Existential threats to nursing home care seem immediate. 

To quickly enumerate: a lack of Medicaid support in most states; a workforce shortage fueled by “Great Resignation” effects of the COVID-19 pandemic; the decades-long congressional impasse over immigration, and the lowest jobless rate in over a half-century; an imminent federal staffing mandate that ignores the foregoing dynamics; and, finally, inflation, which remains high despite several Federal Reserve interest rate hikes intended to curb it.

Yet a sleeper threat hides in plain sight. It is Medicare Advantage (MA), which soon will pass a tipping point where it eclipses fee-for-service (FFS) Medicare in enrollment. Through overpayments, the federal government has effectively created unbeatable competition to the FFS model, which President Lyndon Johnson signed into existence in 1965. But at what cost to consumers and providers? 

As the New York Times reported last spring, “every year, tens of thousands of people enrolled in private Medicare Advantage plans are denied necessary care that should be covered under the program, federal investigators concluded in a report[.]” 

During the August 2021 surge of the COVID-19 Delta variant, the American Medical Rehabilitation Providers Association alleged MA plans used prior authorization to deny over half of admissions to inpatient rehabilitation facilities. For those beneficiaries, the plans deign to provide coverage for “risk-score gaming” to make them seem sicker, and boost payments, is, in the opinion of experts, a key strategy.

The federal government, by its own admission, recently surrendered claim to an estimated “$2 billion in improper payments” to MA insurers, though it’s going after every nickel in unintentional overpayments to nursing homes from the transition to the Patient Driven Payment Model. 

As a former insurance regulator, I find this unsurprising. Look at the revolving door between the Centers for Medicare & Medicaid Services and the health insurance industry. Like so many state insurance regulators I knew, the dream is to monetize your regulatory experience, and being too heavy-handed a regulator will not endear you to prospective employers.

Thus, in the face of a powerful insurance lobby, who will stick up for MA beneficiaries and those providing their care? It is easier to identify who will not.

AARP, the marketing juggernaut and self-styled voice for seniors, pushed the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, which rebranded the Medicare Part C plans in effect since the 1997 Balanced Budget Act as “Medicare Advantage” – an advantage lost on the late Senator Ted Kennedy, who was reported complaining, presciently, that “Congress would provide lavish subsidies to private health plans, giving them an unfair advantage in competition with the government-run Medicare program.” In 2007, AARP entered a deal with the UnitedHealthcareGroup to promote its insurance products.

While nursing home providers are begrudged making any money, with perhaps only break-even solvency acceptable to many policymakers, it’s fine for health insurance executives to make fantastical sums of money – even though, as fiscal intermediaries, they provide no actual healthcare. 

Thus, the CEO of UnitedHealthGroup reportedly earned over $20 million in 2022, a robust 13% pay raise from the prior year, and the company itself reported a 15% increase in year-over-year revenue in its first quarter report this year. 

Such figures compare favorably to an all-payer margin for nursing home care that would have been -1.5% in 2021, without pandemic-related funds, according to the March report of the Medicare Payment Advisory Commission known as MedPAC (even with one-time assistance, MedPAC found “40 percent of SNFs had negative total margins” in 2021). 

In that report, MedPAC acknowledged “chronically low payments from Medicaid” and, in a familiar annual complaint, stated that “Medicare payments to SNFs, financed by taxpayer contributions to the Part A Trust Fund, subsidize payments from other payers, most notably Medicaid.” However, the report cited one survey finding that “Medicare’s FFS per day payments were 25% higher than MA rates” concluding that “[t]he payment differential between MA and FFS SNF rates indicates that facilities accept lower payments to treat MA enrollees who are not much different from FFS beneficiaries.”

That is a dangerous conclusion. The fact that providers squeezed by insurers “accept” lower payments speaks to a lack of choice, not volition. And if MA becomes the only game in town, as it’s on track to becoming, the cross-subsidization cushion MedPAC complains of will evaporate, and providers will be chiseled into bankruptcy by an industry whose familiar tactics are to delay, and deny, claims, and assume any risk of meager regulatory fines as the price of business. 

Brendan Williams is the president and CEO of the New Hampshire Health Care Association and author of “The Enemy Within: Medicare Advantage and The Future of U.S. Healthcare” in the Quinnipiac Health Law Journal.

The opinions expressed in McKnight’s Long-Term Care News guest submissions are the author’s and are not necessarily those of McKnight’s Long-Term Care News or its editors.