Nursing Home Care in an Era of Increasing Scarcity: The Case of Pennsylvania

• In Event: Population Aging and COVID-19

Abstract

Across the United States, 10,000 Baby Boomers turn 65 each day. Approximately 70% of them will require long-term services and supports (LTSS) at some point in their lifetime with nearly half having substantial needs for care. Given the extensive supportive care services required, nursing homes play a crucial role for elders with such significant needs who cannot be easily cared for in community settings. Care in nursing homes is extremely costly and the largest public payer – the Medicaid program -- pays most of these costs, particularly in institutional settings.

Medicaid financing of nursing home care provides the strongest safety net for low income older adults, persons who have high-intensity LTSS needs, and consumers with exorbitant LTSS costs, many of whom have to spend down their resources to become eligible for the program. Yet, as important as this service setting is to these populations, nursing homes currently face serious threats to their financial viability. This is particularly true in the context of the COVID-19 pandemic, where the costs of caring for residents in a safe way have increased significantly, even as the ability to recoup these costs from the Medicaid program has been constrained.

The purpose of this study is to assess key demand and supply factors affecting the performance of the nursing home industry in Pennsylvania over time. It draws from several large, national data sources, including Nursing Home Compare, LTCFocus.org, the U.S. Bureaus of the Census and Labor Statistics, and Certification and Survey Provider Enhanced Reports (CASPER), as well as state-level population projections and Departments of Health and Human Services data. An aggregate database was constructed with historical data points at the facility, regional, and state level. Annual total and regional trends were examined from 2010 to 2020.

The aging of the population in the state suggests that the demand for LTSS will increase over the coming decade. Nursing homes are now serving individuals who have particularly challenging diagnoses and they are increasingly drawn from less wealthy populations. Staff hours among direct care workers have remained relatively unchanged over the last ten years, while RN hours have declined slightly. Thus, even as the population has become somewhat more medically complex, total care hours have not changed much as skilled hours have declined.

Compensation levels for the direct care workforce have remained relatively flat in nominal terms and declined in real terms, making it difficult to recruit and retain direct care workers. While certain individual quality metrics have improved, overall aggregate quality scores have declined. Constant direct care hours for more medically complex residents likely contributes to this result. It points to the need for further investment in staffing and staff training which can only come about in the context of a payment structure necessary to support it.

Medicaid has been a growing source of payment for nursing home residents, constituting a rising proportion of residents and increasing number of bed days while Medicare continues to decline as a payment source. Moreover, Medicaid rates paid to nursing homes have been declining as a percentage of private and semi-private room charges. To the extent that charges reflect underlying costs, then it is clear that over time, reimbursements are not keeping up with the costs of serving this population. There is thus a growing gap between what nursing homes require to meet the needs of residents at the quality levels required, and the level of reimbursement paid by Medicaid. Unless there is an increase in reimbursement rates or a change in the way that nursing homes are financed, nursing homes will be hard pressed to meet the needs of the state’s most vulnerable citizens.

In sum, findings suggest a growing gap between what nursing homes require to meet the needs of residents and the level of reimbursement paid by the largest funder of service: Medicaid. Considering demographic trends, this gap will only grow over time in the absence of policy change. The pandemic has further highlighted the existing challenges resulting from an underfunded service infrastructure and the need for additional investment if nursing homes are to provide high quality care to a growing cohort of older adults requiring support.

Authors

• Edward Alan Miller, University of Massachusetts, Boston

• Elizabeth Simpson