MedPAC Commissioner: Underfunding Turns Medicaid-Heavy SNFs into ‘7th Circle of Hell’

The Medicare Payment Advisory Commission (MedPAC) once again advised that Medicare’s payments for skilled nursing facilities are too high — but also acknowledged the challenges for providers caused by low Medicaid reimbursement.

A presentation by Dr. Carol Carter delivered to MedPAC on December 5 examined Medicare margins for SNFs amid the larger contexts of beneficiary access to care, quality-of-care indicators, access to capital markets, and changes in Medicare costs and payments. While Medicare margins for SNFs remain high, with an aggregate margin of 10.3%, the total margin for SNFs was very different: -0.3%.

The American Health Care Association (AHCA), which represents skilled nursing providers across the country, emphasized the perilous position this puts providers in.


“The future of long-term and post-acute providers is at risk,” AHCA president and CEO Mark Parkinson said in Tuesday statement. “Centers across across the country are closing, leaving seniors and their families with no place to go for care. MedPAC reports that SNFs are averaging a -0.3 percent margin. That means that many providers are losing money while struggling to keep their doors open.”

In her report to MedPAC, Carter noted that nursing facility revenue increasingly come from lower-paying sources, such as Medicaid and Medicare Advantage plans. Medicaid payments in particular came under the microscope from other commissioners, according to the transcript of the meeting.

“I wonder … would it be possible to orient our support, or lack of support, for SNF compensation depending on the number of Medicaid beds they serve?” MedPAC commissioner Marjorie Ginsburg said during the meeting. “And I don’t know what the average is. I suspect it’s a chronic problem nationally, to get the number of Medicaid beds necessary.”


The average share of Medicaid days at a given SNF is something close to 63%, Carter said at the meeting, though she noted this number can vary and that Medicaid numbers aren’t in the report.

For its part, the National Investment Center for Seniors Housing & Care (NIC) reported that Medicaid accounted for exactly two-thirds, or 67.6%, of resident days at nursing facilities in the third quarter of 2019.

But “cross-subsidization” is a fairly well-known phenomenon in the industry, she noted.

“I think that’s a very explicit argument that providers, the provider community, will make is they need the high margins on the Medicare side to cross-subsidize the lower payers,” Carter said. “We… think that’s particularly bad policy, because it’s really not targeted. What it means, then, is when Medicare is paying more, it is going to exactly the facilities that need it the least, because they will be having relatively lower shares of Medicaid?”

Other commissioners noted the challenges inherent in Medicare essentially supporting the sustainability of Medicaid beds, especially since Medicare “is already in all sorts of fiscal difficulty,” as commissioner Kathy Buto noted. Dual-eligible patients, or patients eligible for Medicare and Medicaid, on the other hand, would fall under MedPAC’s purview, she added.

The Medicaid problem for SNFs is becoming “more and more of an acute social problem,” commissioner Dr. Francis Crosson noted. A great deal has changed for long-term care providers since the Medicaid program first became the default payment for many seniors, he said, due to longer lifespans and what appears to be increased incidences of dementia and Alzheimer’s disease.

One of the problems is that many of the long-stay Medicaid patients in the skilled nursing setting are also dual-eligibles, commissioner Dr. David Grabowski noted.

“I think our … underinvestment in Medicaid is leading to higher costs downstream for Medicare,” he noted. “And we’ve shown that in a lot of research … it’s not the way you’d ever want to fund this, with these separate programs.”

And while he noted this wasn’t immediately relevant to the issues discussed around the adequacy of reimbursement for SNFs, commissioner Dr. Lawrence Casalino noted that — in his experience — nursing facilities with a higher concentration of Medicaid patients tend to be unpleasant places due to the shortage of resources.

“If you’ve ever spent time in the Medicaid part of a nursing facility that has a high percentage of Medicaid patients, I hated to go there,” he said. “Honestly, I felt like I was descending into, like, the seventh circle of hell. It was just unbelievable. And it’s not the staff’s fault. They’re doing the best with what they have.”

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