The House of Representatives’ Committee on Energy and Commerce has released a budget proposal that would place a moratorium on the federal nursing home staffing mandate and also prevent states from establishing new provider taxes.

In its quest to find $880 billion in savings, the committee was widely expected to propose major cuts and changes to the Medicaid program in the reconciliation bill. Instead, total Medicaid savings amounts to $172 billion over a decade, due to tighter eligibility and enrollment checks, and work requirement, Tao Qiu, analyst with Macquarie Capital, said in a note.

The package released Sunday night does not include some of the most profound changes to Medicaid that provider advocates have feared, such as per capita caps or a reduction in the Federal Medical Assistance Percentage (FMAP).

Nursing home operators can “breathe a sigh of relief” as the core of the Medicaid program has been left untouched, Qiu said.

Some operators, however, cited lingering worries.

“The direct impact of the Energy & Commerce Committee proposal on nursing homes could have been a lot worse, but we are still early in the process,” Brian Ellsworth, vice president for public policy and payment transformation with Health Dimensions Group told Skilled Nursing News. “The potential for an indirect impact on nursing homes from states having to fill large holes in their budgets remains a significant potential concern.”

The narrow majorities for both parties in Congress mean that cutting programs like Medicaid are going to be controversial on both sides of the aisle, he said.

“Overall, it appears that Congress is walking a fine line between making cuts to Medicaid to satisfy budget targets versus keeping vulnerable House members on board.”

Medicaid now serves one in five Americans and in same states it is more like 30%, Ellsworth noted.

Looking ahead, Congress will have to deal with deadlines around the debt ceiling, Congressional recess and the start of the new fiscal year on Oct. 1, Ellsworth said.

“It seems that House Republicans are trying to keep the schedule moving and have action by Memorial Day, which may be ambitious,” added Ellsworth. “Many of these Medicaid cuts won’t age well as folks dig deep into them. So even if they try to keep the schedule moving, there are any one of a myriad of issues that could derail these budget talks.”

Moratoria on staffing rule, provider taxes

In a section labeled “Preventing Wasteful Spending,” the committee is calling for a moratorium on enforcing the nursing home minimum staffing rule.

“This section requires HHS to delay implementation, administration, or enforcement of the final rule titled ‘Medicare and Medicaid Programs; Minimum Staffing Standards for Long-Term Care Facilities and Medicaid Institutional Payment Transparency Reporting’ until January 1, 2035,” the proposal states.

It’s a bit baffling as to why Congress chose to proposed a 10-year moratorium, rather than repealing it outright, Ellsworth said.

“It might have something to do with how the cut is scored, or it may have something to do with politics of the matter,” added Ellsworth. “Addressing the staffing rule in the budget bills creates the added bonus of creating some savings for Medicare and Medicaid that won’t have to be generated from other cuts.”

The moratorium comes after a federal judge in Texas last month struck down the minimum-hour requirements of the staffing rule. While nursing home providers cheered that decision, industry advocates have been pushing for a Congressional repeal of the mandate to stop the measure without any further legal wrangling.

It remains to be seen how this legislation will interact with the recent lower court decision, Ellsworth told SNN.

It will be interesting to see how this legislation interacts with the recent lower court decision striking much of the rule down.

“An important thing to keep in mind is that many states have staffing rules and so that even if the federal mandate is ultimately repealed, most markets will be dealing with worsening staffing demand and supply imbalances over the next five years,” said Ellsworth.

Home equity capitalization would also be increased to $1 million, compared to the existing $500,000, as a way to expand long-term care eligibility, said Qiu.

Skilled nursing industry advocates also have been pushing against cuts or limitations to provider taxes, which support Medicaid funding for nursing homes. Clif Porter, CEO and president of the American Health Care Association/National Center for Assisted Living (AHCA/NCAL), expressed deep concern about the fate of provider taxes when speaking with Skilled Nursing News recently.

“Provider taxes are an important tool in states’ toolboxes to fund the Medicaid programs; many states use the program. Providers pay a fee and the federal government matches that fee, and then that match is used to fund Medicaid in the state,” he said. “ … We’re doing everything we can to just make sure that policy makers understand that it is indeed a legitimate funding tool and not necessarily what some of these policymakers want to paint it to be.”

The proposal released Sunday night calls for a moratorium on new or increased provider taxes.

“This section freezes, at current rates, states’ provider taxes in effect as of the date of enactment of this legislation and prohibits states from establishing new provider taxes,” the document states.

For its part, the Centers for Medicare & Medicaid Services (CMS) proposed a rule Monday to close a Medicaid tax loophole that it says allows states to disproportionately tax Medicaid-related services, inflate federal matching funds, and reduce their own financial responsibility. The rule clarifies that taxes targeting providers based on their Medicaid volume – such as taxing Medicaid units more heavily than non-Medicaid ones – are not “generally redistributive” and violate federal requirements.

For example, if a state taxes nursing facilities with more than 40 Medicaid-paid bed days at $200 per bed day but taxes those with fewer Medicaid patients at only $20 per bed day, the tax structure unfairly burdens Medicaid providers, CMS said. This enables the state to collect more from high-Medicaid facilities, claim a higher federal match, and then return funds to those same providers, minimizing the state’s actual Medicaid investment.

‘Reconciliation process far from finished’

The American Health Care Association and National Center for Assisted Living (AHCA/NCAL) is not resting yet in its efforts to shield the industry from cuts to Medicaid or future federal regulations on minimum staffing.

“This reconciliation process is far from finished, and we will remain actively engaged and persistent in advocating that Congress protect our nation’s vulnerable seniors and individuals with disabilities from harmful cuts to Medicaid,” Michael Bassett, senior vice president of government relations for AHCA/NCAL, said in an emailed statement to Skilled Nursing News.

Nevertheless, the largest association for for-profit providers welcomed the direction of the initial discussions.

“We are still combing through the details of this first round of legislation and  are assessing  how it may impact our long-term care sector.  We’re grateful that Chairman [Brett] Guthrie recognizes the impracticality and overreaching nature of the staffing mandate, and we urge Congress to protect access to care and repeal this reckless regulation once and for all,” he said.

Meanwhile, Katie Smith Sloan, president and CEO of LeadingAge, said the provider tax moratorium and stricter uniformity rules reduce state flexibility to adjust or redirect funds, potentially threatening provider viability and limiting access to care.

“The policies in the bill represent dangerous cuts to Medicaid. Cuts at the federal level force states into impossible choices: reduce services, limit access, or slash provider payments. No matter the route, the result is the same: older adults, their families, and the providers who serve them, lose,” she said. “We urge Congress to protect Medicaid and the aging services infrastructure that helps older Americans age with dignity, not desperation.”

Amy Stulick and Zahida Siddiqi contributed to the reporting.