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NYS Limiting Choice and Access to Nursing Homes

5/24/2022

What if someone told you that you there is no choice in what and where you could buy your food? If you like Trader Joe’s, Wegmans, or Whole Foods grocery stores – sorry, you have to get your food from Walmart. It’s a silly scenario but think about it, most people would push back. There’s nothing wrong with Walmart, it’s a perfectly fine store. However, some people want that special brand or that special shopping experience, they want what is important to them even if it means that it can only be found at a store other than Walmart. The lowest price is a strong motivator, but it is not the only motivator in buying decisions, there are others. The point is that people want choice. The silly grocery store scenario is exactly what’s happening slowly and quietly with long term and post-acute care in New York State (NYS) on a much more consequential scale. Consumers are losing the freedom of choice for a social or hospitality model and are being driven almost exclusively to a medical model for their care. This essay will explore just a few factors on how NYS policy is contributing to the limitation on consumer choice for health care.

Before starting, let’s acknowledge that talking about results of public policy may prompt agreement or dissent with the underlying philosophy behind those policies. That is not the purpose here. The purpose here is simply to talk about what has happened and what is happening to make choices in health care limited, particularly as it relates to long term, skilled nursing and post-acute care. Unfortunately, it will take a few paragraphs to “tee up” the conversation.  

For many years the Medicaid system has been under expansion, making the individual financial conditions for qualification easier and less restrictive. The rationale for this liberation to access to Medicaid has been that people with chronic, long term health conditions should not have to spend their life savings in their later years for these needs. At the same time, this expansion of social benefits has come with a very steep price. Every dollar that doesn’t come out of an individual’s pocket for these services must be replaced by a dollar from another source. Medicaid is being pushed by these policies to become that payor source. Unfortunately, this policy only works if the pool of dollars is also expanded. That part is not happening.

But wait you might say, what about excess profits, waste and abuse? Surely there are savings to be had by attacking these areas and not adding dollars to the pool. True, savings can be realized by efficiencies and greater oversight. These methods have been, and continue to be implemented, to the point of capping the amount that the State is willing to pay for the services they receive (the Medicaid Global Cap). However, the strategies of efficiencies and oversight face the inevitable laws of diminishing returns. At some point, the savings from these cost cutting methods no longer are great enough to sustain the greater utilization of the system by the population.

NYS is currently trying to minimize health care cost and maximize services using three strategies on top of finding efficiencies. They are mandating staffing levels, using a 70/40/5 formula to measure and restrict organizations’ ability to direct the fiscal affairs of the facility, and finally by blocking health care providers from collecting from patients for non-payment – effectively shifting the cost of care onto the provider. The next few paragraphs will very briefly describe each of the initiatives to make sense of why they are leading to decreased choices in care settings.

Mandated staffing ratios sound great, who can argue with more personalized care and more caregivers? It would be great in an environment where labor is plentiful and financial resources are not limited, but that is not the case here. The labor shortage today has been well documented, as has been the increase in wages that all business are instituting to get the labor. Indeed, it is one of the ingredients feeding into the roughly 8% inflation rate we have been experiencing over the last year. However, NYS has not recognized these conditions and has raised Medicaid reimbursement rates only 1% over the last ten years. But wait, isn’t there money in the budget for this staffing mandate? Yes, there is. Combining 2021 and 2022 budget years, the extra funds specifically for the staffing requirements are approximately $125 million, equivalent to less than a 2% rate increase. It has been conservatively estimated that complying with the staffing mandates at full occupancy will cost the industry between $700 to $900 million immediately. That is if the staff can be found. Penalties to facilities for not meeting the regulation can add up quickly at $2,500 per day.

Separately, NYS is requiring that seventy percent of revenues from all sources (Medicaid, Medicare, insurance, private payments, guest meals, etc.) must be spent on direct resident care, and of that seventy percent, forty percent of that number be spent on direct care giver salaries. Under that same regulation, facilities are limited on the profit they can make from all sources of revenue to five percent of revenue – excess profits must be rebated back to NYS. This regulation has been termed the 70/40/5 regulation. Effectively what this regulation does is to limit the amount that providers can spend on facility upgrades, such as furniture, equipment, and other consumables that, with age, must be replaced. Building remodeling, additions, and major capital expenditures will be difficult. There are many ramifications to this regulation, these are only a few examples.

Finally, hospitals, nursing homes, assisted living facilities, doctors, etc. are no longer allowed to attempt to collect unpaid room and board or medical expenses of any kind by garnishing wages or placing a lien on a house of primary residence. With rates of more than $500 per day, the cost of uncollectible resident accounts could add up. This essentially shifts these costs to the provider.

Back to the point, how these policies are limiting choice in health care. The mandated staffing ratios combined with the 70/40/5 regulations are pushing providers to use their revenues on day-to-day operations. The natural result will be the proliferation of medical models of care, a model that makes facilities look less home like and more like a clinical or hospital setting. Facilities that have traditionally offered a choice to consumers of home like or apartment like setting will become less available. Why would this be you may wonder. The reason is that often facilities who emphasize the hospitality model admit less clinically needy residents who still need skilled nursing care but not to the highest levels. To maintain these hospitality models, facilities need to spend revenues in areas not considered direct resident care. For these facilities, they will now have to meet staffing ratios, whether their resident acuity and census requires the ratios or not.

To wrap up the discussion, the sky isn’t falling. It may feel as though it is if you are in the hospital waiting for nursing home placement - facilities are slow to admit, ensuring that they stay within the parameters of the staffing regulations. By virtue of this staffing “crunch”, choices of facilities will be even more limited. Facilities that do have enough staff to admit from the hospital may not offer “the brands” that you are shopping for. There are a couple of ways that NYS can alleviate the staff issues in nursing homes. One way would be to ease the staffing requirements as other states that recognize the labor issue have done. The other obvious fix, which will be the last that is chosen, is for NYS to take its funding obligations seriously and address the problem in real world dollar terms. This would be the best and long run solution. Gimmicks with a short dated life, like the use of the national Guard and worker bonuses, will not fix the problem.

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