Staffing mandate could shift big costs to states — but they may not know it yet

A federal staffing mandate would likely leave states struggling with how to afford increased costs among their operators, a threat that could force wide scale changes in how state Medicaid systems pay providers for skilled nursing care.

It might also convert some state budget officials into opponents of the mandate, once they see more clearly the financial implications.

So warned Martin Allen, senior vice president of reimbursement policy for the American Health Care Association, last week at the AHCA Convention & Expo in Denver.

State leaders can’t wait to make changes until the proposed regulations kick in at least two years from now, depending on when the rule is finalized, Allen added. They need some way to “ramp up” so that providers have some funding in their pockets as mandated nurse hiring begins happening in earnest.

“If you think about the timelines that you have in an old-fashioned, cost-based system, you’re going to have a period of time where the cost has to be spent to make it into the rate,” Allen told members during a session on Medicaid reimbursement changes. 

“In a normal environment, you could have a two-to-three-year window to get this included,” he added. “That isn’t possible. We need to be engaging with the data … and the state reps … to begin advocating for a statewide amendment or perhaps a waiver in order to get this funded prospectively.”

No two states would approach the increased expense the same way, considering that among the 50 different Medicaid systems, some already pay prospectively and others pay retrospectively, while still others have state caps on annual spending increases.

Allen said the importance of addressing those questions at the state level now “is tremendous.” But in many places, there may be little realization yet of what could be afoot with billions of new expenses expected for providers.

‘This is coming’

With so much happening at the federal level to impact Medicaid programs, the staffing rule’s possible financial implications on state funding hasn’t even landed on the radar yet, added Grant Beebe, AHCA’s new director of Medicaid policy. 

“Unwinding is the predominant theme from an operations perspective, 30,000 feet and looking out at the topography, for state Medicaid directors and their senior staff,” he said. “But this is coming. This is certainly a conversation that is evolving and because of the uncertainty and the impact it has for our community, lean into that partnership [with Medicaid agencies] … and let them know the concern.”

Even divided across 50 states, the staffing rule’s $4 billion annual cost estimated by the Centers for Medicare & Medicaid Services would add up significantly for states that base provider payments on cost reporting. Other analyses have projected the costs at $6 billion or $7.1 billion annually.

“What’s the implication of $6 billion annually on patient days around the country?” Allen asked. “More specifically, the state executives are going to be looking at that building by building to … come up with what the reasonable, or I should say necessary, approach needs to be with state Medicaid directors.”

Adding to the complexity: Upper payment limits require average Medicaid payments for services to fall below average Medicare rates for the same services. That could stand in the way of efforts to increase Medicaid support for staffing. When calculating new rates based on cost reports that include significantly higher staffing costs, states may find it harder to stay within those limits.

In fact, given a true picture of the costs that could be shifting to states, state budget officials and Medicaid directors may find themselves compelled to join with AHCA and others in arguing against the staffing mandate’s unfunded hiring requirements.

“Do they know about this? Are they aware of the cost pressure they may be facing in two years? Probably not,” Allen said.

AHCA in recent months has shifted some of its focus and financial resources to provide more help to states as they battle for more appropriate Medicaid reimbursement from long-reluctant states. Beebe said convening shared resources and innovating technical support to forge more functional partnerships during budget negotiations will remain a focus for the association.