Oped: Unlocking the federal money hose (or, A solution to the assisted living and affordable housing crises)

"It's not just about healthcare. It's also about housing."

We’ve all heard the phrase, “There’s no such thing as free money.” Normally, we would not question the truth of this statement. After all, you’d think that state government programs come with costs to the general public. These are facts of life. Most of the time, we progressives only argue that the benefits of more expansive government programs outweigh the costs. But when it comes to solving the assisted living crisis, free money is out there - mostly.

The assisted living crisis sits at the core of so many problems our state faces. Many homeless Rhode Islanders have health problems that require assisted living care. While Rhode Island has not maxed out our federal allocation of low-income housing units, federal rules only allocate us 731 units. Assisted living has no unit limit. Many Rhode Islanders who could be housed in an assisted living facility live in a nursing home, costing the state much more money because assisted living is broken. Why is assisted living broken? Because Medicaid rates are far too low. Most assisted living facilities don’t even take Medicaid patients. Those that do lose money hand over fist on the Medicaid patients. What assisted living needs is higher Medicaid rates. And we have a mechanism to pay those higher rates for free.

Some government programs create a version of free money for state and local governments. In Rhode Island, Medicaid assisted living is one such example. We can significantly raise rates at no net cost to Rhode Island’s taxpayers. How? By using the Medicaid shift. The way Medicaid works, the federal government matches the money states put in. For assisted living in Rhode Island, the federal government’s contribution to Medicaid effectively doubles the size of the state’s Medicaid fund. So, if the Rhode Island state government contributed, for example, about $1.2 billion to Medicaid funding, the federal government would contribute approximately another $1.2 billion to the fund. As we said, free money. Even better, for assisted living in our state, the federal government contributes a little more than what Rhode Island contributes to Medicaid.

We can draw down net federal money for assisted living at no net cost to Rhode Island taxpayers. How? Through the Medicaid shift. Here’s how it works. Let’s pretend that the state raises taxes on medical care providers by about $10 million and funnels that money into paying the state costs of higher Medicaid rates. Because the federal government matches that funding, actually paying a bit more than the state pays, the state government can afford to increase Medicaid reimbursement rates by a bit above $20 million. Since the reimbursement rate increase would benefit the same medical care providers who paid the taxes, they come out ahead by a bit more than $10 million. In short, if done right, the Medicaid shift gets more money to providers at no net cost to the state. The feds only allow this mechanism to run up to a tax rate of 6% of provider revenue. But assisted living has no tax in our state. We have six full points of Medicaid shift capacity. Let’s use them.

The state has used the Medicaid shift in the past. However, it has never done so for assisted living facilities, and we think it should. There is a political problem. Since most assisted living facilities turn away Medicaid patients, the providers that turn away the patients would pay more in taxes without benefiting from the higher Medicaid rates. They might get mad. Honestly, though, all providers should take Medicaid patients, and once we raise the rates, the excuse will go away. Raising assisted living rates will help address the crisis because many more Medicaid patients will be accepted. It’s not just that more people will get the care they need, quality will go up too – both for the people already in assisted living now and for the people that will get into assisted living.

The Medicaid shift funds will go towards solving our affordable housing crisis. When assisted living facilities take in more Medicaid patients, that in itself comprises a significant victory in our fight against homelessness. What’s more, the extra funds could go towards further expanding assisted living infrastructure. In concrete terms that means more room for more people who need a place to live.

We should also look at using the Medicaid shift for home care. If families wish to keep their older parents or grandparents out of assisted living facilities, the state should better provide these families with the means to do so. Given the rapidly aging American population, these concerns will be more pressing than ever. Let’s be proactive.

It’s time to use the Medicaid shift to unlock the federal money hose. Let’s start with assisted living.