November 21, 2024 Washington, DC — Findings of U.S. Department of Health and Human Services research, conducted by a research team from the LeadingAge LTSS Center, Gerontology Institute at the University of Massachusetts (UMass) Boston, and Miami University underscore the significant financial strain faced by nursing homes serving the growing population of Medicaid residents.

Report findings, published last month by the Assistant Secretary for Planning and Evaluation (ASPE), are based on an assessment of Medicaid payment rates and the costs of caring for nursing homes’ Medicaid populations to understand the relationship between state Medicaid payment rates and providers’ costs of care.

Medicaid Payment Rates and the Costs of Caring for Medicaid Beneficiaries in Nursing Homes analyzes Medicaid payment-to-cost ratios for nursing homes in 44 states for the pre-pandemic period (2019). It also examines the relationship between state Medicaid payment rates and nursing homes’ ability to provide high-quality care to residents.

“This (study) shows that nursing homes are struggling financially, and it would appear to me that if you want to influence better outcomes in nursing homes, then you want to ensure proper funding,” says Marc A. Cohen, co-director of the LeadingAge LTSS Center @UMass Boston and research team member. “Greater numbers of people are retiring. They are living longer. They are living long enough to experience long-term care needs. The demand for care will increase significantly.”

Key Findings:

• Medicaid Payments Fall Short: On average, Medicaid payment rates covered only 82% of the costs associated with providing care to Medicaid residents. For nearly 40% of nursing homes, Medicaid per diem payments covered 80% or less of their estimated per diem costs.
• Cost Coverage Variability: The majority of nursing homes (52%) reported Medicaid payments that covered between 80% and 100% of their Medicaid-related costs, while 8% of facilities received Medicaid payments that exceeded their costs.
• Ownership Impact: Nonprofit nursing homes experienced a lower Medicaid payment-to-cost ratio (0.76) compared to for-profit (0.83) and government-owned facilities (0.80).
• Staffing Levels Influence Cost Coverage: Nursing homes with fewer than 3.00 hours of nursing staff per resident day (HPRD) saw higher Medicaid payment-to-cost ratios (0.85), while those with more than 4.00 HPRD had the lowest ratios (0.77).

The report’s findings highlight the ongoing challenges faced by nursing homes in providing high-quality care to Medicaid beneficiaries under current payment structures. As the nation continues to explore Medicaid payment reforms, these insights will be critical in guiding policy decisions that impact the sustainability and quality of care in long-term care communities across the U.S.