On February 25, Alaska Pioneer Homes (APH) Division Director Clinton Lasley sent a letter to residents of the Pioneer Homes under the subject heading “Governor’s Honest Budget: Sustainable, Predictable, Affordable.”  He was informing them their rates would double.

The six Pioneer Homes across the state provide a variety of care for Alaska elders, from those who are largely self-sufficient to those who need 24-hour care.

Under APH’s proposal, the latter would see rates increase from $6,795 per month to $13,333 per month, a 96-percent increase.

“Over the years, the Pioneer Home rates have not been reflective of what it costs us to provide services,” Lasley testified during a Department of Health & Social Services (DHSS) Senate subcommittee hearing Friday, March 8.

“That is reflective of what it truly costs us to provide services today,” he said of the increase.

“We know this a very sensitive and hard conversation to talk about increasing the rates of the Pioneer Home residents.  It is a large increase,” acknowledged Sana Efird, Office of Management and Budget (OMB) administrative services director for DHSS.

Shirley Penrose’s mother, a resident of the Juneau Pioneer Home, is one of the elders facing the 96-percent increase.  She elected to privately pay her monthly rates.

“I find it quite disturbing that the director intends to raise rates in one move rather than to phase it in over a period of time,” Penrose wrote in a letter to the subcommittee.  “A reasonable cost of living increase would be tolerable[, but] this is not reasonable.”

Lasley said the State is paying $650,000 per month, across the division, for those electing to self-pay, rather than use Medicare, Medicaid, or long-term care insurance.

“Trust me, it was one of the hardest decisions I’ve ever made.  But if we’re truly going to get to a place where we are charging what it’s reflective of us to provide the service, and knowing that the State is subsidizing $650,000 a month for individuals that may have the ability to pay more, the question then was, how do we implement that rate increase?  Do we do it all at once?” Lasley asked.  “That was sort of my decision to put that forward and say, ‘Let’s just do it.  Let’s right-size the division.’”

He told subcommittee members he decided to send the letter to residents to be transparent and to prevent them from learning of the increase by reading the news.  

But that letter simply reflects the policy laid out in Gov. Mike Dunleavy’s FY 2020 budget released two weeks prior. 

Residents did learn through the news on February 13 that Dunleavy intended to raise Pioneer Home rates.  Efird reiterated the intent to roughly double the rates during a Senate Finance hearing on February 22, three days before Lasley sent his letter.

The only question, Efird testified then, was the exact amount of the increase, leaving residents worrying for days.

The Department of Law is reviewing the regulatory package necessary to formally change the rates.  When it is approved, those regulations will be subject to public review and comment at least 30 days before implementation.

Budget Tricks Make APH Budget Cut Look Like an Increase

The first Pioneer Home was established in Sitka in 1913 as a home for indigent men.  Using Marine barracks, it was converted into a home for elders in 1915.

APH’s mission is to provide “elder Alaskans a home and community, celebrating life through its final breath.”

“What happens when they can’t pay this extra enormous amount of money?” Sen. Elvi Gray-Jackson (D-Anchorage) asked Efird.

AS 47.55.020 reads in part, “The department may not evict a person from a home if the income and assets of the person are insufficient to pay the monthly rate[.]”

The statute goes on to say that residents with insufficient assets and without private insurance to cover costs qualify for State assistance.

“The proposal will not evict Pioneer Home residents from any of the Homes,” Efird assured Gray-Jackson.

Efird added that the Dunleavy administration is creating a $15 million needs-based grant to provide a safety net for those who can’t adjust to the increase.  Yet DHSS is not certain the amount is enough.

“We may be forthcoming with a change in this number,” Efird said.

While AS 47.55.030 allows DHSS to set Pioneer Homes rates through regulation, it also specifies, “The rate charged need not fully compensate the state for the cost of care and support.”

Raising rates to match costs is a choice by the Dunleavy administration.

“As you have all heard over the past few months, the governor fully intended on putting together a budget in which expenditures cannot exceed existing revenue,” Lasley wrote in his letter to residents.  “The FY2020 budget does not reduce our authority to spend the same approximate funding as we have this year, but goes to the core of the governor’s objective which is we must earn what we spend.”

“If we’re not charging what it costs us to provide these services, there’s no way we can earn it,” Lasley clarified to the DHSS subcommittee Friday.

In the budget, Dunleavy is cutting APH unrestricted general fund (UGF) spending by $18 million, over half its FY 2019 allotment, while increasing its designated general fund (DGF) authority by $14 million.

“The Pioneer Homes was funded in the past, basically, with unrestricted general funds.  The governor’s proposal has reduced the unrestricted general funds and increased designated general funds to reflect an increase in the rates for the Pioneer Homes,” Efird explained.

But at least a portion of that $14 million increase in DGF is hollow receipt authority.  Just because APH raises the rates doesn’t mean it will realize that additional revenue and then be able to spend it.

Consequently, the total funding in OMB’s presentation makes it seem as if APH funding is being increased, when in reality it is being deeply cut.

OMB took the same approach with the University of Alaska (UA), cutting UGF by $134 million, but increasing hollow tuition receipt authority by $155 million to make it seem like the budget is being increased.  This, despite testimony from OMB that UA can’t possibly bring in that much new tuition.

To compound the effect in the APH budget, OMB created a new component for the $15 million in payment assistance grants.  That reports as “Other” spending, interagency receipts to the Pioneer Homes, that is double-counted because it is also UGF.

So rather than a total APH funding increase of $15 million, as OMB reports, one must subtract the $15 million in interagency receipts and the $14 million in hollow receipt authority to see the true year-over-year cut to APH.

It remains to be seen how much of that $14 million DGF increase APH actually earns, as Lasley phrases it, assuming the rate increases are implemented at all.

“At the proposed rates, I believe… the state will subsidize a larger number of residents as fewer people will be able to self-pay,” Penrose warned the subcommittee.

She added that her mother will likely be able to find cheaper care elsewhere.

“I have a feeling that migration will be one of the issues,” Sen. John Coghill (R-North Pole) agreed.

APH Doesn’t Ask Applicants About Assets, But It Does Ask Residents

Subcommittee members had a variety of questions about demand for the Pioneer Homes and the impacts rate increases would have.

“How many do you turn away?  How many are on a waiting list?  And how do you prioritize?” asked Sen. Lora Reinbold (R-Eagle River).

Alaskans who have lived in the state for at least one year are eligible to live in the Pioneer Homes when they turn 65.

However, 91 percent of the beds systemwide are filled, and the waitlist has 6,000 people on it.

Lasley recommends that those with an interest in the Pioneer Homes establish a place on the inactive waitlist when they turn 65 so that when they develop a medical need, they can move to the active waitlist.  That list has about 200 people, with priority established based on the date a resident joined the inactive waitlist.

The average age of entrance is 81.

“We never ask an individual their ability to pay prior to coming in.  We don’t ask their ability to pay whenever they put themselves on the waitlist,” Lasley said.

Subcommittee Chair Natasha von Imhof (R-Anchorage) asked if APH is letting people know about waitlist eligibility or the potential need for long-term care insurance to help with monthly rates.

“It’s one thing to say, ‘What is it you have?  Okay, thank you very much.’  The next step is, ‘Here are your tools that are available to you,’” von Imhof told him.

Lasley said APH currently does not reach out to people before they join the waitlist.  They are exploring using Permanent Fund dividend (PFD) data to inform people who turn 65 about their options.

“What if somebody doesn’t have the ability to pay, but they own a home and nothing else?” Gray-Jackson asked.

Residents are required to liquidate their assets to receive State assistance, Lasley replied.  DHSS will put them on temporary assistance while they are selling their home.

“Until a year ago, we did not ask anyone that was in the Pioneer Homes, that said that they could private pay, what their resources and ability to pay were,” he said.

APH started asking residents about their assets in December of 2017, making such questions routine a year later.  Lasley said it helps APH determine when a resident may have to switch to State assistance.

Over Half of APH Residents Receive Most Expensive Level of Care

APH considered several factors for the proposed rate increases, Lasley testified.  He noted that while data from the Department of Labor shows inflation has increased 35 percent over the last 15 years, Pioneer Homes rates have increased only 15 percent.

“We were not only not charging the rates reflective of what it costs to provide the service; but we have not been keeping up with inflation,” he said.

Data from Genworth’s Cost of Care Survey shows that assisted living care in Anchorage costs $6,000 per month on average, while nursing home care costs $22,000.

“The magnitude is alarming,” von Imhof remarked.

Lasley said APH is unusual in that it provides both levels of care.  Level II of the three-level system at APH costs $4,692 per month.  Level III care, akin to a nursing home, costs $6,795 per month.

As part of the rate increase, APH is switching from three levels of care to five.

Lasley said 55 percent of the current Level II residents were actually on the cusp of Level III care, costing the State more money because of the additional nursing care needed.

Under the new system, those residents would move to Level III and pay $11,185, a 138-percent increase.

Folks on the higher end of the current Level III, like Penrose’s mother, would move to Level IV.

That would allow for a new Level V, Alaskans with advanced dementia or likelihood of self-harm that Lasley said are currently being turned away from APH and improperly sent to hospitals or the Alaska Psychiatric Institute.

Residents under the new Level IV would fall below Genworth’s average nursing home costs, despite the 96-percent increase.

However, residents in the new Level II would see a 40-percent rate increase.  The monthly cost of $6,569 would exceed Genworth’s average for assisted living in Anchorage.

“Are people going to be able to go somewhere else?” Coghill asked.  “Do we have other services available that they can run to if they don’t want to use the Pioneer Homes?” 

“The state is facing a huge senior care shortage,” Lasley acknowledged.

Lasley and Efird suggested elders would likely stay in their own homes longer as a result of the increases, relying on family members or home health care nurses.

Meanwhile, Dunleavy’s budget would also eliminate the $20 million Senior Benefits Payment Program that provides cash to low- and moderate-income seniors.

The majority of APH residents statewide are currently Level III and would therefore see 65- or 96-percent increases under the new system.

“The impact of the State’s decision to so drastically raise the Pioneer Home rates and the effect it would have on the mental and emotional well-being of our elderly must be carefully considered,” Penrose wrote to the subcommittee.  “Please ask yourself what your reaction would be and what you would do if out of the blue your bank doubled your mortgage or your landlord doubled your rent.”

The subcommittee will consider the Alaska Psychiatric Institute (API) on Monday.

Last month, DHSS abruptly privatized API, turning it over to for-profit Wellpath Recovery Solutions.

The Midnight Sun has an excellent write-up on how the Dunleavy administration predetermined to privatize API.  Email evidence indicates that DHSS was justifying privatization on a safety-related incident a week before that incident occurred.

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