The Medicare Payment Advisory Commission (MedPAC) at its October 10 meeting began discussions on assessing Medicare payment adequacy and updating payments for skilled nursing facilities. This follows an earlier expression of interest by Commissioners during MedPAC’s April meeting, when they highlighted the need for a deeper exploration of Medicare beneficiaries residing in nursing homes.

This recent session began with an overview of nursing homes, focusing on operations, care delivery and reimbursement. A key distinction was made between long-term custodial care and short-term skilled care. To provide a comprehensive understanding, the MedPAC staff examined the differences in payment structures between Medicaid and Medicare, as well as the increasing role of Medicare Advantage, including Individual Special Needs Plans (I-SNPs) and Dual Special Needs Plans (D-SNPs).

While fee-for-service (FFS) remains a significant payer, Medicare Advantage enrollment has been growing rapidly in certain markets, with many residents shifting to these plans. Long-term care insurance plays only a limited role in financing nursing home care due to various factors that constrain demand.

The session also highlighted major challenges to improving care for nursing home beneficiaries. These included the financial incentives that encourage hospitalization of long-stay residents, the low Medicaid payments that vary from state to state, which contribute to staff turnover and quality of care issues, and the disparity in care quality faced by minority groups, who often reside in understaffed and lower-quality facilities, according to the presentation. The differences between urban and rural nursing homes sparked significant discussion toward the end of the meeting.

Throughout the session, the significant care needs and high medical costs of nursing home populations, was a recurring theme, along with a concern about the quality of care provided in these settings.

MedPAC noted that existing value-based care models have not adequately prioritized the needs of long-stay nursing home residents. As a result, the Commission is now examining Medicare’s efforts to improve care for these residents.

Moving forward, MedPAC will focus on managed care-based approaches, such as I-SNPs, as well as FFS-based models, including value-based purchasing, accountable care organizations, and other quality improvement initiatives. It was also noted that MedPAC will monitor the nursing home staffing mandate rule.

The outcomes of this review will culminate in a chapter in the June 2025 report to Congress. At the end of the presentation, MedPAC Commissioners had the opportunity to ask questions and discuss additional issues related to nursing home beneficiaries and potential future policies.

To contact MedPAC and give comments, accepted within 14 days of the meeting, use meetingcomments@medpac.gov