Trends in Long-Term Care - U.S. Senate Special Committee on Aging

2894
It is technically at the actual average equity dur<strong>in</strong>g the year period.
Now, that means if you take the equity every month, you add it up,
and you divide by 12. In this way you prevent someone from putt<strong>in</strong>g
<strong>in</strong> a lot of equity at the end of this period, and tak<strong>in</strong>g out from the
beg<strong>in</strong>n<strong>in</strong>g and say<strong>in</strong>g my equity for the year was that equity on December
31. This is why we have the actual equity over the year.
The next portion is~ that you add the cost of your operation, plus
that 23-percent <strong>in</strong>flation factor, plus your real property cost, whether
imputed rent, maximum rent, or depreciation, plus your return on
equity, and you get your rate.
Now, that rate is the rate that is calculated to provide for all of
these costs, subject to these limitations, and to provide for return on
equity, if there is some, and to pay what is determ<strong>in</strong>ed to be the fair
real property cost, so all of the <strong>in</strong>stitutions that we are look<strong>in</strong>g at
should be able to pay for themselves. should be able to meet all of
their current debts, because the system is designed to allow for passthrough
of all costs of runn<strong>in</strong>g the nurs<strong>in</strong>g home.
If there is any place where a cost is disallowed, for example, if the
real property costs are doubled or tripled what is allowed, the nurs<strong>in</strong>g
home operator has a choice.
He either pays the rent, or he cuts down on some other service, or
he cuts down on his profit.
Now, if the person cuts down on the service and reports that cut,
that will be reflected <strong>in</strong> here, which will be heard the next time he
comes up for <strong>in</strong>flation, for a cost certification, so that is not a very
popular way to do it.
If he cuts down on his profit, he is runn<strong>in</strong>g a profit-los<strong>in</strong>g bus<strong>in</strong>ess,
a money-los<strong>in</strong>g bus<strong>in</strong>ess, and he is pay<strong>in</strong>g all of this profit to his
landlord.
That is not usually very popular. WhTat we have found, too often
<strong>in</strong> New York, is that there are cuts, there are methods of <strong>in</strong>flat<strong>in</strong>g
certa<strong>in</strong> of these costs, for example, there are no-show jobs that have
been put <strong>in</strong>to adm<strong>in</strong>istrators' salaries.
If you put your wife on, if you put your son on, if you put your
cous<strong>in</strong> on, and that person collects the money, and pays it back to
you, or that person never collects the money, and it is merely used to
get a little bit of extra out of the nurs<strong>in</strong>g home, to go all the way
up to your dollar maximum, then you can keep this portion a little
bit <strong>in</strong>flated.
The same th<strong>in</strong>g for salaries. As has been found <strong>in</strong> New York, if
your mother was put on as a maid, whether she does work or not,
her salary is reported, and if it is with<strong>in</strong> the category average, it
will be allowed, and there will even be an <strong>in</strong>flation factor added to
it, so if your mother is on as a maid, not only do you collect her salary,
you also collect her salary plus a profit at 23-percent <strong>in</strong>crease, when
it comes up for reimbursement, and the same th<strong>in</strong>g all the way
through.
If <strong>in</strong> addition to buy<strong>in</strong>g food for the nurs<strong>in</strong>g home, you buy food
for your own home, and that is <strong>in</strong>cluded <strong>in</strong> the dietary, not only do
you get the benefit of the food, but you get the benefit of <strong>in</strong>creas<strong>in</strong>g
your costs.
The same is true with all of these costs down to real property.
That is the system.