LeadingAge

On November 18, CMS published the Medicaid Fiscal Accountability Regulation (MFAR) Proposal on the Federal Register. This proposed rule would make significant changes to key parts of state Medicaid financing structures for nursing homes and hospitals.

For nursing homes, including Life Plan Communities (LPCs)/Continuing Care Retirement Communities (CCRCs) with nursing homes/health centers, the most significant proposed changes are to provider taxes and supplemental payments.

This article provides a summary of key provisions of the MFAR proposal as they relate to nursing homes. A full crosswalk comparing current policy to the proposal is available from LeadingAge here. 

Implications for Provider Taxes

Provider taxes would not be banned outright under the proposed rule. CMS is, however, proposing to set new criteria for which revenue generated by provider taxes would or would not receive federal matching funds, and state provider taxes would face new scrutiny under the proposed regulation. Current policy requires that provider taxes be broad-based and uniform (or, in other words, be applied to providers equally), and that if states want more targeted tax structures, like a bed tax, it must receive a CMS waiver to do so.

This process would not change under the proposed rule, and states would still be able to receive these waivers from CMS, but the considerations of what would be allowed under those waivers would change. Specifically, states would be disallowed from receiving federal funds for taxes that “impose undue burden” on the Medicaid program. Such “undue burdens”, per the proposal, include:

1. Taxing providers that provide less Medicaid services at lower rates than those that provide relatively more Medicaid services.
2. Medicaid services, in general, being taxed more than non-Medicaid services (except when excluding Medicare/Medicaid revenue).
3. Not taxing, or taxing at a lower rate, groups of providers with no Medicaid services compared to other groups (e.g., those that take Medicaid).

In addition to these cases, the proposal also says that a tax would impose an undue burden if it “excludes or imposes a lower tax rate on a taxpayer group defined based on any commonality that, considering the totality of the circumstances, CMS reasonably determines to be used as a proxy for the taxpayer group having no Medicaid activity or relatively lower Medicaid activity than any other taxpayer group.”

In other words, CMS would have significant latitude determining whether a provider tax and any provider tax exclusions or “discounts” would comply with the proposal if finalized. This could very well mean that exclusions or lower taxes for LPCs, for example, could be determined disallowable.

Further, current policy does not allow providers to be guaranteed to be held harmless under provider taxes. This means taxes can’t be levied with the understanding that any funds a provider pays will eventually circle back to them. CMS proposes new language in MFAR that would allow CMS to more closely look at arrangements between providers, states and other relevant entities – including arrangements not in writing or legally enforceable – to determine if providers have “reasonable expectation that the taxpayer will receive a return of all or any portion of the tax amount.” If CMS reaches that conclusion, provider taxes could be further jeopardized.

Finally, all provider taxes for which a state wants to receive federal matching funds would sunset every three years under the proposal. States could renew at the end of the three-year period but would need to get CMS’ approval to do so.

States would have three years to comply with the MFAR requirements once a rule is finalized.

Implications for Supplemental Payments and Upper Payment Limits

In addition to provider taxes, the MFAR proposal seeks to make revisions to Upper Payment Limit (UPL) demonstrations and supplemental payments.

For the most part, this affects state Medicaid agencies and imposes new reporting requirements, including payment amount by provider and the criteria and methodology used to calculate these payments.

The proposal also includes new requirements for how UPLs can be calculated and which data sources to use. The following approaches would be allowed under MFAR, with more detail on each in the proposal:

• Cost-based demonstrations: retrospective demonstration, prospective demonstration
• Payment-based demonstrations: retrospective payment-to-charge UPL demonstration, prospective payment-to-charge UPL demonstration, payment-based UPL demonstration

It would also limit the amount of time a state could have supplemental payment policies without federal review. If finalized, MFAR would sunset supplemental payments every three years. In order to continue payments beyond that time, CMS approval would be required.

Similar to the provider taxes, states would have three years to comply with these MFAR requirements.

Implications for Ownership Arrangements

The proposal also has the potential to put ownership transfers between private organizations and government entities under increased scrutiny.

Under current policy, UPLs are calculated by provider types (e.g., nursing homes) and ownership type. There are three categories: state government, nonstate government and private ownership. When supplemental payments are calculated, they are differentiated by these groups.

CMS asserts that private providers have been making arrangements with county and other nonstate governments to transfer ownership to the government entity while maintaining operational control of the facility. Doing so potentially allows the provider to receive a higher supplemental payment if the amount available in the nonstate government category, for instance, is higher than the private ownership category.

The proposed rule includes criteria CMS would use to determine which category a facility would fall into if there was a private-government ownership transfer, including who is responsible for the facility’s operations.

Next Steps

LeadingAge is continuing to assess the potential impact of the MFAR proposal on its members and the residents they serve. Given the central role Medicaid plays in nursing home financing, it is important to make sure that any policy change would not have an adverse effect on a Medicaid enrollee’s ability to receive the care they need, including in nursing homes.

We will work with our state partners and members to determine the implications of the proposal and provide feedback to CMS, including through comment letters. We will also develop resources for our members to educate them on the MFAR proposal and how they can participate in the rulemaking process. 

Members may reach out to Brendan Flinn of the LeadingAge staff with questions and concerns related to the rule.

On Wednesday, November 20, the Senate Finance Committee, Subcommittee on Health Care held a hearing entitled, “Alzheimer’s Awareness: Barriers to Diagnosis, Treatment and Care Coordination.” Subcommittee Chair Patrick Toomey (R-PA) and ranking member Debbie Stabenow (D-MI) timed the hearing to coincide with National Alzheimer’s Disease Awareness Month.

The hearing highlighted the need for integrating Alzheimer’s care and how dementia-specific care planning could improve the care delivered by nurses, social workers, and community health workers. Several witnesses raised points reflecting concerns that few Medicare beneficiaries living with dementia receive comprehensive care planning despite clinicians’ ability to obtain reimbursement for care planning if they use the proper CPT code, since 2017. Senator Stabenow referenced her legislation, Improving HOPE for Alzheimer’s (S.880), that seeks to provide outreach and reporting on comprehensive Alzheimer's disease care planning services furnished under the Medicare program.

Marc Cohen, Ph.D., co-director of the LeadingAge LTSS Center at UMass Boston, was an invited witness. He is also a clinical professor at the McCormack Graduate School at UMass Boston, and the Research Director at the Center for Consumer Engagement in Health Innovation at Community Catalyst.

Dr. Cohen’s testimony included points about the current long-term care (LTC) insurance market context and how to improve the affordability and accessibility of private long-term insurance. He shared:

• LTC risk is suitable for risk pooling through an insurance design and there is “an opportunity to move our financing system for middle-class Americans away from a ‘private-pay safety-net based impoverishment model’ toward an insurance-based approach.”
• However, making private insurance more accessible requires making it more affordable and attractive to consumers calls for a multi-pronged approach addressing both supply and demand problems.
• Even in the context of market improvements, voluntary private LTC insurance is likely to play at best a modest role in meeting our challenge. Paradoxically, “public insurance models could very well spur significant growth in the private market, as sectoral roles become better defined and enable citizens to plan appropriately.”

Senator Toomey indicated that he has circulated a discussion draft bill that will assist families with the cost of LTC. His bill would allow Americans with 401(k)s to take money out of those accounts to purchase LTC insurance. During the question and answer segment, Senator Toomey asked Dr. Cohen about this idea. Dr. Cohen observed that any focus on LTC insurance is important and the proposal could potentially lower premium costs. However, to significantly move the needle to protect the majority of middle-class Americans private insurance is one piece of a puzzle – but any real solution needs the development of some type of public insurance.

Senator Bob Casey (D-PA) also commented that LTC insurance is out of reach for several middle-income households. He mentioned an Alzheimer’s Association report that states “Medicaid is the only public program that covers the long nursing home stays that most people with dementia require in the late stages of their illnesses.” He asked Dr. Cohen about his thoughts on the impact of caps and cuts to the Medicaid program, and the impact on individuals with Alzheimer’s disease. Dr. Cohen said that per capita caps should not be considered for several reasons:

• They shift fiscal liability to states and individuals without solving any problems.
• Medicaid programs are serving a growing number of people over age 65 and these individuals have complex health care needs.
• Per capita caps would force states to cut back on optional services, such as home and community-based services, which could be devastating for people with dementia and functional impairments.

LeadingAge is pleased that the Subcommittee on Health Care held the hearing to discuss improving diagnosis and care coordination for people with Alzheimer’s and other dementias. However, without action on financing, it is unlikely that most Americans will realize the benefits of changes in diagnosis and care coordination. Because of limited market penetration, private LTC insurance only plays a modest role in paying for care. Fewer than 10 percent of households currently have LTC insurance policies, translating into roughly seven million Americans. Costs continue to rise such that premium levels are out of the reach of most middle-class Americans; less than one-third of new buyers are drawn from the broad middle class. We must do better to create a society that allows all of us, including people with Alzheimer’s disease and other dementias, to age with dignity and choice.

On Wednesday, November 20, the Senate Finance Committee, Subcommittee on Health Care held a hearing entitled, “Alzheimer’s Awareness: Barriers to Diagnosis, Treatment and Care Coordination.” Subcommittee Chair Patrick Toomey (R-PA) and ranking member Debbie Stabenow (D-MI) timed the hearing to coincide with National Alzheimer’s Disease Awareness Month.

The hearing highlighted the need for integrating Alzheimer’s care and how dementia-specific care planning could improve the care delivered by nurses, social workers, and community health workers. Several witnesses raised points reflecting concerns that few Medicare beneficiaries living with dementia receive comprehensive care planning despite clinicians’ ability to obtain reimbursement for care planning if they use the proper CPT code, since 2017. Senator Stabenow referenced her legislation, Improving HOPE for Alzheimer’s (S.880), that seeks to provide outreach and reporting on comprehensive Alzheimer's disease care planning services furnished under the Medicare program.

Marc Cohen, Ph.D., co-director of the LeadingAge LTSS Center at UMass Boston, was an invited witness. He is also a clinical professor at the McCormack Graduate School at UMass Boston, and the Research Director at the Center for Consumer Engagement in Health Innovation at Community Catalyst.

Dr. Cohen’s testimony included points about the current long-term care (LTC) insurance market context and how to improve the affordability and accessibility of private long-term insurance. He shared:

• LTC risk is suitable for risk pooling through an insurance design and there is “an opportunity to move our financing system for middle-class Americans away from a ‘private-pay safety-net based impoverishment model’ toward an insurance-based approach.”
• However, making private insurance more accessible requires making it more affordable and attractive to consumers calls for a multi-pronged approach addressing both supply and demand problems.
• Even in the context of market improvements, voluntary private LTC insurance is likely to play at best a modest role in meeting our challenge. Paradoxically, “public insurance models could very well spur significant growth in the private market, as sectoral roles become better defined and enable citizens to plan appropriately.”

Senator Toomey indicated that he has circulated a discussion draft bill that will assist families with the cost of LTC. His bill would allow Americans with 401(k)s to take money out of those accounts to purchase LTC insurance. During the question and answer segment, Senator Toomey asked Dr. Cohen about this idea. Dr. Cohen observed that any focus on LTC insurance is important and the proposal could potentially lower premium costs. However, to significantly move the needle to protect the majority of middle-class Americans private insurance is one piece of a puzzle – but any real solution needs the development of some type of public insurance.

Senator Bob Casey (D-PA) also commented that LTC insurance is out of reach for several middle-income households. He mentioned an Alzheimer’s Association report that states “Medicaid is the only public program that covers the long nursing home stays that most people with dementia require in the late stages of their illnesses.” He asked Dr. Cohen about his thoughts on the impact of caps and cuts to the Medicaid program, and the impact on individuals with Alzheimer’s disease. Dr. Cohen said that per capita caps should not be considered for several reasons:

• They shift fiscal liability to states and individuals without solving any problems.
• Medicaid programs are serving a growing number of people over age 65 and these individuals have complex health care needs.
• Per capita caps would force states to cut back on optional services, such as home and community-based services, which could be devastating for people with dementia and functional impairments.

LeadingAge is pleased that the Subcommittee on Health Care held the hearing to discuss improving diagnosis and care coordination for people with Alzheimer’s and other dementias. However, without action on financing, it is unlikely that most Americans will realize the benefits of changes in diagnosis and care coordination. Because of limited market penetration, private LTC insurance only plays a modest role in paying for care. Fewer than 10 percent of households currently have LTC insurance policies, translating into roughly seven million Americans. Costs continue to rise such that premium levels are out of the reach of most middle-class Americans; less than one-third of new buyers are drawn from the broad middle class. We must do better to create a society that allows all of us, including people with Alzheimer’s disease and other dementias, to age with dignity and choice.

Congress has enacted a second continuing resolution (CR) for fiscal year 2020. This latest CR, adopted as the first was expiring on November 21, keeps federal programs funded through December 20.

Congress did not pass any of its 12 annual appropriations bills in time for the October 1 start of the new fiscal year.

Congress is currently funding all federal discretionary programs at fiscal year 2019 levels until midnight December 20 under the CR.

Funding FY20 rental assistance contracts at FY19 levels is not sufficient for FY20. Housing providers’ costs increase, even when they’re assisting the same number of residents from year to year.

HUD’s Section 202/PRAC renewals need at least $38 million more in FY20 than they received in appropriations in FY19; for Section 8 contracts, a much bigger program, there’s an increased need of $843 million for FY20 compared to FY19.

While FY19 levels might be sufficient for a couple of months at the beginning of FY20, HUD will soon feel a definite pinch and CRs with a duration past December 20 may not provide needed resources to renew rental assistance contracts.

LeadingAge is keeping in close touch with HUD officials and appropriators on these issues.