Harrisburg, Pennsylvania — Pennsylvania’s nursing homes have spent two decades absorbing a quiet penalty built into the state’s Medicaid system. For every dollar they spend caring for a Medicaid patient, they get 80 cents back. And unless the state legislature acts before June 30, that gap is about to get even wider.
Operators across the state are now pressing lawmakers to reform the mechanism responsible — a tool called the budget adjustment factor, which the state uses to spread limited Medicaid funds across all nursing facilities when the budget doesn’t fully cover what they’re owed.
How the Adjustment Factor Works — and Why It’s a Problem
Pennsylvania is one of only five states — along with Nevada, Maryland, New Hampshire, and Idaho — that use a budget adjustment factor to manage Medicaid nursing home reimbursements. The current three-year term expires June 30, giving lawmakers a narrow window to act.
Keystone Seniors, a coalition of long-term care operators, has launched paid advertising in the Philadelphia suburbs and northeastern Pennsylvania to push for reform. The ask is straightforward: set a minimum floor of 90 cents per dollar so that the shortfall can’t grow unchecked.
Mike Jacobs, president and CEO of the Pennsylvania Health Care Association, explained the math bluntly. Last year, the cost to establish a 0.90 floor was just under $200 million in state funding. This year, he said, that number has more than doubled — because care costs keep rising while Medicaid rates have stayed flat.
“Providers are using the better payment system in other states to prop up their facilities in Pennsylvania,” Jacobs said. “If we continue down this path, they’re not going to be able to do that anymore, and they’re just going to sell, close or leave.”
How Pennsylvania Stacks Up Against Its Neighbors
A review completed by Jacobs’ organization and the Service Employees International Union found that in 2025, Pennsylvania nursing homes received just $256 per resident per day in Medicaid reimbursement. That compares to $275 in both Ohio and New Jersey, $299 in New York, $326 in Delaware, $355 in West Virginia, and $375 in Maryland.
Those gaps aren’t trivial. Operators have been offsetting losses in Pennsylvania with stronger margins in other states — a workaround that’s becoming harder to sustain.
Legislation Is Moving — Barely
Two bills would set the 90% floor: House Bill 1310 in the state House and Senate Bill 692 in the Senate. Rep. Maureen Madden, a Democrat from Monroe County who chairs the House Aging and Older Adult Services Committee, is a co-sponsor of HB 1310.
Madden has also introduced a separate grant program to help nursing homes fund capital upgrades — similar to the building grants available to public schools.
“I think we need to do both,” Madden said. “Give them more dollars to operate and help them so that we can get up to speed — provide really state-of-the-art facilities where seniors don’t feel like they’re in an institution.”
The timing pressure is real. A recalculation in how Medicaid reimbursements are determined means the gap between costs and payments is set to widen further in the coming fiscal year — unless Harrisburg moves.
Stakes Rising as Baby Boomers Approach
The nursing home industry has made the demographic argument before, but advocates say it’s more urgent now. Within the next five to ten years, the leading edge of the Baby Boom generation will be entering nursing home care in large numbers.
“We’re going to need every bed we have, if not more,” Jacobs said.
The state’s widening Medicaid funding crisis has already pushed some facilities toward the brink — and operators warn that without reform this session, the adjustment factor’s expiration in June could accelerate closures across Pennsylvania just as demand for beds is set to surge.
