New York to Pull Nursing Home Residents Out of Managed Medicaid — While Also Pursuing More Spending Cuts

After a tense year of standoffs between New York nursing home providers and the state government, Gov. Andrew Cuomo outlined his budget for the new fiscal 2021 with an eye toward curbing rapidly-expanding Medicaid spending.

The budget doesn’t propose specific cuts to the Medicaid program, but Cuomo’s goal is to achieve $2.5 billion in savings to the program this year, part of the executive budget’s attempt to close a $6.1 billion budget gap.

And though the state has taken aim at Medicaid spending on nursing home care in recent months, ballooning home health costs played a major role in Cuomo’s desire for cuts — which comes as the state also moves to pull long-term care residents out of its managed Medicaid plan.


Cuomo’s proposal to achieve that $2.5 billion reduction would involve reforming the current Medicaid system through the work of a new Medicaid Redesign Team (MRT), to be chaired by Michael Dowling of Northwell Health and labor leader Dennis Rivera. The goal of the MRT is to reform the program and secure the savings through either finding “additional industry revenue” or efficiencies, with “zero impact to beneficiaries.”

Cuomo’s budget briefing book identifies the spending growth of Medicaid’s managed long-term care (MLTC) program, which covers elderly and disabled persons and “costs about 10 times more than the coverage for individuals enrolled in mainstream managed care.”

MLTC accounted for 33% of state-share Medicaid spending in the Empire State in fiscal 2020; spending in the program grew by 301% from fiscal 2013 to fiscal 2019, according to the budget briefing. This was mainly because of the increased use of the Consumer Directed Personal Assistance Program (CDPAP), which keeps members out of the nursing home and institutional settings and in in-home care, the budget book noted.


In addition, New York recently finalized the removal of long-term SNF residents from managed Medicaid, New York State Health Facilities Association (NYSHFA) president and CEO Stephen Hanse told Skilled Nursing News.

According to a letter to New York nursing home administrators obtained by SNN, the Centers for Medicare and Medicaid Services (CMS) approved a Section 1115 Demonstration waiver that limits the managed long-term care partial capitation plan (MLTCP) benefit to three months of care. After that, such individuals will be covered by Medicaid fee-for-service.

It’s a move that the state had sought last year, as it became apparent that the cost of caring for a long-term nursing home patient “is what it is,” as Jay Gormley, the chief strategy officer at MJHS Health System in Brooklyn, N.Y., pointed out in July. In other words, the cost structure in that setting isn’t going to be truly impacted by the use of managed care, he explained.

“Once you are admitted to a nursing home and you’re in that nursing home, that cost … 80% of that stuff is not variable, and the stuff that is variable is around how sick you are,” Gormley told SNN last year.

The overall increase in MLTC spending, driven by the growth in the home-based program, was the biggest contributor to Medicaid spending growth, New York’s budget briefing for fiscal 2020 noted. Other factors included support for minimum-wage workers in the health care sector and state support for distressed hospitals.

The main point to take from that, according to Hanse, is that nursing homes are not to blame for the state’s budget woes.

“What is clear from the nursing home perspective is that nursing homes and long-term care facilities are not what is driving Medicaid spending increases,” he told SNN.

This has been a point of contention with long-term care providers in the state. Citing data from the American Health Care Association, Hanse pointed out that providers face a gap of $65 per patient per day between the cost of caring for patients and the Medicaid payment. According to Hanse, that gap “leads the nation.”

Providers have also been hit on other fronts related to state Medicaid spending, although many of those issues are separate from the new budget briefing; negotiations for the fiscal 2021 budget will be taking place over the next few months.

In one recent example, New York made a 1% cut to Medicaid payments beginning at the start of the month. That cut was approved by the state Legislature as part of the fiscal 2020 budget, according to a statement from the Department of Health (DOH) that was provided to SNN at the time.

The cuts affected nursing homes, hospitals, physicians, pharmacists, home care entities, and Medicaid managed care plans, for an estimated annual reduction in gross Medicaid outlays of $124 million for state fiscal year 2019-2020 — with decreases of $496 million in “each state fiscal year thereafter,” according to the State Register notice.

In 2019, meanwhile, senior living and care providers in New York sued the state to fight a proposed $246 million in Medicaid cuts that would have stemmed from changes to the case mix index used by the DOH to calculate the rates for SNFs.

“These rate reductions were motivated purely out of budgetary concerns, with no consideration for the residents in the nursing home or the facilities that have to provide the care that is necessary for these residents,” the plaintiffs argued in the suit.

The DOH held otherwise, saying in a statement provided to SNN at the time of the lawsuit that the change would not disrupt nursing home residents or their care — and arguing that the 2020 budget included a change in the method used for reimbursing nursing homes.

The case is currently ongoing and is “separate and distinct” from the 2021 budget, Hanse told SNN. A preliminary injunction issued in November 2019 is still in place, he noted.

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