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Medicare funding cuts delayed—for now

August 1, 2008
by Bob Gatty
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The skilled nursing facility (SNF) and assisted living community achieved an important victory June 30 when President Bush signed an Iraq war spending bill that delays six Medicaid rules until April 2009. However, efforts are still under way to block proposed Medicare cuts of $770 million for SNFs to compensate for a “forecasting error” made by the government in 2005.

The American Health Care Association/National Center for Assisted Living (AHCA/NCAL) had sought a one-year moratorium on seven Medicaid regulations that would result in lower Medicaid funding, four of which industry officials said would negatively affect seniors and their care.

The legislation halts efforts to reduce federal Medicaid funds by implementing regulations that would limit Medicaid payments for case management services, impose cost limits for public providers, and limit provider taxes, rehabilitation services, graduate medical education, and school administration and transportation services.

“Clearly, Congress understands how vital this funding is, especially as governors and state legislatures face budget pressures that are squeezing state Medicaid funding,” said Bruce Yarwood, president and CEO of AHCA/NCAL, who expressed appreciation to members of Congress who supported the delay. The regulations, he said, would have disrupted “our already fragile long-term care system during these challenging economic times.”

While the regulation delay was a positive development for the long-term care industry, the AHCA and the Alliance for Quality Nursing Home Care (AQNHC) continued efforts to prevent the $770 million in reductions proposed by the Centers for Medicare & Medicaid Services (CMS) for SNFs. In addition, industry groups sought to block new legislation that would prohibit the use of arbitration agreements at the time of admission to a nursing facility or assisted living residence, and expressed support for a new five-star rating system for nursing homes by CMS.

In comments submitted to CMS regarding the cuts, AHCA said the agency does not have the authority to “correct” for an error in forecasting budget neutrality for case-mix adjustments, which is at the heart of the issue. “This so-called ‘forecast error’ correction appears to be nothing more than a budget-driven ‘take back’ from providers who have risen to the challenge of providing quality care for higher acuity Medicare beneficiaries and in so doing, helped achieve significant savings to the Medicare program,” the organization said. “By its action, CMS will wipe out payment for real case-mix changes resulting from increases in the acuity of SNF residents. AHCA members have made great strides in improving the quality of care and in treating higher acuity patients. The proposed adjustment threatens all such achievements.”

On June 25, 40 senators and 108 U.S. House members joined Sens. Kent Conrad (D-N.Dak.) and Norm Coleman (R-Minn.), and Reps. Earl Pomeroy (D-N.Dak.), Shelley Moore Capito (R-W.Va.), and Shelley Berkley (D-Nev.) to send separate letters to Health and Human Services Secretary Mike Leavitt warning that Medicare beneficiaries are “severely threatened” by the administration's action. Sen. John Warner (R-Va.) earlier sent a separate letter to Leavitt expressing the same concern.

“Because SNFs rely on Medicare to make up for chronic underfunding by the Medicaid program–an average of $13 per day for every Medicaid beneficiary in nursing homes nationwide–it is critically important that Medicare reimbursement remain fair and consistent,” the letters said. “We believe that if the CMS were to finalize its proposed rule, the ability of providers to care for our nation's most vulnerable population–the frail elderly and disabled–would be severely threatened.”

“Lawmakers of both parties, in both chambers, have stepped up to oppose the Bush administration on this important health policy matter because it makes little sense to first jeopardize seniors' care–and then do so in a manner wasteful of tax dollars,” said Alan Rosenbloom, president of the AQNHC. “This is bad, ill-considered Medicare policy, and the facts simply do not warrant proceeding with these regulatory-driven Medicare funding cuts.”

Limiting arbitration

The bill to prohibit the use of arbitration agreements at the time of admission, the “Fairness in Nursing Home Arbitration Act of 2008” (H.R. 6126 and S. 2838), was the subject of hearings before the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights in mid-June. Expressing opposition to the measure were representatives of AHCA/NCAL, and a written statement in opposition was submitted by the American Association of Homes and Services for the Aging (AAHSA).

Kelley Rice-Schild, owner, operator, and administrator of the Floridean Nursing and Rehabilitation Center in Miami, told lawmakers AHCA/NCAL believes the proposal “to limit arbitration and undermine the Federal Arbitration Act represents bad public policy.” She said the organization supports the use of arbitration as a “reasonable, intelligent option for both patients and providers to help assist in the resolution of legal disputes, and aggressively opposes efforts to diminish the use of arbitration by American businesses, especially those unfairly targeting long-term consumers and providers.”

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