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How Medicaid Waivers Have Affected Nursing Home Utilization – and Why the Staffing Proposal May Further This Trend

One of the unintended consequences of the minimum staffing proposal may mean less utilization of nursing homes as residents are shifted to other means of care – a trend spurred by an expanded use of Medicaid waivers. Policymakers may opt for these as a safety net for access issues among seniors, especially in rural settings, according to experts. 

Analysts and officials from state associations that Skilled Nursing News spoke to believe that Medicaid waivers in assisted living and home and community-based services (HCBS) may be utilized to a greater extent nationally to mitigate issues arising from the mandate. Already in existence in certain states for decades, the more widespread use of Medicaid waivers has meant less skilled nursing facility (SNF) use.

“There will be a ripple effect, we believe, especially in rural communities when [the staffing rule] goes into effect. [Nursing homes] are not going to be able to meet the standard as it’s been proposed,” said Patti Cullen, president and CEO of Care Providers of Minnesota.

If states are faced with potential closures and access issues for seniors, policymakers may ease access issues in other care settings, she said, to better provide some level of service to seniors in their home communities. 

“It wouldn’t surprise me if that is one of the repercussions, absolutely,” Cullen said of Medicaid waiver expansion in HCBS and assisted living.

Government entities will have to increase daily rate Medicaid payments to cover minimum staffing standards anyway, Dana Wollschlager told SNN. Wollschlager serves as partner and industry practice leader of senior living development and advisory services for Plante Moran Living Forward.

In Illinois, for example, a $21 loss per day could go to $30 or $40 loss per day on Medicaid, she said. The average Medicaid payment to a skilled nursing provider is currently $192.87 per day, but the actual cost to provide care is closer to $213.70. With Medicaid waivers, government entities waive certain provisions of Medicaid law, said Cullen. HCBS waivers can include coverage for room and board while residents just have to pay for services, or certain regulations can be waived.

On the assisted living end, waivers usually pay for services rather than room and board, she said. Each state applies for such waivers and they get approved separately. Of course, waiver payments still tend to be far less than what a provider would get from the private pay market, added Cullen.

Less utilization over time

In the past, as many states adopted Medicaid waivers more than a decade ago, SNF utilization rates declined 31% across the country between 2015 and 2022, according to data published by Plante Moran. Federal and state programs as well as payor sources are supporting programs and initiatives to push care out of the nursing home setting, the company found.

“I would say over the last 20 years, some states have been more progressive,” said Wollschlager. “We are going to start seeing the shift across the country, because it is a preferred environment for the consumer, and it’s less expensive.”

Arizona, for example, implemented Medicaid waivers in assisted living and HCBS in the early eighties. Currently, the state has 143 SNFs compared to 3,000-plus assisted living facilities. And, SNF admissions have been flat for the past decade, according to David Voepel, CEO of the Arizona Health Care Association (AZHCA). 

“Our Medicaid Agency is the Arizona Health Care Cost Containment System (AHCCCS). It’s in their name to find the least cost system for residents. Since we are an HCBS model, the home is the first choice,” he said.

Ohio’s Medicaid waivers have grown over the years, Ohio Health Care Association (OHCA) Executive Director Pete Van Runkle said, starting out small with a home care services program called Passport. Now, there are more people opting for the Medicaid waiver options than there are in nursing homes, he said. 

“Over the years we saw a significant decline in skilled nursing facility Medicaid census,” said Van Runkle, adding that the number of Medicaid days per year dropped from 20 million in the early nineties to 15 to16 million Medicaid days currently. “I think we’ve reached an equilibrium where people who really need the level of care of a skilled nursing facility … those folks are going to skilled nursing, and the people who don’t have the same level of need are going to home care or assisted living, depending on their circumstances.”

Next year, the assisted living Medicaid waiver program, and HCBS Passport program are getting an 80% increase in rates, drumming up an “incredible” amount of interest among OHCA members, Van Runkle said, as well as those looking to do more business in the state because of the rate increases among Medicaid waiver programs.

“We’re going to see a significant increase in access,” Van Runkle said of home care and assisted living utilization. “These things were really done as much as anything for workforce reasons by these providers, particularly on the homecare side.”

It’s a similar situation to skilled nursing, with Medicaid beneficiaries who needed home care but were turned away because of low reimbursement and staff shortages, he said. In order for certain services under a Medicaid waiver, a resident needs to be eligible for nursing facility level of care, Cullen said. Technically, seniors in some waiver programs could be served in nursing homes as well.

“Those waivers could potentially serve the same population that would be in nursing homes. But that really isn’t how it’s played out for the most part, because they don’t have the level of staffing and security that a nursing home would have,” said Cullen, referring to dementia care and combative residents in particular. Residents stepping down from hospital care would also need a nursing home rather than alternative settings, she said. 

“However, what we find fairly often is that as diseases progress, or if additional conditions are added, seniors move from home to independent living to assisted living to nursing homes,” said Cullen.

Reaching an equilibrium

While many nursing homes and nursing home beds have closed over the decades, Cullen says this trend is more a result of workforce shortages in Minnesota, rather than an inability to compete with assisted living or home care.  Years ago, Cullen would have said these waivers created competition for nursing homes. Now, acuity has already shifted and the nursing home has “extremely heavy care folks” with comorbidities, IV therapies and significant pressure ulcers, among other diagnoses. 

As for Arizona, it has built a post-acute care system that is heavily dependent on HCBS, Voepel said. For states that have more SNF availability than HCBS or assisted living, it’s going to take time to reach the same sort of equilibrium.

“Arizona has been up front for decades on sending people home,” said Voepel. “Other states start to look at it and say, ‘okay, maybe we can do part of that.’ The problem that states are going to have is that they’re heavy on skilled nursing facilities – you can’t just shut that model off. That model delivers a service that is well needed within those states. You can’t flip them around automatically.”

A lot of Arizona SNF closures happened around 2008, Voepel said, during the recession; but, it’s important to note that the state has never really been heavily dominated on the skilled nursing side, he added. For states that didn’t embrace waivers and didn’t expand Medicaid, care settings where waivers are allowed are viewed as competition to nursing homes. Cullen is “getting a lot of calls” from these states asking how Minnesota has managed waivers in other care settings, along with Medicare-Medicaid managed care plans, and what these plans are willing to pay for in different care settings.

“Our structure is such that they have greater payment liability for folks who are in assisted living than they do in nursing homes,” said Cullen.

The big question policymakers should ask as they look ahead at varying demographic waves is to figure out if it’s better to build more of a certain type of care setting, like nursing homes, or expand service availability across the care continuum, she said.

“The other thing is the reality of the workforce; it can’t be understated. We’re not going to get the workers. The business decisions that folks have made are really tied to that,” said Cullen.

Source: Skilled Nursing News