The Continuing Paradoxes of Nursing Home Policy

Few individuals choose to live in a nursing home rather than in their own home. Many older people and their families fear nursing homes; advocates for younger disabled people lobby for alternatives.¹ Only a small fraction of practicing physicians and nurses work in nursing homes, not all as a first choice. Hospital administrators, who rely on nursing homes as a destination for patients who cannot be discharged to home—and in many instances, as a source of admissions as well—tend to not understand them very well. State and federal budget-makers believe they cannot live without nursing homes, yet fund them reluctantly. For 30 years, public policy toward long-term care has attempted to minimize the number of people residing in nursing homes. Yet every day 1.5 million individuals in the United States are living in nursing homes, half of whom will never again live anywhere else. More than 1 in 3 US residents who reach age 65 years will spend some time in a nursing home before they die.² Nobody, it seems, loves nursing homes very much, but nursing homes are as necessary as they are misunderstood.

The confusion about nursing homes arises because many clinical practices and public policies about long-term care are unclear and frustrating. In the patchwork of US health care delivery and financing, nursing homes sit squarely atop 2 of the most problematic seams: the disjunction between Medicare and Medicaid and the disjunction between episodic acute care and long-term care. As a result, facilities referred to as “nursing homes” are generally individual facilities with 2 entirely separate—and often conflicting—clinical missions, serving 2 very different kinds of patients (or, as Zweig et al³ demonstrate with the case of Mrs R when she begins her nursing home stay for rehabilitation and continues as a long-term stay resident, the same person under very different clinical and financial circumstances), under radically different sets of payment rules and incentives of Medicare and Medicaid.

Medicare provides coverage for “skilled nursing facility services” for restorative and rehabilitative care for up to 100 days immediately after an inpatient hospital stay for the same condition or its sequelae. The patient is expected to be discharged expeditiously to the community, with or without follow-up home care or outpatient care. For these services, Medicare has historically paid generously; the recent reduction of 11% in Medicare payment rates to skilled nursing facilities was predicated on the evidence that efficient facilities could still be profitable.⁴

Because Medicare-paid nursing home stays are frequent but relatively brief, Medicare beneficiaries account for a large proportion of nursing home admissions but a much smaller proportion of average census: roughly 15%.⁴ For 60% of nursing home residents on any given day, their stays are paid for by Medicaid—although almost all Medicaid-covered residents of nursing homes are also Medicare beneficiaries. The Medicaid nursing facility benefit is, by law, of unlimited duration. It is available, in theory, only to individuals with disabilities or functional limitations that make their residence in the community impossible or impractical, as well as those with savings and income below a certain threshold. However, the benefit covers, in addition to residential services and personal care, only limited nursing and therapeutic care.⁵ Furthermore, Medicare will only pay for 1 physician visit per month for a long-stay nursing home resident, so Medicaid (and most private pay) nursing home residents with acute illnesses such as upper respiratory or urinary tract infections are routinely transferred to acute care hospitals or emergency departments, for which Medicare will pay.

Because nursing home costs include room and board expenses not otherwise covered in health insurance programs, and because almost everyone prefers to remain at home rather than live in an institution, state governments have devoted enormous energy, with considerable but highly variable success, to developing and financing systems of community-based care for Medicaid beneficiaries who would otherwise be eligible for nursing home care. As a result, more than half the individuals now receiving Medicaid-financed long-term care are receiving it in the community.⁶ Total Medicaid-paid nursing home days have been stable for the last 20 years; the demographically fueled growth in demand for long-term care services has largely been absorbed by community-based care.⁷ Also as a result, the Medicaid patients who are in nursing homes are sicker and more difficult to care for than in the past; specifically, these patients are far more likely to have significant cognitive or psychiatric impairments.⁸ In most communities, long-stay nursing home care is indeed the delivery option of last resort. Yet in many parts of the country, Medicaid payments to nursing homes have not kept pace with the additional expense of caring for an increasingly needy population. Nationally, the average nursing home loses money on the average Medicaid patient,⁴ making up the difference, if at all, with profits from Medicare and private-pay patients.

The lack of congruence between Medicare and Medicaid policies as they affect specific individuals mirrors the isolation of acute and long-term care systems from each other and relative lack of communication between professionals who work in the 2 sites of care. Almost by definition, every actual or potential nursing home resident has 1 or more serious illnesses for which she or he is being treated, or has been treated, by a community- or hospital-based physician. As many as half of Medicare patients undergoing specific inpatient surgical procedures or certain medical treatments are discharged directly to nursing homes. Yet with some exceptions, the typical level of communication between clinicians in nursing homes and those in hospitals or the community is limited, and sharing responsibility for planning and modifying patient care is even less. Explicitly or not, most physicians do not continue to follow up and care for their patients who are admitted to nursing homes.

The Affordable Care Act (ACA) contains a number of provisions that hold at least the promise of addressing some of these problems. At the most global level, the ACA created the Federal Coordinated Health Care Office (FCHCO) within the Centers for Medicare & Medicaid Services, with the explicit mandate of addressing the inconsistencies between Medicare and Medicaid policies. That office has made planning grants to 15 states to develop programs intended to better integrate clinical services for “dual eligibles”—patients who are beneficiaries of both Medicare and Medicaid—including patients who need or are at risk of needing nursing home care, by better integrating Medicare and Medicaid financing and policies.⁹ In addition, the FCHCO is working separately with states to address the problems of medical care for nursing home residents to replace the current practice of cost-shifting and frequent patient transfers between nursing home and hospitals with more integrated approaches.

In a number of other ways, the ACA seeks to foster integration of care across the boundary between acute and long-term services. Development of accountable care organizations is perhaps the best-known, if least well-conceived, approach. Less grandiose but more promising efforts include reimbursement experiments with various forms of “bundled payment” that cross the acute/long-term care divide, thereby reducing the incentive to shuttle patients back and forth and provide more seamless care within the nursing home; grants to coalitions of hospitals and community-based organizations for improved “transitional care,” involving the transition of patients discharged from the hospital back to the community; further encouragement of Medicare Advantage Special Needs Plans for nursing home residents, which places the financial responsibility for integrating acute and nursing home care on risk-bearing managed care plans; and, indirectly, Medicare reimbursement penalties for hospitals with “excessive” levels of “avoidable” readmissions, many of which involve patients returned to the hospital from nursing homes.

It is unknown how successful any, or all, of these efforts will be at effecting lasting change in the way health care is delivered in the United States, and there may be less consensus on what a desirable future would be than is generally assumed. But anyone familiar with the sorts of patients now being served by nursing homes knows that such facilities will be needed for the foreseeable future. The hope is that the evolution of clinical practice and health policy will provide nursing homes with a clearer, attainable mission.