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LTC industry faces cascade of spending cuts; thousands of jobs in jeopardy

February 19, 2013
by Bob Gatty
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Some $85 billion in across-the-board cuts in federal programs are expected to take place between March 1 and September 30 unless Congress, with some form of last minute heroics, can cut a deal to avoid those reductions, mandated by law, from being imposed.

If that happens, it will be yet another blow to the long-term care industry, the providers who work there, and the patients whom they serve.

But with Congress taking a week’s vacation just two weeks before the deadline, and no agreement between intransigent Republican and Democratic leaders in sight, the question now is not whether those “sequester” cuts will be implemented. It is if and when those cuts will be ended.    

For the LTC industry, it’s the latest in a cascade of federal spending reductions that have battered it in recent years. Over the next eight years, another $900 billion is set to be slashed unless lawmakers, faced with the impact of job losses and a weakened economy, decide to make changes.

The impact on the skilled nursing facility (SNF) sector in the U.S. will be about $9 billion, according to the Alliance for Quality Nursing Home Care, and its president, Alan G. Rosenbloom, who says that simply is not sustainable. He points out that the American Tax Relief Act of 2012 (ATRA), enacted to avoid the “fiscal cliff” government shutdown last month, slashed at least $600 million in Medicare Part B therapy payments.

He pointed to a recent Wall Street Journal report that SNFs are having a tough time obtaining financing because of Medicare curtailments and noted that a Texas facility recently closed with cuts in Medicare and Medicaid cited as contributing factors.

“Details and facts matter,” wrote Rosenbloom, “and we are letting Congress know for the record the $65.6 billion SNF Medicare funding reduction (FY 2012-2021) is comprised of the following budget and regulatory actions: Productivity Adjustment (ACA-mandated): $34 billion; Forecast Error (Case-Mix) Adjustment: $28 billion; Forecast Error (Market Basket) Adjustment in FY 2011 Rule: $3 billion; Bad Debt (Middle Class Tax Relief & Job Creation Act of 2012): $3 billion; ATRA Medicare Part B Reduction: $600 million (estimated); Sequestration (3/1/13): $9 billion (source: Avalere Health).”

Rosenbloom quoted healthcare policy experts Gail Wilensky, former Medicare chief, and Vince Mor, of Brown University, as writing last year: “If further Medicare reductions are imposed, it will be difficult for facilities to continue using Medicare to help make up for the underpayment of Medicaid…Cuts will have to come from somewhere—forcing facilities to choose between rehabilitation services, skilled nursing and amenities for short-stay Medicare patients, or essential direct care nursing aides for long stay Medicaid patients. Each scenario has negative implications for seniors’ care.”

There is another important impact of the sequester cuts as well. In addition to a 2 percent reduction in Medicare payments to physicians, thousands of jobs will be lost, according to a study by Trip Umbach, a Pittsburgh, Pa-based market research consulting firm retained by the American Hospital Association.

In its study published last September, Trip Umbach estimated that the sequester would result in 496,000 jobs being lost across the economy during the first year of implementation, including 38,115 in nursing and residential care facilities. By 2021, that number will grow to 63,946, the study says.

Whether lawmakers are paying attention to such data remains to be seen. But Trip Umbach made this statement that should cause them to pause as they consider whether to simply allow the across-the-board sequestration cuts to take place:  

“The healthcare sector represents nearly 18 percent of the U.S. economy, and currently is one of the few bright spots in terms of job growth. As lawmakers look at ways to reduce the deficit and fund other priorities, cuts to Medicare are one option. However, it is important to have an accurate picture of what these cuts will mean to the larger economy and, specifically, the negative impact they will have on the unemployment rate. This report provides a view of what these cuts will mean over the next nine years, nearly 767,000 fewer jobs across many industry segments, not all healthcare-related, jobs that will be difficult to replace.”

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

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