The Legislature should end its single-minded infatuation with privatized home care for Florida's elderly. We can do better.
Managed care organizations have raked in hundreds of millions of Medicaid dollars by promising they will keep people out of nursing homes.
They send their clients to adult day care, bring in meals and hire aides to clean kitchens. They often place clients in assisted living, which is far less expensive than a nursing home.
Sounds good. Home-based programs, handled judiciously, probably can save the state lots of money, which is pretty important these days.
But here's the catch:
• Traditional Medicaid programs often provide similar at-home services at less cost than managed care.
• Though managed care companies are supposed to foot nursing home bills when clients grow too frail to live at home, most such clients drop out of managed care as soon as the nursing home looms. Taxpayers get stuck with the bill anyway.
• Though managed care companies supposedly serve people most in need of care, the opposite is sometimes true. Under Florida's fragmented Medicaid system, less-risky managed care clients sometimes get service while more desperate people stack up on waiting lists.
Florida lawmakers either don't notice or don't care. For five or six years, the Legislature has pumped more and more dollars into managed care while letting less expensive programs stagnate.
The result: Less bang for the Medicaid buck. More Floridians living in nursing homes at taxpayers' expense. And sometimes, people dying for lack of services.
Now the Legislature faces a $2.3-billion hole in the budget. As always, Medicaid will be a prime target.
If past is any guide, lawmakers may be tempted to fund managed care at the expense of less costly home-based programs. They will be urged on by managed care companies that have spent millions of dollars contributing to campaigns and lobbying the Legislature and governor's office.
It's terrible public policy, fostered by blind faith that private enterprise is always more efficient than government.
The Legislature and Gov. Charlie Crist need to look beyond that rhetoric and study the hard numbers.
Diverting back to Medicaid
Medicaid, a joint federal-state insurance program, is usually reserved for poor people, but not when nursing homes come into play.
Bills are so expensive that most long-term residents exhaust their savings and fall back on taxpayers to pay for care. Just one client can cost Medicaid more than $4,000 a month.
To avoid or delay this expense, Florida budgets some Medicaid dollars to support frail people in other, cheaper settings.
At first, the two main avenues were the Aged and Disabled Adult program (ADA), which keeps people in their homes, and the Assisted Living for the Frail Elderly program (ALE), which puts people in assisted living.
Local governments or not-for-profit agencies purchase services on the open market, then pass the cost on to Medicaid. The ADA and ALE programs cost the state less than $1,000 a month per client, way less than a nursing home.
A decade ago, Florida began a program called Nursing Home Diversion (NHD), where private companies manage client care.
NHD offers much the same at-home or assisted living services as the two older programs. But instead of reimbursing actual costs, the state pays managed care companies a set monthly fee per client. The companies then buy whatever services they think will work.
In one case, a company took advantage of this flexibility by taking a client to the movies every few weeks, which lifted her spirits and helped keep her at home. Traditional Medicaid programs would never approve an expense for Indiana Jones and a box of popcorn.
The Legislature loves it. In some years, the NHD payment topped $2,200 per month per client, more than twice what the ADA and ALE programs cost.
The primary justification for these larger NHD payments — at least in theory — was that managed care companies would shoulder nursing home costs when clients grew too frail to stay at home or in assisted living.
Except it hasn't turned out that way.
The University of South Florida tracked new clients of various Medicaid programs for three years. A report issued in 2007 illustrated managed care's little secret: When time came for the nursing home, most people disenroll from managed care and fell back on regular Medicaid.
Why should clients restrict themselves to homes on a limited managed care network when they can switch back to regular Medicaid and pick whatever nursing home they want? Want the home down the street? Go back on Medicaid. Want to live in the nursing home where your daughter works? Go back on Medicaid.
The managed care companies collected a hefty premium for shouldering the risk of nursing home care, then saved millions when frail clients diverted back to Medicaid.
When USF added the expense of these disenrolled clients to managed care's monthly stipend, the study showed a whopping disparity between the true cost to Medicaid of managed care clients versus people served by the ADA and ALE programs.
For assisted living clients tracked from fiscal years 2002-03 to 2005-06, managed care cost Medicaid an additional $567 per client, per month.
The gap was even more dramatic for people receiving assistance at home. Managed care cost an extra $904 per month per client.
Just for fiscal year 2005-06, those extra charges amounted to $65-million to $100-million.
"The USF studies are the real deal,'' says Horacio Soberon-Ferrer, who until recently worked with Medicaid programs at the Department of Elder Affairs. "We knew we were overpaying (managed care).''
For the first quarter of 2008, an actuary hired by the state estimated that managed care companies were spending an average of 70 cents on the dollar on client care. The other 30 cents went to administrative overhead and profit.
Since the years studied by USF, Medicare started paying for prescription drugs, which reduced managed care's per-client cost several hundred dollars a month.
On the other hand, Florida has reduced monthly managed care stipends by about $600 a month and is working on mechanisms to charge companies when clients disenroll and enter nursing homes at taxpayer expense.
Will that finally put managed care and other Medicaid programs on a level financial field?
It's hard to say for sure, says David Oropallo, an Elder Affairs specialist on managed care. "But my gut tells me we are coming close.''
Who gets served
Managed care serves a slightly frailer clientele than traditional Medicaid programs do. To qualify, clients usually need help with at least five "activities of daily living,'' like eating, bathing and dressing.
But frailty alone does not determine who is closest to the nursing home brink.
Caregivers are just as critical.
Extremely frail people with good caregivers can survive fine at home or in assisted living. On the other hand, demented people who can still dress and feed themselves will land in a nursing home in a heartbeat without some oversight.
Florida Medicaid has developed a priority scale for determining who is at most risk of nursing home placement. It factors in both frailty and caregiving. Someone rated a "1" is the lowest risk. A "6'' is someone at "imminent risk.''
All Medicaid home-based programs, including managed care, use this scale to determine which clients get service first when dollars become available within that program.
But Florida makes no attempt to use the priority scores across program lines, to funnel money to the highest risk clients waiting for service, regardless of which programs they qualify for.
Over the last five years, combined funding for the cheaper ADA and ALE programs has remained flat at about $118-million, while funding for the more expensive NHD program has grown seven-fold from $30-million to $224-million.
At times, people rated priority 4, 5 or even "imminent risk'' 6 could not get service because they weren't quite frail enough or old enough to qualify for managed care. They could have qualified for ADA or ALE services, but often those programs had no money, so these risky clients went on waiting lists. Meanwhile, less risky clients got help from managed care because that's where the money was.
A prime example of this dynamic occurred this summer.
Because of the budget crunch, the Legislature had frozen funding for all home-based programs for a year, creating a long waiting list for managed care for the first time. The bulk of potential NHD clients were people with risk scores of 3 or below.
Then in July, the Legislature gave managed care an $80-million boost to serve 4,000 new clients, Practically everyone on the managed care waiting list got service, including most of the 1's, 2's and 3's.
Meanwhile the ADA and ALE programs got no new money. Their waiting list included almost 2,000 priority 4's, 5's and 6's. A few also qualified for managed care and got service, but most continued waiting for months because the Legislature funds programs, not people.
This year, 591 people on the ADA or ALE waiting lists moved into nursing homes before the programs could absorb them. More than 1,000 died.
To fix these distortions, the Legislature should combine its home-based and assisted living programs into one budget pot, says Lori Parham, Florida AARP's executive director who is an expert in long-term care.
That way, the Department of Elder Affairs could direct money to the people most at risk of nursing home placement, then serve them in whatever program meets their needs and costs the least.
Help the priority 6's first. Then the priority 5's, and so forth, as long as there is money to spend. Avoid nursing bills. Use the most economical programs when possible. Serve more people.
"That's a better way to protect scarce resources,'' Parham says. "As long as we've got these separate budget lines, it's not going to make sense.''
Stephen Nohlgren can be reached at 893-8442 or nohlgren@sptimes.com. Times researcher Caryn Baird contributed to this report.
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