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Washington budget fight has LTC industry fretting over more cuts

January 17, 2013
by Bob Gatty
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So now the fiscal cliff battle is behind us, but the nation is heading to another possible financial crisis caused largely by politics, and the nursing home sector—and their residents—could well be caught in the middle.

Earlier this week, President Obama told reporters he has no intention of negotiating further federal spending cuts in order to get Republicans in Congress to raise the $16.4 trillion nation’s debt limit, which must be done by March to prevent a government default.

But at least some House Republicans, including new conservative lawmakers elected last November, say they are perfectly willing to shut the government down unless they get significantly more spending reductions. Thus, there is an impasse in the making and reason for those who represent long-term care facilities to be concerned.

To complicate matters further, besides the debt limit, the across-the-board sequester, delayed by the last minute fiscal cliff deal, will kick in early in March unless Congress steps in. That could mean at least a 2 percent reduction in Medicare and Medicaid spending. Moreover, the Obama administration will present its 2014 budget sometime in February or early March, portending another major battle over spending for the fiscal year that begins October 1.

“At each of those stages, there is a substantial risk that in order to close a deal, Congress will have to cut, and from the point of view of payment for skilled nursing facilities (SNFs), we are talking about threats to Medicare,” said Alan G. Rosenbloom, president of the Alliance for Quality Nursing Home Care.

“From our perspective,” said Jeff Myers, senior vice president for policy and government relations at the American Health Care Association (AHCA), “entitlement spending is clearly an issue that deserves a lot of attention, but trying to reach some arbitrary number because of the debt ceiling is counter productive and bad for seniors as well as policymakers.”

There are worries that lawmakers may allow the sequester to be implemented—perhaps modified to limit the impact on defense spending. Should that occur, the money will have to be found someplace and Medicare and Medicaid could well feel the impact, some observers believe.

“If the sequester goes through, it should apply to everybody the way the law was originally written,” contended Myers, who said he has found considerable opposition on Capitol Hill to “unduly burdening the health system by helping defense.”

Rosenbloom worries that if further reductions in financial support for LTC facilities and patients are imposed, the industry could face a crisis similar to 1997 when the Balanced Budget Act required the Centers for Medicare & Medicaid Services (CMS) to substantially change the payment system to save an anticipated $9 billion. When those changes were implemented, Rosenbloom recalled, $16 billion was extracted from Medicare and some 20 percent of nursing homes went bankrupt.

“In my view, we are perilously close to finding ourselves in that same situation,” he warned. “This sector as a whole cannot sustain another significant hit.” He pointed out that aside from any new cuts that might be imposed as a result of the continuing debates on Capitol Hill, the Affordable Care Act’s productivity provisions could result in reductions that could eliminate any potential marketbasket increase for providers.

Both Rosenbloom and Myers said their organizations have made suggestions to Congress regarding ways to reduce spending, such as reforming readmissions policies.

“We’ve been on the Hill suggesting ways to save, like an extremely innovative readmissions policy by encouraging SNFs to work more closely with hospitals,” said Myers. “We are trying to work on ways to make things better, but to do that means getting away from cuts resulting from the debt ceiling, the continuing resolution (budget) and the sequester. Entitlement reform should be considered in a thoughtful way.”

“There is a real possibility to restructure the post-acute care delivery system more broadly to base payments more on patients needs and characteristics and lot less on where care is provided,” said Rosenbloom. He pointed out that the same medical conditions often are treated in multiple settings with multiple payment systems, resulting in the government paying more in one setting for the same care compared to another. “The President has proposed some steps to rationalize this,” he noted.

Myers said he is hopeful calmer heads will prevail in Congress and that the debate about reducing spending will be part of the budget reconciliation process rather than by having another big scare as the debt ceiling, and a potential government shutdown, draws near.

Although published reports indicated GOP conservative hardliners were determined to use the debt ceiling battle as leverage to extract reductions from Democrats and the White House, some insiders say steps are being taken within the Republican conference to soften that stance and instead concentrate the debate on the budget fight.

While that strategy may not diminish the threat of potential cuts, it would certainly reduce the economic impact of a potential government shutdown and default.

Meanwhile, the Alliance was working on Capitol Hill to gain some relief from provisions of the fiscal cliff package that reduces Medicare payments to SNFs for multiple therapy services. Rosenbloom pointed out that in 2012 Medicare reduced a portion of Medicare Part B payments when patients receive multiple therapy procedures on the same day by 20 percent for outpatient settings and 25 percent for inpatient settings like SNFs. The fiscal cliff law further reduced those payments starting in April, which he said will reduce payments to SNFs by $600 million over the next 10 years.

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