New law puts brakes on nursing home construction: State pushing other forms of long-term health care

June 26, 2006

Families want more long-term-care options for their elderly loved ones these days, and Indiana officials are trying to lend a hand.

The state will begin a year-long moratorium on nursing home construction July 1, shortly after the Indiana Family and Social Services Administration starts a marketing campaign called Options to let Hoosiers know they have choices outside of stashing Grandma at Shady Acres for a couple of years.

Indiana also will boost Medicaid reimbursement for these options, which include assisted living and adult foster or day care. The state also will raise the qualifying income level, making more people eligible.

FSSA representatives say they're making these moves primarily to answer customer need.

"We have a baby boom generation right around the corner ... and these people are demanding a different set of options for their retirement," said Steve Smith, director of the FSSA's Division of Aging. "They're retiring healthier, they're living longer, and we are unprepared to provide them with the alternatives."

The state's efforts also reflect the wishes of the long-term-care industry, which has been trying to diversify to meet that need. The movement away from nursing homes started as long as 12 years ago in other states, said Bob Decker, president of Hoosier Owners and Providers for the Elderly, an Indianapolis-based nursing home/assisted living association.

"This state ... we are behind the times," he said, noting that better Medicaid reimbursement will encourage providers to diversify.

Earlier this year, the Indiana Legislature approved a year-long moratorium that will pause the construction or addition of comprehensive care beds not affiliated with hospitals until June 30, 2007. The moratorium amounts to an extension of temporary freezes regulators enacted last December.

It buys FSSA time to study the market, said state Sen. Patricia Miller, R-Indianapolis. In the meantime, it prevents an influx of developers from taking advantage of recently improved Medicaid reimbursement for nursing homes.

"Basically, most nursing homes across the state have vacancies," Miller said. "We have more beds right now than we need."

Four hundred seventy-one nursing homes accept Medicaid in Indiana, according to FSSA.

Indiana spends 75 percent of its Medicaid long-term-care budget on nursing home care, while the national average is around 59 percent, Smith said.

FSSA will raise Medicaid reimbursement 15 percent for assisted living, 5 percent for adult-day services and more than 40 percent for adult foster care, which involves housing up to three people in a private home that provides food and medicine management.

It also will try to spread the word about Medicaid's coverage of these alternatives. Smith said 70 percent of referrals to nursing homes come from hospitals. He wants hospitals to be more aware of the other choices for long-term care.

"We'd like to see that 70 percent go way down," he said.

Nursing home care is an expensive option. Medicaid spends about $1 billion annually on coverage for 25,000 Hoosiers. Other choices like home care could be as much as 20 percent cheaper, Smith said.

While Smith expects "moderate savings" from the new emphasis, he said FSSA's primary motivation is improving quality of life for those who don't want or need nursing home care.

Patients overwhelmingly prefer home care over skilled nursing, said Rick Kissel, chairman of the business succession and estate-planning group at the Indianapolis law firm Dann Pecar Newman & Kleiman.

He said patients feel more comfortable in their own homes and want to avoid the loss of independence and privacy that comes with nursing home care.

A growing number of long-term-care providers have added programs like adult day services instead of nursing home beds when they expand, said Art Logsdon, president of the Indiana Health Care Association, the biggest long-term-care lobbying group in the state.

He has heard little "hue and cry" from nursing homes over the moratorium.

"The association for years has been urging the right care at the right time at the right place," he said.
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