Medicaid Paying Less Than Minimum Wage to Nursing Homes: Study

January 25, 2011 Updated: October 1, 2015

A mobile recliner sits outside the room of a terminally ill resident of the Hospice of Saint John on November 5, 2009 in Lakewood, Colorado. The non-profit hospice accepts patients regardless of their ability to pay, although most are covered by Medicare and Medicaid. (John Moore/Getty Images)
A mobile recliner sits outside the room of a terminally ill resident of the Hospice of Saint John on November 5, 2009 in Lakewood, Colorado. The non-profit hospice accepts patients regardless of their ability to pay, although most are covered by Medicare and Medicaid. (John Moore/Getty Images)
Medicaid underfunded nursing homes by $5.6 billion in 2010 and paid rates less than minimum wage, according to a new report released by the American Health Care Association. 

While the U.S. minimum wage is $7.25 per hour, Medicaid is funding nursing facility care by only $7.17 per hour for every patient, a release for the report stated.

"This report reveals a truth many would not believe—today's nursing facilities are paid less than the minimum wage," Mark Parkinson, president and CEO of the American Health Care Association (AHCA) said. "That must change if we ever hope to serve the needs of a Baby Boom generation that will only stress our care delivery system further."

Conducted by accounting firm Eljay, the report revealed startling deficiencies in Medicaid payments to nursing care centers. Nursing homes in New York, Illinois, Massachusetts, New Jersey, Minnesota, and Wisconsin were the most underfunded, the report said.

To fill in the gap, nursing home providers have to turn to other funding sources, like Medicare, which threatens to deplete that entitlement system as well.

"There is a vast gap between the actual cost of providing quality eldercare and what the Medicaid program truly finances," Parkinson said.

"As Baby Boomers begin to ponder their long term care needs in the future, it is simply unsustainable for Medicare to continue filling that financial gap. As current trends indicate, this problem will only grow worse in the coming years."

The report found that New York received the least amount through Medicaid, underfunded by $1.4 billion. Illinois and California came in second and third, underfunded by $378 million and $310 million, respectively.