Overview of Federally Certified Long-Term Care Facilities

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May 11, 2020
Overview of Federally Certified Long-Term Care Facilities
Long-term care facilities (LTCFs), commonly referred to as
Medicare pays for nursing home services under a
nursing homes, provide services to those who require
prospective payment system (PPS). The PPS pays SNFs a
skilled nursing care over a short period of time for
daily per diem amount after adjusting for urban or rural
recuperation or rehabilitation after an acute illness or injury,
facility locale, resident case mix, and area wage differences.
often referred to as post-acute care. LTCFs also provide
continuous care for an extended period, including around-
Figure 1. 2018 U.S. Spending on Nursing Home Care
the-clock supervision of, and assistance with, basic personal
care activities, which is referred to as long-term care (LTC)
or long-term services and supports (LTSS).
Individuals may qualify for LTCF coverage through the
federal Medicare program—which covers health care for
elderly and certain disabled individuals—or through the
state-federal Medicaid program, a means-tested entitlement
that finances primary and acute medical services and LTSS.
The programs differ in regard to the type and scope of
services covered. Specifically, both programs cover post-
acute care, but only Medicaid covers LTSS for eligible
beneficiaries. Medicare does not cover LTSS in nursing

Source: CRS analysis of National Health Expenditure data obtained
In the United States, 15,436 LTCFs, with 1.6 million total
from the Centers for Medicare & Medicaid Services (CMS), Office of
beds, participated in Medicare and/or Medicaid as of April
the Actuary, prepared November 2019. Data include freestanding
2020. The overwhelming majority of these facilities (94%)
and hospital-based nursing care facility expenditures for both
were dually certified by state survey agencies (SAs), under
Medicare and Medicaid.
federal guidelines, to participate in both Medicare and
Notes: Sum of values may exceed totals due to rounding. “Other
Medicaid—4% were certified as Medicare only, and 2%
Public Sources” include sources such as the Veterans Health
were certified as Medicaid only. Medicare facilities are
Administration and state and local programs.
designated as skilled nursing facilities (SNFs); Medicaid
facilities are known as nursing facilities (NFs).
Under Medicaid, states establish their own payment rates
for nursing home services. Federal statute requires that
these rates be consistent with efficiency, economy, and
Nursing homes receive payment for services from private
quality-of-care standards, as well as sufficient to enlist
and public sources. Medicaid is the primary payment source
enough providers so covered benefits are available to
for most certified nursing home residents. In 2016,
Medicaid enrollees at least to the same extent they are
Medicaid was the primary payer for nearly 62% of
available to the general population in the same geographic
residents, just over 25% of residents paid privately or with
area. In some cases, states make supplemental payments to
another payment source (e.g., private insurance), and
Medicaid providers that are separate from, and in addition
Medicare was the primary payer for just over 14% of
to, the standard payment rates for services to Medicaid
residents. A nursing home resident’s primary payment
source may change over time. For example, once residents
have reached Medicare coverage limits and have spent
Medicare-Covered Skilled Nursing
down personal assets on their care, they may use Medicaid
Facility Services
as their primary payer, assuming the residents are dually
SNFs provide post-acute care to qualifying Medicare
eligible for Medicare and Medicaid.
beneficiaries, on a limited basis, for treatment of different
diagnoses and conditions. Medicare pays SNFs for daily
In the United States, $168.5 billion was spent on nursing
skilled nursing, daily skilled rehabilitation, drugs/
home services across all payers in 2018. Figure 1 shows
biologicals, durable medical equipment, and bed and board
the major sources of nursing home care expenditures and
provided with such services, among other benefits.
the proportion of monies spent, by payer. Combined,
Medicare and Medicaid (state and federal) spent $88 billion
To be eligible for Medicare SNF coverage, a beneficiary
on nursing home services in 2018, which accounted for
must have had an inpatient hospital stay of at least three
52% of total U.S. nursing home spending.
consecutive calendar days (not including the day of
discharge) and must be transferred to a participating SNF,

Overview of Federally Certified Long-Term Care Facilities
usually within 30 days after discharge from a hospital. The
physical environment in its nursing homes that are more
participating SNF must provide services for a condition that
stringent than federal requirements.
was treated during the beneficiary’s qualifying hospital stay
(or an additional condition arising in the SNF).
Home- and Community-Based Settings vs.
Institutional Settings
A Medicare beneficiary who qualifies for SNF coverage is
entitled to up to 100 days of covered care per spell of
Other types of residential settings that provide housing and
illness. For most Medicare beneficiaries, SNF cost sharing
services (e.g., assisted living facilities) generally do not provide
is as follows: for the first 20 days of a Medicare-covered
the type of skilled nursing or continuous care offered in
SNF stay, no beneficiary cost sharing is required; for the
nursing homes. These settings are considered community-
21st through the 100th day, daily coinsurance, indexed
based, not institutional. As such, they are not subject to
annually at one-eighth (12.5%) of the current Part A
federal Medicare and Medicaid Requirements of Participation
inpatient hospital deductible, is required. In 2020, the daily
(RoPs) for long-term care facilities.
SNF coinsurance amount is $176.
Community-based residential settings are licensed and
regulated by states. However, some residential settings may
Medicaid-Covered Nursing Facility
qualify to provide Medicare skilled nursing facility (SNF) care
or Medicaid nursing facility (NF) care as part of a continuum
NFs provide post-acute care to Medicaid beneficiaries who
of services in, for example, Continuing Care Retirement
require skilled nursing care and rehabilitation due to an
Communities. To take part in the federal programs and
injury, disability, or illness. NFs also provide LTSS to
receive payment, the institutional care associated with these
eligible Medicaid beneficiaries who meet state-defined
settings would have to meet Medicare SNF or Medicaid NF
nursing home eligibility criteria, referred to as level-of-care
RoPs. In addition, Medicare- and Medicaid-covered services
criteria. State Medicaid programs are required to cover NF
such as home health or personal care may be provided in
services for beneficiaries aged 21 and older. States have the
community-based residential settings, similar to services
option to cover NF services for beneficiaries under the age
provided in a participant’s private residence. Home health
of 21. All states provide this optional service.
agencies must meet federal requirements to participate in the
Medicare and/or Medicaid programs. For more information,
To define level-of-care criteria, states may use functional
see CRS In Focus IF11544, Overview of Assisted Living Facilities.
criteria, such as an individual’s ability to perform certain
activities of daily living (e.g., eating, bathing, dressing, and
walking) or to perform certain instrumental activities of
Survey and Certification
daily living (e.g., shopping, housework, and meal
Federal law requires a survey and certification process for
preparation) that allow an individual to live independently
determining whether nursing home providers meet the RoPs
in the community. States also may use clinical criteria,
and qualify for federal payments. Federal certification to
which include diagnosis of an illness, injury, disability, or
participate in Medicare and/or Medicaid is not the same as
other medical condition; treatment and medications; and
state licensure. A state license permits a provider to operate
cognitive status, among other information. Most states use a
as a nursing home in a particular state. Generally, a nursing
combination of functional and clinical criteria in defining
home must be licensed by a state before it is operational,
the need for institutional long-term care.
whereas federal certification is determined after a facility
has been licensed and has been in operation for a short
NF services include nursing care and related services,
period of time.
dietary services, specialized rehabilitation services (e.g.,
physical and occupational therapy, speech pathology and
States carry out the processes of initially certifying nursing
audiology services, and mental health rehabilitative
homes and determining continued compliance with the
services), dental care, pharmacy services, medically related
RoPs through agreements with the Secretary of Health and
social services, and a program of activities. Medicaid
Human Services (HHS). SAs conduct the survey process,
coverage of NF services also includes room and board.
which includes unannounced, on-site inspections of nursing
homes. Certain survey metrics and quality ratings for
Minimum Federal Requirements
nursing homes can be found on the CMS website “Nursing
Nursing homes must meet certain Requirements of
Home Compare.”
Participation (RoPs) to receive federal payment for services
provided to qualifying beneficiaries under Medicare and
The HHS Secretary is statutorily authorized to impose
Medicaid. Included in the RoPs, among other requirements,
certain “remedies” for deficiencies found during surveys.
are the specific rights granted to residents and the scope of
For example, the HHS Secretary may impose fines on
services that must be provided to those eligible for
nursing homes, which are referred to as civil monetary
residency. Consolidated implementing regulations for
penalties. Additionally, the HHS Secretary is required to
Medicare and Medicaid nursing homes are established in 42
maintain a program of increased surveys for nursing homes
C.F.R. Part 483, Subpart B.
identified as being significantly out of compliance with the
RoPs. The program is known as the Special Focus Facility
Nursing homes also are subject to state licensing
(SFF) program; as of April 2020, the SFF program included
requirements and state regulations. A state may set
85 nursing homes.
minimum requirements for staffing, quality of care, or the
Phoenix Voorhies, Analyst in Health Care Financing

Overview of Federally Certified Long-Term Care Facilities

Kirsten J. Colello, Specialist in Health and Aging Policy

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