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A Brief Look at the GOP’s Health Care Reform Proposal and the Skilled Nursing Industry

The Republicans have put forth a proposal to repeal and replace the Affordable Care Act. The proposal, dubbed the American Health Care Act (AHCA), not only undoes much of President Obama’s landmark health care reform, but also includes Medicaid reform. Groups like the American Health Care Association and AARP have expressed concern over parts of the legislation. Meanwhile, NIC data show that any change to Medicaid will undoubtedly impact the skilled nursing sector.

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The AHCA in a Nutshell

Some of the major tenets of the AHCA are:

  • Remove medical device, pharmaceutical, and health-insurance premium taxes established by the Affordable Care Act. Remove the individual and employer mandates that require people to have insurance and employers to provide it.
  • Maintain rules preventing insurance companies from denying coverage based on pre-existing conditions and allowing young people to stay on parents’ insurance until age 26.
  • Provide $100 billion over nine years in funds available to states that apply for grants for preventive health programs, safety nets for insurance providers, and other endeavors. Unspent funds will be used for reinsurance to insurance companies with high claims costs.
  • Increase Health Savings Account contribution limits.
  • Eliminate coverage for new enrollees that meet the requirements for Medicaid under Medicaid expansion (133% of Federal Poverty Level) in 2020. Eliminate existing additional federal funding for home- and community-based services for Medicaid enrollees in 2020.

These changes will impact the skilled nursing industry:

  • Change federal payments to states for Medicaid to a “per capita allotment,” which will be adjusted annually to reflect growth in medical inflation. Starting in 2020, federal allotment for Medicaid spending to states will be capped based on 2019 enrollment and medical inflation.
  • Decrease retroactive Medicaid payments from three months prior to approval of eligibility to within the month of eligibility.
  • Prevent states from increasing the allowable amount of home equity from $500,000 to $750,000 for Medicaid enrollees seeking long-term supports and services (LTSS).

Kaiser Family Foundation provides a useful comparison of the proposal to the current law here. The Congressional Budget Office (CBO) report also provides clarity on the proposal’s impacts.

Not to Be Confused with the Other AHCA

The American Health Care Association, which also goes by acronym AHCA, has expressed concern over the proposal, specifically where Medicaid is concerned. Mark Parkinson, president and CEO of the largest trade association for nursing homes, said in a statement, “Long-term care providers across the country are disappointed that cuts to Medicaid are included in the Obamacare repeal and replace bill released yesterday. The current Medicaid system underfunds nursing center care by $22.46 per day, resulting in a shortfall of nearly $7 billion annually. The bill released yesterday will sharply reduce Medicaid funds across the board for all beneficiaries, making it harder than ever to maintain access to care for the most vulnerable in our society.” AARP has also vociferously pronounced its opposition to parts of the AHCA that impact seniors, arguing the reform will reduce seniors’ access to care.

What’s NIC Got to Do With It?

While current NIC data in no way can predict how Medicaid reform will impact the skilled nursing sector, the data clearly demonstrate the importance of Medicaid as a revenue stream and patient volume driver to the nation’s nursing homes. The most recent NIC Skilled Nursing Data Report, published last week and spanning five years of data through the end of 2016, found that Medicaid Mix (the share of patient days attributable to Medicaid) grew substantially over the time series. Preliminary NIC data also indicate that Medicaid revenue makes up at least half of total revenue for most nursing homes, even among those operators striving to grow their short-term, post-acute business, which is attributable to Medicare and managed Medicare.

For all the commotion in recent years about value-based payments in Medicare and narrowing managed Medicare networks, the fact remains: Medicaid is really important to nursing homes. Therefore, it’s not a stretch to conclude that reforming the Medicaid program will impact nursing homes. Whether the industry benefits or not from such reform remains to be determined, but the fact that Medicaid drives much of nursing home business cannot be understated.

NIC Spring Investment Forum attendees will get the opportunity to hear insights on how Medicaid reform could impact the sector. Our own Bill Kauffman will also present the findings from the most recent NIC Skilled Nursing Data Report, including a deep dive into the Medicaid figures. With so much up in the air, everyone in the seniors housing and care sector is sure to benefit from such timely discussions.


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