Using Medicaid to Cover Services for Elderly Persons in Residential Care Settings: State Policy Maker and Stakeholder Views in Six States. Contracting with Providers


Clients' service needs are unique to each person in each setting and must be addressed individually in the contract language. However, there are certain principles involved in developing and negotiating a contract for packaged services, including:

  • Counties have the option of creating a "base rate" that defines payment to the provider for certain services all residents of the setting receive, such as supervision or meal preparation. The law says that each client is to receive an individualized service plan and that the county only pays for those services in that service plan. However, if all the clients referred to a particular provider always need a particular set of services, the county may have a "base rate" set for those services and, in addition to that rate, pay for the other individualized service needs of each person. Thus, the base rate may or may not include personal care services. When the contract is renewed, the county has the option to re-negotiate rates, based on of increases or decreases in the amount of funding available from the state.

  • Service package payments are limited to services that meet chronic needs. Services that meet episodic or acute needs should not be included in the package, but should be billed on a fee-for-service basis to the appropriate payer. These payers include fee-for-service Medicaid, Pre-paid Medicaid, Medicare or private insurance.

  • Personal care services (which meet chronic client needs) and incidental nursing services (which are limited to medication set-ups and the drawing up of insulin) may be included as an Assisted Living service, payable by the Elderly Waiver or Alternative Care programs. Those that are not included in the Assisted Living or Assisted Living Plus group of services (e.g., those for episodic or acute needs) must be delivered by a Medicare certified Class A Home Care agency or by the client's Prepaid Medical Assistance Plan provider (the state's managed care program.)

  • Individualized service rates negotiated within a payment package should not exceed the fee-for-service rate limits for similar services delivered outside of an Assisted Living or Assisted Living Plus group of services.28

  • Per state and federal regulation, payment shall not be made for homemaking service in addition to the Assisted Living service payment package; it is expected that any homemaking service needed is always included within the payment package.

Contracts for Assisted Living or Assisted Living Plus services must enumerate which appropriately licensed services are offered by the provider and the service payment methodology the county will use to pay for each needed service.

Although county contracts with Residential Care, Family Foster Care or Corporate Foster Care providers may not detail the service rate payments for each service provided to Alternative Care or Elderly Waiver clients to the same level that Assisted Living or Assisted Living Pluscontracts do, the service(s) these providers are responsible for delivering to Alternative Care or Elderly Waiver clients must be detailed in the client's care plan.

28. Rate equalization exists only in that the service payment rate for a "public-pay" client shall not exceed the service payment rate for a "private-pay" client.

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