Updated May 23

Nursing homes in Texas on average have to cover a gap of nearly $20 per day to take care of residents who pay with Medicaid, but a bill before the state Legislature seeks to close that gap with the help of federal funding.

House Bill 2766, filed by Rep. J.D. Sheffield, R-Gatesville, was voted out of the Texas House of Representatives by a margin of 96-42 on May 10 and sent to the Senate. As of May 23, the bill had been voted out of the Senate Committee on Health and Human Services 6-3.

Proponents said the bill would bring in about $440 million in federal funding per biennium to be distributed across the state’s 1,200 nursing homes at no cost to the state. This money could help nursing homes afford much-needed capital projects and combat high staff turnover rates, Sheffield said.

“HB 2766 would help nursing home owners retain good staff, and that will improve the quality of care more than any other thing I can think of,” he said.

The most recent data collected by the American Health Care Association in 2014—a trade association representing about 500 nursing homes in Texas through the Texas Health Care Association—show providers in Texas spend an average of $157.84 per day caring for Medicaid residents. About $138.37 of that was reimbursed by Medicaid coverage, resulting in a $19.47 gap. HB 2766 could close that gap to around $1, THCA officials said.

However, the bill has garnered opposition from private pay nursing homes—which do not accept payments through Medicaid—which have expressed concern that they would end up paying into the system without receiving a benefit.

How it works

HB 2766 proposes taking advantage of a federal program by creating a Nursing Facilities Reinvestment Allowance paid by nursing homes based on their revenue. Through a self-assessed fee, nursing homes across the state would each contribute about 6 percent of revenue—an estimated $375 million in total—to a state trust fund. The state would use the funds to draw down matching dollars from the federal government through the Centers for Medicare & Medicaid Services.

The money paid in fees would be distributed back to the nursing homes dollar-per-dollar, officials said. THCA, which worked with legislators on crafting the bill, estimates a total of $440 million in new dollars from the federal government would be left over and available to distribute to nursing homes. Those funds would be split, with half going toward improving Medicaid rates and half going toward improving resident care based on a CMS five-star rating program.

Texas is one of six states in the U.S. that does not take advantage of this program, said Eddie Parades, vice president of government affairs with StoneGate Senior Living and a member of the THCA who helped craft the bill.

About 85 percent of the 120,000 nursing home residents in Texas are on Medicaid, Parades said. Without the influx of federal funds or a rate increase from the state, long-term care providers that rely on Medicaid reimbursements will quickly be in a crisis, he said.

“We are on razor-thin margins,” he said. “If we don’t get a rate increase this year, there will no doubt be nursing home closings in Texas. Nursing homes will start closing in rural markets first.”

The effects of the low reimbursement rate can be seen in Cy-Fair. Kirby Green, who operates Park Manor of Cy-Fair—a skilled nursing facility with 101 residents, including 63 on Medicaid—said he does everything he can to make sure his staff is recognized and appreciated but is often left simply hoping they do not choose to pursue other work.

“You can be doing all these great things to retain your staff, but ultimately if they cannot support their families, you’ll have them moving on for 50 cents more [or] a dollar more [per hour],” he said. “These are the [certified nursing assistants], the face of the community, the ones providing direct care and interacting with families. It’s extremely frustrating when you cannot pay them what they deserve.”

Opponents raise questions

Similar bills have been filed in past legislative sessions but fell short because of fears that such a system would disadvantage nursing homes that have few or no Medicaid patients.

Officials behind HB 2766 said these low-Medicaid facilities would be made whole, meaning they would not shoulder any financial burden. Part of the process involves creating a nonprofit corporation that allows high-Medicaid homes to offset the cost of the program for low-Medicaid homes through voluntary payments from participating high-Medicaid facilities. About 90 percent of high-Medicaid nursing homes said they would be willing to participate, officials said.

However, the CMS program these bills takes advantage of does not allow any mechanisms that would guarantee private pay nursing homes their money back, so the establishment of the nonprofit cannot be included in the language of the proposed bill.

Opponents expressed skepticism that private pay residents would not be harmed.

“We have concerns about the unwritten portions of this bill and the private arrangement that falls outside the statute,” said George Linial with LeadingAge Texas, a trade association that advocates for nonprofit retirement communities and nursing homes. “The bill guarantees that someone will have to pay a tax, and there’s nothing in the statute that protects pay communities or residents from this tax.”

Paredes said there will be a binding legal contract in place that will make sure low-Medicaid facilities get their money back first. Sheffield ensured the costs paid by low- and no-Medicaid providers would be offset.

“It’s a smart way to improve long-term care and avoid using state revenue,” he said. “It’s also the only viable plan on the table right now.”