The gap between allowable Medicaid costs and actual state payments to nursing home operators will hit $4.5 billion this year, according to projections from an industry-backed study.

The average per diem gap in Medicaid reimbursement will be $13.10, according to an analysis by BDO Seidman. That’s a 4% increase from 2004, and a 45% increase from 1999 levels, researchers said.
“This study underscores the fact that even before implementation of proposed federal Medicaid cuts, most states are already forced to utilize the very federal funding program that has been targeted for cuts and still cannot achieve payment-cost balance critical for providing quality care,” said Bruce Yarwood, president and CEO of the American Health Care Association, which commissions the report each year.
More states are directing funds to non-institutional settings, said BDO Seidman’s study director Joe Lubarsky.
“A larger share of Medicaid funding is being redirected toward home and community-based services,” he explained. “This, in turn, has put pressure to dampen rate increases to nursing homes, and contributed to the widening gap between Medicaid funding and cost.”
In 2007, nursing facility services will constitute just 47% of Medicaid’s long-term care expenditures, down from 50% in 2004 and 57% in 2000.
Lubarsky also warned that President Bush’s proposed reduction in the maximum provider tax rate would cut an additional average of $6.53 per Medicaid resident day.
The full BDO Seidman report is available at

Falling short
States with the greatest projected Medicaid shortfalls for 2007, per resident day.
New York $24.97
Vermont $23.85
South Dakota $22.62
New Hampshire $22.57
Wisconsin $21.48
Minnesota $19.98
Source: BDO Seidman LLP, 2006