Congress, States, CMS Urged to Ensure Nursing Facility Medicaid Rates Cover Care Costs

A Congressional advisory body on Wednesday put forth recommendations for closer assessment of nursing facility Medicaid payments, including whether they are sufficient to cover costs of care.

The proposals could allow for a finer tuning of Medicaid rates and therefore could benefit the sector, as long as they do not put greater administrative costs and burdens on providers, according to operators and advocates who spoke with Skilled Nursing News.

In pushing for these recommendations, the Medicaid and CHIP Payment and Access Commission (MACPAC), a non-partisan legislative branch agency that provides policy and data analysis, noted that facilities that serve a high share of Medicaid-covered residents have worse quality outcomes on average than other facilities, and the COVID-19 pandemic exacerbated many of these disparities.

MACPAC devoted a long chapter in its March 2023 report to Congress to analyzing quality of care and reimbursement rates in nursing facilities.

The advisory panel said that in order to make sure that Medicaid reimbursements are adequate in addressing statutory goals of efficiency, economy, quality, and access, the Centers for Medicare & Medicaid Services (CMS) would need to “update” the requirement that states conduct regular analyses of all Medicaid payments relative to the costs of care for Medicaid-covered nursing facility residents.

MACPAC recommended that states “ensure that nursing facility payment rates are sufficient to cover the costs of efficient and economically operated facilities.”

States and CMS should make facility-level findings publicly available in a format that enables analysis, the Commission also said.

And MACPAC added further fuel to the push for greater transparency in nursing home ownership, recommending “comprehensive data” on finances and ownership and pushing for an examination of “the effects of real estate ownership models and related-party transactions.”

Experts on the sector say the MACPAC’s recommendations, if implemented, can be beneficial on many levels.

“The increased transparency would shine a brighter light on the disparities between the cost of caring for Medicaid residents and reimbursement rates in many states,” said Fred Bentley, of healthcare research and advisory services firm ATI Advisory, where he is managing director of Medicare Innovation Practice. “Well-designed value-based care payment models would create an incentive for long-term care facilities to deliver efficient, high-quality care.”

However, Bentley said that the data generated by MACPAC’s recommended reporting requirements would need to be interpreted by each state’s executive and legislative branches.

After all, even though CMS has authority over aspects of Medicaid programs, states set their own Medicaid reimbursement rates, he said.

“MACPAC’s recommendation that CMS provide the data and technical assistance to states is helpful, but ultimately the necessary changes to Medicaid LTC reimbursement will play out on a state-by-state basis,” he said.

Advocates for the nursing home sector also agreed with some aspects of the recommendations.

“We agree with MACPAC that states should be required to conduct regular assessments to ensure Medicaid is covering the actual cost of care. For decades, Medicaid has notoriously underfunded long term care, making it difficult for nursing homes to keep their doors open, let alone make investments,” the American Health Care Association/National Center for Assisted Living (AHCA/NCAL) said in an emailed statement to SNN, but added, “States typically require detailed cost reporting. Moreover, neither ownership nor line items on a budget sheet prove whether a nursing home is committed to its residents. If we truly want to improve nursing homes then we need policy makers to focus on meaningful solutions that can strengthen care rather than additional reporting requirements.”

Local factors

Meanwhile, some providers believe the new round of recommendations could be helpful if they spur analysis and, ultimately, action that narrows the social and economic differences between states.

Wesley Lo, CEO of Ohana Pacific Health, told SNN that if adequate Medicaid reimbursement rates result from MACPAC’s policy recommendations, he supports them. 

Ohana Pacific has 11 health care entities located in Hawaii that include long-term care, rehabilitation services, memory care, home health services and adult day health programs.

The Healthcare Association of Hawaii has estimated that reimbursement rates fall short, Lo said. 

“We reviewed a bunch of the cost reports, and we run negative margins in our facilities on Medicaid,” he said. “ … So it is problematic.”

And if the collection and reporting at the facility-level doesn’t add to administrative burdens amid the labor shortage, particularly in rural states like Hawaii, Lo said any initiative to accurately compensate states might be fruitful, provided it takes the “local” scene into consideration.

“That’s not necessarily a bad idea, as long as more work is not being placed on a lot of the smaller facilities that don’t have the ability to do that,” he said. 

MACPAC did acknowledge that its recommendation to improve transparency may, in fact, put greater burdens on providers because data on provider finances and related-party transactions are not currently collected by states and the federal government, but added, “Over time greater transparency may lead to changes in state payment rates and methods by allowing more stakeholders to participate in the rate development process.”

As for its other recommendation for updating information sought from providers, MACPAC said, “Because most nursing facilities already submit cost report information to states, it is unlikely that this recommendation would substantially increase the administrative burden for providers.”

Variations from state to state

In its extensive chapter on nursing facilities, MACPAC noted that conditions for staffing and disparities vary from state to state, and must inform policy making.

For example, the Commission said nursing facility staffing levels vary widely across states and that can impact quality of care. In three states — Alaska, Hawaii, and North Dakota — and the District of Columbia, fewer than 10% of freestanding nursing facilities had one- or two-star staffing ratings in 2019, while in three other states — Georgia, Louisiana, and Texas — more than 70% of facilities had these low ratings, the report noted.

“We also found wide state variation in the disparities between facilities that serve a high share of Medicaid-covered residents and those that do not,” the advisory body said.

“The wide state variation that we observe suggests a role for state policy,” the report stated. “Although some state variation may be due to factors other than Medicaid, disparities by payer mix are likely affected by Medicaid payment policies. Moreover, the fact that some states have relatively high staffing levels and few disparities by payer mix shows that ensuring adequate staffing to meet the needs of Medicaid-covered residents is an achievable goal.”