Where States Land on Making Nursing Home Medicaid Rate Increases Permanent

A lot of temporary measures will dry up or disappear when the public health emergency (PHE) comes to an end, but one thing that may become permanent is the Medicaid rate bumps states put in place to alleviate pressures nursing home operators face.

At least that’s the hope for industry leaders and advocacy groups.

Right now there are 12 states that have Medicaid add ons currently tied to the end of the PHE, according to American Health Care Association/National Center for Assisted Living President and CEO Mark Parkinson.

And Medicaid was the primary payer for 59% of nursing facility residents in 2019, according to MACPAC data.

But the “big priority for 2023″, Parkinson has said, is to get all 50 states to revisit and ultimately adjust their Medicaid rates. 

“What we hope that all 50 states do is to rebase their rates, to take a look at the actual current cost of taking care of people in the Medicaid setting – not relying upon numbers that in some cases are 10 years old and they’re just attaching an inflation number to it … So we would hope that every state would actively consider rebasing those rates,” he told reporters this week at the annual AHCA/NCAL conference in Nashville.

Among the states that have already permanently increased Medicaid rates include Illinois and Pennsylvania, while Texas, Kentucky and North Carolina are in the group that have continued their percentage increases at least through the end of the year.

Parkinson also pointed to a way in which the federal government could step in and assist, specifically by issuing a Medicaid adequacy rule — which would require states to pay an adequate amount of Medicaid to not just nursing homes but all government providers.

“In far too many states right now the reimbursement for Medicaid is dramatically less than the actual cost of taking care of people in nursing facilities, and CMS has the power and we urge them to enforce it,” he added.

While the Centers for Medicare & Medicaid Services (CMS) has not specifically mentioned such a lever, they did back in August encourage states to allocate Medicaid dollars toward improving staffing, ultimately helping the federal agency fully realize its goal of strengthening quality of care, accountability and transparency in the sector.

Permanent fixtures

Some states have already taken big steps to boost Medicaid rates, many doing so for the first time in a number of years.

Illinois earlier this year approved a $700 million increase to nursing home funding in the state, which took effect July 1. Increased funding was tied to bolstering staffing levels and quality of care.

The $700 million was broken down as $290 million to $350 million toward staffing incentives; $70 million toward a new quality program; $83 million for CNA compensation and support workforce retention, tenure, promotion and training; $34 million to end rural reimbursement rate disparities; $52 million to transition from Resource Utilization Groups (RUG-IV) to Patient Driven Payment Model (PDPM); and $170 million to boost base Medicaid reimbursement.

Illinois Health Care Association (IHCA) Executive Director Matt Hartman back in April called the state move a “monumental achievement,” and a goal the association and its members had been working toward for almost two years.

Florida also tied rate increases to employee pay.

The state’s budget included a Medicaid rate increase of $293 million for nursing center care, or approximately $419,000 per care center.

As a condition of the rate increase, all nursing center employees must be paid at least $15 an hour. This will be implemented by requiring providers to enter into a supplemental wage agreement with the Agency for Health Care Administration to ensure compliance.

Pennsylvania Gov. Tom Wolf this summer approved a Medicaid reimbursement increase of 17.5% for the state’s nursing homes for next year, amounting to an increase of around $35 per resident per day.

The funding increase marked the single largest Medicaid increase for nursing home resident care during the state’s budget cycle in the modern reimbursement era, according to Pennsylvania Health Care Association President Zach Shamberg.

The Nebraska legislature added $26 million to its two-year budget, which amounted to a 15% increase. Roughly 55% of Nebraskans rely on Medicaid to pay for their nursing home care, according to the state’s health care association.

One of the most impactful things providers and advocacy groups can do when pushing for rate increases is to go to state officials with solutions, as opposed to just stressing the need for additional funds, according to Zimmet Healthcare Services Group CEO Marc Zimmet.

“It is about giving them something realistic, giving them something that lets them achieve some policy … That it’s not going to go back to bite them,” he previously told SNN.

Still in limbo

Operators in states like Texas are anxiously awaiting to see what their legislature will do, but they aren’t exactly hopeful.

Cascade Health Services CEO Ron Haney previously told SNN that it’s been 10 years since the state last increased Medicaid rates and Texas usually hovers around 49th or 50th in the nation. The state is currently operating on a temporary 12% bump, which providers like Haney hope will be made permanent.

The Texas legislature, which only meets every other year, is set to convene in January 2023.

In North Carolina, the governor continued its boosted Medicaid support through the end of the year, however, SanStone Health & Rehabilitation President Jennifer Robinson said she was “extremely confident” that state officials have listened to providers and want to help.

“The good thing for us is that we have a short-term plan in place, they heard us, they answered us and they’re going to continue to fund us this year for the Covid add ons. But I think they also understand that 84% of nursing home providers in North Carolina are limiting new admissions due to staffing shortages, and this all goes back to reimbursement and being able to find staff and workforce challenges,” Robinson said on an episode of the Rethink podcast.

Accura HealthCare CEO Ted LeNeave expressed similar sentiments about the four states in which he operates, specifically highlighting Iowa’s governor as one that has been a “great supporter of long-term care.”

“We’re in a rebase year and I think as we get through this session, we’ll see some changes that will help us,” he said.

Nursing home operators aren’t the only ones keeping a close eye on what states decide to do with Medicaid rates.

Financing companies in the skilled nursing space have also taken note of the more stable flow of funding, and how it has allowed some providers to make longer term plans.

“Operators are now able to make decisions like, ‘I have control of my business now, I would like to get out of this landlord relationship that I have and own the building,’ which many times can be at a lower cost than paying the lease payment to rent the building,” Brent Holman-Gomez, senior vice president for Cambridge Realty Capital, told SNN back in August.

“With the regular income cash flow, they know how it’s going to work for years going forward. They can make those kinds of plans,” he added.

Sabra Health Care REIT (Nasdaq: SBRA) CEO Rick Matros has also taken notice of the move toward more permanent state Medicaid funding relief.

“Some of these states are starting to have some pretty serious access issues. That’s going to create a lot of bad headlines, so that will be a factor as well,” Matros said during the company’s second quarter earnings call. “I think all of that is positive, and should go toward continuing the momentum.”

The Omega Healthcare Investors (NYSE: OHI) leadership team also highlighted a number of states that have announced rate increases during its second quarter earnings call.

These types of “balanced state actions” are what Omega Senior Vice President of Operations Megan Krull hopes the federal government keeps front of mind when proposing future mandates — such as a federal staffing requirement.