America's nursing home crisis

Only a universal, long-term care benefit can put an end to poor quality, low pay and inadequate staffing

Last July, a 46-year-old intellectually disabled man was discharged from a hospital to a nursing home after a minor stroke. His social worker determined he was no longer safe in the group home where he’d lived since his mother died in 2016.

At the same time, in another part of town, a 75-year-old retired government worker in the fifth year of his Alzheimer’s diagnosis, entered a skilled nursing facility that specialized in memory care. It is part of the assisted living community that he called home for half a decade.

Though government standards for the two facilities are the same, their experiences once institutionalized could not have been more different.

The younger man has no assets. His only income is a small disability check from Social Security. Medicaid pays for his long-term care; Medicare pays his health care bills. The skilled nursing facility where he landed earned just two stars from Nursing Home Compare, the second lowest possible grade on the Center for Medicare and Medicaid Services comparison website.

It is one of only two nursing homes in the wealthy suburban county where he lives that offered to take him in. Besides his intellectual disability, he suffers from several physical impairments, depression, high blood pressure and incontinence. He requires help with almost every aspect of daily life.

His new abode is short-staffed, worker morale is low, and the low-paid nursing assistants have a difficult time keeping up with his basic needs. He recently developed a skin infection on his leg, its cause, according to the chief nursing officer, unknown. The only other nursing home to offer an open bed also earned two stars from CMS for its subpar quality performance.

Meanwhile, the government pensioner has sufficient assets in his individual retirement accounts to afford the more than $10,000-per-month it costs to live in his complex’s memory care unit. It provides him with pleasant surroundings and every service he needs, not to mention vastly superior meals compared to the 2-star nursing home.

The only thing the two facilities have in common is that they are owned by privately-equity firms. The high-end memory care unit belongs to a multi-billion-dollar hedge fund with extensive holdings in health care. The 2-star nursing home is owned by a fast-growing family-owned chain with dozens of nursing homes in a handful of Midwestern and East Coast states.

Since passage of the Nursing Home Reform Act in 1987 initiated routine inspections of skilled nursing facilities (SNFs), and CMS in 2008 launched its quality star-rating system, journalists have had a field day mining those reports and the civil suits brought by aggrieved family members to write scathing stories blaming private equity owners for the low quality of care at many facilities. Today, about 70% of the nation’s 15,000 SNFs are privately owned.

There is an abundance of bad actors among their owners (see recent NPR/Kaiser Health News stories here and here, for instance). Their business models often include siphoning off healthcare dollars to pay exorbitant rents charged by the real estate’s owners, which often belong to the same private firm as the nursing home operator. These holding companies sometimes use the same siphoning technique with wholly owned outside contractors that provide rehab, maintenance or other services used by the home.

Privately-held nursing homes’ quality ratings as measured by Nursing Home Compare are consistently below those owned by non-profits. A 2015 report by the Kaiser Family Foundation found 42% of for-profit homes earned just 1 or 2 stars from CMS while 39% earned 4 or 5 stars. Among non-profits, 21% of SNFs earned just 1 or 2 stars while fully 60% earned the two highest grades. The poorest performing nursing homes are disproportionately located in the nation’s poorest communities, which rely on Medicaid for most of their funding.

That quality imbalance contributed to differing mortality rates inside nursing homes during the first two years of the COVID pandemic, when more than 200,000 residents and tens of thousands of nursing home workers died from the infection – a fifth of all deaths. Privately-held SNFs had a higher mortality rate during the pandemic that non-profits, according to a report issued last month by Office of the Inspector General at the Health and Human Services Department.

Medicaid rates to blame

Yet researchers who study the industry say profit-seeking private owners are not the sole nor even the major cause of the industry’s shortcomings, nor the gross inequities among different socioeconomic groups receiving long-term care. The primary culprit, they say, is the low reimbursement rates paid by the nation’s 50 state Medicaid agencies, which the most recent data show financially support 65% of all nursing home patients but generate just 51% of the revenue flowing into their facilities.

An issue brief released last month by the Medicaid and CHIP Payment and Access Commission found a direct correlation between Medicaid payment rates and facilities’ quality ratings and employee pay. State Medicaid agencies paying SNFs the highest rates earned both the highest quality ratings and paid the highest salaries to their nursing staff (which includes not just registered nurses and licensed practical nurses, but certified nurse assistants, who do the bulk of the personal care work). Those paying the least had the worst ratings and lowest salaries.

A recent survey of more than 12,000 homes submitting Medicare cost reports found facilities with the highest proportion of Medicaid patients collected an average of just $237 per day for each patient, nearly 15% below the median payment rate from all payers. “Medicaid rates are not even the cost of an okay hotel room in a lot of states,” says Tamara Konetzka, a professor of health services research at the University of Chicago, who has studied nursing home care for nearly two decades. “That’s not enough to provide the kind of services and quality we’d like to see.”

While I don’t usually find myself echoing industry trade groups’ positions, in this case I must make an exception. Unreasonably low Medicaid rates are directly responsible for the low staff pay and inadequate staff-to-patient ratios that produces the unenviable living conditions and poor quality of life experienced by many of the estimated 1.1 million seniors and disabled residing in America’s nursing homes. The median pay (half earn more, half earn less) was $14.56 an hour in 2021, according to the Bureau of Labor Statistics, which suggests many CNAs, 20% of whom are immigrants, earn barely more than the federal minimum wage.

“They are making only that much for pretty dangerous work,” says Howard Gleckman, a senior fellow at the Urban Institute, a former journalist who has studied nursing home care for decades. “The injury rate for CNAs is among the highest in the country. You are more likely to be injured as a nursing aid than being a coal miner. It’s mostly back injuries from lifting old and overweight people.”

No wonder hundreds of thousands of CNAs left the profession during the pandemic, despite having spent one to four months earning state certification to land their jobs. “They’re not coming back,” Gleckman says. “They’re taking jobs at warehouses because it’s easier to lift boxes than it is to lift old people. And it pays better.”

That’s raising the burden on the remaining workers in an industry where staff turnover approaches 100% a year. A new study released this month in Health Affairs calculated the median nursing home had sufficient nursing staff to afford each patient 3.7 hours of individualized care per day, well below the 4.1 hours recommended by many advocates. Raising all nursing homes to that standard would require investing an additional $7.25 billion annually, according to the study, which would raise total national spending on long-term care by about 6%.

The missing agenda item

Yet spending more money on each Medicaid patient, which would allow nursing home operators to raise pay to attract and retain more and better qualified workers, wasn’t on the nursing home improvement agenda that President Biden announced last October. He focused on the bad actors in the industry, promising to step up inspections of homes with the worst safety records, increase penalties on those that fail to improve, and cut off Medicare and Medicaid funding for repeat violators of health and safety standards.

His proposal included a scant $218 million for generating what he suggested would be “good-paying, union jobs in nursing home care.” Most of that new funding was focused on training programs.

The most controversial element of the agenda, and the one that will generate headlines when a new rule is announced in a few months, will be adoption of a national minimum staffing ratio. The American Health Care Association/National Center for Assisted Living, the trade group for the for-profit industry, has already launched a massive lobbying campaign attacking the advocacy community’s preferred standard, which is still being formulated by officials at CMS.

“The sector would need to hire 191,000 caregivers to meet a potential 4.1 hours per day per resident federal staffing minimum,” a spokesman for the trade group said in an email. “We would love to hire more nurses and caregivers, but the workers and the resources simply aren’t there. An enforcement approach will not solve this labor crisis."

The Biden administration might take a different approach by setting a minimum share of revenue that nursing homes must devote to staff. Staffing ratios include not just the CNAs, but the LPNs and RNs needed to meet the medical requirements for serving long-term residents.

But researchers, writing in the latest issue of Health Affairs, noted mandating minimum expenditures might not lead to hiring more staff. Their study found “nursing homes that were highly reliant on Medicaid revenue spent a greater proportion of revenues on nursing staff yet had lower nursing staff levels than other nursing homes.”

New York state, where a minimum staffing ratio of 3.5 hours per day per resident went into effect this year, may emerge as a test ground for a national standard. The law, passed in 2021 but delayed by an industry lawsuit, also requires spending 70% of revenue on direct patient care and 40% on nurse staffing.

A 2019 study by the New York City-based Long Term Care Community Coalition, a patient advocacy group backing the new law, found the new standard would have its biggest impact on for-profit facilities. Non-profit and government-owned facilities are already devoting slightly above 4.0 hours of nursing care per resident per day, its study found, while for-profit facilities in the state, which accounts for over 60% of homes, averaged just 3.3 hours per resident-day.

The state’s new law “does not resolve the basic problem of predatory operators who are buying up our nursing homes and squeezing out profits in increasingly sophisticated ways,” Richard Mollot, LTCCC’s executive director said in a press release backing new proposals to limit private acquisition of non-profit nursing homes. “The time has come to stop further intrusion of for-profits in New York’s nursing home sector.”

Yet the trade group for New York’s non-profit homes has also come out against the new minimum spending and staffing law. It joined for-profit SNFs in the lawsuit that delayed implementation. “There is no army of surplus nurses and aides available to fill these positions because there is a nationwide health care worker shortage that is disproportionately affecting nursing homes,” said James Clyne, Jr., CEO of LeadingAge New York, which represents non-profits. “The staffing level law penalizes nursing homes thousands of dollars per day for failure to meet these arbitrary and irrational targets. This mandate will only drain nursing homes of the very resources they need to recruit and retain more staff.”

Even researchers sympathetic to the cause of better patient care worry about the unintended effects of a national standard on nurse spending and staffing ratios. “The adequacy of Medicaid and Medicare payment levels to ensure that nursing homes could fund any new regulations regarding nursing staff levels would play an important role in the success of any new regulation,” wrote John Bowblis of Miami University and David Grabowski of Harvard, the lead authors of the new Health Affairs study. “In addition, mandating higher nursing staff levels could be offset by reducing staffing levels in other important areas, such as activities or social services. These ancillary services have been shown to drive nursing home quality, including the important, but often overlooked, quality-of-life domain.”

Gleckman of the Urban Institute questions the entire premise of the regulation: “Counting staff is not the best way to determine quality of care in a SNF. Turnover is what matters, according to the research. You’d rather have long-tenured staff, which can only be achieved with higher pay. You can meet ratios by churning staff and it won’t lead to better care.”

Konetzka of the University of Chicago, who sat on last year’s National Academies of Science, Engineering and Medicine (NASEM) committee studying how to improve nursing homes, echoed those sentiments. “The regulation has to be tied to additional funding,” she says. “It’s naïve to think they can just find those people. I’m not sure the money is there given the preponderance of Medicaid funding in nursing homes.”

Given the likelihood that the forthcoming rule will be an unfunded mandate, the most likely result will be widespread violations and poor enforcement, an outcome that would be no different from the minimal sanctions imposed over the decades for violations of the 1987 nursing home reforms. That law established a patient bill of rights, set up a system of routine inspections and imposed stiff penalties, up to and including termination of Medicare and Medicaid eligibility, for violations. The law is rarely enforced.

The untried solution

The United States and the United Kingdom are the only countries among nine large industrialized economies that do not provide their citizens with a universal long-term care benefit, according to a recent report from the National Academy of Social Insurance. The countries that do provide nursing home support for anyone aged or disabled rely on either payroll taxes on all workers – the way we fund Social Security and Medicare in the U.S. – or general revenues, or a mix of both.

Virtually every report lamenting the state of long-term care in the U.S. has called for creation of a universal long-term care benefit. It must be government-led, since private insurance markets have failed abysmally at providing an affordable option.

The number of insurers offering policies has dropped from more than 100 in 2004 to about a dozen in 2020, according to the National Association of Insurance Commissioners. The Congressional Research Service reports the number of policies in force, most of which do not cover the full cost of long-term care, has fallen by more than a million to 6.4 million in the past decade – this in an aging society where the share of gross domestic product devoted to long-term care is expected to reach 3% by 2050, which is triple the current level.

Establishing a long-term care benefit was listed as the first financial goal in last year’s National Academies report. The committee further recommended “studying how to design such a benefit and then implementing state demonstration programs to test the model prior to national implementation.” Such a system, the report said, would increase access, reduce arbitrary and inequitable barriers between sites of care, provide comparable resources for all nursing homes and establish payment rates sufficient to achieve high quality in all settings.

It’s unfortunate the committee only focused on nursing home care. The dirty secret about long-term care in this country is that most of it is provided by uncompensated family members – people, usually women, who give up time, careers and much of their personal life to take care of incapacitated loved ones. More than 50 million Americans provide unpaid care to family members or friends with health and functional needs, a quarter of whom provide care for more than one person and a fifth of whom report they have their own health issues, according to a survey conducted by the National Alliance for Caregiving and the AARP in 2020.

It is critical that the U.S. consider long-term care comprehensively, not just nursing home-based. Any financial plan must allow the money to follow the beneficiary wherever they reside, a principle already embraced by CMS. This would allow patients and their families to decide the best option, whether that is services provided in a skilled nursing facility, another institutional setting (group homes or psychiatric facilities, for instance), or in the home.

It should also offer the option of pay and training for family caregivers. As Gleckman points out, it is more efficient to take care of 200 people in a single residential facility than have health care aides spending a significant portion of their time driving around cities and suburbs to reach their daily clientele. Paying the person who is already in the home and providing that care makes much more sense.

“Raising Medicaid rates is really a short-term solution,” says Konetzka of the University of Chicago. “Political feasibility aside, everyone on the National Academies committee felt very strongly that we need to move to a more rational system of financing where long-term care across the spectrum is covered. Long-term care could be a Medicare Part L, where there is a long-term benefit that could be used for nursing homes or home care, and you don’t have to impoverish yourself to qualify for it.”

Unfortunately, no one has come up with a politically acceptable way to raise the necessary revenue, which will inevitably require raising taxes. Both previous attempts at initiating a limited long-term benefit foundered on the tax issue.

In 1989, then House Ways and Means chairman Dan Rostenkowski found himself on the receiving end of seniors’ brickbats when he included a tax on Social Security earnings to finance his Catastrophic Coverage Act. In 2011, the Community Living Assistance Services and Supports (CLASS) program included in the original Affordable Care Act was withdrawn by President Obama when his administration determined that providing even a $50 daily benefit would require monthly premiums of $250 or more because so few people would enroll in the voluntary program.

Clearly, the only way to provide adequate long-term care for every citizen who needs it is to make it a universal benefit within Medicare. The taxes needed to support such a program in an aging society would have to be broad-based, progressive and adequate to provide long-term financial stability.  

Only a few months before his death in early 1978, Minnesota Senator Hubert Humphrey, speaking at the dedication of the Health and Human Services Department building that bears his name, gave what many consider the greatest speech of his career. “The moral test of government,” he said, “is how that government treats those who are in the dawn of life, the children; those who are in the twilight of life, the elderly; and those who are in the shadows of life, the sick, the needy and the handicapped.”

By every measure, our government has failed that moral test for those living in the shadows at the nation’s nursing homes.