LTC Bullet: Bleeding Medicaid Dry

Wednesday October 3, 2001


Nursing homes in the Puget Sound region of Washington State are in serious financial trouble and Medicaid is unlikely to bail them out. In his article "Nursing Homes Seek More Medicaid Funds" (Puget Sound Business Journal, September 28, 2001, p. 5) Peter Neurath reports that local nursing homes are appealing for higher Medicaid reimbursement at a time when the state’s Medicaid program is already "caught between rapidly rising health-care costs and strained budgets."

Approximately 70 percent of Washington’s nursing home patients are Medicaid recipients, roughly the national average. This is particularly problematical given the finding in a recent BDO Seidman study referenced in the article that the gap between nursing home costs and Medicaid reimbursement in Washington is $11.61 per patient per day, or $61 million a year. According to Mike Neeld, Director of the Washington Health Care Association, "the only way nursing homes can now stay in business . . . is to charge private pay patients $20 to $30 a day more than what Medicaid pays," reports Neurath.

How long can nursing homes use cost shifting to stay afloat? The article reports that 49 local nursing homes are in bankruptcy with six closing their doors in the last year. Dennis Braddock, Secretary of the Washington State Department of Social and Health Services (DSHS), told reporter Neurath that he believes "we are headed for disaster unless we adjust the system." According to the article, "DSHS’s Medical Assistance Administration, which is mostly Medicaid, consumes 42 percent of the department’s $5.1 billion 1999-01 budget, up from 23 percent in 1990." Neurath also reports that DSHS is proposing Medicaid reforms to gain control over costs such as capping enrollment, imposing premiums and co-payments on select recipients, and adjusting coverage and benefits based on budgetary limitations.

In response to this worsening predicament, Neeld of the Washington Health Care Association offers in the article the possibility of the state establishing a "long-term care trust fund" financed by payroll taxes and matching contributions from employers. "The Legislature has a choice," said Neeld commenting on the situation. "It could lower expectations and settle for a lower level of care."

Source: Peter Neurath, "Nursing Homes Seek More Medicaid Funds," Puget Sound Business Journal, September 28, 2001, p. 5. Online at

CLTCF Comment: Nationally, the percentage of private out-of-pocket expenditures for nursing home care has been declining at the same time Medicaid’s share has been increasing. This trend may prove fatal to an increasing number of nursing homes that rely on cost shifting to offset inadequate public reimbursement. A new source of public money to shore up the system is not likely. The Washington State Legislature as well as state governments around the country must look for realistic alternatives at a time when tax rolls are down, health care costs are up, and Americans are likely in no mood to pour more of their hard-earned dollars into a failing program at risk of collapse. Fortunately, the Center for LTC Financing’s "LTC Choice" framework for public policy reform points lawmakers in the right direction. (Read the Center’s "LTC Choice" report online at Regardless of your preferences or politics, it is becoming increasingly clear that a greater role for private financing is a necessary ingredient in any realistic proposal to create a rational and financially viable long-term care system.