Michigan is weeks away from enacting cost controls on medical care for auto accident victims, and critics are warning that this effort to lower insurance costs will cause some long-term care businesses to close and force some patients into nursing homes.
The new rules begin in July and are Part II of the no-fault auto insurance overhaul that Gov. Gretchen Whitmer signed into law in spring 2019.
The first part took effect last July and gave motorists a first-ever choice in the amount of no-fault medical coverage they must buy with auto insurance.
Previously, Michigan drivers were required to buy unlimited, lifetime no-fault coverage with benefits that even the best Blue Cross policies don’t offer, such as long-term specialized rehab, home and vehicle modifications and 24/7 in-home attendant care.
The most controversial change happening next month will require rehab clinics and other medical care providers who treat crash victims paying with no-fault insurance to cut some of their prices by 45%. The baseline for the cuts is the prices the providers’ charged back in January 2019, before the revamped no-fault law.
These price cuts would in turn affect the more than 6,600 auto accident victims who are receiving long-term care and rehabilitation paid for by the Michigan Catastrophic Claims Association through the per-vehicle annual fee that all Michigan drivers were once assessed. These individuals often have traumatic brain injuries and require lifelong care.
Some care providers have already told patients and their families to start looking for alternative arrangements because if the 45% price cuts take effect, they will close. Others have merged with different provider businesses in hopes of continuing operations.
These providers typically run more expensive and labor intensive operations than are offered to patients who weren’t injured in auto accidents and therefore aren’t covered by no-fault insurance with its extensive benefits.
In other states, care providers must make do with lower reimbursement rates and less insurance coverage. Because those states lack a care provider industry that was built up from no-fault’s generous reimbursements, their catastrophically injured crash survivors often end up in Medicaid-funded nursing homes or, if they qualify, may get some in-home care through a Medicaid “waiver” program.
“For all of Ohio, we have one program in one city that is like what you have multiple of in multiple cities,” said John Corrigan, director of the Ohio Brain Injury Program.
Preparing to close
Troy-based Aspire Rehabilitation, which provides residential apartments with rehab services for 20 auto accident survivors, is among the care providers that are preparing to close — cutting loose all of their patients and laying off more than 50 staffers.
All of Aspire’s patients’ living and rehab costs are currently covered by no-fault insurance and range from about $325 to $970 a day, depending on injury severity and staffing needs, according to co-owner Randal Bruce.
“We have no choice. There is just no way we can absorb a 45% cut to our revenue,” Bruce said. “We’ve looked at everything in terms of cutting services, cutting staff — our overhead is just too much in terms of the type of residential rehabilitation that we provide … so there just wasn’t any way to do it.”
He added, “Our rates are very reasonable, and in a good year, our profit margin may be around 10%.”
Those in the care provider industry warn that once the price controls start and businesses begin closing, there may not be enough specialized residential rehab centers or in-home care providers left for all the auto accident patients needing help — especially those in remote areas.
“You have some really vulnerable people who live in their homes right now,” said Tom Judd, president of the Michigan Brain Injury Provider Council and a manager at a brain injury rehab clinic. “And they might not have a big support system around them — they might only have the care provider who takes care of them. And when that care provider isn’t able to do that, where does that person go?”
Under such a scenario, if patients can’t find another provider, they could be forced to leave their own homes and go into nursing homes. No-fault insurance would presumably pay all of their nursing home bills, giving those patients a step up in care options than someone entirely reliant on Medicaid.
Still, in a traditional nursing home with fewer specialists on staff, a severely injured auto accident survivor is unlikely to receive as much one-on-one attention and rehab as before.
A review of care industry bills, obtained by the Free Press, shows that the charges to no-fault insurance for a year at residential rehab centers for auto accident patients can range from roughly $240,000 to more than $400,000, and sometimes exceed $700,000 for 24/7 attention from nurses. The costs for traditional residential care at skilled nursing centers is roughly $105,000 to $140,000 a year, according to the review.
Services impacted and a potential fix
The 45% price cuts apply only to certain services, generally post-acute care, that don’t have Medicare billing codes. For services with Medicare codes, the price controls will let medical providers charge 200% of Medicare rates.
That amount is slightly higher than the 190% that commercial health insurers such as Blue Cross Blue Shield pay hospitals in Michigan for all procedures and services, according to a report by the RAND Corp.
The long-term care provider industry says it is especially impacted by the 45% cuts because many of the services it provides to auto accident patients do not have Medicare codes. That is because Medicare isn’t designed to pay for all the things no-fault insurance does.
“There is no billable code that covers what we do,” said John Prosser, vice president and partner at Health Partners, which provides in-home nursing care to mostly no-fault insurance patients in the Kalamazoo, Flint, Grand Rapids, Traverse City and Bingham Farms areas.
Health Partners plans to close down its business if the 45% price rule takes effect, cutting loose its 97 patients and 580 employees, Prosser said.
“This is just absolutely devastating,” he said. “I have clients who are quadriplegics on ventilators. Where are they going to go?”
The care provider industry is pressing state lawmakers to pass legislation that would prevent the 45% price cuts to services without Medicare codes.
The latest proposal, introduced Thursday by state Rep. Ryan Berman, R-Commerce Township, would instead restrict providers’ prices to the average amounts charged within a 50-mile radius, as determined by annual market surveys conducted by the state.
An earlier proposal calls for tying reimbursement to a new fee schedule that would purportedly equal about 200% of Medicare rates, which proponents say would keep the intent of no-fault reform without devastating the long-term care industry and patients.
Critics of the fee schedule proposal — generally the insurance industry — note how it would be designed by the care industry and its prices could be revised upward.
Earlier this month, the State Long Term Care Ombudsman urged Senate Majority Leader Mike Shirkey, R-Clarklake, to pass legislation to stop the 45% cuts “so that thousands of vulnerable citizens are not displaced and left with no viable or equitable substitution for the specialized care they are receiving in residential and community-based settings.”
“These specialized services are not available in nursing homes or other long-term care settings, and the staff in these new settings have not been trained to meet the unique needs of these survivors,” the ombudsman, Salli Pung, wrote in the letter. Neither bill has moved beyond the Legislature’s insurance committees.
The care provider industry says the 45% price cuts will be devastating because they don’t have big profit margins or do billing like hospitals, where sticker prices for services and procedures are well above what patients and insurance companies ultimately pay.
“We have a profit margin, but it’s not huge. It’s like probably 10%,” said Joe Richert, CEO of Romulus-based Special Tree Rehabilitation System that specializes in treating auto accident survivors with brain and spinal cord injuries. “There’s a perception out there that the providers somehow have a 45% cushion to be able to sustain these kind of rates and stay in business — that’s just obviously not true.”
Health Partners, the company that does in-home care and plans to close, bills no-fault insurance $75 an hour for its nurses and pays the nurses $40 an hour, not including the cost of benefits and taxes, according to Prosser.
The care can be expensive because many Health Partners patients receive 24-hour assistance in their homes. Some are on ventilators and have two people present at all times: a registered nurse and a home health aide. The cost of staffing around-the-clock nursing care is roughly $50,000 a month, Prosser said, and can hit $70,000 for patients needing a nurse and an aide together.
Outside Michigan, accident victims generally don’t receive constant one-on-one or two-on-one care in their home paid for by insurance. They instead reside in nursing homes or care facilities where nurses and staff oversee multiple patients.
Brad and Laurie Newell of Milford have been paid caregivers in their home for their 28-year-old son, Drew, who suffered a traumatic brain injury in an auto accident four years ago that nearly killed him. Drew’s doctor prescribed 24/7 attendant care with two aides always present, or 336 billable hours of weekly care that no-fault insurance has covered.
Drew once required a feeding tube and tracheostomy. Today he uses a wheelchair and struggles with short-term memory, although is starting to regain his ability to speak short sentences.
One of the two companies that supplemented Drew’s in-home care, Centria Healthcare, recently informed the family that it will stop services for auto accident patients in July when the price controls begin. The other company, 1st Call Home Healthcare, plans for now to keep seeing no-fault patients.
No-fault insurance will continue paying Laurie Newell to provide attendant care for her son. However, new rules that take effect next month will limit her to no more than 56 paid hours per week, so more outside aides will need to visit the house to help with Drew.
The Newells feel lucky that all of Drew’s therapy and rehab providers expect to stay in business and continue seeing him. That isn’t the case for some auto accident patients in Drew’s programs whose providers are shutting down, forcing their families to scramble for alternatives before July.
“For some of the other people, it’s been bad. A lot of these people are going to end up going to a nursing home,” Brad Newell said. “And in a Medicaid nursing home, you’re not going to get PT. You’re not going to get these things that are much needed.”
Centria Healthcare didn’t respond to a message seeking comment.
Unlimited option still popular
Since Part I of the insurance reform took effect last July, most Michigan drivers have continued to buy unlimited, lifetime no-fault coverage.
The Insurance Alliance of Michigan, an industry group, said this month that 70% of drivers are still choosing unlimited, which is the default option. Of the others, 17% are picking reduced coverage or completely opting out of no-fault and 13% were unknown.
The new cost controls are expected to ultimately lower the price of no-fault policies. Some drivers in high-cost urban areas such as Detroit who have entirely opted out of no-fault medical coverage have been saving $1,000 or more per year.
Only drivers on Medicare or with commercial health insurance that covers auto accidents are allowed to completely drop no-fault medical, known as personal injury protection or PIP.
The annual per-vehicle catastrophic claims fee, which all Michigan drivers once paid, now applies to only those choosing unlimited no-fault policies. The fee is set to drop to $86 in July, down from $100 last year and $220 in 2019.
There is now roughly $20 billion in the catastrophic claims fund for the future care of the most severely injured, said Kevin Clinton, executive director of the catastrophic claims association.