Utah stands to lose more than $100 million in annual federal health care funding — not because of fraud or abuse, but because of a misunderstanding.
A new report by the Office of the Utah State Auditor raises questions about a complex program that supports care for some of Utah’s most vulnerable nursing home residents. Audits matter, and the State Auditor’s work should be taken seriously. But, in this case, the report oversimplifies and maligns a lawful, tightly regulated program that was created to solve a very real problem in long-term nursing home care in Utah.
More than a decade ago, Medicaid was not paying enough to cover the actual cost of caring for patients in skilled nursing facilities. As a result, Utah’s nursing homes were losing over $100 per Medicaid patient per day. That deficit, amounting to millions of dollars annually, put many nursing homes in the red and threatened to force the closure of others.
Utah’s Department of Health and Human Services partnered with the federal government in 2013 to develop a solution called the Nursing Facility Upper Payment Limit (UPL) program. They didn’t start from scratch; they looked at similar programs in other states and built a version of the program with even stronger safeguards and oversight, making it one of the most tightly regulated programs of its kind in the country.
The structure of the federal program is what often leads to confusion. Federal rules require the state to work with a non-state government entity, typically a rural hospital, to help manage and finance the program. These entities provide the upfront funding for their own hospital operations that allows Utah to access a federal Medicaid match — at no cost to Utah taxpayers. The state administers the distribution of those additional federal funds directly to the nursing facilities to help offset the losses in providing care to Medicaid patients.
A common criticism in the audit is that not every dollar remains permanently at the nursing facility level or that administrative costs are part of the structure. That criticism, however, fails to acknowledge that the program is specifically designed to provide some of the additional federal funds for rural health care generally — this outcome is intended and is not misuse or fraud. To qualify, the participating rural hospitals are required to provide their own funding, manage compliance and meet strict federal and state requirements. As specifically allowed by the program, after budgeted and other nursing facility costs are met with the additional federal dollars on an annual basis, any remaining funds may be used for other designated health care purposes, including supporting the delivery of services in rural communities, creating a win-win situation.
The program ensures that funding is used first and foremost to support patient care at Utah’s nursing facilities, and the program requires that all additional federal Medicaid dollars remain at those facilities until all their operating and other costs have been paid each year. Those costs include costs of care, nursing facility operations, staffing, clinical services, supplies, equipment and maintenance.
As intended by state and federal law, these additional federal funds are tightly regulated, tracked and audited at both the state and federal levels and by the operator’s private accounting firms. In short, the program works as designed and intended.
The audit did not find or describe any financial impropriety but instead took issue with the policy behind the program. In reality, the program operates within and complies with both federal and state law and is subject to ongoing and rigorous oversight, with clear accountability built into every step of the process.
It is imperative that policymakers understand how the program actually works rather than relying on partial information or incomplete assumptions. If misunderstandings lead to the program being eliminated, the state will forfeit more than $100 million annually in additional federal Medicaid funding, which comes at no cost to Utah taxpayers. The cost of providing nursing home care, however, would not go down; that burden would instead be shifted to providers, families and taxpayers. Alternatively, nursing home care would no longer be as readily available to those who need it most.
Complex problems require careful solutions. The Utah UPL program is a helpful and essential solution to the cost of providing expensive long-term care for Medicaid patients. Utah should take the time to fully understand how this program works, why it was created, the significant benefits it brings to nursing home patients and what would be lost if we get it wrong.
Understanding the program is not just about funding or paying for the costs of long-term care; it is essential to the stability of care for thousands of vulnerable Utah seniors.