May 1, 2010 | by Robert Gatty

Medicare, Medicaid funding cuts battle continues

At a glance…

Two lawmakers urge their colleagues to protect Medicare and Medicaid from additional cuts in the government’s 2011 budget.

While the new healthcare reform law is now on the books and contains numerous provisions important to skilled nursing facilities (SNFs), the industry continues its battle against further reductions in Medicare and Medicaid funding as Congress gets down to work on the federal budget for 2011.

Although President Obama, in his budget proposal, did not recommend reductions for SNFs or other healthcare providers, lawmakers who support the industry have contacted House budget committee leaders expressing opposition to any further reductions.

In a “Dear Colleague” letter April 1, Reps. Shelley Berkley (D-Nev.) and Shelley Moore Capito (R-W. Va.) urged their fellow lawmakers to contact House Budget Committee Chairman John Spratt (D-S.C.) and Ranking Member Paul Ryan (R-Wis.) asking them to “help preserve Medicare and Medicaid funding for the long-term care community as their Committee examines issues related to these important entitlement programs.”

In their letter, Berkley and Capito point out that SNFs face increasing pressures due to struggling state Medicaid programs coupled with Medicare funding reductions of more than $12 billion over 10 years, as of October 1, 2009, which have significantly reduced resources available for skilled nursing care at a time when patients have more medically complex needs than ever.

“Any further reductions will hurt a growing economic sector, since long-term care added 50,200 jobs in 2009 alone,” the letter said, noting that the nation’s 16,000 nursing facilities and 39,000 assisted living communities comprise 1.1% of the gross domestic product.

“Because workforce expenses represent 70% of a facility’s total costs, any reductions in funding will result in workforce cutbacks which will not only severely compromise the ability of long-term care to provide life-sustaining care services to frail, elderly and disabled patients and residents, but also will decrease the economic contributions of the sector,” the letter warned.

The two lawmakers asked their colleagues to urge the Budget Committee to “support the long-term care community through reasonable annual inflation adjustments and fair reimbursement for unpaid Medicare co-payments….”

Bruce Yarwood, president and CEO of the American Health Care Association (AHCA), was supportive of the representatives’ efforts. “The letter draws needed attention to the chronic Medicaid underfunding crisis, which is increasingly problematic for patients and facilities at a time when, in just the past six months, Medicare-funded nursing home care has been cut by nearly $27 billion over 10 years,” he said.

Yarwood was referring to the $12 billion in cuts mentioned earlier combined with about $14.6 billion in a productivity adjustment to be implemented beginning in FY 2012 under the healthcare reform law.

While the sweeping new law does not reduce payments to SNFs for 2010 or 2011, it includes a number of provisions-some major-that will directly affect the industry. The provisions that affect post-acute and long-term care described as “positive” by the National Center for Assisted Living (NCAL) include:

  • Extension of the exceptions process for the Medicare Part B therapy cap until the end of 2010.

  • Language added at AHCA’s request stating that the Medicare Payment Advisory Commission (MedPAC) must take Medicaid payments into account as it analyzes providers like SNFs.

  • Elimination of Medicare Part D cost-sharing for assisted living residents covered by Medicaid who otherwise would be admitted to a SNF. Co-pays for dual eligibles receiving services in a Medicaid managed care organization are also eliminated.

  • Several provisions improving healthcare workforce programs, including a demonstration project providing further training opportunities specifically for direct care workers employed in long-term care settings.

  • The CLASS Act, providing a voluntary payroll deduction plan for long-term care.

  • State demonstration programs to evaluate alternatives to current medical tort litigation and a Sense of Congress statement on tort reform.

  • New grants under the Elder Justice section for health information technology and workforce training.

  • A Government Accountability Office (GAO) study and report on the Five-Star Quality Rating System.

NCAL listed the following as negative provisions, in addition to the $14.6 billion in cuts over 10 years:

  • Delay in implementation of Resource Utilization Group, Version Four (RUG-IV) until October 1, 2011, although neither changes to concurrent therapy requirements nor MDS 3.0 were delayed, and so they take effect 2010. Under those provisions, concurrent therapy payment is based on “treatment” minutes by the therapist and not the number of therapy minutes performed by patients. Thus, patients are assigned to lower RUG categories with lower payment levels. Part of the MDS process allows clinical staff to “look back” at certain conditions and services/treatments previously provided to the patient. For example, on admission, MDS permits the nurse to check the hospital chart to note previously provided treatments that will need to be followed up in the nursing facility. Under the new rule, the look-back information can only be used for clinical purposes, not billing purposes.

  • A new Independent Medicare Advisory Board (IMAB) was created to make recommendations to Congress regarding such issues as Medicare payment rates for SNFs. IMAB will submit recommendations to Congress for a vote of either approval or disapproval. Some providers, such as hospitals, received an exemption from IMAB until 2019, but SNFs were not included. The fear is that the IMAB will recommend rate cuts that will be difficult for Congress to overturn.

  • New transparency requirements for nursing facilities as part of the Nursing Home Transparency and Improvement Act, which was included in the overall legislation.

  • Additional background-check requirements for SNFs and nursing facility employees with direct patient access under included provisions of the Patient Safety and Abuse Prevention Act.

  • Changes to reporting of crimes requirement contained in the included Elder Justice Act provisions.

In addition, like all other businesses, SNFs and other long-term care companies will be affected by provisions in the reform law that require employers with at least 50 full-time employees to offer minimum essential coverage to employees to pay an excise tax. The provision is effective in 2014.

…the nation’s 16,000 nursing facilities and 39,000 assisted living communities comprise 1.1% of the gross domestic product.

Bob Gatty has covered governmental developments of the trade and business press for more than 30 years. He is founder and president of G-Net Strategic Communications, Sykesville, Maryland.

To send your comments to the editor, e-mail mhrehocik@iadvanceseniorcare.com.

Long-Term Living 2010 May;59(5):16-19

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