Nursing homes fear rule that would cut billions in Medicare payments

The nursing home industry and patient advocates are nervously awaiting an impending federal rulemaking that could mean billions in lost Medicare payments.

The Centers for Medicare and Medicaid Services (CMS) is expected to issue a draft regulation as soon as tomorrow that might spell the end of a payment adjustment that the industry says is worth $24 billion over 10 years. The change would take effect on Oct. 1.

Nursing home lobbyists said the disappearance of this funding could force more than one major company out of business. Some senior citizen and patient representatives worry about the impact on the patients in those facilities.

The industry acknowledges that the margins they earn from Medicare payments are sizeable, but insist they need high reimbursements to make up for the money they say they lose treating Medicaid beneficiaries, who make up the majority of their patients.

Stemming from changes made by the Balanced Budget Act of 1997 to the way Medicare pays the facilities, Congress enacted the add-on payments in 1999 when reimbursements dipped lower than expected and amended it in 2000.

President Bush’s FY 2006 budget request calls for an end to the extra payments to nursing homes (also called skilled nursing facilities), albeit in a somewhat oblique manner.

The Department of Health and Human Services (HHS) “will refine the Skilled Nursing Facility Prospective Payment System in 2006 to ensure appropriate payments for certain high-cost cases,” the budget document states. Refining the payment system is a requirement for doing away with the adjustments. The OMB estimates five-year savings of $10.13 billion.
The White House Office of Management and Budget (OMB) has consistently advocated ending the adjustments.

The CMS regulation is expected to lay out changes to the payment system that would spell the demise of the add-ons, but lobbyists said the proposed regulation probably would stand only as a starting point.

In previous years, then-CMS administrator Tom Scully and then-HHS Secretary Tommy Thompson prevailed on the White House to leave the add-ons in place. Scully now lobbies for nursing home interests.

Those proponents of extending the payment adjustments have moved on, and nursing home lobbyists say they do not know whether they can count on the backing of CMS Administrator Mark McClellan and HHS Secretary Mike Leavitt at a time when the administration is seeking to reduce the deficit significantly.

The prospect of achieving billions of dollars of savings on a mandatory program without having to go through Congress is tantalizing to the OMB, several lobbyists commented.

Industry and patient advocates likely will be able to rely on continued support from key congressional Republicans who are loathe to intervene legislatively lest they trigger an avalanche of efforts to revise the Medicare prescription drug benefit slated to debut on Jan. 1, 2006.

One lobbyist said any Medicare-related bill would become a “freight train” for members of both parties who are disgruntled about the structure or cost of the new Medicare drug benefit.

Three bills already have been introduced that would reform the Medicare reimbursement system for nursing homes by linking payments to improved quality: Sen. Ron Wyden’s (D-Ore.) Long-Term Care Quality and Consumer Information Improvement Act of 2005 (S. 708), Rep. Phil English’s (R-Pa.) Medicare Nursing Facility Pay-for-Performance Act of 2005 (H.R. 1381) and Rep. Marcy Kaptur’s (D-Ohio) Long-Term Care Quality Improvement Act of 2005 (H.R. 1166).