House passes bill to reimburse nursing homes, care facilities at 100%

The state House of Representatives passed a bill 44-25 on Wednesday that would annually adjust the reimbursement rate for community-based providers to 100% of the costs of caring for patients covered by programs such as Medicaid. Those providers include nursing homes, assisted living facilities and care facilities for people with developmental disabilities.

That’s a 10 percentage-point jump from what Gov. Kristi Noem proposed in her December budget address. The bill’s sponsor, Rep. Chris Karr, R-Sioux Falls, told legislators that full reimbursement is necessary to fulfill the state’s obligations and pay its bill to providers so they can stay afloat.

Mark Deak, executive director of the South Dakota Health Care Association, told legislators in the House Committee on Appropriations last week that 15 South Dakota nursing homes closed in the last five years, with seven closures in the past 12 months.

“When you look at the rate of acceleration, there will be more closings to come if we don’t take further action,” Deak said. “This bill makes it a priority to care for our elderly and disabled South Dakotans.”

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As Noem described it in her budget address, the reimbursement rate in 2022 stood at 69% for nursing homes, 73% for community support providers for South Dakotans with developmental disabilities, and 64% for psychiatric residential treatment facilities.

“This methodology reflects the reasonable amount that we should pay for services that are provided. Unfortunately, as the cost of living has increased, reimbursement rates for many of these services have struggled to keep pace,” Noem said. “… These providers are critical to our state and ensure we can continue to take care of some of the most vulnerable among us.”

Usually, the Legislature will decide what the state can afford to spend on reimbursement rates based on what is available in the budget. This bill would automatically reimburse community-based providers 100% of their service costs each year.

Deak explained to South Dakota Searchlight earlier this year that a reimbursement rate of 100% still wouldn’t fully cover the costs of providers, because service costs aren’t updated frequently enough to address inflation and other factors. 

“I think the situation merits getting closer to 100% of methodology, because then you get closer to 92% or 93% of coverage,” Deak said. “Then I think folks would have a better shot of making a go of it.”

That’s where another bill of Karr’s comes in, HB 1138. The House passed HB 1138 Tuesday in a 65-5 vote that would require an annually updated cost report to accurately reflect those changes in service costs.

“If we’re not using updated cost reports, what does it matter that we pay 100% of methodology?” Karr asked legislators on the House floor Tuesday. “If we’re only paying 70-80% of the true cost, what are we doing? We’re setting them up for failure.”

Rep. Tony Venhuizen, R-Sioux Falls, rose in opposition to HB 1167 on Wednesday citing that other state services, such as education and corrections, are not ensured 100% reimbursement. Putting that commitment into statute would tie legislators “in knots,” he added.

“It is a mistake to write it into law to say, ‘we’ll fund indeterminate things at indeterminate levels,” Venhuizen said.

Two legislators, Reps. Marty Overweg, R-New Holland, and Peri Pourier, D-Rapid City, shared that they have autistic family members who would be impacted by the bill. Overweg pointed to millions of dollars legislators approve to spend on building projects across the state and the rising costs the Legislature approved to pay because of inflation.

The state isn’t properly paying its bill for these providers, he said.

“Even if it ties the hands of future legislators,” Overweg said, “then they can just spend less money.”

Karr’s response is that the state should always pay its bills going forward and that the Legislature should be committed to taking care of the state’s obligations “year after year after year.”

“I don’t want them to chase their tail in this big, circular, unsustainable process we’ve been going through of not paying our bills and not taking care of our loved ones,” Karr said.

Both bills will now head to the Senate.