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


There were major differences in views regarding service rates and whether they constituted a barrier to serving Medicaid clients. Some, but not all, providers felt the state's rates were too low or "wholly inadequate." Most other respondents felt that the RCAC and CBRF combined market rate (room, board, and services) was too high and that the variation in these charges did not appear to be correlated with the quality of care.

  • This is an area where I'm more sympathetic to the industry. Medicaid rates have been suppressed to hold down costs and need to be re-evaluated.

  • Providers always say they are too low, but I know Wisconsin pays a higher rate than other states.

  • I think we're paying too much. Someone puts up a ranch house with 4 bedrooms and 2 people per room and they charge $3800 a month for each person. That's outrageous. The DD rates are $6500 a month. Half of the rooms might be empty and then they come to us and want us to pay these rates.

  • The assisted living industry thinks there is this large private market of people who want to move to their facilities and that they will have enough money until they die. When the money runs out, they come to the counties and want us to pay their private pay charges of $4500 a month, but the counties won't. Under Family Care, the state negotiates rates.

One respondent said that a major barrier to serving waiver clients in RCACs is that the state's statutory limit on waiver rates, which is 85 percent of the state's average nursing home rate, is almost double the actual waiver rate of $43 a day. Another respondent strongly disagreed:

  • It's not true that counties limit waiver payments to $43 a day. It's exactly the opposite. The counties pay what they're asked to pay and they don't' have the expertise to figure out from the facility's cost report if they are overcharging.

Several respondents expressed concerns that people who spend down in RCACs will not be able to stay in their RCAC apartments because the facility will not accept the waiver rate, and a number of providers specifically cited the state's payment policies as a problem.

  • The profit on services provided to public pay residents is limited to 10 percent and a financial audit is required of all providers receiving $25,000/year or more in public reimbursement.

Others stated that counties do not have the expertise to enforce the limit, and that many facilities exceed the 10 percent profit limit.

  • We had to hire outside auditors to look through the CBRF contracts because they hire expensive accountants to hide stuff. We hired retired accountants who'd worked in big auditing firms -- we recouped a lot of money -- hundreds of thousands. But most counties can't do this, so the facilities have the upper hand.

A few respondents expressed concerns about the effect of high rates on the overall amount of funding available for HCBS.

  • The more money spent in RCACs, the less available for home care. Additionally, because RCACs require private apartments, they can be more expensive than CBRFs. Counties are also reluctant to pay for private rooms for Medicaid beneficiaries in CBRFs due to the additional cost. Many counties perceive RCACs as too costly for the waiver program and won't pay for waiver clients who've spent down in these facilities.

One respondent noted that with so Waiver participants living in RCACs (189 out of about 13,500 individuals), many RCAC providers have little experience working with counties and vice versa. Counties are afraid they will be charged too much and providers are concerned that they won't be paid enough. Another noted that the state does not have a cost-effective method for reimbursing services in CBRFs and RCACs, noting that these settings should offer economies of scale but, in fact, it costs more to serve people in these settings than it does to provide services in their homes.

One respondent noted that the state is aware of these issues and is taking steps to address them.

  • The state is developing a rate setting methodology and a model contract for counties and facilities to use for waiver clients in RCACs, and is exploring ways to bill the Medicaid fee-for-service system for coverable services provided in assisted living as a way to make optimal use of limited waiver funds. To do this, the facility would have to partner with a home health agency or county agency that is certified to bill Medicaid.

A few respondents stated that the rates are not just for the services themselves, but that they need to cover other costs, particularly those incurred to meet regulatory requirements such as training. At that same time, most recognize that the state does not have the money.

  • I see both sides of the issue. But if there's not enough money we need to look at the state's priorities -- isn't taking care of our parents and brothers and sisters who can't be cared for at home more important than some other priorities?

A few others stated that the problem was not the rate per se, but the lack of a payment system that offers incentives to provide good care.

  • We need to get to the point where we have a system that purchases quality and pays fairly for it. We don't have a way to reward the higher quality providers.

  • The state needs to get away from a cost-based program because there is no incentive to be efficient. When you get efficient your rate goes down. Negotiated rates are better. One rate does not work for everyone. Family Care uses negotiated contracts with a capitated rate that is not a function of cost. The County operates as a managed care provider and is therefore exempt from audit requirements. Audits are required for cost-based systems and you have to fill out an 80 page contract.

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