Why Nursing Homes Want To Waive Goodbye to Reform Law

For nursing homes, it’s been a tale of two weeks — and if last week celebrated the best of times, this week may signal the worst.

Monday, May 8: providers kicked off National Nursing Home Week.

Monday, May 15: the New York Times broke a front-page story about how the nation’s nursing homes fear for their survival under the health reform law.

The concerns stem from the health care overhaul’s insurance mandate, and long-term care providers are pushing for federal waivers or other protections. Pending HHS approval, the move may reveal their wisdom or — by inviting new industry scrutiny — symbolize providers’ foolishness.

Reform Law Tries To Alleviate Some Problems

Few doubt that long-term care providers face considerable challenges, partly because their patients have so many health care needs. Poor, elderly patients who are eligible for both Medicaid and Medicare require particularly expensive care. They also represent an outsize chunk of the nation’s health care costs; a Kaiser Family Foundation study found federal spending on dual eligibles was $200 billion in 2005.

The Patient Protection and Affordable Care Act includes a number of reforms intended to improve long-term care, such as:

• A national, voluntary insurance program for functionally disabled people known as the Community Living Assistance Services and Supports Program, or the CLASS Act; and
• More funds for states that expand the percentage of their long-term care spending on home or community-based services.

PPACA also creates two centers — CMS’ Federal Coordinated Health Care Office to align Medicare and Medicaid initiatives, as well as the Center for Medicare and Medicaid Innovation — that have the potential to improve dual eligible cost containment.

And administrators haven’t forgotten the ongoing importance of long-term care. HHS last month announced a new initiative to help states improve delivery of care to dual-eligible patients and in-home care for the disabled.

Yet long-term care operators say that health reform has yet to make a dent in their problems. They also warn that their facilities are strapped by low Medicaid reimbursement.

The federal program currently covers about two out of every three nursing home patients, and an industry-backed study reported that nursing homes lose more than $17 per Medicaid beneficiary per day because of funding shortfalls. Many sector leaders say they’re further troubled by bleak Medicaid spending projections and the likelihood of future cuts.

Nursing Homes Propose a Way Out

The waiver issue came to a head because long-term care operators are extremely exposed to the individual mandate.

Under PPACA, organizations with at least 50 employees must provide affordable health coverage to their workers or pay a penalty beginning in 2012. According to the Times, that penalty could “easily exceed $200,000” per year for an average nursing home. About one-quarter of nursing home workers lack health insurance, as do roughly 37% of home health workers.

The American Health Care Association, nursing homes’ chief lobby, detailed several industry-specific provisions in the Times. According to the AHCA’s head, former Kansas Gov. Mark Parkinson (D), CMS should either:

1. Allow nursing homes more time to comply with coverage requirements;
2. Waive or reduce the penalties for financially strapped facilities; or
3. Let nursing homes take tax deductions for the penalties.

Advocates Blame the Profit Motive

Underscoring the waiver request is that nursing homes, along with the rest of the long-term care sector, have a disproportionately large impact on the nation’s health care and economy.

The long-term care industry is now the nation’s 10th largest employer, responsible for more than 3.2 million jobs, up from 1.8 million jobs a decade ago. Long-term care facilities directly employ more than 250,000 workers in California — with a district-by-district breakdown of their economic impact available here — and the state has the most nursing facilities in the nation.

But if business is booming, why can’t the industry cover its employees’ health?

Some say that long-term care is overly guided by its profit motive. Altogether, there are about 15,700 nursing homes across the nation, and roughly two-thirds are for-profit. (For comparison’s sake, fewer than one-third of U.S. hospitals are for-profit.)

A 2010 California Watch investigation found that hundreds of California nursing homes cut staff or reduced wages despite a 2004 state law that was intended to boost nursing home wages and increase staffing levels.

Yet the industry suggests that many organizations are just scraping by. Thirty-seven states — including California — have instituted taxes on nursing facilities in hopes of gaining additional Medicaid funds for their long-term care providers, who say that the bonus federal dollars are essential to operations.

Critical Reaction May Shape Longer-Term Decision

While many long-term care leaders would prefer to offer health coverage to employees, they say it’s simply not feasible. According to the administrator of one Oklahoma nursing home — which does not offer health coverage to its employees — “We could not provide health insurance to our employees and still be able to pay all our bills and make the payroll.”

But others argue that nursing homes must do more.

Charlene Harrington, a professor at the School of Nursing at UC-San Francisco, contended that it is “scandalous to have nursing home employees taking care of people when they themselves lack coverage and go without care.”

Harrington added that employees with health coverage would be more likely to receive treatment for illnesses and occupational injuries, ensuring that they would pass fewer infections to residents and provide better care.

Meanwhile, Neil Trautwein, a vice president at the National Retail Federation, said that nursing homes’ reported request “reaches new heights of chutzpah,” given that long-term care providers lobbied for the health reform law.

According to CQ HealthBeat, Trautwein also argued that the nursing-home industry doesn’t deserve a special carve out. Trautwein said that if nursing home employees are deemed exempt, “why not retailers, chain restaurants — in fact, all employers on down the line?”

We’ll see if long-term care providers back off their stance, as critical reaction continues to build this week to nursing homes’ reported proposal. Meanwhile, here’s a look at other stories in health reform.

Challenges in Rolling Out Reform

• U.S. health policy leaders might be hesitant to become a member of the Independent Payment Advisory Board, which was created under the federal health reform law to make recommendations on reducing Medicare. IPAB members would have to leave their current jobs to avoid conflicts of interest and would need to be willing to serve a full six-year term. Jonathan Gruber — a health economist at the Massachusetts Institute of Technology — said the commitment would “effectively require giving up an academic career,” which might not interest many experts (Nather, Politico, 5/14).
• Accountable care organizations’ start-up and first-year expenses will cost six to 14 times more than federal officials originally estimated, according to a recent study by the American Hospital Association. The federal health reform law requires federal health programs to begin contracting with ACOs starting in January 2012. According to AHA’s findings, implementing successful ACOs will cost between $11.6 million and $26.1 million, depending on the size of the hospital or hospital system taking part in the organization. In comparison, CMS estimated a cost of $1.8 million in its proposed ACO rule (Daly, Modern Healthcare, 5/14).
• In related news, 10 physician groups that participated in an ACO demonstration project recently said that the proposed rule for the organizations carries too much financial risk. Geisinger Clinic, Marshfield Clinic, Dartmouth-Hitchcock Clinic and other physician groups said they have “serious reservations about the economics and the complexity” of ACOs under the proposed rule. They groups noted that they would not participate in the ACO program if no changes are made. Last week, the American Medical Group Association also criticized the proposed rule, calling it “overly burdensome” and “too difficult to achieve” (Evans, Modern Healthcare, 5/13).
• Comparative effectiveness research initiatives that are outlined in the federal health reform law could reduce the level of investment in pharmaceutical research and raise the cost of developing new treatments, according to a report from the Center for Medicine in the Public Interest. According to CMPI, comparative effectiveness research initiatives could cause pharmaceutical research and spending on innovation development to decrease by $32 billion over a decade. The report also states that comparative effectiveness research could cause economic activity to fall by $4 trillion (Healthcare Finance News, 5/12).

On the Hill

• Members of the Senate Health, Education, Labor and Pensions Subcommittee on Primary Health and Aging recently debated whether implementation of the federal health reform law would increase the use of emergency departments. Although the overhaul included increased funding for community health centers as a means of easing ED crowding, lawmakers are concerned that individuals might continue to use hospitals for nonurgent care. Debra Draper — director of health care at the Government Accountability Office — said that community health centers are helping to divert ED use by educating patients about services provided at the centers (Norman, CQ HealthBeat, 5/11).
• Sen. Bernard Sanders (I-Vt.) has introduced a measure (S 915) that would require all states to establish single-payer health care systems beginning in 2013, and Rep. Jim McDermott (D-Wash.) has introduced a companion bill (HR 1200) in the House. The measure would do away with some of the biggest changes required by the federal health reform law, including the creation of state-based health insurance exchanges. It is unlikely that the bill will become law, but the measure has received support from National Nurses United, the California Nurses Association, AFL-CIO and the International Federation of Professional and Technical Engineers (Reichard, CQ HealthBeat, 5/11).
• Last week, the House Energy and Commerce Committee voted 30-20 to approve a bill (HR 5) that would cap pain and suffering awards in medical malpractice lawsuits. The bill, sponsored by Rep. Phil Gingrey (R-Ga.), would cap noneconomic damages at $250,000 and protect pharmaceutical and device companies from facing punitive damages on government-approved products that later harm patients. The bill is part of an effort by House Republicans to replace the federal health reform law. It is expected to pass in the House but not the Democrat-controlled Senate (Attias, CQ Today, 5/11).

Administration Actions

• In April, HHS granted 204 waivers that exempt certain health plans from coverage-level mandates in the federal health reform law, bringing the total number of plans that have received the exemption to 1,372. The waivers have been granted to employers that offer low-cost health plans, or “mini-med” plans, and provide a one-year exemption from a provision in the reform law that prohibits caps on health benefits (Pecquet, “Healthwatch,” The Hill, 5/13).
• In related news, HHS has granted temporary waivers to New Hampshire and Nevada to exempt the states from new medical-loss ratio regulations in the health reform law. The regulation requires insurers to spend at least 80% or 85% of their premium dollars on direct medical costs. Under the waiver for New Hampshire, the state will be allowed to gradually transition the state’s insurers to the mandated medical-loss ratio over the next three years. In Nevada, HHS granted a one-year adjustment to the medical-loss ratio rules, allowing insurers in the state to spend 75% of their premiums on direct medical costs (Baker, “Healthwatch,” The Hill, 5/13).

In the States

• Minnesota is struggling to develop the state-based health insurance exchange mandated by the federal health reform law. Minnesota Republicans are feeling pressure to refuse to implement the exchange and hope that the U.S. Supreme Court eventually rules the overhaul unconstitutional. Meanwhile, Gov. Mark Dayton (D) — who supports the reform law — could offer his own proposal for an exchange. Republicans are concerned about what an exchange implemented by Dayton would include, but also are worried that the state would get a plan from the federal government if it does not create its own exchange (Gugliotta, Kaiser Health News/Washington Post, 5/16).
• Last week, Washington Gov. Chris Gregoire (D) signed into law three of the measures to help the state comply with the federal health reform law: a bill (SSB 5445) to create the state’s health insurance exchange; a bill (ESSB 5122) to extend insurance coverage to children younger than the age of 26, remove lifetime benefit maximums and prevent insurance companies from denying coverage to people younger than age 19 because of pre-existing health conditions; and a bill (ESSB 5371) to provide an open enrollment period for residents younger than age 19 to purchase insurance (Barr, Modern Healthcare, 5/12).

On the Campaign Trail

• On Monday, GOP presidential candidate and former House Speaker Newt Gingrich (R) sought to clarify comments he made over the weekend on NBC’s “Meet the Press” that some observers interpreted as support for the individual mandate provision in the federal health reform law. In a video on his website, Gingrich said, “I am completely opposed to the ObamaCare mandate on individuals,” adding that he believes “it is fundamentally wrong and … unconstitutional” (O’Brien, “Ballot Box,” The Hill, 5/16).

In the Courts

• Two of the three judges from the Sixth U.S. Circuit Court of Appeals in Cincinnati who will hear a Michigan lawsuit on the constitutionality of the federal health reform law were nominated by Republican presidents. In the case — filed by the Thomas More Law Center in Ann Arbor, Mich. — a U.S. district court judge declared the law constitutional, prompting the center to appeal the ruling. The judges who will hear the case on June 1 are: Circuit Judge Boyce Martin, who was appointed by President Carter; Circuit Judge Jeffrey Sutton, who was appointed by President George W. Bush; and U.S. District Judge James Graham, who was appointed by President Reagan (Norman, CQ HealthBeat, 5/11).