services increased by 9.3%. HCBS waiver
expenditures increased by 11.0% to $16.4 billion. Expenditures for Medicaid home health care benefits increased 7.5%
to $2.8 billion. Expenditures under the
Medicaid personal care services benefit increased 5.6% to $5.5 billion.
Overall, Medicaid spending for institutional services
accounted for about 70% of all Medicaid long term care spending in FY 2002,
while spending for community-based long term care services (HCBS waivers,
personal care, and home health services) accounted for 30% of all long term
care spending. This distribution
continues to change in the range of 1-3% percentage points each year, as
Medicaid programs continue to invest more of their Medicaid resources in
alternatives to institutional services.
The data presented in Table 1 and Tables A through P are
based upon CMS 64 (formerly HCFA 64) reports which states submit to the Centers
for Medicare and Medicaid Services (CMS).
The CMS 64 report is used by the states to claim Federal Financial
Participation (FFP) for state Medicaid outlays, and is audited by the Federal
government. It is therefore considered
one of the more reliable sources of information on
state Medicaid spending.
We have added two new tables this year. Table O presents expenditures data for the
state plan service Targeted Case Management, which some states use to finance
case management services for people receiving long-term care services. Table P presents Medicaid expenditures under
the Program for All-Inclusive Care for the Elderly (PACE). PACE is a comprehensive program that
combines Medicaid and Medicare services for people age 55 and older who are
eligible for nursing facility services.
PACE providers receive payment from both Medicare and Medicaid, if the
state chooses to offer PACE as part of its Medicaid program. This report only presents the Medicaid payments
to PACE providers.
Use of Prior Period
Adjustments
This year, we were able to obtain from CMS more data on prior period adjustments, and have
incorporated those prior period adjustments into reported FY 2002 expenditures. Last year, we incorporated prior period
adjustments only for HCBS waiver expenditures and for California’s state plan
personal care services. These adjustments
corrected historical underreporting for community-based services in California
that occurred largely because state agencies other than the Medicaid agency
administer the personal care service and certain HCBS waivers. Since then, we have learned that several other
states also report a significant portion of expenditures for other Medicaid services
through prior period adjustments, most commonly nursing facility, ICF-MR,
personal care, inpatient hospital, and mental health hospital expenditures. Consequently, this year, Tables A – C and H
– K include prior period adjustments for FY 2002 expenditures for these services,
including disproportionate share expenditures for inpatient and mental health
hospitals. These tables only include
adjustments received by CMS through September 2002 for expenditures made in
2002. We have not incorporated prior
period adjustments that apply to years prior to FY 2002. We plan to continue to include making such adjustments
in future years.
The inclusion of prior period adjustments greatly increased
(and in a few cases decreased) reported expenditures for particular services in
selected states. For example, the
inclusion of prior period adjustments explains Wisconsin’s large increase in
nursing facility expenditures and California’s large increase in ICF-MR
expenditures. However, at the national level,
the impact of these adjustments is 1% or less, except for mental health
hospital expenditures. The inclusion of
adjustments increased mental health hospital expenditures by 15%, and increased
disproportionate share mental health hospital expenditures by 4%. These large increases are due to large
adjustments for California (for mental health hospital expenditures) and New
York (for disproportionate share expenditures).
Impact of Medicaid
Upper Payment Limit (UPL) Programs on Nursing Home Expenditures
It is also increasingly apparent that the use by states of
Medicaid Upper Payment Limit (UPL) programs distort reported Medicaid spending
for nursing home care. As explained in
a recent study of DSH and UPL mechanisms:
“[S]tates have developed UPL
programs as a way to draw down extra federal matching dollars….These programs
are essentially a variant of the DSH program:
a state makes an additional Medicaid payment (that is, payment that is
over and above regular Medicaid reimbursement) to a targeted group of
providers---such as nursing homes or hospitals—that are typically owned by a
county or local government…The enhanced payments can be well in excess of the
actual cost of medical services provided to Medicaid beneficiaries. The state claims federal Medicaid funds for
the enhanced payments and then requires the providers to give back much or all
of the enhanced payment to the state in the form of Inter-Governmental
Transfers. Thus, similar to DSH
financing, the state receives federal matching dollars without putting up any
real state dollars.”
The study estimated that the 34 states included in the study
made $3.8 billion in UPL payments for nursing homes in 2001 that did not
reflect real payments to nursing home providers. Thus, it is apparent that a significant percentage of the
increase in Medicaid SNF expenditures, as reported in these annual memos,
actually reflects increased state use of UPL programs, rather than real
increased spending for SNF services, particularly in the 1998-2002 time period.
Other Technical
Information
We wish to reiterate the usual caveats about CMS 64 data. First, CMS 64 data are by date of payment,
not date of service. Thus, rates of
change in state Medicaid spending for specific services, as reported on the CMS
64, can be due to factors related to state payment policies as well as to real
changes in service utilization by Medicaid beneficiaries. For example, simply by delaying one month’s
payments to nursing home providers from June 30th to July 1st,
a state can push 13 months of nursing home spending into a later fiscal year,
leaving only 11 months of nursing home payments in the earlier year. These kinds of “bill paying” practices
definitely occur in some states, usually in response to budgetary pressures.
Second, CMS 64 reports represent state claims to the Federal government of health care expenditures that
states believe are eligible for Federal matching funds under the Medicaid
program. As a result of its audit
process, CMS may disallow some of these claims as not eligible for Federal
matching funds, which are then adjusted on future CMS 64 reports. These adjustments are not reported by type
of service and therefore cannot be used to adjust previously-reported data on
Medicaid spending by type of service.
Third, CMS 64 reports on Medicaid spending by type of service only
represent Medicaid fee-for-service spending, not spending for services provided
through capitated managed care programs.
Since long term care recipients (and/or long-term care benefits) are
usually exempt from Medicaid managed care programs, the growth in managed care
enrollment should not be having a large impact on CMS 64 reports of spending
for long term care services. However,
Arizona’s entire long term care system (called ALTCS) is capitated, and the
accompanying tables only include fee-for-service expenditures in Arizona’s long
term care system (persons newly eligible for long term care services in Arizona
may receive long term care services on a fee-for-service basis before enrolling
in a managed care plan). In addition, a
few other states (e.g. Minnesota, Wisconsin, and Texas) have implemented relatively
large managed care programs that pay for long-term care benefits on a capitated
basis. Also, increased enrollment of
TANF-related recipients and SSI recipients who are not dual eligibles into
managed care programs may be affecting reported spending on the CMS 64 for
personal care and Medicaid home health benefits.
States submit aggregate CMS 64 reports on a quarterly basis
to CMS, and these aggregate reports have generally formed the basis of our
annual Medicaid Long Term Care Expenditures memos. In addition, however, states are also required to submit individual
CMS 64 reports for each 1915(c) Home and Community-Based Services Waiver
Program that the state operates, since CMS is required to track actual
expenditures incurred under each HCBS waiver with estimates provided by states in
approved waiver applications. In recent
years, we have been able to obtain data from CMS on individual HCBS waiver
expenditures, which we report in a separate memo. Based upon feedback from states, we believe
that the individual CMS 64 reports on HCBS waiver expenditures,
aggregated to the state level, provide a more accurate estimate of actual
Medicaid spending for HCBS waivers than the aggregate CMS 64 reports. Therefore, for HCBS waiver services only,
we use the individual CMS 64 reports as the basis for constructing Table D in
the accompanying tables, with the exception of the state of Connecticut, which
did not submit expenditure data for individual waivers in one quarter in 2002.
A few other words of explanation.
Table F: Total Home Care, is the
sum of Personal Care (Table C), HCBS Waivers (Table D) and Home Health (Table
E). Table G: Total Long Term Care, is the sum of Tables A through E. Also, the “Expenditures Per Capita” number
that appears in the final column of each table is simply total Medicaid
expenditures divided by the total
state population.
As always, we appreciate any comments which you may have about these
data. We would like to thank John Klemm
and Betsy Hanczaryk in CMS’s Office of the Actuary and Carl Underwood and John
Hoover in CMS’s Center for Medicaid and State Operations, Division of Financial
Management, for their assistance in making these data available.