By AHCA/NCAL

Republished with permission from AHCA/NCAL Notes Newsletter.

The Medicaid payment deficit to the nation’s nursing facilities is estimated to have reached $6.7 billion in 2014, according to the annual Medicaid shortfall report commissioned by AHCA from Eljay and Hansen Hunter & Co.

“On average, Medicaid reimbursed nursing center providers only 89.7 percent of their projected allowable costs incurred on behalf of Medicaid patients,” the report said. That aggregate shortfall translates to $21.20 per Medicaid resident per day, somewhat lower than the 2013 shortfall of $24.26.

While the deficit has moderated “due to Medicaid rates increasing slightly more than project cost increases” during the reporting period, “significant shortfalls still exist,” said the report, based on data from 35 participating AHCA state affiliates, representing about 77 percent of Medicaid resident days across the country.

A typical center with an average daily census of 100 residents, 63 of whom would typically be funded by Medicaid, would lose $1,336 each day for providing care to those residents, totaling $487,000 in losses over the course of a year.

“If all costs of operations were considered—not just Medicaid-allowable costs—the shortfall would be significantly greater,” the report said. While Medicare revenue has played a critical role in offsetting Medicaid red ink, recent Medicare rate reductions and declining margins means the program cannot fully subsidize the Medicaid shortfall, the report said. “Providers have been forced to leverage provider taxes heavily in order to mitigate significant Medicaid underpayments,” the report said.

The approaching demographic tsunami of senior citizens raises “serious questions about the capacity of our nation’s long term services and supports (LTSS) system to provide future demand for services,” the report warned. Between 2010 and 2050, the population over 65 is expected to double, from 40.2 million to 88.5 million.

With older adults living longer than ever before, the projected rapid growth in the 85-plus age group especially “will likely contribute to a greater need for services,” the report said.

According to the Census Bureau’s 2010 report, the number of people aged 85 to 94 grew by nearly 30 percent between 2000 and 2010.

“Policymakers will be challenged to respond to the growing need for LTSS and to assure that adequate safeguards are in place to protect the frailest LTSS beneficiaries across various care settings and delivery systems,” the report said.

“Budget constraints and competing priorities will affect states’ abilities to meet this demand both now and in the future.”