When President Trump took office, his desire to cut Medicaid and entitlement spending was no secret.

In 2017, he led Republican efforts to repeal and replace the Affordable Care Act. Concerns from moderate House Republicans about deep cuts to Medicaid ultimately helped torpedo the effort — but not before alarm bells sounded in the long-term care community.

More recently, the administration has translated that legislative push to executive action. And it appears to have doubled down on its intent to restrict spending for this state-federal program that pays for a majority of long-term services and supports (LTSS) and covers more than 6 in 10 (62%) nursing home residents in the United States. Several recent proposals, rules and guidances directly or indirectly affect access and eligibility requirements.

While previous administrations have gone after Medicaid spending and capitulated, that is little consolation to current long-term care stakeholders and longtime observers. They wonder if this time the end result might be different for operators, given the administration’s aggressive stance and other factors.

“Up until this month [March], the administration has looked serious and has signaled that they wouldn’t back down,” observes Dan Mendelson, CEO of consulting firm Avalere Health. “Although now with hospitals heroically addressing COVID-19,  it’s possible that the administration reverses course so as not to rock the boat for providers.” 

MFAR outcry

Prior to the coronavirus outbreak, long-term care providers were not taking the recent string of executive moves lightly. 

Drawing the most scorn was the proposed Medicaid Fiscal Accountability Rule, which the administration proposed on Nov. 18 as part of a strategy to promote transparency and shore up Medicaid program integrity. Both major nursing home associations have firmly called on the Centers for Medicare & Medicaid Services to withdraw the rule.

The American Health Care Association says this executive action could cut up to $50 billion nationally from the Medicaid program each year and hurt access to care for 75 million Americans.  

“It has the most direct and/or indirect impact on skilled nursing facilities,” says Mike Cheek, senior vice president for reimbursement policy at AHCA.

The proposed rule addresses the financing mechanisms that states use to draw down additional federal Medicaid funding, such as provider taxes, intergovernmental transfers (IGTs) and supplemental payments. Among its aims: It would establish new reporting related to supplemental payments to Medicaid providers and upper payment limits (UPL) on what Medicaid can reimburse providers. It also would make changes to the rules of supplemental payment and UPL arrangements, and changes to financing the non-federal share of Medicaid with new requirements and reviews of state financing mechanisms.

The most direct impact on SNFs, according to Cheek, would occur in 28 states that use SNF provider taxes to help draw a bigger federal Medicaid match. The rule’s IGT implications would most directly affect three states: Indiana, Texas and Utah. 

Says Cheek: “In terms of the indirect impact on SNFs, virtually all states will experience reduced federal matching funds and, therefore, create Medicaid budgetary pressure due to some provider-type supplemental payment programs such as for hospitals and Medicaid-managed care plans.” 

Brendan Flinn, director of Medicaid and home- and community-based services policy for LeadingAge, agrees that MFAR is negative for long-term care. 

The rule’s proposed changes “could seriously reduce federal funding available to states, and there’s no way for states to make ends meet in that environment without making cuts to Medicaid LTSS programs,” he adds, noting that the cuts could occur in rates, eligibility or both.  

Here we go again

To be fair, few truly embrace the legal loopholes states employ to increase Medicaid share; CMS has called them“state financing gimmicks.” 

But David Grabowski, a professor of health care policy in the Department of Health Care Policy at Harvard Medical School, says these mechanisms are merely a symptom of a bigger problem.

“I’m not a huge defender of the provider tax, but I’m a defender of we need to increase Medicaid,” he says. “I’m a believer in we get what we pay for, and a lot of problems can be traced to underfunding Medicaid.”

CMS Administrator Seema Verma argues in a Feb. 12 blog post that the proposed rule is in the name of program integrity: “For many years, Congress and a growing chorus of oversight agencies like the Government Accountability Office, the HHS Office of the Inspector General, and the Medicaid and CHIP Payment and Access Commission have called for CMS to strengthen its oversight of Medicaid supplemental payments. The Trump administration is finally taking action.”

As she suggests, the Trump administration is not the first to seek to eliminate the financing mechanisms targeted by the rule. The Bush administration was the last administration to try to promulgate regulations in this area, according to Cheek.

Prior to the onset of the coronavirus, what was in danger of affecting the outcome this time around was the lack of unity among the governors, Cheek points out.

The governors behind the scenes were messaging to their delegations about the rule but were not as organized as 2006, “when it was a full-court press on the Hill to block this,” Cheek notes. Without a strong show of support at the state level, the outcome could bode badly for the field and, ultimately, seniors.

A ‘healthy’ opportunity?

Another executive action that has elicited providers’ scorn is the Healthy Adult Opportunity initiative. Unveiled on Jan. 30, it allows for states to apply for block grant waivers. These new waivers allow states to establish a block grant waiver for adults ages 19 to 64 enrolled in Medicaid.

Not a rule, this guidance allows for such waivers at the option of the individual states. There is no requirement that a state adopt a block grant waiver. Still, the guidance has caused ripples of worry across long-term care.

Providers’ key concern: CMS stated that states have the potential to share in savings that result from these waivers and can use those savings to reinvest in their Medicaid programs. It is unlikely, however, that any block grant waiver would result in significant funds available for such reinvestment. 

Verma argues in a Washington Post op-ed in February that the outrage has been an overreaction. “Let me be clear: Fearmongering notwithstanding, HAO does not cut Medicaid funding,” she writes. 

A central problem with the block grant concept is the money is fixed. If a state wants to make a major investment in innovation, for example, the federal government will not be sharing in that, Grabowski says. He points to an even scarier scenario: In the event of a disaster, such as the coronavirus, under the block grant program, the feds would not be sharing in those resources.

“I worry a little bit about placing that burden entirely on the state when it’s such a huge public health concern,” he says.

Other potential landmines

There are other measures that try to reduce funding. Several take a stab at Medicaid through eligibility. The latest blow to the program is Trump’s 2021 budget, unveiled in early February, which would cut nearly a trillion dollars from Medicaid over 10 years and include work requirements.

And lest people think none of these rules have a chance at taking effect, consider the so-called Public Charge rule, which went live on Feb. 24. It aims to reduce the number of people eligible for green cards and other visas, basing their status on whether they are dependent on government benefits or likely to be in the future. 

This concerted effort to change work requirements gives industry observers pause. “It shows that it’s more than just what happened in the past,” Mendelson says. “It’s a significant and ongoing effort to change the shape of the program.”

And neither he nor Grabowski buys the idea that the measures aim to reduce federal spending.

“I don’t think anyone is trying to balance the budget,” Mendelson says. “It’s a philosophical desire to rein in Medicaid spending by focusing on individuals to make sure the rules don’t allow immigrants and others who aren’t eligible to access services.”