Medicaid in particular has become a serious problem for the states. It funds at least 2/3 of all spending for nursing home care and is the primary payer for long term care services in the United States. Unlike Social Security and Medicare, seniors do not automatically qualify for Medicaid at age 65 and instead must qualify based on income and assets at indigent levels. Many seniors follow a “spend down” path to get rid of money and assets so that they can qualify. Since the economic crisis began three years ago, Medicaid rolls have increased while the available dollars to cover services have decreased. The current situation and future projections are so serious that both the Fed. Chairman and the Secretary of Health and Human Services (HHS), the body that runs Medicaid and Medicare, issued unprecedented high profile warnings on back-to-back days in early 2011.

Over 10 million Americans now require long term care annually and Medicaid is the primary payor of long term care services in the United States. In 2009, Medicaid spent $240 billion on long term care services accounting for 43% of total expenditures. By comparison, $45.6 billion or 19% of long term care services was paid “out of pocket” by the consumer. States spent on average 16% of their annual budgets on Medicaid making it the second biggest budget item behind only education. A report tracking Medicaid spending going back over the last seven years showed that Medicaid underfunded payments for services to all patients by $14.17 everyday in 2009 and this alarming underfunding trend will get worse through 2011.