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Medicaid funding shortfalls follow poor trend

January 1, 2010
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Washington, D.C.-Medicaid financing will have underfunded the cost of providing long-term care by nearly $4.7 billion in 2009, according to an analysis from Eljay, LLC, released by the American Health Care Association (AHCA).

Medicaid pays for more than two-thirds of skilled nursing facility patient days annually. The daily care reimbursement rate-ostensibly tied to the “allowable costs” of providing care in each state-is projected to be at $14.17 per Medicaid patient day.

Reimbursement outlook for 2010 and 2011 is also bleak, worse than any other year in the last seven that the annual report has been compiled. The analysis blames state budget deficits and the expiration of federal stimulus funds at the end of 2010 on the poor forecast.

Other findings of the analysis say:

  • Medicare continues to play an important role in the cross-subsidization of Medicaid deficits. According to the Medicare Payment Advisory Commission, or MedPAC, the average margin on Medicare payment to nursing homes in 2007 was 14.5% while the Eljay analysis indicates a 9.0% shortfall on Medicaid payment for that year.

  • In 2009, for every dollar of allowable cost incurred for a Medicaid patient, the Medicaid program reimbursed, on average, approximately 92 cents.

  • States continue to rely heavily upon provider taxes to fund nursing home reimbursement. However, most states with provider taxes chose not to increase nursing home reimbursement nor lower the provider tax rate as a result of a temporary higher federal match rate on these tax funds under the American Recovery and Reinvestment Act of 2009. Instead, the savings from a higher federal match rate on provider tax funds appears, in most states, to have gone to subsidize state budget deficits.

  • States continue to redirect more of their long-term care budgets to noninstitutional services. This heightened competition among long-term care programs for limited state resources combined with sagging state economies has dampened 2010 Medicaid rate increases. This negative trend will likely continue in 2011 as the economic outlook for states remains bleak and because of the expiration of the higher temporary American Recovery and Reinvestment Act federal match rates (FMAP) as of January 1, 2011.

“To our federal legislators working on national healthcare reform in Washington, this report is a stark and timely reminder that a strong Medicare funding component in a final federal bill is a literal lifeline to protecting their most vulnerable elderly constituents,” said Tim Graves, president of the Texas Health Care Association. Texas was among the top 10 states with the largest aggregate Medicaid underfunding.

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