Nursing home expenditures rank as the second-largest category of Medicaid spending only falling behind hospital services. In 2017, Medicaid was the primary funding source for 62% of residents of nursing homes nationwide. MACPAC uses a three-part framework to evaluate payment policy:

  1. Economy: What is spent on provider payments
  2. Access and quality: What is obtained as a result of the payment
  3. Efficiency: A measure that compares what is spend to what is obtained

MACPAC has reviewed Medicaid fee-for-service payment rates and methodology as of July 2019, which will update their 50 state compendium from 2014. They note that there has been little change in nursing home payment methods. An update is expected later this fall. It should be noted that the compendium does not include information on payments made through managed Medicaid programs.

Commissioners began their deliberations focusing on the validity and utility of comparing Medicare and Medicaid payment for nursing homes noting the difference in residents’ needs and the benefit design under each program. Questions that were raised included:

  • How do the reimbursement rates and methodology align with the incentives that payment policy encourages?
  • Are there Medicaid payment policy changes that can improve the lower quality ratings of nursing homes that serve large numbers of residents with Medicaid coverage?
  • What is the role of Medicaid payment policy in nursing home closures?
  • How can value-based incentives for Medicaid reimbursement be designed where the savings that typically accrue to Medicare get attributed to Medicaid?

Lastly, questions around supplemental payments as well as the use of provider taxes were raised particularly with the Medicare shift to the Patient-Driven Payment Model (PDPM) and the potential ripple effects on Medicaid payment methods. MACPAC staff intend on completing future work in the area which will likely include consultation with providers, including LeadingAge and its members.