COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.: 0695-02
Bill No.: SCS for SB 209
Subject: Elderly; Medicaid; Nursing and Boarding Homes; Social Services Department
Type: Original
Date: April 7, 2003
FISCAL SUMMARY
| FUND AFFECTED | FY 2004 | FY 2005 | FY 2006 |
| General Revenue | ($17,850,240) | ($41,872,659) | ($72,157,341) |
| Total Estimated
Net Effect on General Revenue Fund |
($17,850,240) | ($41,872,659) | ($72,157,341) |
| FUND AFFECTED | FY 2004 | FY 2005 | FY 2006 |
| Total Estimated
Net Effect on Other State Funds |
$0 | $0 | $0 |
Numbers within parentheses: ( ) indicate costs or losses.
This fiscal note contains 7 pages.
| FUND AFFECTED | FY 2004 | FY 2005 | FY 2006 |
| Federal* | $0 | $0 | $0 |
| Total Estimated
Net Effect on All Federal Funds |
$0 | $0 | $0 |
*Revenues and expenditures of approximately $660,000,000 would net to $0.
| FUND AFFECTED | FY 2004 | FY 2005 | FY 2006 |
| Local Government | $0 | $0 | $0 |
ASSUMPTION
Officials from the Department of Mental Health (DMH) assume this proposal does not include ICF-MR's, therefore DMH assumes no fiscal impact.
Officials from the Department of Health and Senior Services assume this proposal would not fiscally impact their agency. DOH officials state this proposal may have an economic impact on nursing homes depending on the annual recalculation of medicaid per diem reimbursement rates.
Officials from the Department of Social Services - Division of Medical Services (DMS) state that annually recalculating Medicaid reimbursement rates for the nursing home industry would significantly increase the cost to the Medicaid program in the next three years and increase the cost to the Medicaid program in future years. This proposal allows for a three year transition period for the recalculated Medicaid rates to be the actual rates paid. By recalculating the rates annually, the DMS would not be able to control program expenditures. This proposal does not allow a minimum utilization adjustment greater than the most current statewide average occupancy minus 3%. DMS states the overall state occupancy has steadily been decreasing over the past several years so this would also add to the cost of the program.
DMS used the 1999 audited cost report data, trended to 2004. DMS assumed the effective date
ASSUMPTION (continued)
for recalculated rates to be effective the later of passage and approval or July 1, 2003. The DMS is using July1, 2003 for the effective date.
The DMS states rates effective January 1, 2003 would require the 2000 cost reports; however, not all of the cost reports have been audited. The DMS used 1999 which is the latest best available information at the time this fiscal note was completed. The DMS estimates that the 2000 cost reports will be completely audited by July 1, 2003. However, the DMS predicts that numerous facilities will appeal the rate recalculation (based on the rebase done in 1995, approximately 60% fo the facilities filed appeals). DMS believes a significant amount of time will be spent on the appeals and that it probably will not be able to finish subsequent years' audits in time for a January rebase. Therefore, additional staff would be needed to complete the audits and recalculate the rates on a timely basis. DMS has included 2 additional staff in the fiscal impact (1 Senior Auditor and 1 Auditor II).
If reported costs are used (i.e. vs. audited data), the DMS estimates that it would cost an additional $3.39 per day to rebase (based on comparison of 1999 unaudited data to 1999 audited data).
DMS calculations were based on current regulations, which includes rebased ceilings, incentives, etc. DMS assumes a minimum utilization of 71% (average state occupancy from June 2002 quarter survey reveal an occupancy of 73.66%).
The DMS states one-third of the annual impact for fiscal year 2004, two-thirds for fiscal year 2005 and full impact for fiscal year 2006 was realized for the three year transition period.
To determine subsequent years' impact for rebasing, the DMS trended the 1999 rebasing analysis to 2005 and 2006 (an additional 3.3% trend for each year - based on CMS Market Basket Index for 2005) and compared it to the 2004/2005 rebased rates. DMS assumed that the medians and ceiling would also be recalculated based on the 2005/2006 trended costs. Only the pass through expenses of the FRV rates have been recalculated due to time constraints. Occupancy and minimum utilization percent was reduced by .5% for each year; minimum utilization = 70% for 2005 and 2006.
ASSUMPTION (continued)
Summary of costs:
SFY 04
Cost to Rebase - 2004 (1999 cost trended to 2004) $1,046,724,184
Cost for Current Rates $ 909,870,173
Annual Rebase Impact - FY 04 $ 136,854,011
Rates effective January 1, 2003 - 6 months in SFY 04 $ 45,618,004
SFY 05
Cost to Rebase - 2005 (1999 cost trended to 2005) $1,071,485,868
Cost to Rebase - 2004 (1999 cost trended to 2004) $1,046,724,184
Rebase Impact - FY 05 (using FY 04 estimated days) $ 24,761,684
Estimated per day impact - FY 04 estimated days 9,345,733 $2.65
Estimated SFY 05 days 9,392,462
Annual Rebase Impact - FY 05 $ 24,885,493
Annual Rebase Impact - FY 04 $ 136,854,011
Total $ 161,739,504
Two-thirds effective, SFY05 impact $ 107,936,336
SFY 06
Cost to Rebase - 2006 (1999 cost trended to 2006) $1,095,905,363
Cost to Rebase - 2005 (1999 cost trended to 2005) $1,071,485,868
Rebase Impact - FY 06 (using FY 04 estimated days) $ 24,419,495
Estimated per day impact - FY 04 estimated days 9,345,733 $2.61
Estimated SFY 06 days 9,439,424
Annual Rebase Impact - FY 06 $ 24,664,301
Annual Rebase Impact - FY 05 $ 24,885,493
Annual Rebase Impact - FY 04 $ 136,854,011
Total $ 186,403,805
Officials from the Department of Social Services - Division of Legal Services (DLS) state that DLS customarily represents the Department of Social Services in defending agency decisions, including decisions involving per diem reimbursement rates. Based on DMS projections as to ASSUMPTION (continued)
the number of nursing homes that would appeal (60% or 306 of 510), DLS assumes it would need 7 additional attorneys and 3 support staff. DLS estimates 50 hours per case (attorney time only).
| FISCAL IMPACT - State Government | FY 2004
(10 Mo.) |
FY 2005 | FY 2006 |
| GENERAL REVENUE | |||
| Costs - Department of Social Services - Division of Medical Services | |||
| Additional nursing home services costs |
($17,576,617) |
($41,545,487) |
($71,821,386) |
| Personal Services (2 FTE) | ($15,913) | ($39,147) | ($40,125) |
| Fringe Benefits | ($6,440) | ($15,483) | ($16,239) |
| Equipment and Expenses | ($8,319) | ($750) | ($773) |
| Total Costs - Division of Medical Services |
($17,607,289) |
($41,600,867) |
($71,878,523) |
| Costs - Department of Social Services - Division of Legal Services | |||
| Personal Services (10 FTE) | ($130,793) | ($160,940) | ($164,964) |
| Fringe Benefits | ($52,932) | ($65,132) | ($66,761) |
| Equipment and Expenses | ($59,226) | ($45,720) | ($47,093) |
| Total Costs - Division of Legal Services | ($242,951) | ($271,792) | ($278,818) |
| ESTIMATED NET EFFECT ON GENERAL REVENUE |
($17,850,240) |
($41,872,659) |
($72,157,341) |
| FEDERAL | |||
| Income - Department of Social Services- Division of Medical Services | |||
| Medicaid Reimbursements | $28,313,896 | $66,611,624 | $114,922,022 |
| Costs - Department of Social Services - Division of Medical Services | |||
| Additional nursing home services costs |
($28,041,387) |
($66,280,849) |
($114,582,419) |
| Personal Services (2 FTE) | ($15,913) | ($39,147) | ($40,125) |
| Fringe Benefits | ($6,440) | ($15,483) | ($16,239) |
| Equipment and Expenses | ($8,319) | ($750) | ($773) |
| Total Costs - Department of Social Services - Division of Medical Services |
($28,072,059) |
($66,336,229) |
($114,639,556) |
| Costs - Department of Social Services - Division of Legal Services | |||
| Personal Services (10 FTE) | ($137,721) | ($169,465) | ($173,701) |
| Fringe Benefits | ($55,736) | ($68,582) | ($70,297) |
| Equipment and Expenses | ($48,380) | ($37,348) | ($38,468) |
| Total Costs - Department of Social Services - Division of Legal Services |
($241,837) |
($275,395) |
($282,466) |
| ESTIMATED NET EFFECT ON FEDERAL |
$0 |
$0 |
$0 |
| FISCAL IMPACT - Local Government | FY 2004
(10 Mo.) |
FY 2005 | FY 2006 |
| $0 | $0 | $0 |
FISCAL IMPACT - Small Business
No direct fiscal impact to small businesses would be expected as a result of this proposal.
DESCRIPTION
This proposal requires the Division of Medical Services to annually recalculate the Medicaid nursing home reimbursement amount. For three years, the recalculated Medicaid reimbursement amount cannot be reduced below the rate allowed at the initial recalculation. The recalculated Medicaid reimbursement amount shall not be less than ninety dollars per day. When recalculating the Medicaid reimbursement rate of any facility, the Division of Medical Services may not apply a minimum utilization adjustment greater than the current statewide average occupancy minus three percent.
The recalculation of Medicaid rates will be performed over three state fiscal years beginning July 1, 2003.
This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space.
SOURCES OF INFORMATION
Department of Social Services
Department of Health and Senior Services
Department of Mental Health
Mickey Wilson, CPA
Director
April 7, 2003