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Challenges to Medicare, Medicaid ahead

December 19, 2014
by Bob Gatty
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Earlier this month, the House Commerce Subcommittee on Health held a hearing focused on financing Medicare and Medicaid, and much of the long-term care industry appeared to be in the crosshairs.

At the outset of the Dec. 9 hearing, Subcommittee Chair Joe Pitts (R-PA) said the biggest budgetary challenge facing the federal government is “mandatory spending, particularly Medicare and Medicaid, which together accounted for 25 percent of all federal spending in FY 2013.”

Those programs, Pitts said, must be “strengthened and modernized, not just because millions of Americans depend on them for their healthcare, but because out-of-control entitlement spending is crowding out other important priorities.”

With that assessment setting the tone for the hearing, Mark E. Miller, executive director of the Medicare Payment Advisory Commission (MedPAC), told lawmakers that the current Medicare payment system contains incentives “that encourage undesirable provider behavior, including furnishing unnecessary services and avoiding certain patients.”

Miller pointed out that in 2008, MedPAC recommended revising the payment system for skilled nursing facilities (SNFs) to eliminate “a payment bias” favoring rehabilitation therapy services and, in 2011 made a similar recommendation for the home health payment system.

Miller said the Medicare program should pay the same amount for the same service, regardless of setting, unless payment differentials are justified by specific factors. He noted that in June, MedPAC reported to Congress that Medicare often pays much higher amounts for treatment of many conditions at inpatient rehabilitation facilities (IRFs) compared with SNFs, where they also are often treated.

“In general, the payments for services in the IRF (including the add-on payments made to IRFs) are as much as 42 percent higher than those in the SNF for treating patients with similar care needs,” he told lawmakers. “The commission is currently discussing a policy to align payments between the two settings for certain conditions.”

Miller said that any policy to address those payment disparities would be accompanied by regulatory relief for the IRFs to allow them to continue serving those patients, but to streamline the cost of that care.

Long-term care hospitals (LTCHs) also were spotlighted by Miller as a place where savings could be achieved through lower reimbursement rates.

He noted that in its March report to Congress, MedPAC reported that many chronically critically ill patients with similar care needs often receive care in LTCHs, whereas others receive care from acute care hospitals (ACHs).

“Medicare pays LTCHs much higher payment rates than those made for similar patients in the ACH,” Miller said. “Studies comparing LTCH care with that provided in ACHs have failed to find a clear advantage in outcomes for LTCH users. At the same time, studies have found that, on average, episode payments are higher for beneficiaries who use LTCHs.”

To reduce incentives for LTCHs to admit lower acuity patients who could be appropriately cared for in lower cost facilities, MedPAC recommended that the standard payment rates be paid only for LTCH patients who meet the chronically critically ill patient profile (those who spent eight or more days in an intensive care unit during an immediately preceding acute care hospital stay).

In his testimony, Miller also reminded lawmakers that to increase the equity of Medicare’s payment policies toward providers who have a role in care coordination, MedPAC has recommended payments be reduced to both SNFs and home health agencies with relatively high risk-adjusted readmission rates.

In March, as part of the Protecting Access to Medicare Act of 2014, Congress enacted a SNF value-based purchasing program that begins in FY 2019, which Miller said includes readmissions and resource use measures. Testifying at the same hearing was Judy Feder, professor and founding dean of the Georgetown University McCourt School of Public Policy, who agreed that efforts to control healthcare entitlement program expenditures must continue, but flatly stated that “Medicare and Medicaid are not in crisis.”

Responsible reforms that are now under way can help reduce projected deficits while sustaining the programs’ fundamental protections for consumers, Feder said. Miller, in fact, observed that Medicare spending per beneficiary over the next decade is projected to grow at a slower rate than in the past 10 years, although the number of beneficiaries will increase as the Baby Boom generation ages. The Hospital Insurance Trust Fund will be exhausted by 2030, he said, unless responsible action is taken.

In the new Congress, which assumes power next month, it is likely that Medicare and Medicaid will the subject of significant reform efforts, all aimed at reducing costs. The LTC industry can expect to face ongoing challenges as those events unfold.

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