Study: Nursing Homes Battered by $6 Billion Medicaid Funding Shortfall in 2011

The skilled nursing sector has been buffeted by waves of cuts and adjustments to reimbursements in 2011, and a recent report on Medicaid underfunding reveals a $6 billion shortfall to nursing homes.

This is the greatest level of underfunding in the history of the study, said Governor Mark Parkinson, president of the American Health Care Association (AHCA), in a Thursday morning teleconference.

About 63% of nursing home residents have their stays funded by Medicaid, but the program fails to fully reimburse facilities for the costs they incur. Facilities lose nearly $20 a day for each Medicaid resident, for about a $6.3 billion loss in 2011.


The margin of loss has risen 13% over 2010’s shortfall, said the report’s author, Joe Lubarsky, president of ElJay, LLC, a firm with expertise in Medicaid cost reporting and analysis, and is substantially greater than 2009’s $16.54 reimbursement shortfall.

“For every dollar of Medicaid-allowable cost that a facility incurs, the states are reimbursing ninety cents—that’s a 10% negative margin right off the top,” Lubarsky said.

The underfunding will only get worse, he continued. Shortfall is expected to rise to $25 a day in 2012, with cost coverage dropping to 86%—”by far the lowest level of coverage and the highest shortfall in the years we’ve done this study.”


Generally, nursing homes rely on Medicare funding to subsidize Medicaid losses, and combined reimbursements from these two programs resulted in a “break even” margin for nursing homes in 2009, according to the report. However, the outlook for this strategy is negative.

“With planned Medicare rate reductions in 2012 and a projected negative Medicaid margin topping 14%, the margin percentage for these two government programs combined will only reach a negative 2.7%,” it says. “The combined shortfall of both Medicare and Medicaid is projected to exceed $2 billion, marking an end to the current reliance on Medicare cross-subsidization of Medicaid shortfalls and the beginning of greater uncertainty.”

At this point, skilled nursing is a “very challenged profession,” Parkinson said. “It’s unfortunate—at the very time we’re making terrific progress, we’re seeing our funding decline.”

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View “A Report on Shortfalls in Medicaid Funding for Nursing Home Care” here.

Written by Alyssa Gerace