Illinois Plans to Drastically Reduce Medicaid Funding Despite Increasing Costs

(Chicago) -- While Medicaid rates paid to Illinois nursing homes have stagnated, health care costs have skyrocketed. According to the Illinois Council on Long Term Care, 2002 could be the worst year yet. The proposed state budget calls for an 8.8 percent reduction -- $171 million -- of Medicaid funding from nursing homes and the elimination of bedhold payments. The Illinois Council predicts that the proposed budget, if passed, could force many nursing homes to shut down, sparking a chain reaction that would cut thousands of nursing home workers out of their jobs and devastate the current level of resident care.

Although average costs at Illinois nursing homes increased 61 percent from 1994 to 2002, Medicaid rates paid to these facilities have increased only 37 percent. This widening disparity in Medicaid funding vs. actual costs minimizes the ability of facilities to attract and retain quality staff, provide effective health care treatments and meet the day-to-day quality of life needs of the residents they serve.

As nursing homes have augmented staffing to include even more highly qualified staff, salaries have contributed to increased costs. In fact, professional nursing levels have nearly doubled in Illinois nursing homes. Over the past eight years, the average 100 bed nursing home has increased staffing of registered nurses from approximately 4.75 Full-Time Equivalent (FTE) registered nurses to 8.7 FTE registered nurses, accounting for an 82 percent increase.

"Additionally, wages for nurse aides have risen dramatically over the past eight years," said Terrence Sullivan, executive director of the Illinois Council on Long Term Care. "Wages to nurse aides have increased during these years by an average of $2.33, constituting a 33 percent increase in pay. The state's largest nurse aide union has also negotiated a three-year contract for an additional 40 percent increase in wages and benefits."

On average, nurse aide wages comprise 22 percent of a nursing facility's total costs. In total, 79 percent of a nursing facility's total expenditures goes to payroll. With the proposed cuts to Medicaid, those nursing homes that survive will have no choice other than to cut staffing levels, which will have a negative impact on the quality of resident care.

The Illinois Council recommends that, with a recession budget, a temporary increase in the provider license assessment is the best solution to the Medicaid budget shortfall -- funds raised by Illinois nursing homes will be matched dollar-for-dollar by the federal government. Increasing the provider license assessment costs the state nothing and will also prevent the loss of needed Medicaid matching funds.

"By cutting $171 million in Medicaid funding, the State of Illinois will lose $85.5 million in federal matching funds," states Sullivan. "Rather than lose federal funds, a license assessment brings more federal funds to Illinois to help solve the state's budget problems. This solution is a crucial first step in helping nursing homes cover their rapidly increasing costs and in maintaining the safety net of long term care for the over 50,000 Illinois residents dependent on Medicaid."

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