Potential Effects of a Proposed Amendment to Medicaid's Nursing Home Reimbursement Requirements

HRD-80-1: Published: Oct 15, 1979. Publicly Released: Oct 17, 1979.

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Currently, States are required to pay nursing homes on a reasonable cost-related basis, using cost-finding methods approved and verified by the Department of Health, Education, and Welfare (HEW). Legislation which has been proposed in an attempt to control Medicaid costs would require each State to pay nursing homes based on methods and standards developed by the State. There is consumer and senior citizen concern that the legislation would cause potential adverse affects, and that it would remove the Federal Government from its verification obligation.

Because at least half of the Medicaid money spent on nursing home care is from Federal funds, HEW, as the responsible Federal agency, should maintain some control of nursing home payment rates. Detailed cost reports have been very important in prosecuting nursing homes that commit fraud and in assuring accurate reimbursements. Under the new legislation, a State should be required to include, in its reimbursement methods and standards, requirements for filing cost reports. Without the cost reports, States could not reasonably attain the assurance required by the proposed amendment that nursing home rates reflect the costs incurred by efficiently and economically operated facilities. The rates should also assure the reasonable availability of nursing home services so that Medicaid recipients can receive such services at least to the extent they are available to the general public. In the past, GAO has found that nursing homes in some States may be able to demonstrate that their current payment rates do not assure that services are available to the degree contemplated by the proposed amendment. The legislation would increase availability to the public, but there would also be an increase in nursing home reimbursements. Thus, it is important to assure that adequate utilization review programs are in place.

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