TITLE: CONCERNING THE EXCLUSION OF DIRECT MEDICARE PART B COSTS FROM ALLOWABLE MEDICAID REIMBURSEMENT TO CERTAIN NURSING FACILITIES.

This bill clarifies portions of SB 97-042, Concerning the Rate Setting Methodology for Reimbursement of Nursing Facilities Providing Services Through the Medicaid Program, requiring that only Medicare Part B direct costs are excluded from the allowable Medicaid reimbursement for Class I and Class V nursing facilities. The bill is effective upon signature of the Governor.

Background. SB 97-042 was estimated to achieve $15.7 million in savings to the state’s Medicaid program as a result of the following provisions:

• placing a 6 percent cap on annual increases in administrative costs for rates for reimbursement of Class I and Class V nursing facilities providing services through the Medicaid program (savings of $5.5 million);

• placing an 8 percent cap on annual increases in direct health care costs for rates for reimbursement of Class I and Class V nursing facilities providing services through the Medicaid program (savings of $8.8 million); and

• excluding Medicare Part B costs from allowable Medicaid reimbursement for Class I and Class V nursing facilities (savings of $1.4 million identified from Medicare Part B direct costs).

SB 97-042 required that Medicare Part B costs were to be excluded from allowable Medicaid reimbursement, and did not differentiate direct and indirect costs. SB 98-173 specifically excludes Medicare Part B direct costs from allowable Medicaid reimbursement. Nursing facility rates for FY 1997-98 are set as such that only Medicare Part B direct costs are not reimbursed. The supplemental adjustments to DHCPF’s appropriation for FY 1997-98 and the budget request for FY 1998-99 include nursing home rates which reflect the $15.7 million in savings estimated in SB 97-042.

The Department of Health Care Policy and Financing (DHCPF) indicates that in October 1997, it had the necessary data to analyze both Medicare Part B direct and indirect costs. October estimates of cost savings, when excluding all Medicare Part B costs, are identified accordingly:

Medicare Part B Direct and Indirect Costs

In Millions

Initial Estimate of Direct Costs Under SB 97-42

October 1997 Revised Estimate of Direct Costs

October 1997 Estimate of Indirect Costs

Total Savings Available With Direct and Indirect

$ ( 1.4)

2.8

5.2

$ 6.6

Fiscal Impact of SB 98-173. Should SB 98-173 fail to pass, DHCPF would revise rates to prevent nursing facilities from receiving both Medicare Part B direct and indirect costs, resulting in $5.2 million in additional savings to the state’s Medicaid program. This would be done by retroactively adjusting rates downward, effective July 1, 1997. Adoption of SB 98-173 is assessed as having no fiscal impact because the current and proposed budget for DHCPF are built according to SB 97-042 and do not reflect Medicare Part B indirect costs.