Question: I live in California; my brother lives in Illinois; and our parents, ages 76 and 80, have lived on the coast of South Carolina since they retired fifteen years ago. Late last year, my father suffered a stroke and, after rehabilitation that was paid for by Medicare, he came home and mother tried to care for him. But it was just too much for her. She could not find any help she could afford and began looking into placement into a nursing facility.
I came in from California to try to be some help and could not believe what I saw: If my father and mother had qualified for Medicaid (which will not happen until almost all of my parents assets are gone), the facility charges one daily rate; but since he will be a private pay patient, he and my mother will be required to pay a much higher rate for the same care. It seems very unfair for my parents to be penalized with higher rates that will deplete their assets much more quickly. Because the doctors say that Dad has a long life expectancy, my brother and I have become concerned about how we will be able to support our mother so she will be able to survive. At 76, she has some health problems also. I am divorced, lucky to have a job, and certainly have very little money to spare. My brother was just given early retirement by his company due to downsizing. Why can’t anything be done about the vast difference in rates?
Answer: Statistics tell us that only five percent of Americans age 65 and older will need long-term care in a nursing facility. But, as you have found out, those who do not qualify for Medicaid are paying, on average, at least 36 percent more than Medicaid reimbursement rates. With private pay rates averaging more than $36,000 annually, this is enough to bankrupt most families very quickly.
What you are seeing here is called "cost shifting." This practice is similar to the way in which hospitals shift costs from Medicare and Medicaid patients - for whom rates are set by the government - to private patients and private insurers in order to make up for the shortfall. Like Medicare, Medicaid uses cost-based methods of reimbursement that set each facility's rates based upon that facility's costs of operation.
In general, the nursing home industry complains that the reimbursement formula used to determine Medicaid rates is overly restrictive because it does not include extravagant salaries, elegant interior decorating, "perks," etc. At the same time, since today's health care climate means tough rate negotiations with large payers such as Medicaid, "cost shifting" may be tied to providers' attempts to shore up profit margins from private pay patients -- a group of individuals which lacks significant bargaining power.
No matter the reason, cost-shifting means greater expense to the end user. For example, if the Medicaid reimbursement rate is $80 per day ($2,400 per month), the private pay rate will be in the vicinity of $110 per day ($3,300 per month). It does not take an MBA to figure out that, under this example, at a cost of additional $11,000 per year, the private pay patient's assets will be exhausted more quickly, thus moving the private pay patient onto the Medicaid rolls more quickly. This cycle places greater burdens on an already exploding Medicaid budget.
What can be done? State legislatures can pass laws requiring that nursing homes charge Medicaid and private payers the same rates; however, due to the nursing home lobby, it is unlikely that many states will follow the lead of those which have embraced this concept. Although you may choose to contact the legislators, in reality, given the length of the political process, a change in the law would come too late for your family. Since your mother and father did not do any planning for this contingency, their -- and your -- options are, at best, very limited.
Jan Collins Stucker is an award-winning writer and editor. Jan Warner is a matrimonial, tax, and elder law attorney. Both are based in Columbia, South Carolina. NextSteps is distributed nationally by Knight-Ridder/Tribune Service.
Please email your questions to janwarner@nextsteps.net or by mail to P.O.Box 11704, Columbia, S.C. 29211.
