Nursing home funding cut in a budget-surplus year is unconscionable

The governor’s proposed state budget would cut $275 million from Medi-Cal payments to California’s skilled nursing facility operators, pushing financially vulnerable nursing homes to the brink of closure. 

Unlike other health care providers, skilled nursing facilities are nearly 100% government funded, with Medi-Cal funding care for two-thirds of the residents and Medicare paying the rest. These public funds don’t cover the cost of care, however. 

Gov. Gavin Newsom’s proposed state budget cuts base funding and leaves these facilities no way to make up the loss. 

As inflation has risen during the last several years, nursing home operating costs have increased significantly, further widening the gap between costs and public funding revenues. At the same time, California has a record budget surplus.

It is stunning that the state government would choose to cut its investment in skilled nursing facilities that provide care to its most vulnerable residents. If the budget proposal is adopted, skilled nursing facility owners would face the last option they would want to consider — cutting wages during an unprecedented worker shortage. 

Skilled nursing facilities provide 24-hour care to residents, who typically are elderly, disabled, chronically ill individuals who need medical assistance and attention on an extended basis. After two years of paying for increased protections against COVID-19, dealing with double-digit inflation and providing higher wages for our health care workers, the proposed state funding cuts would be a devastating blow to these facilities, their patients and staff.

The budget proposal does include some well-intentioned new quality incentive programs. However, no nursing home operator can pay base wages from potential incentive awards. 

The proposed funding reduction likely will result in:

• Lower wages and the end of bonuses that operators were able to pay their staff during the pandemic 
• Fewer beds available to residents insured by Medi-Cal (Medi-Cal reimbursements per individual are far lower than what skilled nursing homes get from Medicare, so operators must limit Medi-Cal beds to stay in business)
• Facility closures 

The California Association of Health Facilities strongly opposes the proposed $275 million cut in funding for our sector. 

We urge the Newsom administration and legislators to work with us to develop an alternative funding proposal — one that will protect our base rate, support operators and our employees in this inflationary environment, and preserve access to skilled nursing care for California’s most vulnerable citizens.

We encourage the public to let their elected representatives and the governor know they should not cut funding to skilled nursing homes — a critical part of our state’s health care system.