Montana seeks to insulate nursing homes from future financial crises

Wes Thompson, administrator of Valley View Home in northeast Montana’s Glasgow city, believes the only reasons his qualified nursing home escaped the fate of 11 nursing homes closed across the state last year are local tax revenue and luck.

Valley County, with a population of just over 7,500, has introduced nursing home support fees of about $300,000 a year for three years starting this year. And when the Hi-Line Retirement Center in neighboring Phillips County closed last year as the COVID-19 pandemic brought more stress to the nursing home industry, Valley View Home took in some of its patients.

Thompson said he sees nursing home closures on the horizon as their financial troubles continue. But lawmakers are trying to mitigate that risk with measures that will raise and set standards for Medicaid reimbursement rates that nursing homes depend on.

A study commissioned by the last legislative session found that Medicaid providers in Montana were being reimbursed at rates well below the cost of medical care. In his biennial state budget proposal to lawmakers, Republican Gov. Greg Gianforte proposed raising rates for service providers who don’t meet the study’s recommendations.

Legislators drafting the state health department’s budget included rates higher than the governor’s proposal, but still not enough for nursing homes to cover care costs. Those rates are subject to change as the state budget bill goes through a months-long legislative process, although Republican-majority lawmakers have so far rebuffed attempts by Democratic lawmakers to get full funding.

As a separate effort to ensure the long-term viability of the long-term care industry, a bipartisan bill passing through the Montana legislature, Senate Bill 296, seeks to overhaul how nursing homes and nursing homes are funded. The bill directs health officials to consider inflation, cost-of-living adjustments, and actual cost of services when setting Medicaid reimbursement rates.

SB 296, which originally heard on Feb. 17, has sparked conflicting opinions from long-term care experts about whether it’s doing enough to avoid nursing home closures.

Republican Senator Becky Beard, the author of the bill, said that while the bill arrived too late for nursing homes that have already closed, she believes it sheds light on a problem that won’t go away.

“We need to stop the attrition,” Beard said.

Sebastian Martinez Hickey, a research fellow at the Economic Policy Institute, a non-profit think tank, said nursing home staff wages were extremely low even before the pandemic. He said the focus should be on raising Medicaid reimbursement rates, in addition to inflationary factors.

“Raising the Medicaid rate for inflation will have a positive effect, but it does nothing to offset what we have experienced over the past few years,” Martinez Hickey said.

Colorado, Illinois, Massachusetts and North Carolina are among the states that have passed laws or regulations to raise the wages of nursing home staff since the start of the pandemic. Michigan, North Carolina, and Ohio introduced surcharges or one-time bonuses.

In Maine, a 2020 study looking at issues with long-term care staff found that Medicaid rates must be high enough to support direct care workers’ wages, which are at least 125% of the minimum wage, which is $13.80 USA in this state. Combined with the other goals outlined in the study, a year later there was a slight increase in the number of nursing homes and beds, improved occupancy, and trends towards a stabilization of the direct care workforce.

Rose Hughes, executive director of the Montana Health Association, which lobbies for nursing homes and the elderly, said many of the problems with elderly care come down to reimbursement rates. There isn’t enough money to hire staff, Hughes said, and even if there were, wages would still be too low to attract staff in a competitive market.

“He is trying to deal with the systemic problems that exist in the system so that in the long run the reimbursement system can be more stable,” Hughes said.

The governor’s office said Gianforte had made it clear that Montana needed to raise rates for its suppliers. Gianforte’s proposed state budget for seniors and long-term care would raise provider rates to 88% of the benchmark recommended in a state-commissioned study. Gianforte’s budget proposal is a starting point for legislators, and the drafters of the legislative budget have budgeted funding at around 90% of the benchmark rate.

“The Governor continues to work with lawmakers and welcomes their contributions to his historic investment in service provider rates,” Gianforte spokeswoman Caitlin Price said in a statement.

Democratic Rep. Mary Caferro is sponsoring a bill to fully fund Medicaid provider rates, according to the study.

“We really need to get our bill passed so that service providers get ongoing funding for predictability and stability so they can take good care of people,” Caferro said at a press briefing on Feb. 21.

But Thompson said even the reimbursement rate recommended by the study — $279 per patient per day, compared to the current $208 rate — is not high enough to cover Valley View Home’s costs. He said he would have to have a heart-to-heart talk with the institution’s board to see what could be done to keep it open if local tax collections, combined with the new rate, weren’t enough to cover operating costs.

David Trost, CEO of St. John’s United, a nursing home in Billings, said the current reimbursement rate is so low that St. John’s uses savings, grants, fundraising income and other investments to make up the difference. He said that while SB 296 considers factors to cover operating costs, it does not take into account other costs such as repairs and refurbishment.

“In addition to paying for existing operating expenses, as required by SB 296, we also need to consider funding capital improvements through some sort of loan facility to help nursing facilities improve the existing environment,” Trost said.

Another component of SB 296 aims to expand home care services through increased federal funding.

The extra money could help reduce or eliminate the waiting list for nursing homes, which now stands at about 175 people, Hughes said. This waiting list not only signals that some older people are not receiving care, but also leads to more people being sent to nursing homes when they may not need this level of care.

SB 296 also ensures that money allocated to nursing homes can only be used for nursing homes and cannot be made available to other programs within the Department of Public Health and Human Services, such as dentists, hospitals, or the Medicaid extension. The nursing home had $29 million left in its 2021 budget, which was transferred to various programs in its aged care and long-term care unit, Hughes said.

If there had been a funding guarantee in SB 296 at the time, Hughes said there might have been more money to run the nursing homes that closed last year.

Keely Larson is a KHN Fellow at UM Legislative News Service, a partnership of the University of Montana School of Journalism, the Montana Newspaper Association, and Kaiser Health News. Larson is pursuing a master’s degree in environmental and natural resource journalism from the University of Montana.

KHN (Kaiser Health News) is a national news service that produces in-depth journalism on health issues. Together with Policy Analysis and Polling, KHN is one of the three main operating programs of the KFF (Kaiser Family Foundation). KFF is a charitable non-profit organization providing health information to the nation.

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