Medicaid Underfunds Senior Care Providers by $7 Billion in 2012

Medicaid will underpay nursing home providers by more than $7 billion in 2012, according to projections made in a report by Eljay, LLC and released by trade group the American Health Care Association (AHCA).

The per-resident, per-day average projected shortfall in 2012 is $22.34—the largest deficit reported since the inception of the study in 1999—and is 14.3%higher than last year’s projection of $19.55.

“There’s a lot of talk in Washington about Medicaid and how it’s ripe for cuts,” said AHCA President and CEO Mark Parkinson in a prepared statement. “This report offers hard data that argues the opposite. The reality is that this program already underpays nursing center providers. Cuts to Medicaid do not make sense for providers or for the millions of Americans who depend on the program.”

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For a typical 100-bed skilled nursing facility where on average 63% of residents rely on Medicaid to cover the cost of their care, the 2012 projected shortfall translates to a loss of more than $500,000 a year.

Between 2010 and 2012, AHCA notes, allowable costs increased an average of 4.2%, but Medicaid reimbursements to providers only increased 2.5% on average.

“As a researcher and author of this study for the past decade, I see adequacy of Medicaid payment for nursing facility services continuing to decline to their lowest point since the inception of the study,” said Joe Lubarksy, President of Eljay, LLC. “I don’t predict any significant shifts until there are significant improvements in state economies, and even then, the trend will continue to be towards a higher priority of funding for non-institutional services.”

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Many nursing homes have traditionally been able to use Medicare reimbursements to partially subsidize Medicaid underpayments, but using Medicare margin data and 2012 projected Medicaid shortfall data, Eljay projects a combined Medicare/Medicaid shortfall that exceeds $2.51 billion for the current year, or a 2.8% loss in revenue across both programs.

As the healthcare system shifts toward managed care for long-term supports and services, the nursing home industry will likely see a decline in occupancy, the report says.

View A Report on Shortfalls in Medicaid Funding for Nursing Center Care.

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Written by Alyssa Gerace