CMS Medicaid Crackdown Could Slash Funding By $50B Per Year, But SNFs Escape Direct Hit on Block Grants

A federal push to reform programs that nursing home operators use to boost Medicaid reimbursement rates could potentially lead to a $50 billion cut in total annual funding — but a separate Medicaid crackdown appears to have spared the long-term care industry, at least for the time being.

The leaders of two major trade groups — the American Health Care Association and the American Hospital Association — on Thursday called on federal officials to completely scrap the Medicaid Fiscal Accountability Regulation (MFAR), a proposed rule that would clamp down on Medicaid supplemental payments for nursing homes and other long-term care facilities.

“The bleak reality is that Medicaid funding is already inadequate,” AHCA CEO Mark Parkinson and AHA CEO Rick Pollack said in a joint statement. “Enacting this proposed rule would cut up to $50 billion nationally from the Medicaid program annually, further crippling Medicaid financing in many states and jeopardizing access to care for the 75 million Americans who rely on the program as their primary source of health coverage.”

Operators and provider groups have been sounding the alarm about MFAR since the Centers for Medicare & Medicaid Services (CMS) first introduced the proposal last November. In short, the rule takes aim at intergovernmental transfers (IGTs) and provider taxes, levers that providers in states such as Texas and Indiana have successfully pulled to win increases to persistently low Medicaid rates.

In CMS’s view, these programs have been allowed to expand without sufficient scrutiny from the federal government.

“We have seen a proliferation of payment arrangements that mask or circumvent the rules where shady recycling schemes drive up taxpayer costs and pervert the system,” CMS administrator Seema Verma said in a statement last year. “Today’s rule proposal will shine a light on these practices, allowing CMS to better protect taxpayer dollars and ensure that Medicaid spending is directed toward high-value services that benefit patient needs.”

But operators on the ground have argued that a sweeping change to these mechanisms could trigger a wave of closures, claiming that many individual buildings rely on the boosts to survive.

“It would result in closures,” Eddie Parades, senior vice president of Lewisville, Texas-based StoneGate Senior Living, told Skilled Nursing News earlier this month. “If this was realized, in the rule, it would be the largest Medicaid change across the nation — I’ve been in this profession 34 years — in my professional career. … This new interpretation could be devastating.”

Parkinson and Pollack’s statement came just two days before the official comment period on the rule comes to a close on February 1; AHCA released its detailed comment letter, which calls the cuts “draconian,” on Thursday.

CMS has received 2,369 comments on the rule as of 4 p.m. Eastern time Thursday.

Block grant uncertainty

In a separate regulatory overhaul, Verma and CMS on Thursday rolled out a plan that will allow states to choose block grants for Medicaid funding — but, crucially, only for adults under the age of 64 without disabilities or a need for long-term care services.

States that elect to participate in the optional program would receive a set amount of federal Medicaid dollars for those beneficiaries, a move that could lead to cuts in the overall number of adults covered by Medicaid — specifically those that benefited from Medicaid expansion under the Affordable Care Act.

But officials characterized the “Healthy Adult Opportunity” plan as a potential boon for older people covered under Medicaid.

“Other low-income adults, children, pregnant women, elderly adults, and people with disabilities will not be directly affected — except from the improvements that result from states reinvesting savings to improve and sustain Medicaid for everyone,” CMS noted in its statement announcing the plan.

Katie Smith Sloan, president and CEO of post-acute and long-term care trade group LeadingAge, pushed back on that logic in a statement provided to SNN.

“It is very unlikely that block grant waivers would result in significant funds available for reinvestment in Medicaid,” Smith Sloan said. “In fact, the purpose of block grants is to reduce spending on the Medicaid program, often to reallocate state dollars to other programs and policy areas.”

Smith Sloan characterized federal Medicaid block grants — which the trade group opposes — as potentially opening the door for further cuts specifically targeting long-term care in the future.

“Inadequate funding already plagues providers of long-term services and supports, who depend upon Medicaid as the primary payer for most costs of care,” she said. “As it is, LeadingAge members must fight for every penny from state coffers allocated to cover the costs of providing vital long-term services and support to older adults and people with disabilities. This new type of waiver would only make it harder.”

AHCA senior vice president of reimbursement policy Mike Cheek acknowledged that the Healthy Adult Opportunity program doesn’t take aim at nursing homes, while also emphasizing Medicaid’s vital role in elder care.

“While the new initiative announced today does not appear to be directed at long-term care services, this is an important issue because most people who reside in nursing centers rely on Medicaid, as well as tens of thousands of seniors in America’s assisted living communities,” Cheek said in a statement provided to SNN. “We will continue to work with our members, CMS, and other stakeholders to ensure that we can provide the quality care on which our nation’s most vulnerable residents rely.”