A Critical Look at New York’s FY 2024-25 Budget: Nursing Homes Left Wanting

By Chelsea Murray, on May 15th, 2024

In the wake of New York State’s recently passed FY 2024-25 budget, the nursing home sector finds itself grappling with outcomes that are far from the support it desperately needed. Despite continued advocacy for substantial funding increases, the final budget delivers less than expected, leaving a critical component of our healthcare system in a precarious position.

Inadequate Medicaid Rate Increases

This year’s budget allocates an additional $285 million, encompassing both state and federal shares, for nursing homes, translating to an approximate 4% rate increase. While any increment is welcomed amidst financial strain, this figure falls significantly short of covering the escalating costs of care. Industry experts and advocates had hoped for a much more substantial enhancement to help offset the rising expenses in labor, supplies, and operations. This underwhelming increase raises concerns about the quality of care and the sustainability of nursing homes across the state.

Unfavorable Capital Rate Cuts

Compounding the challenge is an additional 10% cut in Medicaid capital reimbursement rates, which is on top of an existing 5% reduction. This cumulative 15% reduction is a significant blow, particularly as many facilities are in a dire need of upgrades and renovations to meet safety standards. The cuts not only undermine the ability of nursing homes to maintain their facilities but also signal a disheartening step back in supporting the infrastructure critical to elder care.

The Problematic Case Mix Freeze

The budget continues the controversial case mix freeze, using outdated data to set reimbursement rates. This freeze ignores the increasing acuity of residents, which typically drives up the cost of care. By failing to adjust rates based on current resident needs, the state effectively exacerbates the financial strain on facilities that are already struggling to balance quality care with financial viability.

The Uncertain Promise of the Managed Care Tax

On a potentially positive note, the budget introduces a new managed care organization (MCO) tax intended to raise additional funds. However, clarity is lacking on how these funds will be distributed and whether a significant portion will be channeled into nursing home care. The healthcare community is watching closely, hopeful yet cautious about the potential relief this new tax could bring.

Strategic Financial Planning for Nursing Homes

In light of the FY 2024-25 budget constraints, nursing homes must prioritize financial sustainability by reassessing budget allocations, exploring alternative funding sources, and enhancing operational efficiency. Streamlining expenditures, investing in cost-saving technologies, and engaging in advocacy for more favorable Medicaid reimbursement policies are crucial. Additionally, leveraging financial forecasting can help prepare for future financial scenarios, ensuring the ability to navigate through fiscal challenges while maintaining quality care.

What’s Next?

As we digest the implications of the FY 2024-25 budget, it’s clear that the fight for fair funding is far from over. Nursing homes play an indispensable role in caring for New York’s aging population. Implementing strategic financial planning and advocacy efforts are crucial in navigating the challenges presented by this budget. By focusing on efficient resource management and actively engaging in policy discussions, nursing homes can work towards securing a financial landscape that supports high-quality care and sustainability. Stakeholders must continue to engage in advocacy, ensuring that our elderly can continue to receive the care they deserve in environments that are safe, supportive, and sustainable.

If you need further guidance or have any questions on this topic, we are here to help. Please do not hesitate to reach out to discuss your specific situation.

This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.

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Written By

Chelsea Murray March 21
Chelsea Murray
Executive Vice President

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