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 COVID-19 Battle Shines Light on the Ongoing Medicaid Funding Gap

For Steve Miller, president of Bridgemark Healthcare, the challenges in leading a long term care operator at a time of the COVID-19 pandemic has focused on providing the quality of care necessary to prevent virus infections in buildings, and if there are infections to manage residents back to health without having further spread.

Bridgemark, which has a total of 19 skilled nursing and assisted living communities in Illinois and Missouri, has been fighting the COVID-19 pandemic like all of the other skilled nursing and assisted living communities across the nation, and like many the ability to care for residents and keep buildings and equipment up to par is a question of finances.

Miller says the payer mix, all-in, for Bridgemark, is 15 percent Medicare and 58 percent Medicaid, with a mix of other reimbursement coming from areas like veterans programs and private-pay. The company cares for about 1,969 residents.

As most understand in the long term care business, the difference in reimbursement between Medicare and Medicaid is stark, with many operators subsisting only because Medicare has paid enough to account for what has been a perennial problem of insufficient Medicaid payments to providers.

Miller says the rates in Illinois for his Medicaid skilled nursing facilities (SNFs) historically averaged $149 per patient, per day and $164 in Missouri, which both leaving the provider with a $30 to $50 per patient/per day shortfall when comparing the reimbursement to the actual cost of caring for a long term care resident.

“I’ve never experienced consistent cost coverage from our Medicaid rates,” he says, noting this shortfall is before any additional costs are considered for caring for residents during the pandemic, such as huge increases in the use of personal protective equipment, extra staffing hours and pay, and changes in operations to prevent infections.

“I’ve seen different studies that have been performed in Illinois, which is where the majority of our communities are located, that show anywhere from that $40 to $60 a day shortfall in Medicaid rates,” Miller says.

Medicaid reimbursement has also not improved much even as the nation’s economy improved greatly over the past 10 years, again, prior to the COVID-19 outbreak.

“My experience is that the economic prosperity of the last 10 years has not translated generally speaking into Medicaid funding…that’s not been really connected,” he says.

The irony of course is that the healthy economy has actually fueled even more costs, since it takes more money to attract workers to long term care given the low unemployment and the competition for workers. “This is all before COVID,” Miller says.

During normal times the Medicaid shortfall hits facilities hardest when it comes to daily decisions on upkeep of buildings, for instance. “The financial adjustments that you make to account for the Medicaid shortfall is obvious when it comes to the physical plant. So, when you go into a Medicaid-driven nursing home in the markets where I operate you are going to see an older building with a lot of tired, worn-out parts, a lot of scrapes and scratches, and a lot of duct tape and bailing wire as they might say,” he says.

“You will see that all the time we are constantly behind the curve on physical plant updates and  equipment replacement.”

Miller notes that one can also see the impact of the Medicaid shortfall in terms of the kinds of dining programs that can be offered. “They tend to be curtailed in communities like we operate,” he says. “There are few extras, since there is not a lot of room in a budget.”

He stresses that the core components of resident care are secure; there are no shortcuts on caring for people in Bridgemark facilities. “We protect the quality of care by ensuring that we put the money that we do have to nursing and CNA [cerified nurse assistant] services, and then we try to manage as best we can on the nondirect care operations,” Miller says.

Given all of these shortcomings from the Medicaid payment system, the start of the COVID-19 pandemic just added to the problem. “It’s tough for sure,” Miller says. “The immediate effect we saw almost out of the gate was that short-stay return-to-community admissions essentially turned off overnight,” he says. These individuals are paid for mostly by Medicare and provide healthier payments to providers, he says.

“What that did was lay bare the Medicaid under-funding. The costs of caring for Medicaid residents rose because of the virus, but reimbursement did not, and meanwhile we had lost the offsetting Medicare margins,” Miller says.

One major area that was affected was the cost of staffing as workers are understandably concerned about working in a high-risk environment. Thus, Bridgemark provided premium pay structures to employees working on the frontlines “so that they would be compensated for the risks that they were taking and the stress and strain at a job which was being placed on them,” he says.  

That has come at a cost obviously, increasing Bridgemark staffing costs 10 percent to 15 percent within 30 days of the pandemic emergency.

Across the long term care profession, there have been calls by government officials and the American Health Care Association/National Center for Assisted Living (AHCA/NCAL) to test all residents and staff. That also would be costly as new data from AHCA/NCAL said the combined cost for COVID-19 testing of every resident and staff member in assisted living communities in addition to nursing facilities would tally $672 million nationwide.

What Bridgemark is experiencing when it comes to Medicaid payment is not new and has been the subject of study for years. For instance, a recent article in JAMA said COVID-19 has exposed longstanding issues in “how nursing home services are structured and financed.”

“Medicare is a relatively generous payer, whereas Medicaid often pays below the cost of caring for these frail and medically complex individuals. Thus, the economics of nursing home care hinges on admitting enough short-term Medicare beneficiaries to cross-subsidize the care of long-term residents with Medicaid coverage,” the JAMA article said.

With the COVID-19 pandemic, there has been a dearth of short-stay Medicare beneficiaries coming into facilities as hospitals “are not performing elective procedures like joint replacements so patients who would ordinarily require post-acute care are not being referred to nursing homes,” the article said.

This has resulted in increasingly difficulty for nursing facilities because of decreased Medicare revenue and the higher COVID-19 costs tied to managing residents, it added.

To help remedy the problem, the JAMA article suggests broader use by SNFs of alternative payment models like accountable care organizations and bundled payment models. “These models will provide the necessary flexibility for COVID-19 care,” the article said.

For long-term SNF residents recovering from COVID-19, authors said, “Medicaid must begin to pay a higher rate commensurate with the costs of delivering high-quality long term care to frail older adults. In many states, this will require greater federal contributions.”

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