MEDICAID PAYMENTS FOR NURSING FACILITY SERVICES
Background
In 1965, Congress enacted the Medicare and Medicaid programs making health care available to a large number of people who previously did not have health care coverage. Prior to 1980, Medicaid and Medicare reimbursed nursing facilities (NFs) on a retrospective reasonable cost basis. In 1980, the Boren Amendment was passed changing the reimbursement method for NF services.
Under the Boren Amendment, a State plan for medical assistance must provide for payment of NF services through the use of rates which the State finds, and makes assurances satisfactory to the Secretary, are reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated providers in order to provide care and services in conformity with applicable State and Federal laws, regulations and quality and safety standards. The statutory authority for this provision is found at section 1902(a)(13)(A) of the Social Security Act and the implementing regulations are at 42 CFR 447.253.
State Responsibilities
Based on the Boren requirements, the Health Care Financing Administration's approval of a State plan amendment for NF services is based on the acceptability of a State's assurances, findings and related rate information concerning the rates paid under its plan. States have flexibility to develop Medicaid reimbursement methodologies that conform to the Federal laws and regulations. Consequently, there is no requirement that States develop and use a single payment methodology for all facilities providing NF services.
However, the State must provide the following assurances to support their payment system(s):
- Rates are reasonable and adequate
- Rates will not exceed the Medicare upper payment limit
- Providers have appeal rights
- Providers are required to file uniform cost reports
- Periodic audits are done of participating providers' financial and statistical records
- Public notice of the change was done prior to the effective date of the change
- Rates paid are in accordance with the approved State plan
- Rates paid will not increase as a result of a sale or transfer of the facility
- The payment rates takes into account the costs of complying with the requirements contained in
- The payment rates provide for an appropriate reduction to take into account the lower costs (if any) for nursing care when provided under a waiver of the requirement to provide nursing care 24 hours a day
- The data and methodology used to set the payment rate is available to the public.
In addition, the State must also provide us with:
An estimate of the NF rate and the impact of the change on provider participation, type of care and access to services.
Payment Summary
NF payments are generally made using one of three payment systems; i.e., cost based, per diem and case mix. There is a greater use of prospective payment systems (per diem or case mix) than cost based systems for NF services. It is important to note that although the payment systems can be categorized in general terms, the specific methodology varies from State to State. Moreover, payment systems within a State may also vary between providers and provider types.
As of December 19, 1996
THESE MATERIALS WERE EDITED FROM THOSE PROVIDED BY HEALTH CARE FINANCING ADMINISTRATION (HCFA). BECAUSE THESE MATERIALS HAVE BEEN EDITED AND BECAUSE RULES AND REGULATIONS CHANGE REGULARLY, WE SUGGEST THAT YOU CONTACT YOUR LOCAL AUTHORITIES AND QUALIFIED LEGAL COUNSEL PRIOR TO ACTING.
