The Biden administration plans to require the nation’s 15,500 nursing homes to spend most of their Medicaid payments on direct resident care and limit the amount used for operations, maintenance and capital improvements or diverted to profits.

If passed, it would be the first time the federal government has insisted that nursing homes spend the majority of Medicaid dollars on resident care.

The strategy, which has yet to be formally proposed, is among several measures officials are considering after the covid-19 pandemic hit vulnerable nursing home residents particularly hard. In the first 12 months of the pandemic, at least 34% of those killed by the virus lived in nursing homes and other long-term care facilities, although residents of these facilities make up less than 1% of the American population.

Medicaid, the federal state health insurance program for low-income people, pays the bills for 62% of long-term care residents in nursing homes. In 2019, that totaled $50.8 billion. Medicare, which covers short-term nursing home visits for the elderly or disabled, spent $38.2 billion that year. (Officials did not include Medicare payments in their discussions of a direct care spending mandate.)

“The absolutely essential ingredient” for good care is enough staff, Dan Tsai, deputy administrator of the Centers for Medicare & Medicaid Services and director of Medicaid, told KHN.

CMS has sought public comment on a possible direct care spending mandate in its proposed policy update and care home payment rates for next year. Tsai also spoke about it during a meeting with Illinois state officials, nursing home workers, residents and loved ones in Chicago in April.

Studies have found a strong link between staffing levels and care. CMS does not require a specific number of nurses and other staff, although some states do.

“We want to make sure the dollars get to the direct care staff to ensure high-quality care,” Tsai told KHN.

To receive a government paycheck, nursing homes must meet dozens of requirements aimed at ensuring high-quality care. They can be penalized in the event of an infraction. But federal investigations have found that inspectors can miss serious issues and that inspections don’t consistently meet CMS standards. One of the most common breaches was infection control.

In its request for public comment, CMS posed several questions, including: “Is there evidence that resources that could be spent on staffing are instead being used for expenditures that are not necessary for the quality patient care?

The federal interest follows laws enacted in three states – Massachusetts, New Jersey and New York – to tax care expenditures. Massachusetts requires nursing homes to spend at least 75% of their income on resident care. New Jersey nursing homes must spend at least 90% of Medicaid payments on resident care, and no more than 5% can go to profits. New York requires that at least 70% of nursing home revenues — including Medicaid, Medicare and private insurance payments — be used to care for residents and that at least 40% of money for care direct pay for staff “in contact with residents” . Profits are capped at 5%. The three states promise increased Medicaid payments to facilities that comply with the laws.

In April, the National Academies of Sciences, Engineering and Medicine endorsed the out-of-pocket spending strategy in a report on improving nursing care in homes.

“When you take public funds, those dollars should be put back into direct care,” said David Grabowski, a professor of health care policy at Harvard Medical School and a member of the committee that wrote the report. “We expect the nursing home to make the best judgment about the right kind of labour, material and capital expenditure to really produce the highest level of quality, but that just doesn’t matter. not been the case. This recommendation is therefore really an opportunity to put safeguards in place.

National nursing home industry groups oppose the demands, which come at a difficult time as many facilities face staffing shortages. In New York, two trade associations and about half of the state’s homes have filed two lawsuits to block the state spending directive.

Staffing is already “the No. 1 expense” for nursing homes, said Stephen Hanse, president and CEO of the New York State Health Facilities Association, which represents 350 nursing homes and has led one of the suits. “We are a hands-on industry.”

The 239 nursing homes that joined the association’s lawsuit say that if New York’s law had been in effect in 2019, facilities would have been forced to provide residents with an additional $824 million in direct care or return this amount to the State.

Hanse objects to the state telling nursing home administrators how to do their job. “You can have an amazing diet program, for example, and this law would require you to lay off diet workers and hire front-line workers to meet staffing needs,” he said.

The groups filing the lawsuits argue that forcing landlords to spend more money on direct care leaves less money for maintaining their facilities and the quality of care will suffer. They also claim that Medicaid does not cover resident care costs. Resident advocates say facilities can hide their profits by overpaying related businesses they own, such as laundry or catering businesses.

Although a spending mandate is new for nursing homes in the three states, it has become routine for health insurers nationwide. Under the “medical loss rate” provision of the Affordable Care Act, health insurance companies must spend at least 80% of premiums on the medical care of beneficiaries. A maximum of 20% can be spent on administrative costs, executive salaries, advertising and profits. Companies that exceed the cap must reimburse the difference to the beneficiaries.

In addition to a direct care spending mandate, Tsai said CMS is interested in a slightly different approach underway in Illinois, which made changes to nursing home regulations this year. His Nursing Home Tariff Reform Act increases Medicaid funding and then requires each home to hire at least 70% of the staff that state analysis shows residents need. The state then uses payroll and other data to verify that the establishment has complied. Otherwise, the difference will be deducted from his next payment.

“There are states across the country that are trying a range of approaches to ensure that system dollars from nursing facility reimbursement rates are actually – in one way or another – affected. sufficient and high-quality staff,” Tsai said. “That’s our primary goal.”

KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism on health issues. Along with policy analysis and polls, KHN is one of the three main operating programs of the KFF (Kaiser Family Foundation). KFF is an endowed non-profit organization providing information on health issues to the nation.

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