Representatives for the nursing home industry have strongly criticized a new plan by the Centers for Medicare & Medicaid Services (CMS) to slash fiscal year (FY) 2010 Medicare payments to skilled nursing facilities (SNFs) by $390 million, or 1.2% below FY 2009 as part of an effort to “rebalance” an earlier adjustment.

The rule, announced May 1, came as three organizations representing the nursing home industry revealed a detailed plan to improve nursing home care to the elderly while saving the federal government some $35 billion over the next decade.

As proposed by CMS, this would result in a $1.05 billion, or 3.3% reduction to nursing homes under Medicare, but would be partially offset by a proposed fee update of 2.1%, or $660 million.

The announcement drew sharp criticism from the American Association of Homes and Services for the Aging (AAHSA) and by the American Health Care Association (AHCA), both of which said they would do battle against any proposed reduction.

According to Bruce Yarwood, AHCA president and chief executive officer, the reductions would come at a time when poor economic conditions are already threatening vulnerable populations.

“Considering the fact the Obama administration’s central policy focus is, correctly, job creation and healthcare reform, we believe a thorough review is warranted due to the fact this Bush-era regulation would cut facility jobs and threaten seniors care,” he said.

The proposal also came as the Alliance for Quality Nursing Home Care (the Alliance) released a new study of proprietary nursing homes that found that while vacant positions could be filled, one-third of study respondents said they had to freeze jobs and forgo pay increases because of the nation’s economic downturn.

“It is well known that the nursing home industry has an aging physical infrastructure which will be under considerable stress over the next 20 years,” said the study by Dobson DaVanzo Associates, LLC. “Two emerging trends will exacerbate the stress on this infrastructure; continued growth in the over-85-aged population and growth in the short-stay post-acute population as baby boomers are aging.” The study found that cash flow in the long-term care (LTC) sector is being used to fund operations rather than making needed infrastructure improvements.

Meanwhile, the Alliance, AHCA, and the National Center for Assisted Living (NCAL) presented a new comprehensive Medicare post-acute care (PAC) and LTC reform plan for consideration by Congress, which they claimed could save some $35 billion over 10 years while providing seniors with more care options, better care coordination, and improved quality.

The program’s highlights:

• A voluntary federal catastrophic LTC program would be created to replace existing Medicaid coverage of LTC services for the elderly. It would cover home- and community-based services as well as care in an assisted living facility or nursing home.

• The amount of private funding used for LTC services would be increased by requiring individuals to spend a certain amount of private funds, known as a personal responsibility amount (PRA), before receiving federally funded benefits. The PRA would vary based on an individual’s earning history and assets, and possibly funded through a number of qualified approaches. Individuals with incomes below 150% of the federal poverty level would not have a PRA.

• Individuals without a PRA would be provided assets to federally funded benefits after spending down assets, including any home equity exceeding $50,000, on LTC services. Individuals not considered low income would have to contribute most of their income toward the cost of their care, much like Medicaid requires now with nursing home care.

• CMS would be required to develop a new prospective payment system for all Medicare PAC services. The new system would base payments on each beneficiary’s condition and service needs, not on the service setting. Those needs would be determined using a new patient assessment tool that accounts for such factors as acuity of needs, resource use, diagnoses, comorbidities, and age. CMS would also be required to develop patient and facility criteria to ensure that, under a site-neutral payment system, service providers have the capability to care for patients based on need.

The cost estimate, as scored by Avalere Health for the program’s sponsors, predicted that spending on the new federal LTC program for catastrophic LTC costs would total $1.1 trillion over the program’s first 10 years (2012-2021) compared to the $46 billion in savings from eliminating $594 billion spent on Medicaid LTC for the elderly. However, it estimated that another $448 billion would be saved from payments states would make to the federal government based on their share of the resulting Medicaid savings.

In addition, the new payment method for PAC benefits would reduce spending by another $81 billion, according to the estimate, with the overall savings continuing to grow after 2021, reducing federal budget pressures from retiring baby boomers.

“The healthcare reform goals articulated by President Obama and our congressional leaders-expanding access, improving quality, enhancing choice, boosting efficiency and controlling costs-can now be achieved in a realistic and comprehensive manner by adopting our proposal,” Yarwood said. “There exists a narrow window of time to achieve the global reforms that will guide the U.S. health system for decades to come, and we must not allow this enormous opportunity to escape our collective grasp.”

Alliance President Alan G. Rosenbloom contended that adopting the proposal is not only consistent with the nation’s national healthcare reform goals, but it is “central to achieving it.”

“It is crucial that we recognize that older Americans have both chronic and intermittent healthcare needs,” he said. “Failing to do so does a disservice to those who need care and undermines efforts to bring costs under control. This plan provides a substantive road map to accomplish many of the reform policy objectives that will benefit every American.”

Rosenbloom, Yarwood, and David Kyllo, NCAL executive director, cautioned that holding on to the status quo is “unsustainable in its present form and will eventually collapse.”

“It is incumbent on our elected leaders as well as our profession to help move this proposal from the drawingboard to the healthcare marketplace,” Kyllo said.

Robert Gatty

Robert Gatty has more than 40 years of experience in journalism, politics and business communications and is the founder and president of G-Net Strategic Communications based in Myrtle Beach, South Carolina. He can be reached at bob@gattyedits.com.