We know that Medicaid is the safety net funding source to cover skilled nursing care and room and board when no other payment options exist. The typical daily rate, about $250 per day for nursing care, reimburses providers for room and board, skilled nursing care, personal hygiene supplies, meals, and medications.
What if those services could be delivered appropriately in a lower-cost setting, such as assisted living? Would it not make sense for care costs to be as low as possible for the Center for Medicare & Medicaid Services (CMS) and Medicaid?
Medicaid does not cover room and board costs for assisted living. The exception to this is the Medicaid assisted living waiver program. Many states offer Medicaid waiver programs that help defray the costs of assisted living. Medicaid’s home- and community-based waivers are programs that help Medicaid beneficiaries receive long-term care services and support in assisted living communities or other settings.
As of 2024, 46 states and Washington D.C. offer some level of assistance in the form of waivers for individuals in assisted living or other forms of non-nursing care. Among each of the states, however, wide variation exists in terms of the waiver structure, reimbursement level, and general effectiveness. One aspect that is common across states is that the waivers almost always have enrollment caps in place and because of these caps, waiting lists are unfortunately commonplace.
At the same time, skilled nursing communities are experiencing rising expenses nationally, with labor costs significantly impacting the industry. From 2019 to 2022 alone, skilled nursing care communities’ direct care nursing expenses increased by almost 25%.
(Source: CliftonLarsonAllen, SNF Cost Comparison and Industry Trends Report, 2024)
A 2023 KFF survey revealed that no states were looking to freeze or reduce Medicaid rates, but that some states – Pennsylvania, Texas, Illinois, Missouri, and North Carolina – were examining Medicaid rate methodologies and potentially rebasing rates in response to unsustainable economic trends.
(Source: CliftonLarsonAllen, SNF Cost Comparison and Industry Trends Report, 2024)
Additionally, Medicaid beneficiaries account for more than 60% of skilled nursing patient days. With care costs rising and a deep penetration of Medicaid beneficiaries residing in skilled nursing settings, assisted living waiver programs could be seen as a bulwark against rising care costs in skilled nursing.
Assisted living communities have experienced an increase in resident acuity over the last decade and have demonstrated that they are increasingly equipped to deliver high-quality and effective healthcare to their residents. But still, not every Medicaid beneficiary will be appropriate to take advantage of these state-by-state assisted living waivers. For the Medicaid beneficiary who needs only moderate care services, having access to assisted living waivers can be a game-changer. In a paper published in June 2024, “We Need to Rethink Nursing Homes,” authors Farber and Shah estimate that roughly 20% of nursing home residents actually need access to affordable housing.
While many Medicaid beneficiaries in nursing homes are there because their income limitations and physical needs require it, there are indeed those who are simply there because they cannot afford private pay assisted living and are unable to live on their own in the greater community. For the Assisted Living Waivers to be successful, there needs to be alignment between operators’ expenses and the state-based reimbursement levels. Assisted living operators need to be appropriately compensated for the room and board costs that are incurred to bring forth optimal alignment.
For CMS, expansion of the Assisted Living Medicaid waivers may contribute to reduced Medicaid spending and a more efficient use of Medicaid dollars. For skilled nursing operators, this may translate into fewer residents whose care needs do not warrant full-time residency in a skilled nursing setting. For the beneficiary, this could mean living in a more appropriate care setting for their care needs.