Biden Administration Mulls Medicaid Direct Care Spending Mandate as Nursing Shortage Continues

As nursing homes across the country are grappling with staff shortages exacerbated by the COVID-19 pandemic, the Biden administration is considering a rule that nursing homes spend most of their Medicaid payments on direct care for residents rather than operations or capital improvements.

According to Modern Healthcare, the rule would constitute the first time the federal government insists that nursing homes use the majority of Medicaid dollars for caring for residents. Over 60% of long-term care residents in nursing homes are covered by Medicaid and payments from the program to LTCs totaled $50.8 billion in 2019.

The Affordable Care Act’s medical loss ratio provision requires insurance companies to pay 80% of premiums to beneficial medical care and 20% at most on administrative costs, executive salaries, advertising and profits, Skilled Nursing News reports.

CMS officials have hinted at the possibility of this rule coming to the fore. For example, in an April roundtable discussion with Centers for Medicare and Medicaid Services (CMS) leadership, deputy administrator and director for the Center for Medicaid and CHIP Services Daniel Tsai said:

[CMS is] contemplating and eager for discussion on how we might create either transparency or standards for a minimum amount of reimbursement to actually flow to the direct care workforce versus all sorts of other things.

Illinois, Massachusetts and New York have already tied Medicaid funding to staffing measures. CMS has requested public comment on the possible direct care spending mandate in its proposed update of nursing home payment policies and rates for next year.

Nursing home staffing shortages and high operating costs are causing many SNFs across the country to grapple with the risk of closure. Axios notes that a survey released on Monday by the American Health Care Association (AHCA) demonstrates 60% of nursing homes are operating at a financial loss and nearly 75% are faced with these concerns.

In local news, following an investigation, AZFamily found that a Mesa nursing facility was fined only $500 after an employee’s negligence in administering medication directly led to the death of a resident. Officials found the home reported the death but failed to include additional details.