Owners and operators of nursing homes, and their trade associations, invariably argue that Medicaid rates are too low. They claim that Medicaid rates must be increased if the Centers for Medicare & Medicaid Services (CMS) imposes mandatory nurse staffing ratios, as the Biden-Harris Administration promises to do, or makes other changes to regulatory requirements. For decades, however, federal law has required nursing facilities to have “sufficient” nursing staff to meet residents’ needs. Specifying staffing ratios is not, as the industry claims, an unfunded mandate.
Industry arguments about the inadequacy of Medicaid rates are implausible. If facilities had been “underfunded” for 15 years or were really losing $25 per day or $30 per day or $38 per day or $65.36 per day for the majority of their residents for multiple years, how could facilities possibly still be in business? Why did the price paid for a nursing home bed soar from $80,000 in the fourth quarter of 2019 to $95,600 in the first quarter of 2020, if facilities were losing so much money and the nursing home business was so unprofitable?
Multiple reports and articles – by Consumer Voice, the Empire Center for Public Policy, The New York Times, former Massachusetts state senator Richard T. Moore, and others – as well as litigation by the New York State Attorney General, document that the considerable reimbursement already given to nursing facilities by Medicaid (and Medicare) could be directly channeled to focus on resident care, instead of being diverted to excessive provider profits.
A comprehensive analysis of Medicaid nursing home payment rates comes from the Medicaid and CHIP Payment and Access Commission (MACPAC), the non-partisan legislative branch agency that makes policy recommendations to Congress about Medicaid and CHIP policies. MACPAC published an issue brief in January 2023, “Estimates of Medicaid Nursing Facility Payments Relative to Cost,” and then devoted a chapter to the issue, Chapter 2, Principles for Assessing Medicaid Nursing Facility Payment Policies, in its March 2023 Report to Congress.
MACPAC describes information about Medicaid payment rates as “limited.” It finds that states’ base payments vary widely, from 62-182% of the national average. Some states do not include resident contributions to their care (required by Medicaid post-eligibility rules) when reporting states’ base payments, making total Medicaid payments that facilities actually receive appear lower than they actually are. About 20% of facilities have more than 100% of their costs fully met by base payment rates alone, demonstrating that Medicaid rates are not insufficient across-the-board. In addition to base payments, MACPAC further reports that states make supplemental payments (23 states made supplemental payments of $3.4 billion in 2019) and may also adjust rates based on resident acuity, area wages, and other factors. Nursing facilities may receive far more than “base” Medicaid payments.
Moreover, without greater transparency about how facilities spend the reimbursement they receive, MACPAC reports that it cannot determine the actual costs of providing care to residents and whether existing Medicaid payments are adequate or not. MACPAC calls on CMS to collect and report “comprehensive data on nursing facility finances and ownership necessary to compare Medicaid payments to the costs of care for Medicaid-covered residents and to examine the effects of real estate ownership models and related-party transactions.”
MACPAC’s March 2023 report also dispels other industry myths about nursing facilities, pointing out that declining occupancy and nursing home closures predated the COVID-19 pandemic:
- Nursing home occupancy declined from 88 to 85% between 2010 and 2019, before the pandemic, “in part because of efforts to shift care to home- and community-based services”
- Between 2015 and 2019, more than 500 nursing facilities closed.
Instead of accepting as true implausible industry arguments about inadequate reimbursement, policy-makers need to ensure that Medicaid (and Medicare) reimbursement are used for resident care.
April 6, 2023 – T. Edelman