Under CMS’s Proposed Medicaid Crackdown, Billions in Payments Hang in the Balance

With the federal government looking to crack down on the programs used for shoring up Medicaid reimbursements for nursing homes and other care facilities, billions of dollars could soon be in the balance.

States are going to have to take a closer look at their programs, both for the sake of their SNFs and overall Medicaid budgets, which could be drastically affected in some major states.

The Centers for Medicare and Medicaid Services (CMS) this past November proposed a rule that would rein in spending on Medicaid supplemental payment programs, due to concerns about the arrangements that have evolved over time.


“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 announcing the Medicaid Fiscal Accountability Regulation (MFAR).

With the comment deadline for the proposed rule recently extended to February 1 from January 17, SNN dove into some of the statistics on a state-by-state basis, as listed by the Medicaid and CHIP Payment and Access Commission’s (MACPAC) December 2019 data book.

MACPAC is a non-partisan government agency that advises Congress on Medicaid issues, similar to the Medicare Payment Advisory Commission’s (MedPAC) role on Medicare policy.


In the fiscal year 2018, nursing facilities (NFs) and intermediate care facilities for people with intellectual disabilities (ICF/IDs) received $50.54 billion in Medicaid fee-for-service payments across the U.S., according to the data book.

For that same fiscal year, supplemental payments to NFs and ICF/IDs accounted for $3.47 billion in payments, or 6.9% of the total Medicaid fee-for-service reimbursement, according to the data book. But for several states, supplemental funds represented a significantly greater percentage of the Medicaid fee-for-service payments to NFs and ICF/IDs.

Twenty-five states provided some kind of supplemental payment to nursing facilities as of July 2019, according to a policy issue brief from MACPAC in December 2019.

In Indiana, for example, supplemental payments account for $1.02 billion out of $2.69 billion in total Medicaid fee-for-service funding. That translates to 37.9% of total such payments — far and away the leader for all states in both the percentage and dollar-value categories.

Nevada’s NFs and ICF/IDs receive $292.8 million in total Medicaid payments, with $102.6 million in supplemental dollars, or 35% of the total Medicaid haul. In New Hampshire, supplements to NFs and ICF/IDs account for 24.1% of total Medicaid payments, coming in at $96 million; the state receives a total of $398.8 million in total Medicaid fee-for-service payments.

Utah saw supplemental Medicaid payments to NFs and ICF/IDs of $83 million, or 23.8% of total Medicaid fee-for-service payments of $348.3 million.

Indiana is one of multiple states that makes use of supplemental payment programs to help mitigate the fact that the cost of caring for Medicaid patients usually exceeds the base rate offered by Medicaid for those services. In that state, the ownership of the asset — or “quasi-ownership,” in the words of Jeff Davis, the founder and president of Chicago-based Cambridge Realty Capital — is transferred to a third party, usually local hospitals, while the SNF operator continues managing the facility.

In that state, the hospital-based SNF would then receive higher Medicaid reimbursements for the same SNF services.

Texas is another state with a supplemental payment program — though that state has some key differences from Indiana, notably in the fact that it has a managed Medicaid program.

That means that the Lone Star State’s total Medicaid payments aren’t reflected in the MACPAC numbers, since the report only includes fee-for-service payments. But that state has seen a significant uptick in participation in its quality-based supplemental payment program, StoneGate Senior Living senior vice president Eddie Parades told Skilled Nursing News last year.

This came even with an increase in the number of metrics SNFs have to track — and show improvement on — to receive payment.

“We are up to about 800 [facilities] of the 1,200 that are going to participate in QIPP 3,” he told SNN at the time.

That program falls under a Section 1115 demonstration waiver for the Texas Medicaid program, which MACPAC noted in its analysis. Texas received about $5.1 million in supplemental payments in fiscal 2018, according to the data book.

This is one point that a MACPAC analyst emphasized in conversation with SNN: States that use managed Medicaid programs aren’t captured fully in the data.

“Twenty-four states currently have some sort of managed long-term care that covers nursing facilities,” the analyst noted. “In those states, we just have a little bit of caution with the numbers … we don’t have the full picture of all the payments they’re receiving.”