Medicaid programs nationwide underpaid nursing homes by $3.3 billion in 1999, or a weighted average shortfall of $9.05 per patient per day, or more than $3,300 for a patient over a year, according to an industry-funded study released last week. The study claims the biggest shortfalls between reimbursement and costs were in Massachusetts, New Jersey and Vermont.
"The biggest problem is the vast majority of Medicaid programs nationwide reimburse for nursing home care at substantially less than what is acknowledged as the cost of that care," said Charles Roadman II, M.D., president and chief executive officer of the American Health Care Association, Washington, which commissioned the study. The association lobbies primarily on behalf of for-profit long-term-care providers.
With the pressure to increase staffing, there is a disparity between "Cadillac expectations" and "Volkswagen payment rates," Roadman said.
The study, conducted by the consulting firm BDO Seidman, includes data from 36 states for which audited 1999 figures were available. The firm averaged the Medicaid rates paid to providers, weighted by each facility's number of Medicaid patient days, for each state and compared that figure with a similarly weighted average of allowable-cost data. Allowable costs are determined by each state based on providers' cost reports and are considered an appropriate approximation of total costs. Capital and marketing costs typically are not allowable, and the study's authors note that the disparities would have been much larger if the industry's definition of cost had been used.
The difference between the two weighted averages represents the shortfall between reimbursement and costs. The states studied accounted for 72% of the 368.5 million Medicaid nursing home resident days billed in 1999. Results were extrapolated to the rest of the states.
Of the 36 states surveyed, only Alabama had reimbursement rates higher than allowable costs, with a weighted average of $102.78 per patient per day compared with an allowable cost of $100.30 per patient per day. At the other end of the spectrum, the weighted average reimbursement in New Jersey was $124.95 per patient per day, but the allowable cost was $146.06, a shortfall of $21.11. Vermont's shortfall was calculated to be $19.95 per patient per day, and Massachusetts had a $14.71 shortfall per patient per day, according to the study.
Joe Lubarsky, a certified public accountant and partner in charge of BDO Seidman's long-term-care division, said states in the Northeast tended to have the biggest shortfalls because their labor costs are the highest. A 13-state region from Virginia to Maine had the highest disparity between reimbursements and allowable costs, $11.91 per patient per day.
Dennis McGowan, a spokesman for the New Jersey Department of Health, which runs the state's Medicaid program, said the department had no immediate comment on the study's claims. McGowan noted that the state computes its average Medicaid per-patient-per-day rate as $134, and he said that ranks among the top 10 highest in the country. The state added $20 million to nursing-home funding last year to pay for more caregivers, he said.
The study noted that five of the states whose shortfalls were among the top 15-No. 4 Nevada, No. 6 Oregon, No. 8 Florida, No. 12 Virginia and No. 14 Wisconsin-have appropriated more money for skilled-nursing care since 1999.
Lubarsky said the disparities continue to widen. The severe shortage of nurses and certified nursing assistants is driving up costs faster than the general rate of inflation, which is often the basis for rate increases, Lubarsky said.
Other factors expected to worsen the gap include state budgetary pressures, a slowing economy, the expected elimination of a Medicaid loophole many states have used to increase budgets and the elimination of the so-called Boren Amendment, which requires that Medicaid reimbursements be "reasonable and adequate."
Roadman said he expects to use the study in lobbying leaders of HHS and the Centers for Medicare and Medicaid Services for a full-blown debate on how to pay for long-term care.
At a news conference, Roadman said he wouldn't go so far as to call for re-establishing the Boren Amendment but said the CMS must force states to expend the resources necessary for quality care. "If I had my way," he said, "we would have (federal staffing) standards, but we would also have federal dollars to pay for it."