Department of Social Services
Department of Health

Staff Study: Cost of Nursing Home Care to New York's Medicaid Program (94-D-25)

During the year ended September 30, 1993, New York paid nursing homes $4 billion in Medicaid. We compared New York's Medicaid payments for nursing home care to such payments in ten other states. We found that New York spent nearly twice as much as the state with second highest payments ($2.1 billion in California). We identified several reasons for the higher payments in New York. For example, operating costs for nursing homes are much higher in New York. Using 1992 data, we estimated that the median annual cost to operate a 100-bed nursing home in New York would be $4.7 million; in Massachusetts, the next costliest state, the cost would be $3.8 million.

In addition, the average daily Medicaid expenditure per nursing home resident is much higher in New York ($123) than in the other states (which averaged $71). We further noted that the average length of stay in New York's nursing homes is longer than in the other states, and New York's Medicaid program covers a higher percentage of nursing home days than the Medicaid programs in the other states. We also noted that New York's nursing homes use more direct care staff than nursing homes in the other states, and the Medicaid reimbursement rates in New York may be based on historical costs that are not efficient.

Moreover, compared to nursing homes in the other states, nursing homes in New York charge higher rates for private patients. As a result, these patients deplete their assets and become eligible for Medicaid sooner than such patients in the other states. We also noted that, when caring for residents with similar needs, New York's hospital-based nursing homes are paid much higher Medicaid reimbursement rates than New York's free-standing nursing homes. We estimated that, in 1992 alone, these higher rates cost New York's Medicaid program $133.5 million. Our study raised several important issues for the consideration of New York's policymakers.

(This report is not available electronically you can request a printed copy via email.)