Lawmakers must first tackle “relatively low” Medicaid reimbursement rates for nursing homes if they want to prod providers into hiring more staff, adopting more home-like models of care and improving quality. 

“If the policy goals are to improve nursing home staffing and make the facilities more home-like, the first step for policymakers is to change how nursing homes are paid and regulated,” David Grabwoski, Ph.D., a health care policy professor at Harvard Medical School, wrote in an article published Friday in Innovation in Aging.

“Given public payers provide the majority of nursing home revenue, public dollars will be needed to fund these improvements,” he added. 

Grabowski argued that poor staffing and lack of home-like models have persisted in the nursing home sector for decades due to them being largely reimbursed by government payers. He found that while Medicare margins are typically in the double-digits, data shows that Medicaid (which is the dominant payer of nursing home services) reimbursements on average are below the cost of care. 

That makes it challenging for providers to invest in improved care delivery if they care for mostly Medicaid residents, he said. 

He added that raising the reimbursement rates to match the cost of care would be an “important step towards financing meaningful reform.” Increased reimbursements should also be tied to more accountability and mandated spending on direct care. 

“These facilities cannot simply raise private prices to hire more staff or raise the capital to build a small-house model of care,” Grabwoski wrote. “Some of the shortfall can likely be recouped through increased accountability of existing government payments, but it is unclear whether the transformative changes highlighted in this piece — large increases in staffing and the construction of small-home, resident-directed models — can be achieved via accountability alone.” 

Grabowski added policymakers must also consider that nursing homes are just one part of the larger long-term care system and the overarching goal is to “ensure that individuals have access to the services that they need in the setting that they prefer.” 

“There will always be some individuals that need nursing home care, but many individuals will prefer home- and community-based services (HCBS),” he concluded. “A key goal is the expansion of Medicaid HCBS such that individuals can access services in the setting they prefer.”