Illinois nursing homes seek Medicaid rate hike
[April 09, 2025]
By Peter Hancock
SPRINGFIELD — Nursing home industry officials are urging Illinois
lawmakers to increase the rates they receive from the state’s Medicaid
system, arguing the current rates are outdated and are forcing many
facilities around the state out of business.
“We’ve expressed our concerns that closures will happen. We’ve been
saying that for years, and it’s actually happening now, and it will
continue to get worse,” Jonathan Aaron, co-president of the industry
lobby group Health Care Council of Illinois, said during a recent
interview.
The Illinois Medicaid program pays for the care of approximately 55,000
residents who live in 738 nursing homes, also known as skilled nursing
facilities, according to the state Department of Healthcare and Family
Services.
Nursing facilities are paid a flat rate per day for each Medicaid
resident. The rate varies for each facility and is based on three
components: nursing costs, capital costs and support costs.
In 2022, Gov. JB Pritzker signed legislation addressing the nursing cost
component of the formula. That legislation was expected to provide an
additional $700 million a year into nursing homes in the form of
incentives for them to raise wages for nursing staff and increase their
staffing levels.
The capital component of the formula is intended to reimburse facilities
for costs like mortgage interest and asset depreciation.
The legislation now being considered in the General Assembly addresses
the support component, which covers non-clinical, administrative costs
such as food, laundry, housekeeping, utilities, maintenance, insurance,
dietary and general office services.
“The challenge with this is, it is based on a snapshot in time, and the
current support portion of the rate is based on 2017 costs,” Aaron said.
“It’s no secret that costs have gone up exponentially over the past
eight years. We simply can’t keep up being that far behind in
rightsizing what our reimbursement should be.”
Industry officials say the low reimbursement rates have led to at least
31 facilities in Illinois going out of business in recent years while
one of the nation’s largest nursing home operators, Peoria-based
Petersen Health Care, which operated facilities in Illinois, Iowa and
Missouri, filed for bankruptcy last year.
The proposed legislation would give each facility nine years’ worth of
inflation adjustment to the support services component of their rate
structure, reflecting the increase in the consumer price index from
September 2016 through September 2025.
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That language is contained in Senate Bill 1606, sponsored by Sen. Dave
Koehler, D-Peoria, and House Bill 2858, sponsored by Rep. Bob Rita,
D-Blue Island. Both bills have attracted bipartisan support.
“It’s basically a matter of trying to keep up with the costs,” Koehler
said in an interview. “The current rates right now are all based on 2017
pre-pandemic costs. A lot has changed in terms of inflation today. So
we’re just trying to keep up with that and make sure that the nursing
homes are getting what they need so we don’t have any more closures.”
Although lawmakers are struggling with tight revenues this year, Koehler
said the reimbursement increase can be accomplished without straining
state resources. The increase would be paid for, he said, through the
state’s nursing home bed tax — a tax levied on each Medicaid-funded
resident day in Illinois nursing homes. The money generated by that tax
is then used to draw down federal matching funds, which would then be
used to fund the higher reimbursement rates.
“So in a sense, it is not really costing the state or DHFS any
additional money,” Koehler said.
One question that will be on many lawmakers’ minds, however, is how long
those federal matching funds will be available. Last week, the U.S.
Senate gave its endorsement to a House-passed budget resolution that
calls for potentially hundreds of billions of dollars in Medicaid cuts
over the next 10 years.
Koehler, however, said he doesn’t believe the state should base its
decision around concerns about what the federal government might do in
the future.
“You know, the federal government under Trump has been so back-and-forth
that who knows where it’s going to land,” he said. “So I think we have
to go forth with our best strategy and say, ‘This is what we think needs
to happen.’ And if it doesn’t happen, well then, we’ll scramble after
that. But I don’t think we should stand by and just not do anything.”
Lawmakers are working this week to meet a Friday deadline for each
chamber to pass most non-budget-related bills and send them to the other
chamber.
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