CMS reportedly explored nursing home Medicaid spending requirements related to patient care

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The federal government may soon require nursing homes across the country to spend most of their Medicaid payments on direct patient care, according to a report from Kaiser Health News.

Although not yet officially proposed, the Biden administration’s strategy would limit the amount of Medicaid dollars used for operations, maintenance and capital improvements or considered profits.

If the measure does pass, it would be the first time the federal government has had a say in where nursing homes should spend their federal funding, according to the KHN article.

“We want to make sure the dollars get to the direct care staff to ensure high-quality care,” Daniel Tsai, deputy administrator and center director for Medicaid and CHIP services, told KHN.

While such a mandate is relatively new to states and federal agencies, the expense provisions have become “routine” for health insurers, the article notes.

Medical Loss Rate Provision of the Affordable Care Act already requires insurance companies must pay at least 80% of the premiums for the medical care of beneficiaries and a maximum of 20% on administrative costs, executive salaries, advertising and profits.

In April, CMS asked stakeholders to submit their thoughts on the potential spending mandate under the proposed payment rule for next year.

CMS officials also announced the possibility of a Medicaid requirement during an April nursing home roundtable hosted by the agency in Chicago. State officials, nursing home workers, residents and their families participated in discussions with CMS Administrator Chiquita Brooks-LaSure and CMS Deputy Chief Administrator and Chief Operating Officer Jonathan Blum , as well as Tsai.

During the roundtable, Tsai told reporters at the event, including SNN, that CMS “is looking at and looking forward to discussing how we can create either transparency or standards for a minimum amount of reimbursement is actually paid to direct care staff versus all sorts of other things.”

That same month, the National Academies of Sciences, Engineering, and Medicine (NASEM) endorsed Medicaid’s spending strategy in its wide-ranging report.

David Grabowski, a professor of health care policy at Harvard Medical School and a member of the NASEM committee, sees the Medicaid mandate as acting as “guardrails” of industry.

“We expect the nursing home to make the best judgment about the right kind of labour, material and capital expenditures to really produce the highest level of quality, but that just doesn’t not been the case,” Grabowski told KHN.

The federal agency continues to closely monitor states like Illinois, Massachusetts and New York, which have already tied Medicaid funding to staffing measures.

Illinois House Bill 246 passed the legislature earlier this month, providing a $700 million increase in funding for nursing homes in the state. Facilities would need to meet at least 70% of federal staffing guidelines to earn premium reimbursement; pay is based on their CMS quality star rating.

New York also passed a law effective April 1 that says 70% of a nursing home’s income must be spent on direct resident care and at least 40% on staffing.

Two lawsuits have already been filed to block New York’s directive, led by major industry trade groups like the New York State Health Facilities Association.

Massachusetts requires care homes to spend at least 75% on resident care.

So far, CMS said it plans to incorporate three staff turnover metrics into its five-star rating system — the percentage of RNs who departed over a one-year period; the total number of nurses who left during the year, including RNs, licensed practical nurses (LPNs) and practical nurses; and percentage of director turnover.

Weekend staffing data will also be will be published on the Care Compare site but will not be part of the five star system at this time.

Doubling down on the discussion of Medicaid’s mandate after the April roundtable, Tsai told KHN this month that adequate staffing is an “essential ingredient” for good direct care.

“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.”

The change in how Medicaid dollars can be spent is part of White House reforms introduced in February; a minimum federal staffing ratio, increased control over private equity ownership, financial support for investigations, and stiff penalties were other major aspects of Biden’s initiatives.

Medicaid pays 62% of long-term care residents in nursing homes — in 2019, that payment was $50.8 billion, according to KHN. CMS did not include Medicare payments in discussions of a direct care spending mandate, according to the publication; Medicare spending was $38.2 billion in 2019.

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