Nursing home owners and advocates have long decried low Medicaid reimbursements to the sector across the U.S. And now leaders in New York state – home to one of the largest number of facilities – are uniting to forcefully demand change.
Much like the rest of the country, closures, especially in Upstate New York, have mounted due to labor shortages. And, the shutdowns are impacting the quality of care for older adults giving rise to a crisis of access. As a corrective measure, a coalition of nursing home owners, health care workers’ union and other statewide partners are calling for reforms to the state’s nursing home Medicaid reimbursement policies.
New York State Health Facilities Association (NYSHFA) is part of the coalition along with LeadingAge and other nursing home providers as well as 1199 SEIU – a union with a membership of 400,000 – who are calling on state officials to increase Medicaid reimbursement and rebase Medicaid rates.
These leaders and advocates have issued a joint letter to Governor Kathy Hochul requesting a $510 million investment for fiscal 2024, followed by an additional $300 million for 2025. And beyond that, they are demanding a rebasing of Medicaid rates to account for the significant rise in costs. They want a commitment from the state to reform its system’s methodology by 2025.
“I’m just tired of having a really hard time in being able to take care of the elderly and pay my staff. My costs have gone up 40% on just labor alone,” Robert Hurlbut, president of Hurlbut Care Communities, which operates 11 facilities in the New York area, told Skilled Nursing News. “I just feel bad for our state’s elderly,” he said.
New York was 45,000 healthcare workers short before the pandemic, and the shortage has increased to 65,000 healthcare workers, he said. Moreover, Upstate New York’s nursing homes have not seen a Medicaid reimbursement increase in 15 years except for a modest increase in 2022. Meanwhile, the current reimbursement rate covers only 50% to 60% of the actual costs, creating a substantial financial burden on the industry and owners like Hurlbut, who is a member of NYSHFA.
“Our request is crucial to address the $810 million annual state funding gap,” Hurlbut said. “This gap, in turn, contributes to more congested hospitals, a shortage of beds, and negatively impacts our already overwhelmed emergency departments.”
Making matters worse, Governor Hochul’s newly proposed budget calls for $1 billion in cuts to Medicaid funding.
While many other states face similar challenges, New York’s example will be instructive to follow given the large size of the sector’s presence in the state. New York is home to 97,000 nursing home residents.
Nursing home advocates say the need to increase Medicaid reimbursement is crucial to ensuring that future funding keeps pace with inflation. A failure to do so means nursing homes have to suppress salaries and are generally unable to meet expenses, ultimately impacting access and quality care.
“We haven’t had a Medicaid rate increase in years. So, the question is, can you live on your salary from years ago?” Hurlbut said.
Since 2019, New York has seen a reduction of 5,600 nursing home beds and that has posed challenges for those seeking quality care close to home, an important consideration for families and loved ones.
And many nursing homes that are managing to stay afloat are doing so with reduced occupancy as low as 60% due to staffing shortages. “Say we have a 100-bed nursing home. A lot of us have shut down like 20 to 40 beds. They’re offline because we can’t get the staff and the Medicaid rate isn’t where it should be,” Hurlbut said.
In the midst of this crisis, the state’s policies towards nursing homes feel punitive.
“So [the governor’s] got these two bills, one for safe staffing and then the 70-40 rule. And there’s gonna be fines if we don’t meet [the requirements],” he said, referring to the rule that requires residential health care facilities to spend 70% of their revenue on direct care, with 40% centered on resident-care staffing. “Well, I can’t meet it if the Medicaid rate isn’t going to pay for it, and if there aren’t staff around to do it.”
Hurlbut said hospitals are also supporting funding for nursing homes because hospitals are getting overcrowded with patients who could be receiving more cost efficient care at a skilled nursing facility. A hospital close to Hurlbut’s nursing homes, Strong Memorial Hospital in Rochester, is facing this situation. “There’s about 120 residents in the hospital right now who should be in a nursing home,” he said.
Medicaid dollars Siphoned from SNFs
Moreover, Hurlbut said that many programs are competing for Medicaid dollars, which sometimes means money is needlessly pushed away from SNFs. He cites the example of a program in New York state called CDPAP, or the Consumer Directed Personal Assistance Program, a Medicaid initiative that allows consumers to choose and hire their own personal caregiver. “That program used to be six years ago [funded at] $500 million … and now it’s almost $22 billion.”
In addition, the state is also paying for what are known as middlemen such as the Medicaid long-term care associates, which allocates money to another unnecessary expense, said Hurlbut. “They’re like middlemen deciding who gets on Medicaid and where. We never used to have them, and they’re not needed because social workers really decide this along with [needs identified by] the residents’ medical wellbeing forms.”
New York’s budget cycle starts in April and goes from April until March. Beyond these increases, nursing home advocates are asking for Medicaid rebasing for nursing homes after 2025, saying that it is long overdue since it hasn’t been done in decades.
“The [higher] costs should actually be recognized. And that hasn’t happened in 30 years,” said Hurlbut.
Estimates on cost increases associated with running a nursing home vary, but according to some, Medicaid rebasing should reflect that costs have jumped by $1 billion in the last 30 years.
Problems from pandemic disinvestment
To top it all, Governor Hochul has proposed a 10% cut in the Medicaid rate for the capital portion – although the operating portion is untouched. In totality, this translates to roughly a rate cut of about 1% overall, Stephen Hanse, president and CEO of NYSHFA, told SNN. Currently, New York’s average statewide reimbursement rate is $276, he said.
“New York needs to reinvest in nursing homes. And any cuts are unacceptable,” Hanse said.
In 2023, New York raised its Medicaid rate by 7.5% – with about 1% of that increase still awaiting federal approval. But nursing home leaders said that it was an inadequate increase.
“It’s a poor Medicaid rate increase,” Hanse said, adding that NYSHFA and its partners want to rebase the Medicaid system in New York “so that it’s an equitable system.”
“New York completely fails to cover the costs of Medicaid residents in a nursing home. They only cover three quarters of the cost. [So] That’s our number one priority in this budget session right now,” he said. Hanse recently presented testimony at the state Medicaid health hearing to increase the Medicaid rate.
Some of the cuts put in place by former Governor Andrew Cuomo have taken a toll on the sector over time.
“New York is the only state in the nation that cut Medicaid to nursing homes during the pandemic,” Hanse noted. “You’re seeing backups at hospitals because nursing homes are unable to take patients from hospitals. You’ve seen beds go offline. You have seen units close. you’ve seen facilities close. So there’s a recognition that this disinvestment has caused real problems. And that’s why it led to last year’s 7.5% increase. While we’re grateful for that increase, it’s far from enough to address the 16 years of disinvestment.”
Governor Hochul has yet to respond to the coalition’s demands for more funds, but state legislators seem open to giving more funding, Hanse said.
“We’re seeing very positive responses in the legislature,” he said.