Alex Spanko covers the skilled nursing industry for Aging Media Network, with a particular focus on the intersection of finance and policy. He recently wrote a great article discussing the decline in occupancy at the nation’s nursing homes.  Occupancy “stayed flat between the most recent two quarters, but the proportion of residents covered under Medicaid hit a record high — while the share of bread-and-butter Medicare residents fell to a record low.”

Medicaid accounted for 67.6% of resident days at nursing facilities in the third quarter of 2019, according to the most recent data analysis from the National Investment Center for Seniors Housing & Care (NIC).  However, fee-for-service Medicare, the gold standard for nursing homes with daily rates higher than all other payer sources, dipped to a record low of 10.9% of patient days.

The difference, from a financial standpoint, is stark: Traditional FFS Medicare provided reimbursements of $523 per day in the third quarter, NIC’s analysis found, compared to just $214 per day for Medicaid. That $214 daily average revenue per Medicaid patient day actually represents a high water mark since 2012 as well.

The gain in overall day share translated to revenue mix, with Medicaid accounting for a record-high 51.5% of nursing home income in the third quarter; Medicare revenue mix slid to 20.7%.

Consisting primarily of Medicare Advantage, managed Medicare accounted for about 6.3% of all patient days; these plans reimbursed at a rate of $431 per patient day, a slight drop, for a total revenue share of 9.8%.

“Medicaid is continuing to apply pressure to state budgets, because reimbursement rates are not keeping up with rising labor and other operating costs,” NIC chief economist Beth Mace said in a statement announcing the results. “This is not just a rural state issue. Continued growth in Medicaid may also be contributing to financial and budgetary pressures for bigger states like New York and Massachusetts.”

The nation’s nursing homes were 83.6% full in the third quarter, NIC found, a decrease of just a tenth of a point from the second quarter — and a 48-basis-point increase from June 2018.

“The fact that skilled mix decreased 50 basis points and occupancy was relatively flat in the third quarter suggests that Medicaid demand is helping to stabilize occupancy,” NIC concluded.

NIC senior principal Bill Kauffman echoed that sentiment in the statement.

“After a period of declining and then flat occupancy rates, the data this quarter suggest increased demand for skilled nursing from Medicaid patients is driving continued occupancy stability,” Kauffman said. “It’s too early to know if this trend will continue into the fourth quarter.”

 

The Medicaid Asset Protection Trust (MAPT) is a tool that may protect your house from going to reimburse Medicaid for nursing home costs but only after the house is in the trust for at least five years. A trust is a legal entity that owns assets.  The MAPT is a good option to consider to keep the family home and other assets for your family and not the nursing home.

After the house is transferred to the MAPT, you still receive your STAR, veterans and other real estate exemptions. You maintain your house and pay your taxes like normal. You may even forget your house is in the trust. Your lifestyle stays the same.

If you put the house on the market, the trustee (manager) — usually one or two adult children — signs the binder and contract. At the closing the purchaser pays the trust. The trustee deposits the proceeds check into a bank account in the name of the trust. The grantors of the MAPT (the parents who transferred their house to the trust) still have their capital gains tax exclusions —$250,000 each, for living in the primary residence two out of the last five years.

The MAPT is an “income only” trust, which means the grantors (parents) only have a right to take income from trust assets but may not spend the principal. However, the trustee may purchase a new house with the proceeds and the new house is owned by the trust. Buying the new house does not start a new five-year period because the assets, whether real estate or cash, all stayed in the trust.

If the parents do not buy a new house with the sale proceeds, they may make gifts of trust principal to the children who are beneficiaries of the trust. The children and parents do not pay tax for the gifts.  If there is a house and cash in the MAPT, the parents may direct the trustee to use trust assets to pay for real estate taxes, home maintenance and repairs, and home insurance for the house in the trust. The parents may also invest the money in the trust and take income distributions from the investments.

As opposed to common thought, adding children’s names to the deed of the house is not a good idea. If your child is sued, their judgment creditor can put a lien on your house. If the child dies before you, you may own the house with their spouse. If the parents sell the house, the child may have to pay capital gains tax because they were not living in the house. The MAPT avoids these complications.

The MAPT allows preservation of assets, including the family home, from the devastating cost of care in a nursing home and at the same time provides flexibility upon the sale of the home.

A recent report published in the Journal of the American Medical Association that looked at the past six decades of mortality data noted a decline in overall life expectancy in the United States for three consecutive years. The JAMA report looked at life expectancy and mortality across the country from 1959 through 2017. Final life expectancy numbers for 2018 will be released soon by the U.S. Centers for Disease Control and Prevention. The general trend: Life expectancy improved a great deal for several decades, particularly in the 1970s, then slowed down, leveled off and finally reversed course after 2014, decreasing three years in a row.

Despite spending more on health care than any other country, the United States has seen increasing mortality and falling life expectancy for people age 25 to 64, who should be in the prime of their lives.  Death rates from suicide, drug overdoses, liver disease and dozens of other causes have been rising over the past decade for young and middle-aged adults. By age group, the highest relative jump in death rates from 2010 to 2017 — 29 percent — has been among people age 25 to 34. The all-cause death rate — meaning deaths per 100,000 people — rose 6 percent from 2010 to 2017 among working-age people in the United States.

In contrast, other wealthy nations have generally experienced continued progress in extending longevity. About a third of the estimated 33,000 “excess deaths” that the study says occurred since 2010 were in just four states: Ohio, Pennsylvania, Kentucky and Indiana. The state with the biggest percentage rise in death rates among working-age people in this decade — 23.3 percent — is New Hampshire, the first primary state.  All five of these states are part of the opioid crisis.

The risk of death from drug overdoses increased 486 percent for midlife women between 1999 and 2017; the risk increased 351 percent for men in that same period. Women also experienced a bigger relative increase in risk of suicide and alcohol-related liver disease.
Obesity is a significant part of the story. The average woman in the United States today weighs as much as the average man half a century ago, and men now weigh about 30 pounds more. Most people in the United States are overweight — an estimated 71.6 percent of the population age 20 and older, according to the CDC. That figure includes the 39.8 percent who are obese, defined as having a body mass index of 30 or higher in adults (18.5 to 25 is the normal range). Obesity is also rising in children; nearly 19 percent of the population age 2 to 19 is obese.

Kaiser News recently reported that many seniors are so scared of the thought that they will be abused and neglected in nursing homes that some discuss “rational suicide”.  The concept of rational suicide is highly controversial; it runs counter to many societal norms, religious and moral convictions, and the efforts of suicide prevention workers who contend that every life is worth saving. More seniors are weighing the possibility of suicide, experts say, as the baby boomer generation — known for valuing autonomy and self-determination — reaches older age at a time when modern medicine can keep human bodies alive far longer than ever.

Is it better to die on your own terms?  The question itself is taboo. Many want the option to take “preemptive action” before their health declines in their later years, particularly because of dementia. A Kaiser Health News investigation in April found that older Americans — a few hundred per year, at least — are killing themselves while living in or transitioning to long-term care. Many cases KHN reviewed involved depression or mental illness.

Dena Davis is a bioethics professor at Lehigh University who defends “rational suicide” — the idea that suicide can be a well-reasoned decision, not a result of emotional or psychological problems. Davis, 72, has been vocal about her desire to end her life rather than experience a slow decline because of dementia, as her mother did.

Suicide prevention experts contend that while it’s normal to think about death as we age, suicidal ideation is a sign that people need help. They argue that all suicides should be avoided by addressing mental health and helping seniors live a rich and fulfilling life.

Public opinion research has shown shifting opinions among doctors and the general public about hastening death. Nationally, 72 percent of Americans believe that doctors should be allowed by law to end a terminally ill patient’s life if the patient and his or her family request it, according to a 2018 Gallup poll.

If you or someone you know has talked about contemplating suicide, call the National Suicide Prevention Lifeline at 800-273-8255, or use the online Lifeline Crisis Chat, both available 24 hours a day, seven days a week. People 60 and older can call the Institute on Aging’s 24-hour, toll-free Friendship Line at 800-971-0016. IOA also makes ongoing outreach calls to lonely older adults.

McKnight’s reported on the forseeable suicide of an assisted living resident in a Five Star Senior Living community in Arkansas.  Staff members at Morningside of Springdale assisted living community cut back on the number of checks they conducted on his room which allowed the man time to commit suicide.  The man had a history of considering suicide and had objected to the every-two-hours room checks required by the state, according to an investigation by the state’s Office of Long Term Care.

Staff members agreed to accommodate the resident’s request for less frequent checks. He died April 23 in his room, and Morningside reported the death to the state and local authorities, officials said.

Lobbyists for the nursing home industry are complaining about a new bill called The Ensuring Medicaid Provides Opportunities for Widespread Equity, Resources and Care Act (EMPOWER) which reauthorizes the federal “Money Follows the Person” program. The goal of the bill is to give seniors and other certain Medicaid beneficiaries greater ability to stay at home rather than enter a formal care setting.

EMPOWER was included as part of the Medicaid Extenders Act of 2019 and was signed into law by President Trump on Jan. 24. That legislation provides full funding for the MFP program and will last for three months. Reps. Brett Guthrie (R-KY) and Debbie Dingell (D-MI) co-sponsored the EMPOWER renewal.

But the American Health Care Association says that old people can’t stay in their own homes.

“The view that there are thousands of people who live in nursing facilities that are able to live at home is a myth,” he told McKnight’s this week. “We take care of a very frail population. The average nursing home resident is 82 years old and needs assistance with five activities of daily life. We encourage the all members of Congress to visit a facility and observe both the terrific care that we provide and observe the extremely frail condition of our residents.”

 

Cohousing is a community where people own their individual homes plus a share of common areas such as outdoor space and a clubhouse with kitchen, living and dining rooms. They typically prepare and share meals several times a week and become more than just neighbors.

They are usually structured as a condominium with a homeowners association, but are self-managed. Owners (called members) collectively make decisions, usually by consensus. Committees oversee the financial, administrative, maintenance and other work normally handled by a management company, although they may hire outsiders for some jobs. Each member is expected, and in some cases required, to pitch in, whether it’s cooking, cleaning or fixing the Wi-Fi.

Senior cohousing is a newer type designed for people who want to avoid the isolation that can happen when families move away and friends die. “There is a natural loss of community as you age. There is no way to replace it with jobs or schools,” said Christian Zimmerman, whose company developed Phoenix Commons, where he also lives.

JoAnna Allen called it “a great antidote to the loneliness that hits a lot of people.” She was familiar with cohousing, but her husband, Ken, was less gung ho. He came around “once he realized he could still have his privacy and independence,” she said.

There are 168 established cohousing communities in the United States including 14 that are senior-focused, said Karin Hoskin, executive director of the Cohousing Association of the U.S.  None have been established in South Carolina yet.

Some of the senior communities have minimum age requirements; others don’t but end up with mostly seniors because they lack the space and amenities most families want. In California, senior housing developments generally can exclude residents younger than 55 if they have at least 35 units and meet other requirements.

When members get sick, other members usually will help with meals or trips to the doctor, but “this is independent living. There is nobody there to take care of you if you really need greater levels of care. We are very clear about that,” said Katie McCamant, owner of CoHousing Solutions, a development and consulting firm.

Owners can sell cohousing units to whomever they want as long as they don’t violate antidiscrimination laws. Buyers must meet age requirements in senior communities that have them.

Cohousing is “a peculiar market,” said Bob Miller, a member of Wolf Creek Lodge. Buyers “are not buying real estate. They are buying into a very special community. It’s not going to work for everybody.”

Prices at his 30-unit community range from $300,000 to $500,000. “For Grass Valley that’s not cheap,” he said. “It’s significant to buy in,” but ongoing expenses are “very economical.” Association fees run about $360 per month.

There’s no solid research on cohousing resale values, but in 2010, Davis appraiser Lee Bartholomew did a limited study looking at new and resale prices at five all-age cohousing communities in Northern California. Initially, they sold for more per square foot than standard condos, but they also have green-building features that add to construction costs and appeal to cohousing buyers. From 2008 through 2010, they appreciated faster than standard condos, he said.

McKnight’s had an interesting article referencing Green Street Advisors analysis blaming “greedy” landlords for the financial problems in the nursing home industry.  Both ignore the fact that the landlord and the corporate operator both siphon funds from the facilities away from patient care to increase the profit margins.  The report notes that nursing facilities are typically subject to long-term, triple-net leases where tenants are required to cover all operating and capital expenditures. But that coverage has been “squeezed” in recent years because of interest rate increases, slumping demand, increased labor costs, and managed care plans putting pressure on lengths of stay.

The article states the obvious that “rents are likely too high in the skilled nursing industry and will need to drop to foster a healthier relationship between owner and operators, a new report advises”.  In the analysis, Green Street Advisors urges landlords “don’t be greedy.” It suggests that SNF rents may need to drop by 10% on average to strike the right balance where both parties benefit.  The only losers are the caregivers and residents.  The SNF industry will remain “under pressure” if the revenue side of the ledger fails to grow to keep up with rising rents, said Dan Hermann, president and CEO of Ziegler.

“The key takeaway is that ‘win-win’ relationships are the optimal outcome for skilled nursing operators and landlords,” Lukas Hartwich, lead healthcare sector analyst for the Newport, CA, firm and author of the report, told McKnight’s. “An important factor in ‘win-win’ relationships for SNFs is a sustainable level of rent coverage.”  Green Street urges landlords to set “sustainable” rent levels, that both allow their tenants to profit, and collect enough cash to fund capital expenditures — around 2% to 3% —for those buildings.

“Facilities that fall short in these two areas are destined to spiral downward,” they write. Calculating profitability can be tricky, but the firm estimates that a tenant’s share of facility revenues should be about 7% to make its operations sustainable.

Four prominent real estate investment trusts must drop their rents to strike that win-win balance, the report notes: LTC properties (6%), Sabra Health Care (7%), Omega Healthcare Investors (11%) and Welltower (12%). Sabra and Omega have notably feuded with tenants in the past year over rent costs, with the former’s largest operator, Senior Care Centers, filing for bankruptcy in December, citing ballooning lease costs.

The authors also note that their analysis does not account for “dramatic changes in the operating environment,” such as government reimbursement levels, and assumes inflationary growth of revenue and expenses over time.

“The REIT model — forget whether it’s nursing, just any real estate asset — is premised on continuous escalations,” he told McKnight’s. “Your question when you have continuous escalations is: How will the balance of your expenses be escalating, and can your revenues escalate at the same level?”

He added that when REIT executives factor in inflation and flat revenues it is understood that “eventually the model is going to break.”

And that’s why people have been exiting the nursing home industry for years on the REIT side,” Hermann added.

Popular Science reported on the decline in life expectancy in America.  Because of the for-profit health care market, America spends more on healthcare per citizen than almost any other.  We are not seeing the returns. Life expectancy had been steadily climbing for decades but in the last few years life expectancy has declined.

“A new report from the Centers for Disease Control shows that a small decrease in life expectancy, from 78.7 to 78.6 years, is part of a continuing trend. Even as we make progress treating cancer, heart disease, and stroke—three of the biggest killers—we’re losing ground on other fronts and have been since 2014. That makes this continuous decline unlike anything we’ve seen since World War I and the Spanish influenza, which both happened between 1915 and 1918.”

The CDC highlighted three things that have contributed to American’s shrinking life expectancy in recent years: drug overdoses, chronic liver disease, and suicide. “Increased death rates for unintentional drug overdoses in particular—a subset of unintentional injuries—contributed to the negative change in life expectancy observed in recent years,” the report reads.

But the changes aren’t affecting everyone equally. Take a look at these charts:

life expectancy factors

Geographic location is significant.

life expectancy US 2016

Skilled Nursing News reported on a new study that shows that the Medicaid program may be overpaying operators by billions of dollars per year.  Medicaid is the single largest payor for skilled nursing services, covering about 62% of all nursing home residents according to a 2017 analysis by the Kaiser Family Foundation.  A pair of economists from the University of California, Los Angeles and the University of Georgia published an extensive analysis of Medicaid spending in nursing homes, determining that longer stays in SNFs don’t lead to better outcomes for residents — and thus the government shouldn’t necessarily pay for as many patient days.

“Since we find no evidence that longer stays lead to health improvements, this difference points to Medicaid overspending of … $5,480 per Medicaid stay or about 18.6% of Medicaid spending per nursing home stay,” Martin Hackmann and R. Vincent Pohl wrote in their research, published as an issue brief by the National Bureau of Economic Research. “Multiplying this fraction with national Medicaid nursing home spending of $55 billion in 2015 suggests annual savings of up to $10.2 billion.”

The researchers specifically looked at nursing home residents who started paying for services out of pocket; Medicaid covers skilled nursing care for income-qualified residents, typically after they exhaust their personal resources.  The pair found that nursing homes tend to retain residents longer in periods of low occupancy, but increase discharges of Medicaid beneficiaries once that figure hits around 89%, as they attempt to seek out the highest paying self-funding residents.

“At lower occupancies, nursing homes benefit from extended Medicaid stays, to the extent that Medicaid rates exceed the marginal cost of care. At higher occupancies, this incentive is muted because nursing homes prefer to occupy their scarce beds with more profitable private payers,” they wrote. “In contrast, private payers’ home discharge rates vary little (between 1.7% and 2.1%) and not systematically with occupancy.”

At the same time, the researchers didn’t find a solid connection between longer lengths of stay and health outcomes, noting that the one-year hospitalization rate was actually lower for Medicaid residents at high-occupancy nursing homes, when they were most likely to be discharged.

“Overall, we conclude that marginal Medicaid beneficiaries appear to be relatively healthy,” they wrote. “We also find no evidence that longer stays lead to improved health outcomes suggesting that longer nursing home stays (on this margin) likely constitute over-utilization of nursing home care.”