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House lawmakers have gutted legislation that initially set out to strike a compromise between the interests of the burgeoning industry that provides long-term care for the elderly in neighborhood settings and the consumer advocates looking out for thousands of Hawaii residents who live in these facilities.

Gone are provisions in that would have required the Department of Health to conduct unannounced visits of the various types of health care facilities it oversees instead of giving the operators a heads-up that they are coming.

Also stripped from the bill were requirements for care home operators to pay — for the first time — licensing and certification fees, which could have created a new revenue stream to beef up the department’s oversight and make inspection reports accessible to the public online in a timely manner.

The intent of the bill, introduced in January by Vice Speaker John Mizuno and co-sponsored by nearly half of the 51-member House, was to help Hawaii caregivers financially while boosting consumer protection and potentially opening up more space in family-like settings for elderly people who require a nursing-home level of care.

But in a one-two punch this month, the Health and Human Services committees, chaired by Reps. Della Au Belatti and Dee Morikawa, respectively, stripped out everything except a provision that lawmakers rejected last year over concerns of displacing low-income residents of community care foster family homes.

CCFFHs, as they’re called in the industry, can each have up to three clients with the proper certification from the Department of Health, but at least two have to be on Medicaid. If it’s just a two-client home, one must be on Medicaid. This type of care facility was created specifically to serve Medicaid beneficiaries.

The bill as it stands now would let two people who are married or in a civil union pay out of their own pocket to live in a three-client CCFFH.

This would mean more money for the operators while giving married couples who require a nursing-home level of care another place to live together. But it threatens to leave low-income elderly residents without a place to go — which is why Gov. David Ige’s administration opposes it.

“The community foster family home was, and still is, an integral part of the long term care continuum of care for the Medicaid program and provides a less restrictive community-based home for Medicaid recipients who are at a nursing facility level of care,” Human Services Director Rachael Wong told lawmakers in her written testimony.

“The CCFFH allows recipients to remain in the community rather than go into a nursing facility, which is a major national goal and the personal preference for many individuals and families,” she said. “With this change, there is the potential of reduced CCFFH beds for Medicaid recipients, which could result in individuals having to remain for longer periods of time in an acute hospital bed until a community-based bed becomes available, or going into a more costly nursing facility.”

There’s already another type of care facility, called an adult residential care home, or ARCH, that can take up to five clients, all of whom can pay privately or be on Medicaid. ARCH operators can also apply for an expanded certification to accept more clients.

There are 493 adult residential care homes with 2,703 beds, and 1,145 community care foster family homes providing 2,897 beds, according to a recent count by the state long-term care ombudsman.

The bill, as amended in Belatti’s committee, instructs the Department of Human Services to examine the effects of requiring ARCHs to accept Medicaid recipients.

This could help level the playing field between the two types of care homes, but is something the industry — a powerful lobbying force in the Legislature — would more than likely oppose. Private-pay clients can pay double or triple those on Medicaid.

The amended version of the legislation would create a two-year pilot program that would allow five to 10 community care foster family homes to have two people paying privately, so long as they are married or in a civil union.

Last year, lawmakers killed a bill at the 11th hour that would have allowed a married couple to live in a community care foster family home. Mizuno had what he thought was the perfect poster couple — Noboru and Elaine Kawamoto, married 67 years — to usher the law to passage, but it turned out that a client on Medicaid would have had to leave the Kaneohe care home for them both to live in it.

Noboru Kawamoto, a 94-year-old decorated World War II veteran, still lives in the same care home, operated by Jonathan Hanks, and his wife continues to visit him there periodically.

Hanks pleaded with lawmakers last session to pass the bill, bringing the Kawamotos to one hearing after another. He testified again this month, urging support for the measure by making the case that no state regulation should separate a married couple.

“This is a fundamental right,” he said in his written testimony, adding that there is a need to open up more beds for people to pay privately while balancing the needs of Medicaid clients.

The Department of Health joined DHS in opposing the provision in House Bill 2005 that allows a private-pay couple to live in a community care foster family home.

“The CCFFH program was designed to ensure availability of nursing beds in two CCFFHs specifically for the Medicaid population,” Health Director Virginia Pressler said.

Caregivers and operators submitted dozens of form letters — the same testimony, but with a different name — in support of allowing two private pay clients to live together.

Belatti, who did not return a message seeking comment Monday, said in her that the measure was amended in response to “the concerns raised in the testimony.”

The Department of Health objected in its testimony to statutorily requiring fees for certification and licensing of the facilities. That’s something health officials have said is already underway as part of a rulemaking process, and the fees were removed in the amended bill.

Many caregivers testified that they would be willing to pay fees of $25 to $50. And some, like Noemi Libed Arzaga, a Big Island CCFFH operator, proposed a “reasonable fee” of $50 to $100 per year.

Keith Ridley, who heads the Department of Health’s Office of Health Care Assurance, which oversees the vast majority of care homes, has said that the state is preparing to impose new licensing fees on long-term care facilities through an administrative rule-making process that doesn’t need legislative approval.

The department hasn’t indicated how much the fees might be, but Lilia Fajotina, president of the Alliance of Residential Care Administrators, an industry trade group, has said she’s heard they could be as much as $3,300.

One of the concessions to care home operators that the once-omnibus measure provided was a provision that would let the Department of Health maintain a forum on its website where state-licensed care facilities could post vacancy information to facilitate the placement of individuals.

But Pressler told lawmakers that the department opposed doing so because “an online forum would be an easy way for computer viruses to enter the state system, whether intentional or unintentional and especially without required resources to prevent or monitor postings for viruses.”

One of the other provisions that’s been removed that caregivers supported in the original bill was a requirement that the state pay interest on late payments (overdue by at least 30 days) to facilities and care managers, which has been an issue in the past.

The stripped-down bill’s next stop is the Finance Committee, chaired by Rep. Sylvia Luke, which can amend the measure again, pass it on as-is for a vote by the full House, or kill it. If it clears the House, the bill would cross over to the Senate for its consideration.

Track the measure’s progress and read all the written testimony