Financial Struggle of Nursing Homes Puts Medicaid Reimbursement Rates Back in the Spotlight

Medicaid is the primary payer for nursing homes, covering more than 60 percent of all nursing home residents and approximately 50 percent of costs for all long term care services. However, Medicaid reimbursements only cover 70 to 80 percent of the actual cost of nursing home care. This chronic gap in funding has resulted in shoestring budgets and ongoing operating losses for nursing home providers.


As the COVID-19 pandemic continues, financial challenges have intensified:

  • According to the Centers for Medicare and Medicaid Services (CMS), nursing homes occupancy​ fell from 80.2 percent in December 2019 to 71.3 percent, where it has roughly remained since early September. 
  • Personal protective equipment (PPE), including N95 masks, surgical masks, gowns and gloves, are a significant driver of costs, as well as surveillance testing, additional staff and hero pay for workers. These are essential expenditures, but have contributed heavily to overburdened budgets. 

Without meaningful reform, the entire long term care sector will be in jeopardy. An August survey conducted by the American Health Care Association and National Center for Assisted Living (AHCA/NCAL) found that more than half of nursing homes are currently operating at a loss and 72 percent of operators say they won’t be able to sustain operation another year at the current pace.

Coast to coast, long term care residents are being forced to uproot and find alternative care. Facilities in California, Colorado, Michigan, New Hampshire, New York and Rhode Island have announced permanent closures or have warned that closures are on the horizon.  

Glen Roebuck, executive director of home, outpatient and senior services at Genesis Health explained how potential nursing home closures will have a detrimental effect on rural residents in particular. In an op-ed in the Des Moines Register he writes:

“When the rural nursing home closes, children and spouses are forced to drive sometimes more than 50 miles to the nearest facility where their loved one may need to move. Both the nursing home resident and their family are negatively impacted by the closure and a forced move. The closure of rural nursing homes leaves a much larger impact on the small, local economy.” 

CARES Act funding has helped long term care providers with COVID-related costs, but more must be done – especially with a third spike in cases looming. 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.”

As the demand for long term care grows, ensuring a stable financial footing will enable providers to continue delivering the high-quality care that our nation’s seniors depend on. A good place to start is by making sure Medicaid reimbursement rates keep up with the cost of care. 

ABOUT AHCA/NCAL
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 www.ahcancal.org or www.ncal.org.