Massachusetts lawmakers are extending a financial lifeline to the state's nursing home industry, which has seen a string of providers shutter in recent months.
On Monday, both houses of the state Legislature passed a budget with $415.4 million in Medicaid funding for nursing homes — a $50 million increase from the previous year's budget.
But there's a problem: The difference between what the state's Medicaid program, MassHealth, pays nursing home operators, and what nursing homes actually spend on care is around $362 million, according to the Massachusetts Senior Care Association (MSCA), an industry group which represents hundreds of nursing homes, rehabilitation centers and other facilities.
"The Legislature’s action highlights their commitment to finding and funding solutions for the individuals who live and work in the state’s nursing homes," said Tara Gregorio, president of the MSCA, the day after the vote to approve the budget for the fiscal year that began July 1.
However, Gregorio warned, the increase in funding won't be enough to close the Medicaid funding gap: "Nursing facilities will continue to close," she said.
At least two senior care facilties — Oosterman’s Rest Home and the Chelsea Skilled Nursing and Rehabilitation Center — have notified the Department of Public Health that they intend to close within the next few months.
Gregorio estimates that 70% of nursing facility residents have their care paid for by MassHealth, and chronic underfunding has been "a major driver of more than 30 nursing facility closures in the last 18 months," she said. "Additionally, the underfunding has contributed to an inability to make needed investments in resident care and meaningful wage increases for front-line staff."
The new state budget includes a provision calling for the formation of a "nursing home sustainability task force" with three primary goals: to ensure the financial stability of skilled nursing facilities; consider the role of skilled nursing facilities within the continuum of elder care services; and address current workforce challenges.
"This is going to be a long haul for all of us who are providing services," said Frank Romano, president of Essex Group Management, which operates several nursing homes in eastern Massachusetts.
As a result of the funding increase, Romano figures that his company will receive about $6 more per patient, per day. But, he adds, that won't cover rising labor costs, which account for over 70% of his business expenses. He blames a tight labor market and a shortage of qualified health care workers.
"I think it's a real challenge for everyone," Romano said. "We've got to get creative on how we're going to solve it. Because without people, we can't give care."
MSCA estimates that over half of the state's roughly 400 nursing facilities are operating at a loss. And because reimbursements are based on 2007 costs, the group says Medicaid reimbursements to nursing homes currently fall about $38 short of the average daily cost of care.
There are currently 150,000 elderly Massachusetts residents living in nursing homes, according to MSCA estimates, and about 77,000 workers who help care for them.
The need for nursing home services will likely continue to increase: 15% of commonwealth residents are age 65 or older, according to a 2018 analysis of federal government data by the Gerontology Institute at UMass Boston. That demographic is expected to balloon to about 21% of residents by the year 2030.
This past March, Health and Human Services Secretary Marylou Sudders told a group of state lawmakers that more nursing homes were likely to close because senior citizens in Massachusetts are increasingly turning to assisted living services or services that allow them to remain at home. As a result, Sudder said, a quarter of nursing facilities have an occupancy rate of 80% or less.
The situation for nursing homes is "not sustainable," Sudders said.