Long  term and post-acute care industry leaders think President Obama’s fiscal year (FY) 2013 budget plan misses the mark by relying solely on cuts to Medicare to reduce spending instead of working with providers on alternatives to reduce hospital readmissions, among other cost saving ideas.

“Our organization’s approach has been to work with the administration and Congress to improve lives and care delivery while at the same time working to remove costs out of the system,” said Gov. Mark Parkinson, president and chief executive officer of the American Health Care Association/National Center for Assisted Living (AHCA/NCAL). “

“We do that by reducing hospital readmissions, placing seniors in the most appropriate health settings, and redoubling our efforts on quality. We shouldn’t have an approach focused solely on cuts. Unfortunately, the president’s budget reflects that singular direction.

The Obama budget calls for $63 billion in Medicare program cost savings over 10 years by implementing the following policies:

• Adjusting payment updates for certain post-acute care providers—This would gradually realign payments with costs through adjustments to payment rate updates in FY 2013 through FY 2022 for these providers. This proposal calls for savings of $10.36 billion by 2017, $56.67 billion over 10 years.
• Equalizing payments for certain condi¬tions commonly treated in inpatient rehabilitation facilities (IRFs) and skilled nursing facilities (SNFs)—Conditions commonly treated in IRFs and SNFs are knee replacements, hip fractures, and hip replacements. The proposal provides broad discretionary authority to the secretary of Health and Human Services to add other conditions. 
• Encouraging appropriate use of IRFs.
• Adjusting SNF payments to reduce unnecessary hospital readmissions—The proposal cuts SNF payments by up to 3 percent beginning in 2016 for facilities with high rates of care-sensitive, preventable hospital readmissions. Savings would tally $1.95 billion by FY 2022, $460 million by FY 2017.

The administration also wants to adjust bad debt reimbursement for most Medicare-eligible provider types from 70 percent of bad debts resulting from beneficiaries’ non-payment of de-ductibles and copayments to 25 percent. This proposal would save approximately $36 billion over 10 years.

Parkinson said such a change to bad debt rules is “tantamount to cutting Medicare benefits” and “this sort of budgeting violates the basic contract between the government and beneficiaries—namely, that covered services will be paid.”

On Medicaid, the Obama budget would limit taxes on health care providers to help fi¬nance the state share of program costs by phasing down the Medic¬aid provider tax threshold from the current 6 percent in 2014 to 4.5 percent in 2015, 4 percent in 2016, and 3.5 percent in 2017 and beyond. This proposal is projected to save $21.8 billion over 10 years.

The White House also wants to apply a single blended matching rate to Medicaid and the Children’s Health Insurance Program (CHIP) starting in FY 2017. State Medicaid expenditures are generally matched by the federal government using the Federal Medi¬cal Assistance Percentage (FMAP); CHIP expen¬ditures are matched with enhanced FMAP (eF¬MAP); and the health care reform law provides an increased match for newly eligible individuals and certain childless adults beginning in 2014.

This proposal would replace these formulas with a single matching rate specific to each state that auto¬matically increases if a recession forces enroll¬ment and state costs to rise beginning in FY 2017. This policy is projected to save $17.9 billion over 10 years.
 
Last week, AHCA/NCAL issued its own budget recommendations to the White House for consideration. These ideas were intended as a patient-centered blueprint for stable funding in Medicaid and Medicare for the long term and post-acute care programs.

Download a copy of the 2013 budget recommendations or visit the AHCA/NCAL website for more information.​