Financial Situation for Long-Term Care Worsens, Connected to Reimbursement Rates and Funding Cuts

April 1, 2021
April 1, 2021

Healthcare is experiencing significant change, driven by demographic trends, outdated financial structures, and technological progress, not to mention the glaring problem of COVID-19 and its ramifications throughout the care continuum. Many non-hospital organizations are struggling with how they have long operated. Not only is it becoming harder and harder to retain employees, but everyone in healthcare needs more staff to care for our aging population. At the same time, government oversight and the wide range of measures aimed at improving the quality of care may be inadvertently creating additional problems for already-burdened care providers. Here is a specific challenge affecting this area of care.

Low Rates for Medicaid Reimbursement, Coupled with Additional Recent State Funding Cuts, May Be Precipitating Skilled Nursing and Long-Term Care Facility Closures.

The reimbursement rate at which CMS pays nursing homes for care of Medicaid residents is shockingly low. In some areas of the country these rates don’t even pay for the full cost of the care being provided. According to the nonprofit National Investment Center for Seniors Housing & Care (NIC), “At around $200 per day, Medicaid is the lowest priced payor source for skilled nursing properties.” Furthermore, this amount is “less than half the rate paid by Medicare and Managed Medicare, $503 and $433, respectively” (Liberman, 2018).

Medicaid Reimbursement Is Damagingly Low

A 2015 research study from the American Health Care Association (AHCA), an industry group representing more than 14,000 facilities and housing 5 million seniors, found that “On average, Medicaid reimbursed nursing center providers only 89.4 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 2015, Medicaid programs reimbursed, on average, approximately 89 cents.” In states where the cost of care is not completely covered, providers have no choice but “to leverage the other payor sources (Medicare, managed Medicare, and Private [Pay]) to offset losses” (Liberman, 2018). In addition, some states are applying additional cuts to their Medicaid payments to help balance.

A Widespread Risk of Facility Closure

Nationwide, the long-term care industry is struggling to survive these challenges to its financial health. For example, “Low Medicaid reimbursement rates have played a role in the closings of 20 nursing homes in the state in the past three years, said Robin Dale, president/CEO of the Washington Health Care Association, which represents the state’s nursing home industry” (Allison, 2020). For 2020, New York State imposed a 1% Medicaid payment cut, “which will reduce gross Medicaid payments, including federal matching aid, by around $125 million in the current fiscal year and about $500 million in following years” (Berger, 2020). Demonstrating the country-wide extent of the problem, Skilled Nursing News describes similar problems in Massachusetts, South Dakota, Wisconsin, Montana, and Texas, where facility closures and financial struggles have been the result of Medicaid cuts and low reimbursement rates (Flynn, 2019).

Allison, J., “Nursing Homes Fight To Stay Afloat With Low Medicaid Rates,” Skagit Valley Herald, March 1, 2020, Retrieved at https://insurancenewsnet. com/oarticle/nursing-homes-fight-to-stay-afloat-with-low-medicaid-rates#.XqiSU2hKiHt.
Berger, L., “Nursing homes in New York grapple with Medicaid reimbursement reduction,” McKnight’s Long-Term Care News, January 2, 2020, Re­trieved at
Flynn, M., “As Medicaid Rates Lag Behind Costs, Unpaid Nursing Home Bills Pile Up,” Skilled Nursing News, March 7, 2019, Retrieved at https://skilled­
Liberman, L., “Medicaid Reimbursement Rates Draw Attention,” NIC Cares Blog, March 21, 2018, Retrieved at­imbursement-rates-draw-attention/.

This blog post begins a series based on our article, Top Issues Across the Care Continuum, which looks more closely at some of the serious concerns of healthcare organizations across the care continuum. Subsequent challenges to be examined include:

  • Short Staffing in Long-Term Care Is Having an Impact on Resident and Financial Outcomes
  • The Patient-Driven Payment Model (PDPM) Has Changed Reimbursement for Physical Therapy in Skilled Nursing Facilities
  • Long-Term Care Continues to Feel the Financial Impact of Civil Money Penalties and Civil Money Penalty Reimbursement Programs.
  • Efforts to Decrease Widespread Antipsychotic Drugs in Long-Term Care Facilities Require Individualized Care Plans.
  • Focused Dementia Care Surveys Are Reducing the Use of Antipsychotic Medication, with Unintended Consequences
  • Infection Control Surveys Reveal a Widespread Problem Across Long-Term Care.

There is a long list of challenges for providers across the care continuum, outside of acute care. For example, with consistent wage pressures, shifting compliance regulations, and rising acuity levels among resident populations, the skilled nursing and LTC workforce is feeling more pressure than ever before. HealthStream works with organizations throughout non-acute care to address these challenges, from keeping pace with regulatory requirements to engaging and developing competent staff who can satisfy the demands of increased patient complexity. By partnering with HealthStream, organizations are equipped to seamlessly manage the pressures of surveyor visits, while remaining focused on high-quality patient and resident care. Learn more about Healthstream solutions for non-acute care organizations.