hand placing Medicaid puzzle piece

Several plans under California’s new cost-saving Medicaid initiative have started using a new tool that’s pushing to create new pathways to transition residents away from skilled nursing facilities and into assisted living instead. The tool could wind up taking millions of dollars away from nursing homes.

The state first got approval to move forward with its California Advancing and Innovating Medicaid Program by the Centers for Medicare & Medicaid Services in December. The initiative is designed to streamline the state’s Medicaid delivery system by using enhanced care management and CMS’ new In Lieu of Services (ILOS) tool. 

The ILOS tool aims to rebalance the long-term care sector by offering medically appropriate settings or service substitutes “in lieu of” traditional Medicaid-funded services that managed care plans offer beneficiaries to reduce “unnecessary institutionalization,” CMS explained. The plans can then recapture their ILOS expenses during annual capitated rate calculations.

As of now, just six managed LTSS managed care plans are offering ILOS to push nursing home residents into assisted living. More plans are expected to follow next year. 

“Shifting 10% of LTSS recipients from SNFs to assisted living homes will generate $99 million in annual Medicaid cost savings: a portion of which could be refunded to MLTSS MCPs through cost savings incentives,” California-based home care consultant Jason Bloome wrote.

There are currently 24 states with managed LTSS programs, which could mean more state programs may be coming in a familiar push to save money on SNF care.

“LTSS spending in the United States accounts for a large portion of state and federal dollars spent on healthcare. In 2021, more than $475.1 billion was spent on LTSS, which represents more than 14.7% of the $3.4 trillion spent on healthcare in the United States,” Bloome noted.