With Medicaid Access Rule Finalized, Home Care Providers Enter ‘Wait-And-See’ Mode

On Tuesday, Centers for Medicare & Medicaid Services (CMS) officials vehemently backed the thought process behind the “80-20” wage mandate in home- and community-based services (HCBS). Providers and advocates, on the other hand, continued to argue that the policy could be disastrous.

During a press call Tuesday, CMS stuck with the theme that, in general, the status quo in Medicaid needed to be disrupted.

“[These rules] will change for the better how tens of millions of Americans receive care,” Daniel Tsai, the deputy administrator and director of Center for Medicaid and CHIP services at the CMS, said on the call. “I was just on [a call] with stakeholders earlier, and somebody described the set of rules here as ‘disrupting the complacency that too many of us have accepted for the Medicaid program for too long.’ And I think that is exactly what these rules are doing.”

After the White House first teased the impending changes to the Medicaid program Monday morning, CMS published the actual final rule later that afternoon.

Amid Medicaid changes, the most relevant news to home care providers is the aforementioned 80-20 provision, which will force HCBS providers to direct 80% of reimbursement to direct care workers.

“We know that the quality of care is directly a function of being able to attract and retain a high-quality workforce,” Tsai said of the 80-20 provision. “And that is an incredibly important piece for both quality of care and fiscal stewardship of the program as opposed to Medicaid dollars going to administrative overhead and profit. We heard many, many comments on this provision. We finalized it with a strong standard, [while also] taking into account the range of comments that really create some reasonable exceptions, and give providers a little bit more time to be able to comply.”

To that point, the likely provider response will be the oft-repeated saying, “no margin, no mission.”

In other words, while quality care may be tied to being able to recruit and retain workers, a mandate that will squeeze providers’ bottom lines is not the way to assure that connection, most providers believe.

There are unintended consequences, instead, that could be tied to the 80-20 rule’s finalization. For instance, though CMS has said that it will aim to make exceptions for smaller providers, this provision likely puts them in harm’s way.

National Association for Home Care & Hospice (NAHC) President William A. Dombi told Home Health Care News Monday that, essentially, states will need to considerably raise rates for HCBS or providers will be going out of business.

In that case, access to care will be directly and negatively impacted.

The other issues that are being addressed in the Medicaid Access Rule also have to do with the murky systems currently in place to track HCBS and HCBS beneficiaries. The 80-20 provision’s runway is longer than expected – providers have six years to comply – but it’s unclear whether states will be able to capture the correct data to ensure compliance.

CMS even said that, currently, it does “not have good insight into rates” across the country. There’s a long way to go, in essence.

Such a mandate is likely to affect the entire home-based care industry. Providers and investors will likely think twice before entering into – or expanding in – the space, and private-pay providers may be forced to raise their rates to compete with mandated HCBS wages.

“We are disappointed that HHS elected to keep the 80% payment threshold in place, despite over 2,000 comment letters to HHS from our industry and trade groups over the past year, which pointed out the significant challenges implementing such a provision would create,” Addus HomeCare Corp. (Nasdaq: ADUS) CEO Dirk Allison said in a statement. “We believe a nationwide ‘one size fits all’ minimum threshold is contradictory to the goal of ensuring access to Medicaid services, given the wide variance in state waiver programs, which directly affects the administrative burden in individual states.”

Allison did add, however, that Addus is pleased with the six-year implementation timeline, as opposed to the four-year implementation timeline that was originally proposed.

“We would expect to see the most significant negative impact from implementation of the rule on smaller providers and the beneficiaries they serve,” Allison continued. “These providers lack the scale and technological capabilities to operate under these requirements and implementation could lead to further industry consolidation. In light of the final rule, Addus is actively pursuing opportunities to address this new industry dynamic with greater scale and with an emphasis on states where we have the best opportunity to engage in meaningful, long-term value creation and partnership.”

Wait-and-see mode

The Medicaid Access Rule is finalized, but the runway to implementation is also longer than previously expected.

That raises the question: What does the industry do now?

Firstly, there will likely be resistance to the rule.

“We also anticipate legal challenges from multiple stakeholders, including states, to prevent implementation of this provision, although the potential outcome of such litigation is unknown,” Allison said.

Challenges will likely come from states themselves, as the 80-20 provision is creating a level of micromanaging between CMS and state Medicaid programs that hasn’t existed before.

“There have been multiple D.C. law firms that have done independent analyses of the proposed rule,” Damon Terzaghi, the director of Medicaid advocacy at NAHC, told HHCN. “And all of them found that the statutory justification was lacking. So, I do think you’ll have states that look at the final rule, that look at the legal analyses that were done, and think that there might be an ability to challenge it. We don’t know for sure. But we do believe this is something that has to be led by the states, and that there will likely be a few who are willing to take the plunge.”

There may be a bit of a political breakdown on the states that are for and against the rule, but there are also traditionally “blue” states that were wary of the provision in the first place.

Potential challenges leave providers in a precarious position, however.

A new administration could be in the White House by this time next year, or the same one could be in place. There could be state challenges, there could not be. There may be exemptions for certain providers, but that isn’t for certain.

Home care agencies don’t want to do an upheaval of their businesses for an unsure thing, but Dombi also doesn’t think they should sit on their hands.

“I would suspect that many of them will be in a wait-and-see mode for a period of time,” Dombi said. “I don’t see the home care providers doing Medicaid today immediately reacting and shutting down out of fear for where it may be in a [six]-year period of time. We would advise against that. Take a more careful, well thought-out pathway to this.”