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New National Medicaid Study Underscores Importance of Including State Relief in Stimulus Plan
Date:10/22/2008

Medicaid Underfunds Actual Cost of Providing Quality Long Term Care by $4.2 Billion in 2008

WASHINGTON, Oct. 22 /PRNewswire-USNewswire/ -- A new Eljay, LLC analysis of Medicaid financing, which was released by the American Health Care Association (AHCA) today, projects that Medicaid underfunds the actual cost of providing quality long term care in 2008 by $4.2 billion -- with New York, Illinois, Ohio, Pennsylvania, New Jersey, Texas, California, Wisconsin, Massachusetts, and Florida seniors most affected by these significant funding disparities.

"Given the substantial gap between the cost to provide quality care and what Medicaid actually pays and the steeply rising pressure on state budgets, long term care providers and the seniors they care for have good reason to be fearful that imminent state budget cuts could threaten access to care," warned AHCA President & CEO Bruce Yarwood. "A post-election economic stimulus package must include state Medicaid relief to help prevent problems with accessing this essential care in 2009."

Yarwood said that the long term care profession is hopeful that sentiment among policymakers is shifting to favor adding robust Medicaid relief, noting Federal Reserve Chairman Ben Bernanke's recent comments before the House Budget Committee suggested that injecting federal dollars to boost state services would help the nation's faltering economy.

Yarwood explained that data from the new Medicaid study shows how dysfunctional and chronic Medicaid funding shortfalls place seniors' growing care needs and state programs in a precarious position, especially as states now wrestle with a collective $50 billion shortfall for the July 2008 - July 2009 state fiscal year, according to the National Governors Association (NGA).

According to the Eljay, LLC analysis, the states with the greatest underfunding of nursing facility care in 2008 are:

Rank State Total (Millions)

1 New York $548.1

2 Illinois $379.3

3 Ohio $281.3

4 Pennsylvania $261.2

5 New Jersey $241.9

6 Texas $235.0

7 California $203.6

8 Wisconsin $200.0

9 Massachusetts $197.0

10 Florida $188.5

Additional Policy Implications Outlined in Medicaid Study

Medicare Cross-Subsidization of Medicaid Remains Problematic - The AHCA President also noted that, despite marginally improved Medicaid rate trends, the combined margin from the two payer sources remains negative. Yarwood said that this combined, negative margin spotlights a troubling fact - Medicare is propping-up Medicaid, and continued reliance on Medicare's subsidization of Medicaid could have serious adverse effects for seniors and long term care professionals alike.

According to the Medicare Payment Advisory Commission (MedPAC), the average margin on Medicare payment to nursing homes in 2006 was 13.1%. Given the 9.2% shortfall on Medicaid payments for that year, the average margin in 2006 from the two government-funded programs combined was a negative 1.8%.

States Redirect More of their Long Term Care Budgets to Non-institutional Services - The study finds that heightened competition among long term care programs for limited state resources, combined with sagging state economies, will likely dampen future Medicaid rate increases.

States Continue to Rely Heavily Upon Provider Taxes to Fund Nursing Home Reimbursement - Yarwood also said that any Medicaid reform initiatives taken up by Congress in the coming year must recognize that, while imperfect, provider taxes and other existing revenue mechanisms including intergovernmental transfers are essential to ensuring Medicaid-financed care remains readily available and accessible.

The complete Eljay, LLC study is available for review at http://www.ahca.org.


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SOURCE American Health Care Association
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