The efforts to stem this plague take their own toll. Facilities are in all-out lockdown. Visitors are banned, and communal dining and events are canceled. There are reports of staff abandoning facilities when covid-19 cases appear. Decades of reform to improve nursing homes have been reversed in weeks, and it’s unclear when circumstances will improve.
As awful as these stories are, the situation could still deteriorate further, from terrible to unimaginable. The age and fragile health of their residents are not nursing facilities’ only vulnerabilities. The industry is potentially facing a financial catastrophe that could prevent any meaningful attempt to beat back covid-19.
Nursing homes survive on a tenuous business model built around two very different groups of patients. One group is “short-stay,” or “post-acute” patients who come to the facilities for rehabilitation and physical therapy after being released from treatment at a hospital for conditions such as a stroke or a broken hip. Although these transient residents use only 13 percent of nursing facility beds, they are quite lucrative. Medicare pays nursing homes, on average, far more than it costs the facilities to provide for these services.
The much larger, and less profitable, group of residents comes to these facilities for long-term care; they largely fill the other 87 percent of beds and typically live in a nursing home for the remainder of their lives. The majority of payments for the care of long-term residents comes from Medicaid, but it’s not enough. On average, nursing homes actually lose money taking care of them.
To stay afloat, nursing homes must to take enough high-revenue short-stay Medicare patients to offset the low-revenue long-stay Medicaid residents. Otherwise, they will go out of business.
The covid-19 pandemic not only threatens the lives of nursing home residents, but also it wipes out the indispensable Medicare revenue that supports their business model. To prevent coronavirus infections, many homes are not accepting new short-stay patients, in part because inadequate testing makes it impossible to know whether those patients carry the virus. And the cash cow procedures that lead to profitable short-stay care such as hip and knee replacements are canceled to keep hospital capacity available to deal with the pandemic.
As with many other policy issues, covid-19 has revealed the fragility of nursing homes’ business model and our underinvestment in high-quality long-term care. It’s not too late to mitigate the damage, but it will take real political will to do so.
An effort to bail out nursing homes by including them in stimulus packages might help in the short term, but it is unlikely to create real change.
The more substantial policy response would be to reform the fragmented payment system where Medicare overpays for short-stayers and Medicaid underpays for long-stayers. One option is to expand health insurance programs for nursing home residents that combine Medicare and Medicaid coverage into one plan. Many programs like this are active, but they are held back by a lack of coordination between the different state Medicaid programs and the federal government. A more dramatic proposal would be to “federalize” Medicaid for nursing home residents. This could eliminate inequities in Medicaid payment rates across states and correct the imbalance that punishes nursing homes in poorer areas with many Medicaid patients, such as ones that have recently been closing in rural areas.
Regardless of the mechanism, paying a fair price for essential long-term care could increase facilities’ abilities to improve their staffing ratios and encourage better quality of care. This puts all residents on equal footing regardless of where they live — or why they are at the facilities in the first place.
Given the ongoing acrimony around simply expanding Medicaid coverage, much less federalizing it for nursing homes, prospects for comprehensive payment reform are dim. Recent proposals have actually moved to cut Medicaid, which would further decimate nursing homes. The tragic reality is that these most vulnerable Americans, many of whom cannot advocate for themselves, are victims of the political stalemate in long-term care policy. They’re getting the nursing home system that the rest of us were willing to pay for. And our failure to provide what they deserve leaves all of us more vulnerable.