The Crisis Facing Pennsylvania’s Long-Term Care System
Pennsylvania’s long-term care providers are sounding a loud alarm. Nursing homes, home care agencies, and senior care advocates are urging Gov. Josh Shapiro and state lawmakers to deliver more funding — and to make that funding predictable. Without urgent action, they warn, the system will continue to buckle under a combination of stagnant reimbursements, soaring costs, and a deepening workforce shortage.
The numbers tell a stark story. Thirty nursing homes have closed across the commonwealth since the start of 2019. Meanwhile, bankruptcies, ownership changes, and facility sales are accelerating — disrupting continuity of care for thousands of vulnerable Pennsylvanians. Industry leaders say the current funding structure is broken, and incremental fixes are no longer enough.
What Is the Budget Adjustment Factor and Why Does It Matter?
A Tool That Became a Problem
At the center of the long-term care funding debate is a little-known mechanism called the Budget Adjustment Factor, or BAF. Introduced under Gov. Ed Rendell in 2005 to control costs, the BAF was meant to be a short-term tool. Instead, it has remained in place for two decades — and its effects have grown increasingly harmful.
The BAF works by reducing the actual Medicaid reimbursement a nursing home receives below the rate lawmakers intended. Rather than distributing the full appropriated amount, the state’s Department of Human Services adjusts payments downward each quarter using a complex formula. As a result, even when the General Assembly votes to raise rates, providers often receive significantly less than expected.
Wild Swings Create Financial Chaos
The BAF does not stay constant. In one recent fiscal year, it dropped from 0.90 in January to 0.78 in October — an additional 12% cut on top of reductions providers already anticipated. At 0.83, where it sat recently, providers are losing an estimated average of $50 per patient per day. Furthermore, the quarterly resets make meaningful financial planning nearly impossible.
Zach Shamberg, President and CEO of the Pennsylvania Health Care Association (PHCA), has called the BAF “the most destructive budgeting tool that the state of Pennsylvania has in its arsenal.” The PHCA adds that the BAF does not affect all providers equally, penalizing those who are more efficient and serve higher Medicaid populations.
How Pennsylvania Compares to Neighboring States
Pennsylvania’s Medicaid reimbursement rate for nursing home care stands at just $256 per resident per day. Consequently, neighboring states far outpace it: Maryland reimburses at $375 per day, West Virginia at $355, Delaware at $326, New York at $299, and New Jersey at $275. By any measure, Pennsylvania ranks near the bottom among states in the region.
Moreover, Medicaid already funds care for more than 70% of nursing home residents statewide. Therefore, inadequate Medicaid reimbursement is not a peripheral issue — it is the central driver of financial instability across the long-term care sector.
The Workforce Shortage Deepening the Crisis
Unfilled Shifts Mount Statewide
Low Medicaid reimbursement directly affects providers’ ability to recruit and retain caregivers. Across Pennsylvania, more than 112,000 direct care shifts go unfilled every month. Additionally, managed care organizations report that 10% of personal assistance staff hours and 27% of nursing hours remain vacant each month.
Nursing Homes Feel the Strain
A recent survey by the Hospital and Healthsystem Association of Pennsylvania, LeadingAge PA, and PHCA found that workforce shortages are reshaping operations across the board. Among nursing home respondents, 53% had limited or capped admissions, 38% had deferred facility upgrades, and 24% had placed admission referrals on waitlists. Meanwhile, 70% of hospital respondents reported increased emergency room wait times as a downstream consequence.
What Providers and Advocates Are Demanding
More Investment in Home Care
The Pennsylvania Homecare Association (PHA) is seeking a 23% increase in Medicaid reimbursement rates for home care and a total investment of more than $800 million to stabilize the industry. The group argues that Pennsylvania’s average hourly reimbursement rate for personal assistance services — $20.63 — is the lowest among neighboring states. By comparison, New York reimburses at $36.31 per hour and Maryland at $25.58.
PHA CEO Mia Haney has been direct in her assessment: “Pennsylvania’s in-home care crisis is both devastating and straightforward — the workforce is collapsing, and people are going without care. Raising rates is an absolute necessity for tens of thousands of vulnerable Pennsylvanians.”
$139 Million for Nursing Homes
Nursing home advocates, led by PHCA and LeadingAge PA, are calling for at least $139 million in new state funding. In addition, they want structural reform to how the BAF operates. Garry Pezzano, President and CEO of LeadingAge PA, has said the underlying system is broken, with providers facing uncertain funding year after year, even as costs of care continue to rise.
Legislative Push for a BAF Floor
House Bill 1310, championed by both PHCA and SEIU Healthcare PA, proposes setting a minimum BAF floor of 0.9. This would ensure that reimbursements do not drop below 90% of the intended Medicaid rate in any given quarter. Projections indicate this reform would inject approximately $139 million to $140 million in new funding into the long-term care system for fiscal year 2025–26.
Importantly, the PHCA and SEIU Healthcare PA have formed what both groups call a historic partnership to jointly advocate for this legislation. Their collaboration signals unusual alignment between providers and labor — both sides recognizing that sustainable funding is essential not just for nursing homes, but for the workers within them.
What Happens If Lawmakers Don’t Act?
The stakes are high. By 2030, rural Pennsylvanians aged 65 or older are expected to outnumber those under the age of 20. As the Baby Boomer generation ages, demand for long-term care will only intensify. Without stable, adequate reimbursement, providers cannot attract staff, maintain facilities, or keep their doors open.
The 2025–26 budget’s $21 million allocation for Direct Care Workers covered only 6% of the workforce. LeadingAge PA called the enacted budget a failure for Pennsylvania’s seniors. Above all, providers and advocates agree: patchwork solutions have run their course. Pennsylvania’s long-term care system needs both greater investment and a predictable funding structure — starting now.
