Ohio lawmakers have approved an $875 million funding package to resolve a long-running dispute over Medicaid reimbursements to nursing homes, bringing a costly legal battle one step closer to an end after the Ohio Supreme Court ruled the state had improperly calculated payments owed to providers.
The measure, passed Wednesday as part of a budget correction bill, now heads to Republican Gov. Mike DeWine for his signature. If enacted, it will settle claims stemming from the 2024-25 budget cycle, when nursing home operators argued the state used a flawed formula that significantly reduced payments to facilities caring for some of Ohio’s most medically complex Medicaid patients.
For supporters of the legislation, the issue goes beyond accounting formulas and budget spreadsheets. They argue the underpayments directly affected facilities responsible for caring for thousands of elderly and vulnerable Ohioans.
“This is the most egregious thing we could have done to individuals that help our elderly live a quality, comfortable life,” state Rep. Jean Schmidt said during debate on the measure. “And today we are correcting that wrong.”
The dispute traces back to a September 2025 ruling by the Ohio Supreme Court. In that decision, the court concluded state officials had used the wrong methodology when calculating Medicaid quality payments for skilled nursing facilities. The ruling found that the error resulted in hundreds of millions of dollars in underpayments and ordered the state to recalculate what providers should have received.
The financial consequences quickly became substantial.
While the court ruling focused on the disputed payments themselves, lawmakers ultimately approved a package worth significantly more than the original amount identified in the case. The legislation allocates approximately $875 million to resolve the matter, including about $310 million from state funds and roughly $565 million in federal Medicaid dollars.
Ohio’s Medicaid reimbursement system pays nursing homes a daily rate for residents covered by the program. In addition, facilities can receive supplemental payments based on quality benchmarks and other performance measures.
Nursing home operators argued that the state’s formula failed to properly account for the medical complexity of the residents they served. According to providers, facilities caring for the sickest and most resource-intensive patients were disproportionately affected by the calculation method, leading to lower reimbursements than lawmakers intended.
Although Ohio later revised the formula, the state remained responsible for addressing payments connected to prior budget periods.
As litigation continued, state officials warned that the costs could grow dramatically. Court filings from Ohio Medicaid estimated that applying the court’s interpretation of the law could increase annual payments by approximately $285 million beyond original projections. Over multiple budget cycles, those additional costs could approach $1 billion.
The legislation approved this week is designed to bring certainty to both the state and the industry. Under its terms, nursing homes accepting the settlement funds must agree to waive future legal claims tied to the disputed reimbursement formula.
Industry leaders quickly praised lawmakers for advancing the package.
Scott D. Wiley, president and CEO of the Ohio Health Care Association, called on Gov. DeWine to sign the bill without delay.
“These funds are critically important to Ohio’s providers and the families they serve,” Wiley said. “We urge Governor Mike DeWine to sign HB 479 into law without delay.”
With the measure now awaiting the governor’s approval, Ohio appears poised to close one of the largest Medicaid reimbursement disputes in its recent history.
