Biden administration considering requirement for Medicaid to primarily fund direct care in nursing homes

The Biden administration may look to require nursing homes to spend a majority of their Medicaid funding on direct care for residents and place a limit on using funds for operations, maintenance, capital improvements or profits, according to Kaiser Health News.

The policy has not yet been officially proposed and would be the first time the federal government requires the majority of Medicaid funds to be spent on resident care.

CMS requested public comments on the potential requirement in its proposed update of nursing home payment policies for 2023. 

In the request, CMS asked questions that included, "Is there evidence that resources that could be spent on staffing are instead being used on expenses that are not necessary to quality patient care?"

CMS Deputy Administrator Dan Tsai told KHN that sufficient staffing is needed to guarantee quality care.

"We want to make sure that the dollars get to the direct care workforce to ensure high-quality care," he said.

Three states already have a care spending requirement: Massachusetts, New Jersey and New York. 

In April, the National Academies of Sciences, Engineering and Medicine endorsed the strategy. Nursing home industry groups are opposed and some in New York, including half the state's nursing homes, have filed lawsuits to block the requirement.

The requirement, however, has become normal for payers. The ACA's "medical loss ratio" provision means that payers are required to spend at least 80 percent of premiums on member care. A maximum of 20 percent can go toward administrative costs, executive salaries, advertising and profits. Those who exceed the difference must pay the difference back to their members.

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