Medicaid Underfunds Nursing Care to its Highest Deficit Ever

January 13, 2014, Washington, DC - The American Health Care Association (AHCA) today released a report by a Medicaid expert demonstrating again that the long term care services of America's most vulnerable individuals are significantly underfunded by Medicaid. The report estimates the nation's highest Medicaid shortfall on record – over $7.7 billion in 2013. On a daily basis, this shortfall is $24.26 per Medicaid patient, which is 8.6 percent higher than the 2012 projected shortfall of $22.34.

"At a time when Affordable Care Act reforms are fundamentally changing the Medicaid program and the way care is delivered, this report raises a number of challenges facing the nursing center profession," said Mark Parkinson, President and CEO of AHCA. "With a low operating margin as reported by MedPAC, our profession does not need more cuts to Medicaid."

The new shortfall number comes at a time when the Medicare Payment Advisory Commission (MedPAC) reports that nursing care centers operate at a margin of 1.8 percent, before sequestration cuts are considered. The report, compiled by Eljay, LLC, also notes that with recent Medicare rate reductions, Medicare no longer fully subsidizes increasing Medicaid shortfalls.

Highlights from the report, titled A Report on Shortfalls in Medicaid Funding for Nursing Center Care, include:

  • The 2013 Medicaid shortfall is expected to exceed $7.7 billion nationally.
  • The estimated average Medicaid shortfall for 2013 of $24.26 per Medicaid patient day is 8.6 percent higher than the preceding year's projected shortfall of $22.34.
  • For a typical 100-bed facility in which 63 percent of residents rely on Medicaid for coverage, this shortfall would mean a loss of more than $550,000 annually.
  • On average, Medicaid reimbursed nursing center providers only 88.3 percent of their projected allowable costs incurred on behalf of Medicaid patients. This means that for every dollar of allowable cost incurred for a Medicaid patient in 2013, Medicaid programs reimbursed, on average, approximately 88 cents.
  • Between the time periods covered by the cost reports used in the study and 2013, this study projects costs will increase an average of 3.8 percent, while rates increased an average of 2.9 percent.

"Medicaid funding for nursing centers continues to be inadequate in most states even as state economies improve," said Joe Lubarsky, President of Eljay, LLC. "It is likely that state rebalancing efforts and transitions to managed care will only exacerbate the problem; all at a time when emphasis on quality has never been higher."

State-by-state Medicaid underpayment data is available on the AHCA website. The full A Report on Shortfalls in Medicaid Funding for Nursing Center Care document is available here.

The American Health Care Association and National Center for Assisted Living (AHCA/NCAL) represent more than 11,000 non-profit and proprietary skilled nursing centers, assisted living communities, sub-acute centers and homes for individuals with intellectual and development disabilities. By delivering solutions for quality care, AHCA/NCAL aims to improve the lives of the millions of frail, elderly and individuals with disabilities who receive long term or post-acute care in our member facilities each day. For more information, please visit or

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