Nursing Homes Should Be Skeptical of Medicaid Block Grants, But MFAR Represents Much Bigger Threat

The first month of 2020 has brought news of potentially sweeping Medicaid changes on multiple fronts, with the current presidential administration doubling down on its goal of undoing the Affordable Care Act and reducing federal spending on the program.

But while nursing home operators and advocates are right to be skeptical of a Centers for Medicare & Medicaid Services (CMS) push to implement optional block grants for Medicaid funding, any direct effects on long-term care are currently only hypothetical — while the separate Medicaid Fiscal Accountability Regulation (MFAR) could bring immediate, irreparable pain.

Just the phrase “block grants” probably brings back negative flashbacks to the summer of 2017, when Republicans — buoyed by the recent election of Donald Trump to the presidency, and wielding control of both houses of Congress — nearly pulled off a complete overhaul of the Medicaid system through a repeal of the Affordable Care Act.


Though the details of that block-grant plan varied over the course of that summer, various sources pegged the overall loss of Medicaid funding at anywhere between $772 billion and $800 billion, causing widespread fears among health care providers that rely on the state-level programs to survive.

“We came pretty close to having $800 billion sucked out of the Medicaid program,” Clifton Porter, executive vice president of government relations for the American Health Care Association, said in a fall 2018 presentation. “I don’t care how you cut it, how you package it … at the end of the day, there would have been problems.”

Porter’s comments came during an overall assessment of the potential crippling fiscal upheaval that nursing homes faced in the 2017 Obamacare fight on Capitol Hill, which famously ended when Republican Sen. John McCain broke ranks from his party to vote down the final version of attempted “repeal and replace” legislation.


“2017 was not fun,” Porter said. “It was probably the most difficult lobbying we’ve ever had.”

The block grant proposal of 2020, however, has some key differences from the aborted Affordable Care Act reform attempts from three years ago. Crucially for nursing home operators, CMS’s “Healthy Adult Opportunity” explicitly excludes anyone over the age of 64, as well as those who require long-term care — effectively taking block grants off the table as a near-term issue for operators of skilled nursing facilities and other long-term care sites.

What’s more, CMS administrator Seema Verma positioned the change as a way to potentially beef up spending on other areas of Medicaid coverage, with a particular emphasis on vulnerable populations.

“We’ve built in strong protections for our most vulnerable beneficiaries, and included opportunities for states to earn savings that have to be reinvested in strengthening the program so that it can remain a lifeline for our most vulnerable,” Verma said in a statement last week.

In effect, the most recent set of block grants looks to erase the Medicaid expansion built into the Affordable Care Act, which gave states the opportunity to cover more beneficiaries by raising the income threshold to qualify for Medicaid. It’s been a controversial political issue: Republican-led states have generally rejected the optional expansion, but the additional coverage has been popular among voters.

To be clear, beneficiaries of Medicaid expansion could see serious harm under the block-grant plan, especially in regions that have come to rely on the added benefits: In parts of rural Kentucky, for instance, Medicaid covers up to half of all adults, who could endure real hardship if their coverage were to disappear under the weight of block-grant math. Any state lawmaker considering CMS’s block grant offer should take a long, hard look at the distress that it could bring to lower-income adults and their families before moving forward.

Given the general aims of the block grants — reducing the federal government’s portion of Medicaid spending — nursing home providers are absolutely correct to be skeptical of the plan as a potential gateway to future cost-cutting measures that would actually affect long-term care operators. It’s completely conceivable to see support for block grants on so-called “healthy adults” carve a path for further changes on both the state and federal level, especially in states with a combination of overall budget crunches and conservative political leadership.

But that’s not the current reality. Nursing homes dodged a major bullet under CMS’s most recent block-grant push, and the industry shouldn’t let the Healthy Adult Opportunity distract their advocacy efforts from a far more immediate threat: MFAR.

Billed as a way for the federal government to exert more control over state-level programs that boost Medicaid funding for nursing homes, MFAR would immediately put $50 billion in annual reimbursements in jeopardy upon finalization.

Aside from being a crucial lifeline in an era where Medicaid programs in states from Massachusetts to Texas to Washington fail to cover the cost of nursing home care, that $50 billion also represents the hard work of the providers and leaders that strove to build unique supplemental payment models.

The programs themselves are complex, but from provider taxes to intergovernmental transfers, state governments and nursing home operators managed to carve out arcane but vital methods of staying afloat — all in order to care for primarily elderly residents who require long-term institutional care, some of the most vulnerable people in the overall health care system.

Indiana and Texas have been repeatedly mentioned as markets that could see devastation if CMS finalizes MFAR as is: In the Hoosier State alone, supplemental payments account for 37.9% of total Medicaid spending on care at nursing facilities and institutions that serve people with intellectual disabilities, according to a December 2019 report from the Medicaid and CHIP Payment and Access Commission (MACPAC). In Nevada, the percentage is 35%; in Pennsylvania, it’s 14.8%.

But MFAR’s effects would stretch beyond the states that have developed successful supplemental payment programs. Should CMS go through with the rule, it would send a clear signal to both state governments and provider groups that may have been considering attempts at Medicaid advocacy: Don’t even try.

Just take CMS’s word for it — Verma certainly didn’t mince words when laying out the rationale behind the rule in November.

“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,” Verma said in the release announcing the proposed rule.

Operators currently find themselves in an MFAR holding pattern. The public comment period for the rule ended this past weekend, but not before more than 2,800 stakeholders — from operators to advocates to residents at senior living communities — weighed in. CMS generally takes at least two months from the close of comments to issue final rules, but AHCA CEO Mark Parkinson predicted that the sheer volume of public reactions could delay a decision even further.

Even though the web portal for comments has closed, providers and other industry stakeholders still have ways of sounding the alarm over potential MFAR devastation. And while the industry is right to keep its guard up on block grants, MFAR is the clear and present danger in an operational landscape that can ill afford major cuts.