Arkansas Leads in Low-Income Assisted Living

By: - September 11, 2006 12:00 am

Arkansas — among the poorest and most rural states in the nation — is miles ahead of most states in providing low-income seniors the same kind of long-term care wealthier elders enjoy in their twilight years, but at prices covered by Medicaid.

With the seventh-largest percentage of people 65 years and older, Arkansas is one of the few states to lure assisted-living developers to its rural communities, using tax credits, streamlined regulations and flexible Medicaid reimbursement rates.

Assisted-living — the fastest growing type of housing in the nation, according to AARP – is preferred by most seniors and their advocates over more restrictive nursing home care.

At about half the price of nursing homes, the more flexible elder-care facilities offer states a shield against a predicted explosion in long-term care expenses created by aging baby boomers and skyrocketing health care costs.

By steering more low-income elders to assisted living, Arkansas already has reduced the number of nursing home beds it pays for by more than 10 percent, effectively lowering the per-person cost of long-term care in the state.

Only five other states – Washington, Oregon, Maine, Kansas and Oklahoma – have been as successful at reducing nursing home occupancy in the last 10 years, according to data from the Centers for Medicare & Medicaid Services.

“Most other states have simply said to providers, ‘We’re willing to pay for assisted living through Medicaid. Who out there wants to participate?'” says Bob Mollica of the National Academy for State Health Policy.

The assisted-living industry receives only 10 percent of its revenue from the taxpayer-funded Medicaid program for the poor and disabled, relying primarily on mid- to upper-income private payers for the majority of its income. By contrast, the nursing home industry receives more than 65 percent of its revenue from Medicaid and other government subsidies.

With more lucrative markets to pursue, assisted-living developers need enticements to locate in low-income rural areas, Mollica explained.

In 2002, Arkansas, along with eight other states, got help from the Robert Wood Johnson Foundation and NCB Development Corp. (NCBDC), a Washington, D.C.-based nonprofit lender and consultant specializing in financing of low-income assisted-living facilities.

Under the program, dubbed Coming Home, each state received ,000 over three years to pay for additional staff to navigate Medicare, the U.S. Department of Housing and Urban Development, the Internal Revenue Service and other federal agencies to secure funding and tax credits for the program.

In Arkansas, the biggest enticement to prospective developers was tax credits specifically designated for low-income assisted-living facilities, said Robert Jenkens, vice president at NCBDC. Without the credits, which cut financing costs in half, it would have been a much tougher investment to sell, he said.

In addition, Arkansas streamlined its Medicaid reimbursement policy and assisted-living regulations and assured developers that the rules would remain constant for at least 15 years, giving them confidence their investments would pay off.

The state also developed an innovative Medicaid pricing plan that allows low-income facilities to charge higher rates as residents’ medical requirements increase. This allows elders to remain in assisted living until they die, rather than having to move to a nursing home when their health declines.

Through the Coming Home project, Arkansas, along with Alaska, Colorado, Florida, Illinois, Iowa, Massachusetts, Maine, Oregon, Vermont, Washington and Wisconsin opened 22 facilities and 73 more are in progress.

While the Coming Home project gave Arkansas a boost, experts agree that the state’s success is largely due to one person, Herb Sanderson, the state’s director of Aging and Adult Services .

To make the project work, Sanderson had to rally resources from four separate state government agencies that normally do not cooperate, something most states have been unable to manage.

“That’s where career leadership of a guy like Herb makes the difference. He provided continuity, administration after administration,” said Don Redfoot, assisted-living expert with AARP.

According to Sanderson, who has headed the aging division since 1984, developing assisted-living facilities takes time and persistence.

“There are many pieces of the puzzle to put together and a lot of different players that have to be willing to act towards the same goal. It’s been a very complex process and it really took a lot of sticktoitiveness to see it to the end,” he said.

After heated debates over two legislative sessions, Arkansas passed a law in 2002, establishing assisted-living regulations, allowing Medicaid funding and offering financial incentives for developers. But even then, finding a willing developer was a struggle.

“I was beginning to feel like Willy Loman (the overworked leading character in the famed Arthur Miller play, “Death of a Salesman”), Sanderson said.

“When we talked to housing people about the project, they understood until we mentioned health care, and they would get all nervous. Then we talked to health care providers, and they understood until we started talking about low-income housing tax credits and their eyes would glaze over. We had to get two separate parties together and try to get them to strike up a partnership,” he said.

Arkansas ‘ assisted-living law requires each unit to include a private bedroom, bath and kitchenette for each resident or couple, plus common areas, full meal service and 24-hour medical and personal care. Despite the cost of private accommodations, assisted-living facilities are cheaper to operate than nursing homes, because residents are encouraged to remain relatively independent, requiring fewer health care workers per person, Sanderson explained.

With the Coming Home project completed, Arkansas intends to use its expertise and regulatory structure to attract more assisted-living developers to its rural communities.

In the small town of Mena, for example, retired citizens are working with the state to bring an affordable facility to their community. Against tall odds, says Sanderson, they’ve successfully negotiated a deal for a 40-unit, facility that is expected to open within two years.

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Christine Vestal

Christine Vestal covers mental health and drug addiction for Stateline. Previously, she covered health care for McGraw-Hill and the Financial Times.