Closing the Medicaid Gap Is Just the First Step, as Nursing Homes Fight for Predictable Reimbursement

Nursing homes and the state associations that represent them continue to put pressure on legislators to match Medicaid rates with rising costs, and change how often rebasing occurs to give operators a more even playing field.

In a lot of cases, Medicaid increases helped lessen the gap between costs and stagnant rates. But, legislators still need to keep up with the cost of care now and well into the future.

To that end, operator advocacy groups in states like Nebraska are working with local administration to create adequate and predictable reimbursement.

Below are eight more snapshots of what states are doing to meet the all-too-familiar Medicaid gap, and explore statutory changes to account for future inflation.

This is a series on Medicaid increases and rebasing efforts among states. Part one can be found here. More information will be added as it’s made available.

Nebraska

In Nebraska, Medicaid was rebased in July 2023 using 2022 cost report data, according to Nebraska Health Care Association (NHCA) President and CEO Jalene Carpenter. At the same time, the state transitioned from RUGS to PDPM.

The state also approved an additional $70 million in Medicaid funding as of July 2022, Carpenter said. The most recent Medicaid cost report data indicated a $49.63 per patient day gap in 2023 between the cost of care and Medicaid payment. Prior to the infusion of the latest funding, the gap stood at $70.19 per patient day.

“We are extremely grateful for that increase,” Carpenter said. “However, based on the most recent cost report data, the average Nebraska nursing home still receives approximately $50 per day per resident less than the cost of caring for that resident.”

Sixty percent of nursing home residents in the state rely on Medicaid, she said, adding that the gap so many states experience isn’t sustainable and will likely lead to additional facility closures.

“Our association is working closely with our state’s new governor, Jim Pillen, to create an adequate and predictable reimbursement environment that will ensure continued access to long-term care, especially for Medicaid beneficiaries,” said Carpenter.

North Dakota

North Dakota’s Medicaid rates will be increasing as of Jan. 1 2024, with its nursing and therapy costs going up by just under $38 per resident per day, which is a “significant increase” in direct care limits and based on 2023 cost reports, Shelly Peterson, president of the North Dakota Long Term Care Association (NDLTCA) told Skilled Nursing News.

The increase translates to a 2024 Medicaid rate in North Dakota of $291.06 per resident per day for nursing and therapy, she said. The average overall state Medicaid rate is around $400 a day.

The state is ending its second year with a new payment program and pricing model. North Dakota switched from a cost-based system to a pricing model, Peterson explained, where the price of a service is set, with a limit on how much will be paid.

“One of the things we talked about was rebasing, how frequently do you rebase … how often do you update your costs based on what you’re spending,” said Peterson.

Rebasing under the old system was once every four years, she said. As the state tests out the new payment program, that will change to every two years, but the question of rebasing time periods will need to be revisited in 2025.

“That’s going to become a really important point of discussion with legislators, because it was envisioned that we’d go back to rebasing every four years, and we’re thinking now that we need to rebase every two years based on how much costs are increasing,” said Peterson.

South Dakota

The state saw rebased rates for fiscal year 2024 – the last rate rebasing had occurred in 2015, according to the South Dakota Health Care Association (SDHCA). The South Dakota legislature in 2023 added new funding as well, resulting in a 25.5% Medicaid increase for nursing homes.

These gains were on top of an ongoing 6% increase from 2022 and 10.6% increase from 2021.

“SDHCA members have made remarkable progress toward achieving Medicaid rates that must be sustained,”  said Mark Deak, SDHCA executive director. “Together we need to hold the line and keep funding levels where they need to be.”

Montana

Since the Montana legislature meets every two years, Medicaid funding was appropriated for 2024 and 2025 fiscal years. The 2024 Medicaid rate increase goes from July 1 2023 to June 30 2024 and is 23%, resulting in a Medicaid rate of $261.26 per patient per day compared to an earlier rate of $212.36 PPD, according to Rose Hughes, executive director for the Montana Health Care Association (MHCA).

Montana nursing homes will see a 6.5% rate increase from July 1, 2024 to June 30, 2025, or a bump on PPD from $261.26 to $278.

“These significant rate increases were based on a study across all Medicaid providers that showed Medicaid was significantly underfunding most providers,” said Hughes. “The study established target rates and the legislature appropriated funds to reach the target rates over the two-year period. This represents a significant rebasing of the rates.”

Legislation was also introduced during Montana’s 2023 legislative session that would have required ongoing inflationary adjustments and rebasing, but that fell through, Hughes told Skilled Nursing News.

That means the association and its members will need to go to the 2025 legislative session seeking rate increases to cover current and projected inflation, she said.

“We plan to work with other providers on legislation to establish a process for updating rates on a regular basis to avoid a situation where the gap between Medicaid rates and costs continues to grow,” said Hughes.

Colorado

Nursing homes in Colorado actually dealt with a 2% cut to Medicaid during the pandemic, offset by a 10% increase for the 2024 budget which started July 1 2023. There is also a 3% increase planned for 2025 and starting July 1 2024, and no less than 1.5% for 2026, starting July 1, 2025.

“Between now and July 1, 2025 there will be a process to determine the structure of our [nursing facility] rates moving forward,” said Doug Farmer, president and CEO of the Colorado Health Care Association (CHCA). “That rate methodology will be taking into account the interest of stabilizing the profession, ensuring access and working to address the increases in behavioral health needed in long-term care settings.”

The state moved away from RUGS and began using PDPM on July 1 2023. A “hold harmless” was enacted in rate setting for 2023, which ensured that no Colorado provider saw a rate decrease as a result of the change, he said.

“That ‘hold harmless’ was used because providers did not have time to begin coding under the new PDPM-based requirement prior to the shift in methodology,” said Farmer.

Rhode Island

Rhode Island will implement new rates on Oct. 1, 2024, based on the first rebasing of rates since its price-based reimbursement system was implemented in 2012; the state received a 6.9% increase on Oct. 1, 2023.

There will also be an estimated 6.6% inflation index applied to Medicaid rebasing on Oct. 1, 2024, according to John Gage, president and CEO of the Rhode Island Health Care Association (RIHCA).

Such changes can’t come soon enough with six skilled nursing facilities (SNFs) in the state closing since the start of the pandemic, leaving 79 buildings remaining. Of these remaining properties, three are in receivership and one launched a “Hail Mary” PR campaign to raise funds to stay open, Gage said, referring to Linn Health.

“Linn is emblematic of nursing homes in desperate financial straits because of chronic Medicaid underfunding, inflation on most all aspects of care, a historic labor crisis and skyrocketing labor costs and agency expenses,” said Gage. 

Advocates, including RIHCA, are pressing for bridge funding and earlier implementation of rebased rates to prevent further closures or receiverships in the state, he said.

Ohio

Ohio approved an additional $1.3 billion in the budget for Medicaid in July to cover two fiscal years, with $200 million to be put toward a private room incentive payment program, according to Pete Van Runkle, executive director with the Ohio Health Care Association (OHCA).

That translates to a 17% Medicaid rate increase, or $39 per resident per day on average, depending on how the provider did on quality incentives, said Van Runkle.

While the program still needs federal approval, the state is calling for applications from residents or prospective residents for category one private rooms on Jan. 1, which have a private bath.

“That’s a small piece, relatively speaking. The rest was really a rebasing. The money was supposed to be divided between our Quality Incentive Program with the lion’s share going to the Quality Incentive Program, and then the remainder going to the base rates,” said Van Runkle. “But that got flipped around because the state didn’t read the statute in quite the same way as we did. They ended up coming up with a lower number for rebasing.”

Arizona

There are no plans to rebase in Arizona, but rates will slightly increase Jan. 1 due to the minimum wage going up, according to David Voepel, CEO for the Arizona Health Care Association (AHCA).