The Looming Crisis in Medicaid LTC Waiver Programs

As part of my continuing march on state Medicaid Long-term Care (LTC) 1915c and 1115 programs, I want to put another “stop and read” in front of you. I want to continue creating increased awareness of what is happening in these publicly funded programs.

These programs were designed to divert and provide crucial Home And Community-based Services (HCBS) instead of nursing home placement for the indigent and only the indigent population. However, the presumption that this action would solve a state’s nursing home dilemma may have been misguided.

These programs are now facing a perfect storm of challenges threatening their sustainability over the next 3-5 years. Let's pull back the curtain on the financial sleight of hand being used to prop up these programs and examine why they may be headed for disaster.

Rising Costs: An Unsustainable Trajectory

The costs associated with 1915(c) and 1115 waiver programs have been steadily climbing, putting immense pressure on state and federal budgets. As the population ages and more individuals require long-term care services, these costs are expected to skyrocket further. States are struggling to keep pace with the growing demand while maintaining fiscal responsibility, with most states having to use more than a third of their revenue on Medicaid.

The Cost-Shifting Shell Game

Both federal and state governments have increasingly resorted to cost-shifting tactics to manage ballooning costs and expenses. Much of the financial burden is transferred to commercial managed care health plans and provider-sponsored networks to absorb the risk. This maneuver allows governments to deflate the apparent costs of waiver programs artificially, but it's merely kicking the can down the road.

Impact on Commercial Plans

Commercial insurers are absorbing higher costs to provide essential services solely based on their capitated contractual arrangements with the states. This now also includes the plans to include “expanded and extended” benefits they must pay for based on cost-saving initiatives the health plans are obligated to provide.

Health plans are continually pressured to provide more, follow regulations about providing benefits, be remanded to provide coverage for limited and non-covered benefits at the discretion of the state Medicaid regulators, and accept low capitation rates as defined by the contract, which is at the discretion of the regulators. This is not a sustainable model.

Provider Networks Under Strain

Provider-sponsored networks also feel the squeeze even more than the deep-pocket commercial health plans. As reimbursement rates fail to keep pace with actual costs, many providers are reconsidering their participation in these programs by selling out or just preceding their contacts.

Enrollment Challenges: A Numbers Game

Despite the critical services offered through 1915c and 1115 waivers, enrollment rates remain surprisingly low. This creates a vicious cycle:

·      Low enrollment leads to higher per-capita costs.

·      Higher costs make the programs less attractive to potential enrollees.

·      Reduced participation further drives up costs.

States often tout high "approval" numbers for waiver slots, but the reality of filled slots paints a different picture.

The Smoke and Mirrors

Federal and state governments employ various tactics to obscure the actual financial state of these programs:

·      Creative Accounting: Using complex funding mechanisms to mask the full extent of program costs.

·      Delayed Reporting: Slow-walking financial data releases to avoid timely scrutiny.

·      Overly Optimistic Projections: Consistently underestimating future costs and overestimating savings.

The Path Forward

As these financial pressures mount, it's clear that the current trajectory of 1915c and 1115 waiver programs is unsustainable. Policymakers, healthcare providers, and insurers must come together to address these challenges head-on. Potential solutions may include:

·      Streamlining administrative processes to reduce overhead costs.

·      Exploring innovative care delivery models to improve efficiency.

·      Implementing more transparent reporting mechanisms.

·      Developing sustainable funding strategies that don't rely on cost-shifting.

The clock is ticking on LTC waiver programs. Without significant reforms and honest contracting and accounting principles, states will face a crisis that leaves these enrollees without the critical services they need when they choose this option. It's time for us all to clear away the smoke and face the mirror of reality.

#Medicaid #HealthcareReform #1915c #1115Waivers #FinancialCrisis #HealthPolicy #CostShifting #VulnerablePopulations #SocialServices #PublicHealth