Question: When I began helping my mother look into placing my father into a nursing facility when she could not longer care for him after his stroke, I was surprised to learn that if my parents privately paid for his care, they would be charged one rate, but if he qualified for Medicaid (which would not happen until almost all of their assets are gone), the facility charged a much lower rate for the same care. Since the doctors say my father has a long life expectancy, I am concerned about how my mother will survive if most of their money goes toward his care. It seems very unfair for my parents to be penalized with higher rates which will deplete their assets much more quickly. Can anything be done about the vast difference in rates so we can "ration" what they have in an effort to provide for both of my parents as long as possible?

Answer: On average, those who do not qualify for Medicaid pay 36 percent more than the Medicaid reimbursement rates. With private pay rates averaging more than $30,000 annually, this is enough to financially devastate most families very quickly.

The difference in rates is caused by "cost shifting," a practice similar to the manner 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.

In establishing rates for each facility, Medicaid uses methods of reimbursement that are based upon that facility's costs of operation. Some nursing homes complain that the reimbursement formula used to determine Medicaid rates is overly restrictive because it does not include extravagant salaries, elegant interior decorating, and other "perks". But since Medicaid pays for the majority of nursing home beds today, in today's health care climate, this means tough rate negotiations. "Cost shifting" is used by providers in an effort to shore up profit margins from private pay patients -- a group which lacks significant bargaining power.

No matter the reason, cost-shifting means greater expense to the private pay end user. For example, if the Medicaid reimbursement rate is $70 per day ($2,100 per month), the private pay rate will probably be in the vicinity of $95 per day ($2,850 per month). It does not take an MBA to figure out that, under this example, at a cost of additional $9,000 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 continuously 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. And, even if you were successful in getting the attention of state legislators, in reality, given the length of the political process, a change in the law would come too late for your family.

Since your parents did not do any planning for this contingency, their options may be very limited. We suggest that you contact an experienced attorney in your locale to help you and your parents create the best plan available that will stretch their dollars the farthest.

Medicare vs. Medicaid. Medicaid and Medicare are often confused by both the public and some attorneys. Medicare is the federal health insurance program that pays for hospital and physician services for Social Security recipients and certain other individuals regardless of financial need. Medicare does not pay for nursing home care except in very limited circumstances and then for only a limited time in limited amounts. On the other hand, Medicaid is a joint federal and state program for individuals who meet certain financial and medical criteria. Medicaid is restricted to those persons with certain medical needs who are financially needy and is a major provider of nursing home services.

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.

Please e-mail your questions to janwarner@flyingsolo.com or mail to NextSteps, P.O.Box 11704, Columbia, S.C. 29211.