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Short-Term Bailouts Won’t Fix Nursing Homes or Medicaid Home-Based Long-Term Care

The illness and death that covid-19 has brought to older adults has created an historic opportunity for the US to rethink the way it delivers and pays for long-term care. Yet, much of the long-term care industry and even many advocates for older adults and younger people with disabilities are lobbying for short-term fixes, not real reform.  

Nursing homes and assisted living operators are looking for a government bailout and federal protection against lawsuits from residents or staff who contracted coronavirus in their facilities. They already have received such liability protection from at least 26 states.

Many advocates for older adults are just as focused on the short-term. They are pushing for a temporary increase in the federal share of Medicaid to pay for home and community-based care. This enhanced federal match similarly falls far short of solving the underlying financial challenges and delivery flaws of Medicaid’s long-term services and supports.  

Quick fixes

That is not to say that long-term care facilities don’t need help. Or that states don’t need more short-term assistance to provide Medicaid long-term services and supports.

But this passing support would leave our broken system of care effectively unchanged. It would paper over the structural flaws for a few months, or perhaps a year. But we’d be left with the same problem: The US spends massive amounts of money to provide the wrong care for older adults in the wrong place. And seniors and their families are worse off for it.

The bailouts for nursing homes could be even worse than that. Badly designed, they’d effectively reward facilities for their covid-19 failures—and discourage reform.

Nursing homes already have received about $7 billion from the federal government in direct aid, and billions more in advanced Medicare and Medicaid payments and through broad-based business relief programs such as the Paycheck Protection Program (PPP) and low-interest loans. The Trump Administration has promised another $5 billion in cash assistance, as well as new rapid testing equipment.

But the industry wants Congress to greenlight another $100 billion in cash assistance to health care providers in the next stimulus bill, with a significant amount reserved for nursing homes and assisted living facilities.

No surprise

The ask is no surprise. Many providers are in deep financial trouble. On the expense side, they face higher costs from covid-19 related testing and personal protective equipment (PPE) and higher labor costs. At the same time, revenues are taking a beating. Nursing homes are suffering from the loss of lucrative post-acute rehab and other care for patients recovering from surgery, strokes, and the like. Potential long-term care residents are reluctant to move in. Assisted living facilities and continuing care communities face many of the same problems, though some are slowly beginning to rebound after a catastrophic spring.

The main lobbying group for the industry—the American Health Care Association (AHCA) and the National Center for Assisted Living (NCAL)—released a survey of nursing home operators that reports 55 percent of facilities currently are operating at a loss, 40 percent believe they cannot remain in business for more than six months at current margins, and nearly three-quarters could not survive a year. Those results are consistent with one expert in nursing home financing who privately predicts that covid-19 will drive about half of all current operators out of business.

One of the nation’s largest nursing home companies, Genesis Healthcare Inc., warned investors on Aug. 10 that cash flow constraints mean there is  “substantial doubt about the Company’s ability to continue as a going concern.”

Moral hazard

A short-term financial bailout may keep some facilities above water for a while. But even after the covid-19 pandemic eases, facilities still will be faced with higher labor costs (severe worker shortages were driving up wages even before the pandemic). They still will be burdened with the capital costs of reconfiguring their interior space to reduce the spread of future viral infections. For instance, many likely will have to abandon arrangements where two—and even four—unrelated residents share a room.

At the same time, demand for both post-acute and long-stay care is unlikely to return to pre-covid-19 levels. Improving technology, Medicare and Medicaid payment changes, and the growth of managed care all will drive patients out of nursing homes and into home-based alternatives.

It is worse with liability protection. Sure, it might reduce short-term legal costs and keep insurance affordable for providers. But government bailouts and liability protection are a classic example of moral hazard: If you think someone else will pay for your mistakes, you likely will keep making them.

In this case, poorly designed assistance will only discourage operators from making needed changes in staffing, care protocols, and design. That, in turn, will drive away more consumers and likely result in more regulation.   

Senior living operators are not alone in their shortsightedness, however. Advocates for older adults also are aiming far too low. The National Council on Aging, for example, is advocating for a temporary increase in federal funding for Medicaid home and community-based care. The AARP doesn’t even go that far: Its legislative response to covid-19 seems primarily focused on supporting more funding for PPE and testing in nursing homes, as well as more oversight of the facilities.

These advocates for providers and consumers should know better. Short-term fixes will do nothing to repair the nation’s shattered system of caring for those with long-term care needs.

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