By Fenit Nirappil – MARIETTA, Ga. – Traversing the halls of his nursing home in a wheelchair, Owen Allen listened to a visiting guitarist play “Sweet Caroline,” then chipped away at a thousand-piece puzzle in the sunroom.
Since muscular dystrophy struck and his legs started giving out, the 64-year-old Atlanta native relies on Medicaid to keep him in the 130-bed home where staff help him pull weights to regain his strength.
As a House Republican committee examines steep cuts to Medicaid at a pivotal hearing Tuesday, nursing home residents like Allen are among the less well-known recipients who could be affected – especially if lawmakers upend an unusual, long-standing tax arrangement enjoyed by most nursing homes.
The “provider tax” remains one of the top targets for drastically reducing federal spending to achieve major budget cuts. House Republicans apparently are backing away from other consequential and far-reaching proposals for Medicaid.
Several lawmakers unveiled language late Sunday that would restrict the ability of state officials to tax health care providers such as nursing homes and return the revenue to them as higher payments for Medicaid services. This maneuver allows states to collect more in federal matching funds.
But the practice has come under fire as a shady accounting move.
Nursing home officials and senior advocates counter that the system is essential to the way the United States finances long-term care for many older Americans – and the ability of people like Allen to access it.
The proposal, which the House Energy and Commerce Committee will consider Tuesday, is politically fraught because seniors are among the voters most likely to turn out in elections.
While seniors typically rely on Medicare for their medical expenses and the cost of hospitalization, many must turn to Medicaid to cover long-term care if they run out of other funds, such as costly long-term care insurance or savings.
Medicaid paid $255 billion for long-term care services in 2022, including $59 billion for stays ininstitutional facilities, a category that includes nursing homes, according to KFF, a health policy organization. More than 60 percent of nursing home stays nationwide are financed through Medicaid.
“Their coverage will be at risk,” said Katie Sloan Smith, president and chief executive of LeadingAge, a Washington lobbying association for operators of nonprofit senior-care facilities. “Either the home itself will have to make up for that loss in some way or they will simply have to say: ‘We can no longer support people on Medicaid’ and close those beds.”
Michael Cannon, director of health policy studies at the libertarian Cato Institute, said the warnings from nursing homes are overwrought. Public funds shouldn’t be the default payment for elder care, he said.
The existing system dissuades people with financial means from saving for nursing home care and undercuts the incentive for more affordable long-term insurance options to enter the market, Cannon said.
“This is a completely selfish shortsighted pleading by an inefficient industry that government has propped up for decades,” Cannon said. “And it’s now begging Congress to please keep putting future generations in debt to pay high-cost, low-quality providers.”
Medicaid generally pays for a semiprivate room, the median annual cost of which was $111,325, according to Genworth’s annual cost-of-care survey.
Nursing home groups say Medicaid reimbursements are already too low to cover the costs of providing care – 82 cents on the dollar, according to federal research-and further cuts would be devastating to an industry facing intense financial pressure.
Nearly 9 percent of nursing homes – 1,459 – closed between 2011 and 2021, according to a 2023 study.
Industry groups have embraced another Medicaid savings proposal released Sunday, which would block a regulation proposed during the Biden administration to establish minimum staffing standards for nursing homes. They said the regulation was unworkable and would accelerate closures.
House Speaker Mike Johnson (R-Louisiana) and his colleagues may target eligibility and work requirements to reduce Medicaid costs. Johnson recently claimed that the program allows able-bodied young men to play video games all day and receive health insurance.
But Medicaid proponents say that when it comes to the program’s elder care payments, people like Allen, who worked installing glass in large buildings such as the Georgia Dome, are more typical.
“These are not folks who did not work or have been a burden of society,” said Deke Cateau, chief executive of Georgia’s nonprofit nursing home network A.G. Rhodes, which houses Allen in its Marietta facility. “They have worked for most of their lifetime, and now they are at a stage where we need to take care of them, where our society needs to take care of them.”
Allen’s story is familiar among older adults. Medicare paid for his rehabilitation when he first came to the home to receive care for his ailing legs. Then Medicaid kicked in when it was time for him to live there. He’s counting on Medicaid to pay next time he upgrades his wheelchair, which he compared to the price of a used car.
“Medicaid helps me out completely,” Allen said. “I don’t know what I’d do if I had to live somewhere else.”
Cateau said between 50 percent and 78 percent of residents in his homes use Medicaid. The rates for private rooms in the Marietta facility range from $375 to $400 daily. The facility’s nonprofit funding helps cover the difference from the usual semiprivate rate for Medicaid beneficiaries.
If the public insurance program is gutted, he said his nonprofit would probably turn away more poor seniors and cut offerings such as music therapy and outings to pick strawberries and attend Atlanta Braves games.
The tax maneuver that Georgia and nearly every other state use to help finance these operations hangs in the balance as lawmakers consider Tuesday how to achieve $880 billion in cuts over a decade, which analysts say is not possible without cutting Medicaid.
Under Medicaid’s federal-state partnership, the federal government provides the bulk of the funding and states decide which services to cover. States must reimburse nursing home stays under federal law, but they can alter eligibility rules and do not have to pay for home- and community-based alternatives.
The provider tax has become an entrenched way for states to finance their Medicaid programs.
The language released by House Republicans on Sunday would freeze current state provider tax rates and prevent the establishment of new ones.
“Because provider taxes are an important mechanism for state Medicaid programs, the inability to assess or modify provider taxes will limit their ability to pay for Medicaid coverage,” said Eric Carlson of Justice in Aging,director of long-term services and supportsfor the organization focused on senior poverty.
Critics of the provider tax say it’s tantamount to accounting fraud.
“Provider taxes are clearly corrupt,” Cannon said. “They are a shell game that allows states to take greater advantages of taxpayers in other states.”
Other leading proposals for Medicaid savings, such as imposing work requirements for able-bodied adults, would have little direct effect on nursing home residents.
The proposal to block the minimum staffing standard for nursing homes comes as the rule also faces a legal challenge. Industry officials say those requirements would devastate their business model because recruiting and retraining workers is challenging, even with existing reimbursement levels.
“In New York City you can find more workers. In a rural area, you cannot,” said Lisa Haglund, chief executive of Heritage Ministries, which operates senior-care facilities in rural New York.
She said her facilities already lose at least$90 a day caring for each Medicaid patient under existing state reimbursements. Mandatory staffing levels would compound those losses through daily fines.
But advocates for residents say the staffing rules protect patient safety.
“The standard we have now is quite trivial,” said Toby Edelman, a senior policy attorney for the Center for Medicare Advocacy. “The very significant amount of care they need requires way more staff than many facilities provide.”
The stakes for elder care with Medicaid cutsgo beyond traditional nursing homes.
Through state waiver programs, Medicaid can also pay for seniors to stay closer to their communities without going into nursing homes, including home visits, day programs or smaller group homes. Medicaid pays far more for these kind of programs, nearly $200 billion, than traditional institutional stays, according to KFF.
Nadine Johnson operates a network of personal-care homes in Georgia, a model that allows seniors to live in family-style housing almost indistinguishable from other homes in a subdivision. She said the math makes it possible for residents who receive about $1,000 per month in Social Security benefits to live in shared rooms with a minimum rate of $2,000 a month. Medicaid pays the difference between their income and the cost, while allowing them keep a small amount of money for personal spending.
“You’re basically helping this person remain in the community and live with dignity,” Johnson said.
When the House first passed a budget framework that essentially required Medicaid cuts, Johnson thought about her conversation with the daughter of a recently deceased patient on Medicaid who was relieved she no longer had to worry about possible cuts because her mom is no longer alive.
“Like, what? That is inhumane,” Johnson said. “They still passed the vote. Nobody listened.”
Grace O’Neal, an 80-year-old former emergency medicine technician, has lived in one of Johnson’s homes for four years, paying with Medicaid funds. She doesn’t want to bother her 50-year-old son butdoesn’t like to cook for herself, wary of fire because of burns she suffered as a child.
“It would be bad news if it got cut,” O’Neal said. “How would they take care of us?
