Maine DHHS Proposes Framework for Nursing Facility Rate Reform

February 23, 2024

Today, the Maine Department of Health and Human Services (DHHS) released the framework (PDF) for MaineCare (Maine Medicaid) nursing facility rate reform for fiscal year 2025, which will support the direct care workforce, incentivize permanent staff, and promote quality care and positive health outcomes for Maine residents who live in nursing facilities.

Governor Mills' supplemental budget proposes an additional $10 million to fund the reforms from January to June 2025. Combined with $29 million appropriated last year, this yields $39 million in fiscal year 2025 for nursing facilities and $49 million once annualized through the next budget process. The new, modernized rate system is part of Maine’s award-winning comprehensive rate reform system. Public forums to discuss the proposed rate reform are scheduled for March 7 and 8, 2024.

The proposed reformed reimbursement, developed with public and provider input starting last year, would:

  • Prioritize direct care staff levels that are significantly higher than the State’s minimum requirements and the federal proposed requirements, because higher staffing levels are related to quality of care and quality of life;
  • Provide an incentive to reduce contract (temporary) staffing, because high use of temporary staffing increases costs, reduces morale and creates barriers to quality improvement;
  • Encourage facilities to increase occupancy levels, which remain below pre-pandemic levels; and
  • Include a value-based payment that will tie a portion of payment to staffing levels and stability, clinical outcomes, resident satisfaction, and high MaineCare utilization.

Supporting the direct care workforce is a priority in nursing facility rate reform and Maine DHHS policy generally, as documented in a report (PDF) the Department released February 21. In Maine as in other states, nursing facilities were especially hard hit by the COVID-19 pandemic. The impact of the contagious and deadly disease on residents was great, as was its effect on staff – many of whom left facilities given the strain. Given the ongoing demand for care during and after the pandemic, nursing facilities often turned to temporary (also called agency, contract, or travel) staff. A recent study found that, in 2022, Maine was among the highest users of temporary staff in nursing facilities–one of only three states that relied on temporary staff to deliver more than 20 percent of direct care nursing staff hours.

DHHS' proposed system disincentivizes the long-term use of such temporary staff and promotes permanent employment and salaries of nurses and nursing assistants. This builds on other efforts to support direct care staff in residential and home- and community-based settings such as over $120 million in recruitment and retention bonuses to over 24,000 workers, a law that ensures rates support at least 125 percent of minimum wage for such workers, and an investment in training and workforce development. These efforts contributed to Maine being in the top five of states on direct care worker policies and supports.

Nursing facility rate reform is scheduled to start on January 1, 2025, supported by an additional $10 million in Governor Mills' supplemental budget ($3.2 million in state General Funds plus matching federal funds). This funding will complement the $29 million ($9.1 million General Funds) already appropriated for state fiscal year (SFY) 2025. When annualized for fiscal year 2026, this $49 million investment will increase nursing facility reimbursement by around 12 percent.

This builds on the more than 50 percent increase in average MaineCare rates for nursing facilities from 2019 to 2024. In addition to rate reform, the supplemental budget proposes $6.6 million ($2.5 million General Funds) to fully fund the higher-than-expected cost of living implemented on July 1, 2023. In addition to rate increases, nursing facilities have received substantial supplemental payments over the years to support operations, with the most recent being $19 million in December 2023 to support direct care workers.

Rate reform will reduce complexity and eliminate “cost settlement” for direct and routine costs, making budgets more predictable for both facilities and MaineCare. Currently, MaineCare pays nursing facilities interim rates for their costs throughout the year and reconciles any differences between those payments and allowable costs at the conclusion of the year. This reimbursement system is complex, inefficient and challenging, since facilities do not know what their final reimbursement will be until the settlement process is concluded. It does not reward cost efficiency and results in significant variation in costs from one facility to another that is not directly related to quality of care. For these reasons, the federal Medicare program and most state Medicaid programs have moved away from cost-based reimbursement. MaineCare will follow their lead by transitioning to a payment model where nursing facilities are reimbursed throughout the year based on more predictable, expected amounts that incentivize high-value care.

Demand for long-term services and supports is high in Maine, which has the oldest median age in the nation. As such, Maine DHHS has prioritized efforts to strengthen the system and the workforce at its heart to improve the health of older Maine people and those with disabilities.