Four adult care homes heard this week they will lose Medicaid funding because they house too many mentally ill people.

These four facilities are the first wave of adult care operations to receive notice that the insurance money that helps pay for residents’ care is being cut off as part of a federal crackdown.

Under federal rules, Medicaid cannot be used to pay for people who live in larger facilities where more than half the residents are mentally ill.

After the state finishes evaluating adult care homes by the end of November, about 135 homes may lose their Medicaid funding. The residents are enrolled in the federal insurance program, but adult care homes collect the money and use it to pay employees and other operating costs.

Two homes in Yadkin County – Pinebrook Residential Centers No. 1 and No. 2 – Heritage Care in Catawba County and Hunter Village in Mecklenburg County will lose Medicaid support on Sept. 17, according to the state Department of Health and Human Services. In all, 195 people live in the four facilities.

Seventy-three percent of Pinebrook residents are mentally ill, as are 57 percent of Heritage Care and Hunter Village residents, according to the agency.

Amy Hart, administrator at Hunter Village, said company lawyers are reviewing the cut-off notice, and she wasn’t sure what would happen next.

“If we don’t get a resolution, I’m going to have some residents that are going to be homeless,” she said.

Adult care industry in flux

The adult care industry is grappling with a host of changes.

Separate from the federal limit on mentally ill residents is last month’s agreement between the state and the U.S. Department of Justice that could move thousands of mentally ill residents out of adult care homes and into their own apartments over the next eight years. The state agreed to the housing plan to resolve a complaint that it is violating federal law by confining people to adult care homes who, with help, would be capable of living on their own.

In addition, a change in qualifications next year could mean that 10,000 people living in adult care homes will no longer be able to use Medicaid to pay for help they receive eating, dressing, bathing, or walking.

The state budget includes $39.7 million to support adult care homes as they lose Medicaid money.

Adult care homes that have their funding cut off will have 30 days to appeal, DHHS Acting Secretary Al Delia said this week. Those who can show they don’t have a disproportionate number of mentally ill residents will have their money reinstated, he said.

The federal rules will also hit group homes for adults with mental illnesses. Group homes will be among the last facilities reviewed, said DHHS spokeswoman Julie Henry.

The state is asking the federal government to take a “flexible approach” toward group homes, Henry said, because they’re considered an effective way to provide services to some people with mental illnesses.

Bonner: 919-829-4821