Medicaid, a joint state-federal program for the poor, , now accounts for almost 40 percent of the state's annual budget, which is about $24 billion, Taft said.

"Ohio pays for nursing homes through a formula that is locked into Ohio demand and is not based on supply and demand," Taft said.

"Because of this outdated formula, Medicaid spending for nursing homes has risen by more than 40 percent in the last eight years even though the number of people served in nursing homes has declined by more than 4,600."

He said the current system reimburses nursing home owners for thousands of empty beds.

As he has in past budgets, he once again called on lawmakers to take the way that reimbursement is funded out of state law and allow the state human services department to set the rates.

He also called on lawmakers to retain a limit on how much nursing homes could be reimbursed.

"If that ceiling is removed in the next budget, and if the formula remains unchanged, the consequences will be catastrophic for all other state programs," Taft said.

The incoming Senate president said lawmakers attempted to balance controlling nursing home spending without removing the method for spending that money from law.

"We'll continue to have that discussion and try to work it out," Sen. Bill Harris, an Ashland Republican, said Wednesday.