Cost-Plus Medi-Cal Pricing in California’s Nursing Homes: What Were They Thinking?

Or, it might be more accurate to say, a deterioration in care, but I think there are other variables at work here that the research might not have analysed.

The research in question is a 100-page study of the consequences of AB-1629, a 2004 California law that changed how Medi-Cal (the state’s Medicaid program) pays nursing homes. Concerned that reimbursement for nursing homes was not adequate to meet the needs of Medi-Cal beneficiaries, then Assembly Majority Leader Dario Frommer (a Democrat, now in private legal practice and running for the state senate this November) sponsored a bill to increase payments.

But get this – not just increase them, but change the reimbursement from capitated payment to cost-plus!

You will not be surprised to learn that the 100-page study found that costs had gone up significantly in the state’s nursing homes, but dollars spend on direct patient care had decreased and nursing home profits had also gone up, while complaints had increased, too.

Why would a liberal Democrat sponsor legislation to line the pockets of nursing homes? Surely this kind of “crony capitalism” is a Republican preserve? Well, not when the workers in these nursing homes are loyal union members.

Of course, Mr. Frommer, the nursing home operators, and the Service Employees International Union are all braying to the media that the study is “premature”. And they are probably correct: I’m sure the next door-stopper of a study of the effects of this sweetheart hand-out will uncover even more unintended consequences!

Medi-Cal has to go back to capitated payments for nursing homes. Even better, stop paying nursing homes at all and give the money to Medi-Cal beneficiaries to spend on their health care as they see fit.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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