Long-Term Care Under Pressure as Most States Expect Medicaid Shortfall

Nursing homes are looking at what may turn out to be a grim fiscal year in 2012 as the Affordable Care Act (ACA) expands Medicaid coverage, while at the same time the federal budget crisis puts heavier pressure on Medicaid directors and nursing home operators on a state level.

Economic experts weighed in during Kaiser’s 2011 50-State Medicaid Budget Survey conference call, highlighting trends in state budgets, Medicaid spending, enrollment, and policy, and how states are responding to federal fiscal challenges, especially as state spending on Medicaid is expected to rise 28.7%.

“As states continue to grapple with historically difficult budget conditions, they must also plan for the implementation of the ACA which envisions new roles for Medicaid and for states,” says the Kaiser report.


However, as they expect the implementation of health reform in 2014, when Medicaid requires expanded eligibility for all legal U.S. residents to 138% of the federal poverty level, many states are worried that federal discussions related to debt and deficit reduction might achieve federal savings by shifting more Medicaid costs to states.

Already, almost two-thirds of state Medicaid directors say they have a 50-50 chance of Medicaid shortfall, said Vernon Smith, a principal with Health Management Association, in the conference call.

In response, 46 states are adopting plans that cut and restrict payments to providers in 2012, while 11 states will have restrictions on long-term care programs and services.


While 20 states say they plan to increase provider rates for nursing homes, a majority 31 states plan to cut or restrict rates.

As providers across the nation look for ways to contain costs, initiatives are emerging to coordinate care for dual eligibles and other high-need populations such as health homes, disease management, and managed long-term care, reports Kaiser.

There’s a state movement to shift away from institutionalized care in favor of home and community based services (HCBS), which in turn could mean diverting funds, says Robin Rudowitz, principal policy analyst for the Kaiser Family Foundation, but she says they don’t have specific estimates of how that could impact nursing homes financially.

Although she couldn’t provide exact figures, some in the health care industry are wondering how budgets will be affected.

“There is a concern, because you’re dealing with a finite set of dollars,” says Greg Crist, vice president of public affairs for the American Health Care Association.

And, with budgets already stretched to their limits and beyond, it will only get worse as Medicaid coverage is due to expand coverage that the Centers for Medicare & Medicaid Services (CMS) Office of the Actuary estimates will bring 20 million people into the program.

“There will be larger subsets competing for a shrinking state and federal pot,” says Crist. “When you look specifically at our [skilled nursing] sector, even more exacerbating is the demographic tidal wave.”

In general, there’s plenty of concern about Medicaid funding, or, more often, underfunding.

“There was about $5 billion of Medicaid underfunding across the states to skilled nursing facilities in 2011,” Crist said, citing a 2010 statewide Eljay, LLC report on shortfalls in Medicaid funding for nursing home care. “Those funding restraints promise to be even tighter in FY 2012. We sense that there’s going to be even more funding cuts and budget cuts related to long-term care.”

Written by Alyssa Gerace