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Billion Dollar Funding Increase Fails to Improve Nursing Home Care in California

San Francisco — A study released today by UCSF found that the quality of nursing home care in California declined despite a lucrative new Medi–Cal rate system that greatly increased payments to nursing homes. By almost every measure, care grew worse after Medi–Cal increased its rates. Complaints and deficiencies grew substantially and access to care did not improve.

The new rate system is the product of a 2004 California law (AB 1629) that was enacted with minimal legislative review and almost no public attention. Under it, Medi–Cal spending for freestanding skilled nursing facilities grew from about $2.5 billion in 2003 to almost $3.5 billion now, an annual increase of almost a billion dollars per year. Despite the budget crisis, the rate system provides for another large increase next year.

The nursing home industry–crafted rate system was supposed to improve nursing home staffing levels but has not. Staffing levels increased only slightly under the new rate system and nursing staff turnover increased. Alarmingly, 144 nursing facilities failed to meet California minimum staffing requirements throughout 2006, and many continue to defy the law on a daily basis with no consequence.

The rate system’s most controversial provision is an unprecedented profit component that pays nursing homes 8 percent of their labor costs to spend or pocket as they wish. Estimated to cost Medi–Cal and taxpayers about $150 million per year, it is deceptively labeled as a “labor driven operating allocation.” Every freestanding skilled nursing facility certified by Medi–Cal receives profit payments, no matter how poor its care. No other Medi–Cal providers are guaranteed a profit.

Medi–Cal is allowing nursing home operators to profit at the expense of residents,” said Patricia McGinnis, CANHR’s executive director. “It is appalling that Medi–Cal is rewarding nursing homes that fail to meet even the minimum standards required by law. There is no accountability to ensure that residents receive decent care.

Major changes are needed in the rate system to ensure that nursing home residents benefit from the greatly increased Medi–Cal spending. For example, nursing homes that do not meet staffing and other requirements should not receive rate increases. Medi–Cal should regularly collect payroll data to monitor staffing levels and disclose this information to the public. The profit component should be abolished and the funds saved should be used to pay for a substantial increase in the minimum staffing requirements.

Click here to download the entire 90 page UCSF study (PDF, 1.3MB).

Click here to read the Los Angeles Times article.