Payment Rates for Personal Care Assistants and the Use of Long-Term Services and Supports among Those Dually Eligible for Medicare and Medicaid

Individuals who are dually enrolled in Medicare and Medicaid have a high burden of disease and disability that often requires care in the form of long-term services and supports (LTSS). Medicaid is the primary payer for LTSS for dual eligible enrollees, and in 2010, LTSS for dual eligible beneficiaries accounted for 24 percent of all Medicaid spending (Musumeci 2013). LTSS may be delivered in institutions such as nursing facilities, but in some cases, care in home and community-based settings may be more cost-effective and better aligned with beneficiary preferences. A number of provisions in the Affordable Care Act aim to expand home and community-based services (HCBS) as an alternative to nursing facility care, including increasing the federal match rate to state Medicaid programs for personal care assistant services (Community First Choice option), expanding Medicaid eligibility for state plan and waiver programs, and enhanced federal matching rates for states to rebalance LTSS expenditures toward HCBS (Harrington et al. 2012). Policies that support the LTSS workforce, such as raising payment rates for personal care assistants, may boost the capacity of Medicaid programs to substitute HCBS for nursing facility use (Seavey and Marquand 2011; Kaye 2014). Within Medicaid, low reimbursement rates can act as a barrier to HCBS access, with an inadequate number of providers willing to provide services (Harrington et al. 2002). Jobs in personal care services, whether in home or institutional settings, are typically characterized as poor in quality, with low wages, limited flexibility and minimal opportunity for advancement, and high rates of disability (Seavey and Marquand 2011). Low wage rates for personal care assistants in particular are cited as a major source of worker dissatisfaction, high turnover, and consequently, a shortage of high-quality providers (Seavey and Marquand 2011). Raising payment rates for personal care assistants in Medicaid may increase HCBS utilization by improving stability in the personal care workforce. Higher wages are associated with longer job spells and reduced turnover among those providing home health and personal care services (Baughman and Smith 2012; Butler et al. 2014). There may be elasticity in the supply of personal care assistants in response to payment rates, because a large proportion of care is provided by informal caregivers (Feinberg et al. 2011). A handful of states, including California, have historically allowed family members (e.g., spouses, children, siblings, and other relatives) to be reimbursed as personal care assistants through Medicaid HCBS. The use of paid family members is growing nationally as other states expand consumer-directed personal care programs that allow beneficiaries to choose their preferred care providers (Newcomer, Kang, and Doty 2012). Higher payment rates for personal care assistants may thus encourage use of HCBS by favorably offsetting lost wages associated with informal caregiving (Heitmuller and Inglis 2007). Increased investments in HCBS are associated with lower rates of informal caregiving (Stabile, Laporte, and Coyte 2006; Rice, Kasper, and Pezzin 2009). Thus, higher wages for personal care assistants may increase HCBS access by boosting the supply of formal providers, both relatives and nonrelatives. It is not known whether higher reimbursement rates for personal assistants would impact the likelihood that beneficiaries would receive HCBS in lieu of institutional care. States that have increased investments in Medicaid HCBS programs have experienced declines in rates of nursing facility use among adults over 65, and spending on institutional care (Kaye, LaPlante, and Harrington 2009; Miller 2011). Alternatively, policies that increase access to HCBS, such as higher payment rates, may primarily expand use of LTSS among those in the community who would have otherwise foregone services. Growth in state HCBS expenditures has been accompanied by rising LTSS use among beneficiaries residing in the community (Kemper et al. 2008; Kane et al. 2013). To our knowledge, no study has empirically examined the relationships between payment rates for personal care assistants and use of Medicaid HCBS. Although Medicaid is jointly administered by the federal and state governments, states retain control of provider payment rates, including those for personal care assistants delivering home and community-based services. In some states, including California, the state sets a base range, and then the counties determine payment rates within the limits established by the state. In California, counties (through the auspices of a Public Authority which functions as the “employer of record”) negotiate with the local union representatives to establish the prevailing rate (California Department of Social Services2007). There is some flexibility to account for caregiver experience and tenure. Thus, although the Medicaid eligibility criteria for HCBS are the same across California's 58 counties, there is substantial within-state variation in payment rates for personal care assistants (Newcomer et al. 2011). Some of the variation might be attributed to county differences in cost-of-living; but the demand for LTSS relative to the available supply of caregivers in a county can also influence the negotiated payment rates for personal care services. In this study, we capitalize on the variation within a single state to examine the associations between payment rates for personal care assistants and the likelihood of receipt of HCBS among those dually eligible for Medicaid and Medicare. We hypothesize that after adjusting for differences in individual and county characteristics, the county payment rate for personal care services will be associated with: Increased likelihood of discharge to the community with home and community-based services. We propose that counties with higher payment rates will have a greater availability of personal care assistants, thus increasing access to HCBS and likelihood of use. Decreased likelihood of discharge to nursing facilities. Assuming that higher payment rates improve access to HCBS, and there remains unmet demand for LTSS provided in noninstitutional settings, we propose that some beneficiaries may elect to receive HCBS as an alternative to discharge to a nursing facility.