February 18, 2026
Higher Medicaid payment rates are associated with a greater likelihood of receiving 4- or 5-star Care Compare ratings, according to a new study published in the Journal of the American Medical Directors Association (JAMDA).
In the cross-sectional study published last week, researchers used 2019 data from 9,473 freestanding nursing homes across 44 states to analyze facility-level Medicaid payment rates and calculated Medicaid payment-to-cost ratios. Researchers concluded that higher Medicaid payment rates were linked to a greater chance of receiving 4- or 5-star ratings for the overall ratings, health inspection, and staffing domains of the rating system.
Most nursing homes in the study sample, nearly 79%, received less than $225 per day from Medicaid. About 17% were paid so little that Medicaid covered less than 70% of their costs, while only fewer than 10% were paid more than their actual costs. Most facilities, or about 75%, were reimbursed between 70% and 100% of what Medicaid patients cost them.
Nursing homes in the sample had an occupancy level of 81% on average. Most were for-profit (74%), while 18% were nonprofit and 8% government-owned and about 54% were part of a chain. Only 6% were in a continuing care retirement community, while 16% had a memory care unit, and 6% had another type of special care unit.
Medicaid made up the largest share of the sample’s residents, or 58%, on average, compared to 12% for Medicare. And, sample facilities provided about 3.7 hours of nursing staff time per resident each day. Moreover, slightly more than one in four of the sample’s facilities, or 27%, were located in rural areas.
As for quality ratings, 47% earned 4 or 5 stars overall. About 32% received 4 or 5 stars for health inspections, 68% for quality measures, and 36% for staffing.
“Findings suggest that inadequate Medicaid payment rates undermine [nursing home] quality and that nursing homes need to subsidize Medicaid losses with profits from other sources,” researchers said. “Policymakers should consider the adequacy of Medicaid payment when seeking to improve quality of care for long-stay residents, as payment policy remains a critical lever for strengthening [nursing home] performance.”
These findings are consistent with prior research, researchers said, noting that higher Medicaid payment rates were associated with a greater likelihood of having a higher staffing star rating, a measure that suggests facilities’ ability to direct greater resources toward compensation, training, and other supports needed to recruit and retain direct care staff.
The higher Medicaid payment was also linked to a greater chance of getting a 4- or 5-star health inspection rating, which could mean that facilities with higher payment rates have the capacity to implement quality assurance and improve compliance with federal quality and safety standards on which deficiency citations are based.
“Collectively, these additional investments – in more qualified staff, enhanced training, and quality improvement initiatives – translate to higher overall star ratings,” the study stated.
Care Compare ratings are provided by the Centers for Medicare and Medicaid Services (CMS).
Clif Porter, president and CEO of the American Health Care Association (AHCA), said the study backs the reality facing providers.
“Medicaid supports the majority of nursing home residents, and this research reinforces what providers see every day: when funding is strong, quality is stronger. The study emphasizes that providers are investing government resources into their workforce and quality improvement efforts, yet Medicaid continues to fall short,” said Porter. “It is critical that federal and state policymakers protect and strengthen Medicaid funding for long term care so that our residents can continue receiving the high-quality care they deserve.”
Funding versus rate construction
Meanwhile, some experts disagree with the analysis of the JAMDA study.
Marc Zimmet, president of Zimmet Healthcare Services group, noted in an online post that higher Medicaid base rates do not reliably lead to higher staffing hours per resident. To assess impact accurately, Medicaid rates must be evaluated in both nominal and relative terms to account for drivers of cost.
For some states, even though the payment rate looks high on paper, much of it is consumed by paying for higher costs of labor and other underlying expenses rather than translating into more staffing hours, he said. After all, nursing homes operate in very different markets, with different costs, payer mixes, labor pressures, and financial structures.
By contrast, some states with only moderate payment rates show stronger staffing performance because their reimbursement is better aligned with their actual cost structure. In these states, payments may not be the highest in absolute terms, but they are more adequate relative to expenses – allowing skilled nursing facilities (SNFs) to devote more resources to staffing, Zimmet said.
In the end, according to Zimmet’s own findings, high-rate, high-cost states do not necessarily outperform moderate-rate, lower-cost states on staffing metrics, he said.
“It’s not always funding – it’s rate construction,” Zimmet said, referring to how Medicaid payment rates are designed and calculated and how formulas account for wages, case mix and other cost factors. If the structure of the payment system is flawed, simply increasing funding may not fix staffing or quality problems, he said.