WASHINGTON (AP) - States have won new freedom to cut the Medicaid payments they give nursing homes, recharging the debate over what's a fair price - and who will pay - for long-term care of the nation's elderly.
Congress revoked the federal law that shielded nursing homes from such cuts as part of this summer's balanced-budget plan.
Since then, Kentucky nursing homes have become among the first to fight state plans to scale back Medicaid payments.
Congress hoped the repeal would make a $15 billion rollback in federal Medicaid contributions to states more palatable to the governors who must find ways to make up the difference.
But nursing homes say the losses will be felt by senior citizens who rely on Medicaid to pay bills, and also by the smaller number of patients who pay their own way.
"Medicaid really is a driving force that shapes nursing homes in this country in the sense that it is the primary payer for most people," said David Kyllo, spokesman for the American Healthcare Association.
The law, called the Boren amendment after the now-retired Oklahoma senator who championed it, had required states to pay nursing homes "reasonable and adequate" prices to meet government quality and safety standards.
Instead of meeting that tough test - which overwhelmingly favored nursing homes in court cases the last 17 years - states now need only ensure that their rate-setting process is clearly defined and provides the chance for public comment.
The National Governors' Association, which lobbied for the change, estimates the resulting cuts in payments to nursing homes will amount to $6 billion to $8 billion over the next four years - about half the total Medicaid savings that Washington wanted.
The Boren amendment kept rates artificially high and didn't let states "take advantage of marketplace competition," Govs. Bob Miller, D-Nev., and Mike Leavitt, R-Utah, said earlier this year.
Because long-term care is so expensive - averaging $112 a day or $41,000 a year - two-thirds of nursing home residents rely on Medicaid.
"Medicaid was never intended to be the nation's long-term care system. It became it by default," said Kyllo. "The repeal of the Boren amendment is certainly seen as a sign that ... (states) can't cope with these expenses."
In Kentucky, Gov. Paul Patton's Cabinet for Health Services recently ran a public notice announcing a $28 million cut in the Medicaid rates the state had planned to pay.
Stunned nursing home operators - who said that would mean $7 less per patient a day than expected - immediately complained to state lawmakers, who plan hearings this month.
The 252-bed Parkway Medical Center in Louisville would lose roughly what it costs to pay 32 nurses aides - an entire shift, said administrator Joe Okruhlica.
"I can't imagine ... still being able to provide any care - let alone quality care," Okruhlica said.
Asking private-paying patients to make up the difference is "incomprehensible," he adds, because they are just 10 percent of Parkway's patients and already pay $113 a day compared to $99.50 the home gets for Medicaid patients.
In spite of the controversy "we are going to propose some change," said health services spokeswoman Barbara Hadley Smith. But she stressed the Patton administration wants a compromise.
Regardless of outcome, the situation illustrates nursing homes' new vulnerability, said Republican state Sen. Julie Rose, who is vice chair of the Senate Health and Welfare Committee.
The last two times significant Medicaid cuts were proposed, Kentucky nursing homes sued under the Boren provision, forcing the state to soften the blow in out-of-court settlements. Without Boren, "we're going to have to be better watchdogs," Rose said.
Others, though, say repeal of the provision means disagreements can now be resolved through public debate rather than the courts.
"I hope that with this public process there's more give and take ahead of time," said Ellen Hesen, counsel to the Kentucky Cabinet for Health Services.
If pressed, nursing homes may try lawsuits under other parts of Medicaid law, said Washington attorney Eugene Tillman, who has handled Boren cases.
And, nursing homes will make the best of the law ensuring open rate-setting, said Robert Greenwood of the American Association of Homes and Services for the Aging.
"We'll probably step up our efforts to make sure the public's aware of the effects cuts could have," Greenwood said.