5 states where Medicaid pounds nursing homes

A client with decent long-term care insurance (LTCI) may look in the mirror and see an ordinary face.

A nursing home administrator will look at that client and see the possibility of turning a profit.

LTCI issuers and producers have always emphasized the advantages that come with using carefully regulated private insurance, rather than a government program meant for the poor, and the advantages may be growing.

In 2012, a typical nursing home in Michigan could earn more than a dollar per day for caring for a patient with Medicaid.

A nursing home in North Dakota could earn almost $3 per day for opening a bed to a Medicaid patient.

Eljay L.L.C. put those figures in the latest Medicaid nursing home funding table it prepared for a major long-term care (LTC) provider trade group, the American Health Care Association (AHCA).

Eljay leaves some states, including Alaska, Louisiana and Mississippi out of the annual funding tables.

Of the 39 states Eljay tracked in 2012, Michigan and North Dakota were the only ones in which the average Medicaid nursing home reimbursement rate exceeded the average allowable charges.

The biggest recorded shortfall between the average reimbursement rate and the average cost of care was in New Hampshire. In 2012, nursing homes there lost $57 per day – 24 percent of the average cost — per Medicaid patient.

In 2006, Arkansas was the only state in the annual funding table in which the average Medicaid nursing home patient generated an operating profit. A nursing home there could earn $1.24 per day for caring for a Medicaid patient. The biggest average shortfall — $28.16, or 22 percent of the average cost – was in Illinois.

See also: Illinois lawmakers consider LTC rights bill.

Some health policy specialists have talked about helping U.S. residents pay for nursing home care and other forms of long-term care, such as assisted living care or home health care, by expanding access to Medicaid.

Executives at for-profit LTC companies refer to the current version of the Medicaid nursing home benefits program mainly to emphasize that they are trying to have as little to do with it as possible.

When Boyd Gentry, chief executive officer of AdCare Health Systems (NYSE:ADK) discussed his company’s first-quarter earnings in March, he mentioned Medicaid, briefly, when talking about how the company might improve LTC facility operating margins.

“We will do this by increasing the proportion of higher margin services, filling our facilities with private pay skilled and managed care patients while deemphasizing Medicaid where we can,” Gentry said.

David Hegarty, president of the Senior Housing Properties Trust (NYSE:SNH), promised to minimize his company’s exposure to either Medicare or Medicaid.

State lawmakers in Indiana have been considering imposing a moratorium on the construction of new nursing home beds. Some LTC industry watchers there say that Medicaid nursing home beds lose so much bed that new, private-pay-only homes can easily offer better value for the price, by avoiding the need to have private-pay patients subsidize Medicaid patients.

Eljay warns in its current AHCA Medicaid funding report that the Medicaid shortfall problem has reached historic levels. The total unreimbursed shortfall for 2012 was probably more than $7.7 billion, or $24.26 per day per patient, the firm estimates.

In many states, Eljay says, lawmakers have tried to transfer some of the cost of the shortfall onto the backs of private-pay patients, by imposing taxes on nursing homes.

Here is a look at the five states with the biggest shortfalls in the newest AHCA report. (The payer mix figures come from a 2013 report from the Henry J. Kaiser Family Foundation.) 

At the end of the story, we also give the national numbers, and numbers for all of the states included in the AHCA data.

 5. New York

Average rate paid: $221.25.

Average allowed costs: $267.64.

Average difference: -$46.39.

Difference as a percentage of average allowed costs: -17%.

Percentage of patients with Medicaid: 71%.

Percentage of patients using private sources of funds: 17%.

See also: 5 most expensive LTC markets.

 4. New Jersey

Average rate paid: $198.51.

Average allowed costs: $240.34.

Average difference: -$41.83.

Difference as a percentage of average allowed costs: -17%.

Percentage of patients with Medicaid: 63%.