The Biden administration has issued a proposed rule setting minimum hours of care by registered nurses and nurse aides in nursing homes. Since nursing home owners can boost profits by reducing staffing levels to dangerous levels, this is a critical step toward protecting residents and workers.

The industry lobby says that low staffing levels aren’t due to profit-seeking, but rather a shortage of workers. However, the supposed “shortage” is self-inflicted. As we explained in a public comment on the proposed rule, nursing home workers are grossly underpaid and overworked. Declines in nursing home employment also reflect a shift toward home- and community-based services (HCBS) that accelerated in the wake of the COVID-19 pandemic, which devastated nursing home residents and staff.

Nursing home care is expensive, yet many homes are dangerously understaffed

The annual cost of nursing home care is around $100,000, far more than most seniors can cover with savings and income. Since most people who need long-term care for extended periods run out of money, the government is the main source of funding for nursing home care and HCBS.

However, Medicare only covers short rehab stints after hospitalization, while Medicaid only picks up the tab after people have drawn down other resources. Since private long-term care insurance is expensive and provides limited coverage, all except the wealthiest households risk being impoverished by long-term care needs, though Medicaid at least guarantees access to nursing home care when other funds run out. The Biden administration’s proposed American Jobs Plan included $400 billion in funding to allow more people to obtain home-based care instead of being forced to live in a facility, but this didn’t make it into final legislation.

Despite nursing homes’ high cost, aides who provide most of the hands-on care earn poverty or near-poverty wages while enduring harsh working conditions. The average aide assists 13 residents. Most aides are women of color, including many immigrants. Workers suffered high illness and injury rates even before the pandemic. Turnover is high—fewer than half of nursing home workers last a year on the job—and affects the quality of care.

What are we getting for the $100 billion Medicare and Medicaid spend annually on nursing homes and similar care provided in continuing care retirement communities? Though it may seem hard to believe, there are no strict requirements for how much care is provided in nursing homes even when taxpayers foot the bill. Much of the money flows to for-profit companies who own 70% of nursing homes and have an incentive to minimize costs at the expense of residents.

Private equity owners are among the worst offenders because they focus on maximizing short-term profits and have fewer reputational constraints. The private equity business model often targets sectors such as newspapers, hospitals, and nursing homes where previous owners had invested in building and maintaining reputations for quality products and services. The new owners take advantage of lingering goodwill and workers’ sense of responsibility while gutting staff and engaging in self-dealing, such as selling facilities to companies controlled by the private equity partners and then charging inflated rent for their use.

Real estate sale-leasebacks and other related-party transactions hold several advantages for private equity partners in nursing home deals. These include hiding profits and shielding assets from creditors in case of bankruptcy or litigation, including wrongful-death lawsuits. High rents and fees from such transactions may be passed on to payers, including Medicaid and Medicare, while proceeds aren’t equitably shared with pension funds and other partners in the deal who put up most of the money and bear almost all the risk.

Though poor health and safety records and bad press coverage may eventually catch up with unscrupulous nursing home owners, they can continue to do business by changing names and hiding behind complex ownership structures. In addition to proposing a minimum staffing standard, the Biden administration has also moved to increase transparency in nursing home ownership given the evidence that private equity and real estate investment trust ownership is associated with poor quality of care.

Unscrupulous nursing home owners take advantage of the fact that residents may have limited options. Medicaid tends to pay less than Medicare and private payers, and, in some states, may not cover the cost of quality care. Higher-quality nursing homes may therefore limit the number of Medicaid beds even while nursing homes that provide substandard care are able to earn a profit. The result is frail nursing home residents—disproportionately people of color—languishing in dangerous homes and cared for by guilt-ridden, stressed, and underpaid workers.

A minimum staffing standard is long overdue

Federal law currently requires only that nursing homes be supervised by a registered nurse (RN) and provide “sufficient” staffing, a standard that isn’t defined or enforced. Some states do better, but all jurisdictions except the District of Columbia require less than the 4.1 hours of total nursing care per resident per day that many experts recommend based on a 2001 study commissioned by the Centers for Medicare and Medicaid Services. Actual care provided varies widely across states, from an average of 3.3 hours in Missouri and Texas to 7.5 hours in Alaska.

The proposed standard isn’t perfect. It’s presented as a compromise between improving resident well-being and preserving access to care given industry claims of worker shortages. It requires nursing homes to have an RN available around the clock in addition to providing at least 0.55 hours of daily RN care and 2.45 hours of daily nurse aide care per resident. While 24-hour RN supervision is an improvement over many previous recommendations, total nursing care prescribed in the proposed standard falls short of 4.1 hours per resident. The proposed standard also fails to include a role for licensed practical nurses, who could end up being laid off in favor of aides.

The nursing home lobby—the American Health Care Association (AHCA)—is trying to derail the proposed standard, saying it would have “disastrous results” by failing to improve quality while potentially displacing hundreds of thousands of residents. But the industry is grasping at straws. For example, it trumpets the fact that a study backing the proposed standard finds no “specific threshold” where quality improves or declines. But the reason the study finds no specific threshold is because health and safety improve with staffing at every level examined, including levels well above the proposed standard. This is hardly an argument against a minimum standard; instead, it’s an argument that tougher standards would yield substantial health and safety benefits.

Industry claims of a worker shortage are equally unfounded, relying on the fact that the workforce shrank during the pandemic as nursing home occupancy plummeted. AHCA says that 15% of nursing home workers left or lost their positions during the pandemic, but this reflects reduced demand for workers, not short supply, as hundreds of thousands of residents and would-be residents died in nursing home outbreaks and others fled or avoided the facilities due to the high risk of COVID-19 infection. If there were an actual worker shortage, nursing homes would be bidding up wages, but nursing home wages have been flat even as workers in other industries have seen gains in a tight labor market. If anything, the fact that the industry has shed workers suggests that there’s a pool of trained workers who could be hired back, especially if pay and working conditions improved. A similar illogic is evident in the claim that rural hospital closures—which are often due to states’ refusal to expand Medicaid under the Affordable Care Act and other financial factors—are evidence of labor shortages that would also affect nursing homes. Instead, these hospital closures would likely have increased the pool of available nurses and aides in these areas.

It’s true that the nursing home industry is in decline, a process that accelerated during the pandemic. But this is a positive trend if more seniors can access better and more cost-effective care at home. Whether or not a federal staffing standard causes more nursing homes to close their doors, as the industry warns, residents may be better off in different care settings. While the industry lobby points to the fact that 38% of nursing homes that closed during the pandemic had four- or five-star ratings, our analysis of August nursing home data finds that 57% of all nursing homes received such ratings, indicating that lower-rated homes were more likely to shut down.

The industry’s warnings of large-scale displacement are almost certainly overblown, since they can’t point to evidence that this happened in states that implemented stricter standards. Studies looking at the experiences of New Mexico, Vermont, and New Jersey found that nursing homes affected by stricter standards were no more likely to close than those already in compliance. Similarly, careful research has found that state and local minimum wage increases didn’t cause nursing homes to shut down but did reduce turnover among low-wage employees and improve residents’ health outcomes, including lower mortality rates. Since nursing home occupancy has rebounded but remains below pre-pandemic levels, any consolidation that does happen would result in efficiency gains by reducing overhead costs per resident. Adequate staffing could also help repair nursing homes’ tarnished reputations and slow their decline.

The staffing standard is critically important, notwithstanding the nursing home industry’s unconvincing arguments

It’s highly unlikely that the rule will cause widespread shuttering of nursing homes and reduce access to quality care as the industry claims. However, ownership changes in existing facilities are both likely and welcome, as the greediest owners will exit the industry. It’s scandalous that the public is paying for-profit companies to care for vulnerable seniors without setting minimum standards for care or understanding where the money is going. The Biden administration’s proposed rules for nursing home staffing and transparency are critical to fixing this broken system.

The industry’s attempt to derail the proposed staffing rule by claiming a widespread worker shortage is outrageous given that the industry continues to pay workers below-market and often poverty-level wages for difficult and dangerous work. The decline in employment that the industry cites as evidence of a shortage is mostly due to a decline in the number of residents—a trend that reflects a preference for aging in place as well as the inadequate care offered in many nursing homes, especially during the pandemic. To the extent that workers fled or were sidelined by illness during the pandemic and would need to be lured back with higher pay and better working conditions, this is a welcome corrective and not reason to weaken the standard.