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 Debt Plan Takes Aim At Nursing Home Providers

​Elimination of certain Medicare provider payments and adjustments to Medicaid matching rates are just some of the so-called “modest adjustments” in President Obama’s plan to reduce the country’s debt by more than $3 trillion over the next decade.

In a White House speech this morning, the president released his proposal and outlined what he described as a “balanced approach to larger deficit reduction through entitlement and tax reform.” However, industry advocates rebuffed the proposal, likely due to its provider-focused approach to Medicare savings that are  expected to reach $248 billion.

“AHCA/NCAL is disappointed with the proposals the president put forth today," said Gov. Mark Parkinson, president and chief executive officer of the American Health Care Association/National Center for Assisted Living (AHCA/NCAL).

"While AHCA/NCAL appreciates and supports the effort to address our nation's budget deficit, additional cuts to Medicare and Medicaid disproportionately affect skilled nursing facilities and the long term care sector and put beneficiaries and jobs at risk." Parkinson said.

Another sign that providers may be weary of the plan was Obama’s statement that “any cuts to Medicare would be capped and limited to the provider side.” What’s more, he said in his speech that “none of the changes I’m proposing are easy or politically convenient.” 

Although the plan credits the health care reform law with alleviating some of the deficit, he cites the Medicare trustees’ estimate that the trust fund will be exhausted in 2024 as reason for further reductions to Medicare spending. As such, the plan proposes to make "gradual changes to Medicare by better aligning payments with the costs of care and improving providers’ payment incentives to provide high quality care.”

Following are some of the Medicare- and Medicaid-specific cuts found in the president’s deficit reduction proposal:

  • Improving efficiencies in post-acute care, specifically for skilled nursing facilities (SNFs), long term care hospitals, inpatient rehabilitation facilities (IRFs), and home health providers. These include adjustments to payment updates and the gradual realignment of “payments with costs through adjustments to payment rate updates in 2014 through 2021,” in addition to the elimination of payment updates for post-acute care providers in 2012 for an expected savings of $32 billion over 10 years.
  • Equalization of payments for certain conditions commonly treated in IRFs and SNFs by reducing the “differences in payment for treatment of specified conditions to encourage care in the most clinically appropriate setting.”
  • A reduction in federal subsidies for high-income beneficiaries and the creation of financial incentives for newly eligible beneficiaries to seek high-value health care services.
  • A reduction in Medicare coverage of bad debt payments from 70 percent to 25 percent for all eligible providers over three years, starting in 2013.
  • An adjustment in SNF payments to reduce hospital readmissions that is comparable to the payment changes made for hospitals in the health care reform law. The proposal asserts that  “to promote high quality care in SNFs,” by reducing SNF payments by up to 3 percent beginning in 2015 for facilities with high rates of care-sensitive, preventable hospital readmissions. The estimated savings for this plan is approximately $2 billion over 10 years.
  • Cutting waste, fraud, and abuse in Medicare through the Campaign to Cut Waste. The administration proposes a series of policies expected to save approximately $5 billion over the next 10 years. The plan includes the recovery of erroneous payments made to insurers participating in Medicare Advantage and strengthening of the Independent Payment Advisory Board.

Medicaid is also on the chopping block in Obama’s plan. Following are a few of the proposals:

  • Making Medicaid more “flexible, efficient, and accountable” by limiting state financing practices that increase Federal spending, replacing complicated matching formulas with a single matching rate specific to each state, and strengthening Medicaid program integrity. Expected to save approximately $66 billion over 10 years, the proposals include reducing the Medicaid provider tax threshold beginning in 2015 by limiting increased payments from the current-law level of 6 percent in 2014, to 4.5 percent in 2015, 4 percent in 2016, and 3.5 percent in 2017 and beyond. 
  • Applying a single blended matching rate to Medicaid and the Children’s Health Insurance Plain starting in 2017. The single matching rate would be specific to each state, which automatically increases if a recession forces enrollment and state costs to rise.

Also in the plan are additional savings that the administration claims would build on the Affordable Care Act to strengthen Medicare and Medicaid by reducing wasteful spending and erroneous payments, and supporting reforms that boost the quality of care.

The administration touts the plan as not affecting Medicare beneficiaries until 2017, but a White House fact sheet notes that 90 percent of the savings, or $224 billion, comes from reducing Medicare overpayments.

“A vast majority of nursing home residents rely on Medicaid or Medicare for their nursing home care. Our facilities already have absorbed billions of dollars of cuts," Parkinson said. "At the federal level, we have been forced to absorb cuts from health care reform and drastic Medicare reductions. Deep Medicaid cuts at the state level have affected our facilities. Now, we have reached a point where additional cuts can no longer be shifted to other areas or absorbed without serious consequences."

Click here for a copy of the president's plan:

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