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

By Pat McGinnis
Executive Director
California Advocates for Nursing Home Reform

A 90 page study released this last week 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. 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.

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