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Dependence on Medicaid seen as deep, risky

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Nonprofit health-care groups received roughly $100 billion in Medicaid funding in 2004, making them dependent on a source of revenue that is “volatile” and “varied,” a new report says.

About one in three Medicaid dollars, or $85 billion to $105 billion, flowed to nonprofit hospitals, nursing homes and home-health groups in 2004, says the report conducted by the Nelson A. Rockefeller Institute of Government, part of the State University of New York system.

Given that Medicaid policies differ from state to state, and that the health-care market is in constant flux, that dependence on Medicaid funding is “significant, varied and volatile,” the report says.

To qualify for Medicaid funding, nonprofit groups must meet certain standards, which in many cases increases their capacity.

Groups unable to meet those standards, however, are forced to rely on funding sources with capacity to meet increases in spending.

The fiscal crisis among state governments in 2001, for example, led to many states reducing their Medicaid reimbursements, reductions that dealt stiff blows to the mental-health sector and other specific services.

Since that time, many states have frozen their Medicaid spending, further hampering the sector’s ability to serve clients.

Nonprofit hospitals received a total of $42 billion in Medicaid funding in 2004, home-based and community-based groups received between $17.5 and $20.9 billion, nursing homes received $11 billion, mental-health groups received between $5.5 billion and $16.9 billion, and managed-care groups received between $9.4 billion and $13.8 billion.

Medicaid spending for nonprofit hospitals and managed-care groups is expected to stabilize, the study says, but remain volatile for mental-health groups and drop for nursing homes.

The study was funded by the Aspen Institute’s Nonprofit Sector and Philanthropy Program.

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