Pitfalls Seen in a Turn to Privately Run Long-Term Care

By Nina Bernstein, New York Times

NASHVILLE — Even as public attention is focused on the Affordable Care Act, another health care overhaul is underway in many states: an ambitious effort to restrain the ballooning Medicaid cost of long-term care as people live longer and survive more disabling conditions.

At least 26 states, including California, Florida, Illinois andNew York, are rolling out mandatory programs that put billions of public dollars into privately managed long-term care plans, in hopes of keeping people in their homes longer, and expanding alternatives to nursing homes.

Subway advertisements and highway billboards feature smiling old people as plans jockey for shares of this vast new market. Companies promise profits for investors and taxpayer savings, too. And some states say the new system is already working.

“It’s a success story,” said Patti Killingsworth, director of long-term services and supports in Tennessee, pointing out that the state was serving a quarter more people with inexpensive home and community services.

But a closer look at Tennessee, widely cited as a model, reveals hidden pitfalls as the system of caring for the frail comes under the twin pressures of cost containment and profit motive. In many cases, care was denied after needs grew costlier — including care that people would have received under the old system.

“The notion of prevention saving money in the long run only works if you actually provide care in the long run,” said Gordon Bonnyman, former director of the Tennessee Justice Center, a patient advocacy group. “Tennessee is probably as good as it gets in terms of oversight and financial regulation, and thus I think it is a cautionary tale.”

Like many advocates, he originally supported managed long-term care, seeing it as a way to break the stranglehold of nursing home lobbies that opposed shifting more Medicaid money to home and community-based care. But now he says too high a price is being paid by very debilitated people denied care when they need it most — people like Billy Scarlett II, who was 33 in 2005 when he sustained severe brain injuries in an A.T.V. accident, and Glenn McClanahan, who is 79.

Mr. McClanahan’s case illustrates both the appeal and the perils of the new system. Once a high school quarterback, a successful car salesman and a ladies’ man, he was living alone on Social Security, already hobbled by arthritis and emphysema, when at 75 he abruptly lost nearly all of his sight. For years, Tennessee residents like him had to move to nursing homes, with Medicaid paying the bills from a mix of state and federal money.

But in 2010 the new program gave Mr. McClanahan another choice: Stay at home with daily help, and go to a nursing home later if he needed it. Medicaid paid a fixed monthly sum to an insurance company to cover and coordinate his future care. For about 30 months, Mr. McClanahan was happy to manage at home with four hours of help daily. The government and the insurance company benefited, too, because his care cost much less than the monthly Medicaid sum paid to the plan — $3,820, which was less than the $4,583 a nursing home would have cost.

But when he developed dementia and his health fell apart in the fall of 2012, the state and the insurer denied his application for nursing home placement and told him he would lose his home care, too. Under tighter rules adopted by the state to serve more people without spending more, Mr. McClanahan was one of thousands of applicants deemed not disabled enough for Medicaid to pay for any help.

The change was new scoring that sharply raised the disability threshold required to get into a nursing home, or to get equivalent care at home. Such thresholds vary from state to state. But in Tennessee, 41 percent of 34,000 applications for care were denied over the 13 months after the change, compared with under 10 percent previously.

In the real world of budget cuts, state officials say, this was the only way to double the proportion of Medicaid recipients served outside nursing homes, to 40 percent. “Yes,” Ms. Killingsworth said, “sometimes that means that not everybody is going to get everything that they think they need.”

In Mr. McClanahan’s case, the day after an official letter scored his need for care at zero, he fell from his short-stay convalescent bed, gashing his face and breaking his nose.

“It’s all about the money,” his son, David McClanahan, said. “I wouldn’t want anybody to have to go through what I went through with my dad.”

Changes, and Audits

For years, efforts to curb fast-rising Medicaid costs centered on welfare mothers and children, even though Medicaid spends more than five times as much on an aged or severely disabled person in long-term care as it does on a poor child.

Long-term care cases traditionally were considered too vulnerable and politically sensitive to be assigned to a managed care company. But between recession-starved budgets and the looming costs of an aging population, many states have decided the old system is unsustainable. About 4.2 million people receive long-term services paid by Medicaid, representing only 6 percent of Medicaid beneficiaries, but about $136 billion, or one-third of all Medicaid spending. They include many formerly well-off people in nursing homes who have “spent down” their “countable” assets — the primary home is the major exclusion — to less than $2,000, the maximum for Medicaid eligibility in many states.

Under the old system, providers bill Medicaid directly, a model plagued by perverse incentives for expensive, unnecessary and even fraudulent care. Despite arguments that people should not have to enter high-priced institutions to get help with activities of daily life like bathing and eating, relatively little Medicaid money was available for cheaper alternatives. Nursing homes have often used political muscle to keep it that way.

Managed care promises more predictable, controlled spending. From a fixed sum per enrollee, plans pay networks of providers to deliver care, which could be as cheap as a recorded medication reminder, or as costly as a nursing home stay.

Like the rationale behind health maintenance organizations, the idea is that plans will benefit financially by keeping costs lower and people healthier, and that the expense of customers who need more care will be counterbalanced by those who need less.

But now, as the formula is applied to a more fragile population, some states have already run into problems that marred the early history of H.M.O.s.

In New York, enrollment in the largest plan, VNSNY-Choice, was suspended for several months last year over the cherry-picking of able-bodied seniors, lured into the system by new adult day care centers offering free takeout food, casino trips and games of table tennis. An audit, undertaken after an article in The New York Times documented the problem, found hundreds of enrollees who were not impaired enough to be eligible, but who cost Medicaid $3,800 a month each,or nearly $34 million in all. Meanwhile, advocates for the elderly and disabled complained, plans were shunning the most impaired, including bed-bound seniors with dementia.

In Wisconsin, which Gov. Andrew M. Cuomo of New York has called a model for his Medicaid reforms, the price of expanding managed long-term care rose by 43 percent in three years, as more people signed up than expected. Further expansion was suspended. The program, which relies on homegrown nonprofits, saw two of nine plans go broke; others cut caregivers’ hours and pay, shifting burdens to relatives.

Still, Kitty Rhoades, Wisconsin’s Medicaid chief, said, “We’re closer to getting it right than most other states.”

Even Minnesota, a pioneer of the system, came under congressional fire for shifting Medicaid costs to federal Medicare. And a 2011 audit found that it had overpaid at least $207 million since 2003 to insurers, including high executive salaries and expenses like a luxury box at a sports stadium.

Helped at Home

Northeast of Nashville, in the house on his father’s farm where he grew up, Mr. Scarlett, who was severely injured in an A.T.V. accident nine years ago, is living proof that high-quality care at home can be better than care in a nursing home. But his family has had to struggle to keep it, under the financial pressures inherent in the shift to managed long-term care.

In 2005, Tennessee shrank Medicaid from one of the most expansive versions in the country to one of the most restrictive. That bitterly contested move, made amid spiraling costs in a state without an income tax, eliminated coverage for more than 170,000 people, many with severe chronic illnesses.

Though the state had experienced more than its share of managed care scandals in the 1990s, it embraced that approach for long-term care, under tight rules and a governor who had been a managed care executive. Officials say it helped keep increases in the state’s Medicaid budget to half the national trend line.

Before his family signed him up for the new program, Mr. Scarlett spent a year in a nursing home, with relatives keeping vigil. Whenever a mucous plug threatened to choke him, his sister, Kimberly Maynard, recalls, she dashed to the nurse’s station to beg for someone to suction the tracheostomy tubing. He was sent to the hospital six times with pneumonia and battled two antibiotic-resistant infections linked to institutional health care. At home, he has been tended 24 hours a day, mostly by licensed practical nurses, and had to go to the hospital only once.

One weekday last fall, propped in a recliner with tubes linking him to life, he struggled to raise a thumb so his father could kiss it, and moved one bare foot against a beach ball that his sister had gently aimed there. “Attaboy,” said his father, Billy Scarlett, 75, who still hopes his son will emerge from what doctors call a persistent vegetative state. “Knock it over here to Daddy!”

But since 2010, when the state expanded the program, called TennCare Choices, and AmeriGroup, a major insurer, took over the case, the program has been trying to drop Mr. Scarlett. The form letters began with a mistaken claim that the family had asked to quit. A letter last fall ordered him “disenrolled” on Dec. 1 and added, “You can’t appeal again.”

The problem: His home care, while it served him best, cost $330,000 a year. If he were dropped from TennCare Choices, he would most likely end up in a nursing home, at an average annual tracheostomy rate of $144,000, potentially a big savings.

In a nursing home “he’d have been gone a long time ago,” Billy’s sister said.