‘Bad debt’ cuts to hit SNFs hard in 10 states

Skilled nursing providers in 10 states are being told to brace for hundreds of millions of dollars in Medicare funding cuts from “bad debt” provisions passed in February’s Middle Class Tax Relief and Job Creation Act of 2012, according to a new analysis by Avalere Health that was released by the Alliance for Quality Nursing Home Care.

Florida, Ohio, Illinois, Pennsylvania, North Carolina, Louisiana, Indiana, Tennessee, Georgia and New Jersey will absorb the largest Medicare funding cuts from bad debt provisions, the Avalere analysis found.

The provisions reduce federal payments to skilled nursing facilities and hospitals that incur bad debt when Medicare beneficiaries cannot pay their cost-sharing expenses. Currently, SNFs can collect 70 percent of beneficiary cost-sharing expenses from Medicare, and 100 percent of bad debt related to the care of dual-eligibles—those covered by both Medicare and Medicaid.

However, the Middle Class Tax Relief and Job Creation Act of 2012 reduces SNF payments of bad debt in both categories: providers who collect 70 percent reimbursement of the debt from Medicare beneficiaries will see that number reduced to 65 percent starting FY 2013, while those who can collect 100 reimbursement of debt related to dual-eligibles will see a phased reduction to 65 percent over the course of three years.

Lawmakers have said that the previous reimbursement policy was too generous and discouraged providers from doing as much as they could to collect the bad debt themselves.

Alliance President Alan G. Rosenbloom, however, has argued that SNF providers can’t collect bad debt from responsible payers when the payers are state Medicaid programs that don’t pay co-pays and deductibles for dual-eligibles, as is allowed by the federal government.

“SNFs have no legal recourse to collect ‘bad debt’ from state Medicaid agencies—and is more accurately described as ‘uncollectible debt’ as mandated by federal law,” he said in a statement Monday.

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