Unless the monthly rate is considered reasonable by assisted living facilities, they will not be willing to contract with Medicaid. In some states, rates in the $1500-$2500 a month range may be needed to attract enough facilities to serve Medicaid beneficiaries. When considering what rate might be necessary and reasonable, states might sample the rates charged by facilities (excluding very high end facilities) to assess (a) how they compare with Medicaid nursing home rates and (b) how many facilities might potentially contract with Medicaid at rates the state might be willing to pay.
It is also important for the state to be sensitive to the potential need to set payment levels that vary based on the assisted living residents' current needs. Doing so will enable people whose condition deteriorates to stay in the assisted living facility rather than having to move to a nursing home. A number of states use such tiered rates (including Arizona, Delaware, Oregon, and Washington). Rates set by case mix (as used in Minnesota, Maine, Wisconsin, and New York) also create incentives to accept people with high needs and retain people whose needs increase. Flat rates, in contrast, tend to force facilities to discharge residents whose needs exceed what can be covered under the rate. As a final point, instead of reimbursing facilities on the basis of specific services delivered, states are permitted to develop a bundled monthly rate. A bundled rate is easier to administer for the state under a waiver program, and for providers under any coverage option.