Home care providers are pushing back on part of a proposed rule by the Centers for Medicare & Medicaid Services requiring states to spend 80% of Medicaid home- and community-based services funds on caregiver wages.
The proposal is aimed at attracting and retaining more direct care workers as the industry continues to face severe staffing challenges due to high demand for in-home care from the COVID-19 pandemic. Some providers say they could be forced to pause hiring, cut workers or go out of business if they are unable to use home- and community-based services funds for staff training and administrative costs.
At least one company is hesitant to move forward until more details emerge. Dirk Allison, chairman and CEO of Frisco, Texas-based Addus HomeCare, told Wall Street analysts last week his firm has paused home care acquisitions until it gets more clarity on the proposed rule.
“Things such as training and regulatory compliance that directly affect the caregiver and the operation in the field are things that we need to have included in the rule,” Allison said on an earnings call last week.
CMS announced the proposal in late April as part of a rule to ensure quality access to Medicaid and the Children’s Health Insurance Program. It came just days after President Joe Biden signed an executive order to expand home-based services and improve jobs for direct care workers.
Nearly all states reported severe worker shortages during the COVID-19 pandemic when demand for in-home services increased. The Labor Department estimates the home care industry needs an estimated 1 million direct care workers by the end of the decade as many of the nation’s 72 million baby boomers seek to age in place.
All 50 states receive Medicaid funding through waiver programs that can be spent on home-based services such as skilled nursing, personal care, home health care and in-home therapy. The Biden administration funneled approximately $30 billion into home- and community-based services and increased the Federal Medical Assistance Percentage to states by 10% as part of the American Rescue Plan Act.
Although 22 states enacted wage pass-through policies requiring a certain portion of Medicaid reimbursements to be devoted to staff through wage increases, other states did not, partly because they did not know if the increased funding would continue beyond the COVID-19 public health emergency.
John Gochnour, chief operations officer of Eagle, Idaho-based home care firm Pennant Group, told analysts on an earnings call last week that companies should be able to use Medicaid funding in ways that also “allow for significant costs associated with operating [their] businesses.”
The proposed rule is rippling through other parts of the healthcare industry. The American Hospital Association said it is evaluating the rule to determine if it could potentially lead to fewer home health and home care aides. In 2022 the average length of stay for patients being discharged from hospitals to home health increased 12% over 2019 due to agency staffing shortages, according to the association.
Providers have until the end of June to comment on the proposal and make suggestions for alternative thresholds. CMS is expected to release the final rule in the fall and give states up to four years to comply with it.