Pennsylvania’s new state budget will provide a significant increase in Medicaid funding for nursing homes while also revising how the state measures spending on resident care.
Under the budget approved for fiscal year 2027, the state’s share of Medicaid funding for nursing homes will increase by $162 million beginning Jan. 1, when the Medicaid fiscal year starts. With additional federal matching funds, the total increase is expected to exceed $360 million.
The funding boost stems from a change to a long-standing Medicaid reimbursement formula. For the past two decades, Pennsylvania has reimbursed nursing homes below their audited costs through a “budget adjustment factor.” The new budget raises that reimbursement floor from 80% to 86% of audited costs and guarantees it will not fall below that level for the next two years.
Supporters say the added funding will help nursing homes recruit and retain caregivers while providing greater financial stability.
The budget also changes how the state determines whether nursing homes comply with a 2022 law requiring at least 70% of eligible expenses to be spent on resident care.
State officials found the original formula sometimes produced misleading results because it included expenses such as property taxes, depreciation and mandatory nursing home assessments—costs that operators have little control over. Those items will no longer count toward total expenses when calculating compliance with the 70% requirement.
The revised formula also adds excess administrative costs to the calculation while continuing to include rent expenses.
The Department of Human Services previously said inconsistent reporting by some facilities and the original calculation method resulted in penalties that did not always reflect the law’s intent.
Industry leaders welcomed both changes, saying they provide greater predictability and a more accurate way to measure spending on resident care.
Labor leaders also praised the additional Medicaid funding but said nursing home operators should use the new resources to improve staffing levels and enhance care for residents.
Current Medicaid reimbursement rates vary widely across Pennsylvania, ranging from about $237 per resident per day at some facilities to nearly $574 per day at specialized nursing homes caring for patients with complex medical needs.
The changes are expected to affect nursing homes statewide that care for Medicaid recipients, who make up a large share of long-term care residents in Pennsylvania.
Source: Phila Inquirer