FW: Florida ARF Response to Provider Rate Cuts

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From the Desk of Suzanne SewellApril 4, 2011

Florida ARF Response to Provider Rate CutsOn March 31, 2011, the Agency for Health Care Administration (AHCA) filed Emergency Rules to cut DD Medicaid Waiver provider reimbursement rates for 90 days. The emergency rules implement a plan developed by AHCA and the Agency for Persons with Disabilities (APD) in response to a projected $170 million APD deficit. While the rate reductions are expected to reduce state General Revenue expenditures by $16.3 million over a 90 day period, they will result in the loss of another $30 million dollars in federal Medicaid funding. The reductions were effective April 1, 2011.

BackgroundThe APD deficit is not a recent event. Our analysis shows it is primarily attributable to APD's FY 05-06 decision to add 5,000 individuals to the waiver late in the year without adequate funding to support the annualized cost of services. The legislature provided temporary relief, particularly in FY 07-08 with non-recurring funds, but funding levels have declined and simply do not cover the cost of care for all of the 31,000 enrollees. Current funding for the DD waivers is at $805 million and is only slightly higher than it was at the beginning of FY 05-06; yet, about 5,000 more individuals are being served at an average annual cost of $30,000, thereby creating a $150 million funding gap.

Additionally, a March 2011 report by Governor 's Chief Inspector General, Melinda , indicated: "The state had no system or standards to assure that per-client community care was cheaper than services in an institutional setting, and this may have contributed to budget overruns." The report concludes APD provided client services without concern for available dollars and, "There are no financial controls to assure approved client cost plans match the amount available to APD to provide the services." 's report went on to say that: "This disconnect has resulted in authorization of expenditures in excess of the amounts authorized to carry out the HCBS waiver program and may have violated Section 216.311,F.S., which provides that no agency or branch of state government shall contract to spend, or enter into any agreement to spend, any moneys in excess of the amount appropriated to such agency unless specifically authorized by law." Also, lawmakers have recently acknowledged that: "While APD may have poorly managed payments to hundreds of contracted, private caregivers, the legislature may be at fault by underestimating state needs."

The above findings support our position that this deficit should not be attributed to providers. We note that providers do not control cost plans, do not approve enrollees, do not determine service rates, and do not establish units of service. All services have to be deemed medically necessary and approved by the state before reimbursement can be claimed by any provider.

Some point blame at individuals and advocates (about 5,000) who exercised their due process rights several months ago when they were placed into tiered waivers that were enacted as cost control measures. Due process is a fundamental right in our society and is an important "checks and balance" system within the DD Medicaid waivers to ensure that recipients are receiving the services they need. By the end of this fiscal year, most if not all of the appeal hearings will be resolved, the state will have determined if its tier waiver placements are meeting the needs of individuals with developmental disabilities, and the true savings from the tiered waivers will be known.

Florida ARF has maintained for several years that tiered waivers were not the answer to controlling deficit spending. Rather, the real problem is the state is trying to serve too many individuals with too few dollars. True resolution of the deficit will require either reduced enrollment, which is not a desirable option, or allocation of additional dollars to cover the cost of care combined with strict utilization management principles so more waitlist individuals can be served. We also note that until the last few years, increasing enrollees resulted in corresponding appropriations and were determined by the Florida legislature. We must return to this practice.

ImpactThe rates that are being cut were established in 2003 as a result of a legislative mandate to implement a uniform rate system and were based on the Mercer Rate Study. These rates are primarily based on direct care staffing funded at the 25th national percentile for average wages, and they have been reduced by 15-25% since 2003 and prior to the April 1 emergency rules. Our provider members are reporting that the new rates will not cover minimum wage rates for direct care staff.

The April 1 emergency rules cut rates for 27 services, and the cuts range from a minimum of 15% for 8 DD waiver services to as high as 30-40% for another 19 services. While the rate reductions are being described as a "15% cut for all rates," they also eliminate the separate rate structure for independent and agency providers and result in a "triple net effect" for many community agency providers who will lose their agency rates, absorb an additional 15% cut on the new lower independent rates, and receive both of these reductions on multiple services. The agencies who will receive the "triple net effect" were encouraged by APD to transition to community-based services and supports because this was considered to be the preferred model. Unfortunately, these cuts will force closure of the same agencies that were encouraged to offer supported employment, supported living, in home supports, and other services that enable higher levels of independence.

APD indicates the rate cuts have the: "Least impact on clients and insures their health and safety while still significantly addressing the deficit in the most expeditious manner." Further, "The temporary plan has been designed so that providers absorb the reductions over the short term of the plan, from April 1, 2011, through June 30, 2011." However, about 1,000 individuals and families served via the Consumer Directed Care program are being told to reduce their expenditures by 15%, meaning either fewer services or families will have to absorb the reduction.

Based on national Medicaid calculations, the emergency reductions will likely result in the loss of 1,278 jobs if agencies cannot find the resources to subsidize the cuts. Sustainability will be difficult since most DD Medicaid waiver provider agencies are heavily dependent on Medicaid funding. Also, most are not-for-profits and adhere to strict funding guidelines that limit cost shifting. While some may be able to survive for a short time as a result of local contributions, this is not a viable strategy in this current economic climate. Over the next 90 days, provider agencies will be challenged to meet staffing standards and comply with stringent program requirements contained within the DD Waiver Handbook.

By June 30, 2011, APD hopes to generate $48 million in savings from rate cuts, collapsing of independent and agency rates, and cost plan freezes. However, the plan is time limited and offers minimal long-range cost controls. Regrettably, the state did not accept suggestions to address this matter over a 15 month period even though deficit spending has been rolling forward for several years.

Four days after implementation of the emergency rates, we are already receiving reports that agencies are closing, clients can no longer be served, and individuals are losing services. For providers who were already struggling to survive in this current economic client, 15-40% reductions cannot be absorbed for even 90 days.

Conclusion

This deficit was not caused by providers, nor was it caused by the individuals who receive their services. Ultimately, there is a cost of care that must be paid and cutting rates because it is an "easy" way to respond to a deficit is not acceptable public policy. Furthermore, any lack of control and oversight over the last several years is not the fault of the individuals served or community provider agencies who act on behalf of the state to meet the needs of individuals the state would otherwise have to serve, and typically in more expensive institutional settings. Providers and individuals with developmental disabilities should not be expected to pay the price for poor public policy and lack of state budget controls.

By early May, the legislature will have passed its General Appropriations Act for next fiscal year. Senate Bill 2000 proposes to reduce the DD waiver by another $90 million dollars. If the Senate bill prevails, funding for this program will be reduced to $715.5 million; and, if the deficit must be eliminated expenditures will have to be reduced by $215 million which equates to a 25% program cut. If the House position (HB 5001) prevails, the DD Waiver program will be funded at approximately $862 million next fiscal year which is a $67 million increase. HB 5001 also identifies $169 million that can be used to cover this year's APD deficit.

Realistically, the APD budget needs to be funded at $900 million to meet the needs of those who are currently enrolled. For this to occur, the legislature will need to add an additional $95 million (state and federal funds) for next fiscal year. If this occurs, the program can be stabilized and APD can turn its attention to serving additional individuals from the wait list. Florida, we can do this!Best regards,Suzanne SewellPresident & CEO