Feb. 20, 2019
Governor’s Budget Cuts Care Center Funding, Assumes Fee-Drive Approach to Assisted Living Oversight
On February 20, 2019 by Jeff Bostic
Governor Tim Walz and Lt. Governor Peggy Flanagan yesterday released the One Minnesota budget that proposes to spend $49 billion in the next two years on a wide range of priorities. The budget contained mixed news for older adult services. While it supports the interim work on older adult protection, the budget does not include increased Elderly Waiver funding, only partially funds the DWRS increase for adult day providers, assumes a fee-driven approach for assisted living providers and reduces Value-Based Reimbursement for care centers.
LeadingAge Minnesota and its partner in the Long-Term Care Imperative (LTCI) shared concerns about the longer-term unintended consequences on costs for senior care with the fee-driven approach to funding regulatory oversight in assisted living as well as the impact cuts to Value-Based Reimbursement could have on access, quality and workforce stability in care centers. Read the LTCI Statement here.
Our team is currently doing a deep dive on the Governor’s One Minnesota budget and will be releasing a special legislative update yet this week with more details. News like this can be disappointing, but we caution that the Governor’s budget is just one step in the overall budget process. We will be amplifying our advocacy efforts in the days and weeks ahead, and working with lawmakers and the Walz/Flanagan Administration to share concerns on this proposal as well as our solutions on how to best to serve the needs of our aging population and those who provide them with care.
In the meantime, here are some details on the Governor’s One Minnesota budget:
Care Centers: Reductions in Value-Based Reimbursement, Implementation of Property Reform
The Governor’s budget implements proposed changes to the Value-Based Reimbursement (VBR) system that were detailed in a recently released evaluation of the payment system. One of those proposals would drastically change the care-related limit formula for rate years starting Jan. 1, 2020, even though care centers have essentially no opportunity to impact their costs or quality score before those rates are calculated.
The new formula, which changes both the quality and cost portions of the calculation, makes it more likely that care centers will be over the cost limit. In the short term, some would be protected by a provision of current law that keeps the limit from dropping more than 5 percent from the previous year, but over time a growing number of care centers would be impacted. These changes are projected to save $1.7 million in the first biennium and over $13 million in the following biennium.
The biggest single savings piece of the proposal is to cap the increase in the other operating price to no more than the SNF market basket index each year when it is updated. Because the Minnesota Department of Human Services (DHS) is currently forecasting increases of 6-7 percent annually in this rate component, it is projected to save substantial amounts -- $11.3 million in the first biennium and $38 million in the second biennium. However, this seems unlikely since this component is not directly based on individual facility costs and the inflation increase is closer to 3 percent.
The Governor’s budget also includes implementation of a much delayed and much needed new property payment system. Unfortunately, while all the details are not known at this point, it does diverge from the proposal that the Long-Term Care Imperative has been working on in several ways:
- DHS would implement a very similar rental system, but the proposed rental rate of 5.5 percent is too low to appropriately incent property investment.
- DHS would extend medical necessity payments to private rooms for all care centers, but cuts the percentage paid to 10 percent which is a reduction to care centers that currently have that option.
- DHS offers a hold harmless that is based on eliminating all existing closure incentives and starts phasing out after one year. In the worst-case scenario, a care center will lose funding as a result of the property changes as well as the changes to the quality limit and other operating price.
It is important to note that the cuts to VBR have a broader impact to care center members when you consider the correlating effect it will have on federal funding and private pay rates.
LeadingAge Minnesota has invited DHS to attend next week’s Payment Committee to discuss the proposed budget. We will also be amplifying our advocacy efforts at the State Capitol to ensure lawmakers understand the detrimental impact this proposal will have providers, professional caregivers and the seniors they serve – particularly in Greater Minnesota.
Increased Fees to Support Assisted Living Licensure, Oversight and Enforcement
While we have not yet seen the detailed language of the Governor’s proposal on older adult protection, the budget sheds some light on increased funding for department operations and enforcement of the reforms we believe will be proposed for assisted living licensure, dementia care standards and other initiatives related to vulnerable adults. While much of the funding for these measures is allocated from the General Fund in the first year, spending in future years appears to come from a fee-driven approach on providers.
No Funding Increase for Elderly Waiver (EW)
Disappointingly, despite a report that recommends much needed updates and improvements to the EW rate system, the Governor’s proposed budget does not fund or implement any of those important changes. The budget also fails to include funding for our proposal to reform the EW program to better meet the current and growing demand for care, services and support for middle and low-income seniors who reside in assisted living or receive home and community-based services.
Partial Funding for Disability Waiver Rate System (DWRS)
On the positive side, the budget proposal does include funding increases for DWRS. While falling short of what was passed and vetoed last year, the proposed budget includes a 4.7 percent competitive workforce factor effective Jan. 1, 2020, which will partially offset the 7 percent rate cut from 2018. In addition, it calls for updating the DWRS rates every two years instead of the current five-year cycle.
Get Ready…. It’s Time to Advocate!
There is a lot at stake this legislative session, and the Governor’s budget recommendations just made our grassroots advocacy even more important.
- Join us on March 12 for our Day at the Capitol. Lawmakers need to know you and hear from you, particularly on how the bills and budgets they are considering will impact you, your staff and the seniors you serve.
- If you can’t join us on March 12, invite your lawmaker to meet with you in your setting to share your story and influence the legislative process. And be sure to include staff and residents in that visit! Use our Host Your Lawmaker Guide for tips on how to plan, promote and execute a successful legislative visit.
- Watch your email for Advocacy Alerts.
- Are you receiving Capitol Conversations? These short, weekly informative video updates keep you up-to-date on the news from State Capitol. Sign-Up Here!
If you have questions regarding the budget, please contact Jeff Bostic at jbostic@leadingagemn.org.