Financial Challenges Continue To Affect Nursing Homes, Emphasizing Need For Higher Medicaid Reimbursement Rates

COVID-19; Medicaid

As the COVID-19 pandemic continues to ravage the country, widespread financial challenges loom over many long term care facilities. One of the root causes of these challenges is Medicaid underfunding. Prior to the pandemic, shortfalls in Medicaid funding had forced providers to operate on shoestring budgets and suffer net losses year after year. Now, these problems have been magnified due to the cost to fight the pandemic.

Here’s how Medicaid shortfalls occur:

  • Medicaid, the primary payer for nursing homes, covers more than 60 percent of all nursing home residents and approximately 50 percent of costs for long term care services.
  • ​Medicaid reimbursements, on the other hand, only cover 70 to 80 percent of the actual cost of care.

Low Medicaid reimbursement rates, coupled with the financial hardships from the pandemic, threaten the viability of the entire long term care sector. An American Health Care Association and National Center for Assisted Living (AHCA/NCAL) survey found that more than half of nursing homes are currently operating at a loss and 72 percent of nursing homes say they won’t be able to sustain operation another year at the current pace. 

The consequences of these hardships are coming to fruition. Nursing homes and assisted living communities in California, Colorado, Michigan, New Hampshire, New York and Rhode Island have announced closures or have warned of possible closures, which will force residents to abruptly move and find new care. These relocations often lead to residents living further away from loved ones. 

The situation is dire for many, and long term care leaders are calling for action.

  • Rhode Island Health Care Association Executive Director Scott Fraser says the industry is facing a “funding crisis” and is concerned about the future for nursing homes. A report submitted to the state shows that nursing homes lost $7 million in 2017 and 2018. He’s calling on the state to boost reimbursement rates to keep up with inflation. 
  • Nursing home representatives in New Hampshire testified before a state legislative committee that without higher reimbursement rates, facilities will be unable to address staffing shortages and increase wages. One organization president said that they lose $45 per day per Medicaid resident. Medicaid residents, he says, make up 80 percent of all of their residents.  

CARES Act funding that long term care facilities have received thus far has helped, but with potential surges of COVID-19, it’s important that they continue to get needed support. AHCA/NCAL President and CEO Mark Parkinson recently told Skilled Nursing News, “If we don’t get assistance beyond that point, beyond the end of 2020 into 2021, that’s when you’re going to see that large percentage of buildings that say that they’re operating at a loss, that’s where you’re going to see potential closures.” 

Long-term solutions are needed to ensure facilities can continue providing high-quality care for their residents. An important place to start is making sure Medicaid reimbursement rates keep up with the cost of care.

The American Health Care Association and National Center for Assisted Living (AHCA/NCAL) represents more than 14,000 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