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Home \ Publications \ Estimates of Medicaid Nursing Facility Payments Relative to Costs

Estimates of Medicaid Nursing Facility Payments Relative to Costs

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January 2023 | Long-Term Services and Supports, Provider Payment

Medicaid is the primary payer for most nursing facility residents, but information about Medicaid payment rates is limited. The net payments a nursing facility receives consist of base payments, which are typically paid on a per diem basis, and supplemental payments, which are generally paid in a lump sum, reduced by provider contributions to the non-federal share of their Medicaid payments.

In this brief, MACPAC presents estimates of 2019 Medicaid base payments across states compared to facility costs, using a standard methodology developed based on feedback from a technical expert panel convened by MACPAC in 2022. The issue brief reviews background information on Medicaid coverage and payment for nursing facility services and the challenges of accurately measuring the costs of care for Medicaid-covered residents. It concludes by summarizing our estimates of Medicaid base payments relative to costs and discussing the limits of available data. Overall, we find that:

  • Across states, average base Medicaid payment rates for nursing facility services varied considerably, ranging from 62 to 182 percent of the national average, after adjusting for differences in area wages and resident acuity.
  • Across facilities within states, base payment rates and costs also vary considerably. Facilities that serve a high share of Medicaid-covered residents generally have lower base payment rates but also have lower facility costs, in part because they generally have lower staffing levels than other facilities.
  • Measures of base payments relative to costs vary widely, ranging from less than 70 percent of costs for 15 percent of facilities to more than 100 percent of costs for 19 percent of facilities. The median Medicaid base payment rate in 2019 was 86 percent of reported facility costs.

In addition to considering base payment rates (the amount that nursing facilities are paid per day for a specific resident), it is also important to consider supplemental payments, which are lump sum payments that some facilities receive in addition to base payments.

Publication Type: Issue Briefs