Financing Senior Care

FinancingBroad Meaning

• Mechanism to pay for health care services- Medicaid is the primary source of

financing nursing home care• Reimbursement

- Actual payment for services delivered

- Methods used to determine the amount of payment

Recent Health Policy Objectives• Curtail direct reimbursement

• Develop new methods of reimbursement that relate amount paid to the clinical needs of patients

• Enrollment in managed care plans

• Investigate and prosecute fraud and abuse

Private-Pay Rate Setting• Non-bundled (room-and-board plus

ancillaries)

• Should be higher than Medicare and Medicaid rates on an all-inclusive basis

• Governed by competition

• Extra amenities and quality generally fetch a premium

Medicare (Title 18)• Covers three categories of people:

- Age 65 and over

- Disabled people on Social Security

- People with end-stage renal disease

• The program is not comprehensive in scope. Benefits are limited.

Medicare Part A (HI)Covers four main services:

1. Hospital inpatient services

2. SNF

3. Home health for skilled nursing care

4. Hospice care in a Medicare-certified hospice

Medicare Part A – SNF coverage• Post-acute (at least 3 days of

hospitalization is necessary)

• Limited to 100 days per benefit period

• A physician must certify the need for skilled nursing care

Benefit Period• Triggered by a specific ‘spell of illness’

• Continues when the patient is hospitalized or receives services in a SNF

• Terminates when the patient remains out of a hospital or SNF for at least 60 consecutive days

Medicare Part B (SMI)• Voluntary program that requires payment

of a monthly premium

• Covers outpatient services

Deductible and Copayments• Deductible applies to each benefit period

• Generally paid during hospitalization. Hence, most patients have met the requirement before they are admitted to a SNF.

• Copayments apply from days 21 to 100 in a SNF

Skilled Care vs. Custodial Care• Custodial care mainly requires ADL

assistance or routine basic care

• Skilled care is complex

• Skilled care requires active involvement of professionals such as nurses and therapists

Medicare Part B Benefits• Services of attending physician

• Diagnostic services

• Other outpatient services (see Exhibit 4-3)

Medicare Reimbursement• Prospective payment system based on

case-mix

• Case-mix reflects a facility’s composite of clinical acuity

• Case-mix is determined by an assessment of each patient using a standardized RAI

• Per-diem, all-inclusive (bundled) rate

Case-Mix ProcessAfter patient assessment has been completed• Step 1: The patient is classified into one of

seven major categories• Step 2: The patient’s ADL score is calculated• Step 3: The patient is classified into one of

44 RUG categories based on index maximizing

Medicaid• Title 19

• For the indigent

• Eligibility determined by each state

• ‘Spend down’ is required if a person exceeds established resource levels

• Community spouse is protected against impoverishment (Medicare Catastrophic Coverage Act 1988)

Managed Care• Primary mechanism for health care

delivery in the United States

• Over 95% of employer-based health coverage is through managed care

• But, approximately 57% of Medicaid and 18% of Medicare beneficiaries are covered through managed care

Risk-Bearing Organizations• Include MCOs• They assume financial risk• Fixed monthly payments to these organizations

are set in advance (prepayment)• The organization must provide all services

needed by the beneficiaries• The organization is at risk of losing money if cost

of services exceeds the fixed payments received

Partnerships With Hospitals• Sponsorship agreement

• Bed-reserve agreement

• Shared service arrangement

• Management contract

Fraud and Abuse• False statements to patients

• False billings

- billing for services not provided

- upcoding

• Kickbacks in exchange for patient referrals

Remedies for Fraud and Abuse• Criminal prosecution

• Fines

• Jail sentences

• Expulsion from Medicare and Medicaid programs

Prohibitions Under the False Claims Act

• Providing and billing for services that are medically unnecessary

• Providing and billing for noncovered services

• Claiming payments for services that are covered in a bundled rate

• Delivering inadequate care

Qui Tam• Whistleblower provision

• A private party can sue a violator on behalf of the government

• Monetary recoveries are shared