Iowa nursing homes feeling budget pinch

Advocates say Medicaid payments inadequate and sometimes late

Enrollment information for managed-care organizations, including Amerigroup, in Iowa's Medicaid privatization plan, phot
Enrollment information for managed-care organizations, including Amerigroup, in Iowa's Medicaid privatization plan, photographed in Cedar Rapids on Friday, Dec. 18, 2015. (Liz Martin/The Gazette)

As the population increasingly ages, government programs that many rely on to pay the high cost of long-term care are not keeping pace and even then sometimes get delayed — often leaving nursing homes struggling to make ends meet.

In Iowa — especially rural Iowa — the situation is worsened by the state’s controversial privately run Medicaid operation, which nursing home officials say has increased the number of contested payments and left the homes holding the bag while the cases are under appeal.

The cost of nursing home care averaged $82,000 a year nationally in 2016, according to research by the Kaiser Family Foundation. And Medicaid — instead of private insurance — is the largest payer for the care, accounting for 62 percent of the share.

In Iowa, more than 400 nursing homes accept patients who pay through Medicaid or Medicare, the government health care programs for the elderly, disabled and poor, a federal database shows.

Medicaid is jointly funded by the federal government and the states, which can set their level of payments to providers within federal guidelines.

States, including Iowa, must be careful when setting Medicaid payment rates because the program continues to chew up a large share of the state budget.

At $1.3 billion from the state’s share of the $4.7 billion program, Medicaid spending accounts for 18 percent of Iowa’s general fund spending. This is second only to funding for public education, according to the state’s nonpartisan legislative agency.


For states, that high price tag must be balanced with creating a payment system sufficient for providers to deliver adequate care to patients who use Medicaid. But a growing number of nursing homes are finding it’s not enough.

Iowa’s state budget is experiencing its own struggles, with shortfalls leading to another year of spending cuts.

Although the state has not cut Medicaid spending among its other budget cuts, the Medicaid reimbursement levels are “inadequate,” said Brent Willett, president of the Iowa Health Care Association, which advocates on behalf of more than 700 long-term care facilities in the state.

Willett said long-term Medicaid residents in nursing homes are underfunded by an average of $30 per day, or $10,950 per year. He said because many nursing homes operate on profit margins of less than 1 percent — and many at a loss — those costs are passed through higher rates to residents with insurance.

Yet with the higher rates, those with insurance spend down their savings more quickly — putting them in a position to need Medicaid and creating “an unsustainable cycle,” Willett said.

Rural facilities feel that pressure even more, Willett said. They tend to have more Medicaid patients than urban facilities, and thus fewer privately insured patients to absorb the impact.

More than a half of residents in Iowa long-term care facilities are covered by Medicaid, but dozens of facilities have roughly two-thirds of their patients covered by Medicaid, Willett said.

“This places rural facilities in an extremely precarious position. As state and federal Medicaid reimbursement continues to fall further and further behind the cost of care, and with fewer private pay residents to pass the costs along to, finding ways to absorb the losses becomes increasingly challenging,” Willett said.


Nursing homes closed last year in Charles City, Le Mars and Storm Lake. The Charles City facility cited financial constraints as the reason. The Le Mars facility had received poor service ratings from regulators.

Iowa’s privately managed Medicaid system is compounding the problem for nursing homes, Willett said.

While the private companies that manage the state’s Medicaid program do not set payment rates, they oversee claims and payments. Sometimes payments are denied and wind up in appeals.

Willett said this can put financial stress on small nursing homes that do not have the resources to cover the gap during the appeal.

He said some facilities must take out loans to cover payroll costs while waiting for Medicaid payments from the managed care organizations.

“We continue to work with the managed care organizations to advocate for the development of more consistent managed care claims payment systems,” Willett said. “These denials — most of which subsequently enter an appeals process — are growing across the state and have resulted in providers accumulating large accounts receivable balances as they await approval for services rendered and costs incurred.”

A spokesman for UnitedHealthcare, one of the two companies managing Iowa’s Medicaid program, said the company works closely with doctors and health care providers, and pointed to a recent state report that said 100 percent of medical and pharmacy claims were administered within 30 days, and that providers are reimbursed at the full Medicaid rate.

“Having operated in Iowa for more than 30 years, UnitedHealthcare maintains strong relationships with providers across the state and we are committed to working with those partners to address any questions,” said Jesse Harris, a company spokesman.


The Iowa Department of Human Services is working with the managed care companies to ensure appropriately prompt Medicaid payments to providers, a department spokesman said. And the state is hearing those payments are becoming more timely.

“While we’re hearing from providers that claims are being paid more timely, and the situation is improving, there may be some older outstanding claims that the MCOs are working to resolve,” Human Services spokesman Matt Highland said. “The department will continue to monitor this and is committed to providing strong oversight of our managed care partners.”

According to the Kaiser foundation, the number of people in the United States age 65 and older is forecast to double by 2060. Its research found that 1 in 3 people turning 65 will need nursing home care at some point.

Of the 1.4 million Americans in nursing homes in 2015, most were over 65, female, and suffering from a cognitive impairment such as a stroke or Alzheimer’s, the foundation reported.

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