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What the proposed 2016 budget would mean for senior living

February 3, 2015
by Lois A. Bowers, Senior Editor
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The 2016 federal budget announced by President Barack Obama on Monday is a mixed bag for senior housing and services providers, according to several organizations representing them.

The $4 trillion budget proposes to “bring the middle class economics into the 21st century” through $1.8 trillion in deficit reductions, mainly through changes to healthcare programs, the tax code and immigration reform. Specifically as relates to healthcare, the budget includes $400 billion in savings over 10 years from Medicare, Medicaid and other programs, which the administration said can be realized by a slowdown in cost growth due to the Affordable Care Act (ACA). “Notably, the budget’s health savings grow over time—raising about $1 trillion in the second decade, and extending the Medicare Hospital Insurance trust fund solvency by approximately 5 years,” according to the budget overview.

The budget would repeal the sustainable growth rate formula for reimbursing physicians who treat Medicare beneficiaries, and it also calls for $54 billion in new Medicare spending.

Post-acute care

LeadingAge supports the increases in funding related to senior housing and home- and community-based services, as well as post-acute care-related Medicare reforms that save costs and promote quality, said Larry Minnix, the organization’s president and CEO, in a statement. He added, however: “We are very disappointed by the president’s proposal for yet more across-the-board cuts in the annual Medicare payment update for post-acute care providers, especially nursing homes. These cuts would be in addition to reductions already in effect under the [ACA] and sequestration. The proposal could result in nursing homes receiving actual cuts in reimbursement to levels below previous years’ payments.”

The Medicare payment updates for all post-acute providers would last from 2016 through 2025.

LeadingAge was one of the 32 members of the Leadership Council of Aging Organizations (LCAO) signing LCAO Chairman Debra B. Whitman’s letter to the president [PDF] about the budget proposal.

The coalition of national nonprofit providers opposes any measure “that would shift additional healthcare costs to people with Medicare,” Whitman wrote. “At the same time, we ask you to again express support for securing better prices on prescription drugs, specifically by restoring Medicare drug rebates, accelerating closure of the Part D coverage gap and through patent reforms,” she said. Among the other organizations represented by the letter were the National Council on Aging and the Paraprofessional Healthcare Institute.

The American Health Care Association/National Center for Assisted Living (AHCA/NCAL) expressed disappointment in the proposed cuts as well. “When it comes to Medicare…the budget’s proposed cuts are ill advised,” Mark Parkinson, president and CEO of the organization, said in a statement. “In the past, our profession has worked with the White House and Congress to offer better ways of finding Medicare savings than just across-the-board cuts. I’m confident we can do so again this year.” AHCA/NCAL is pleased that the budget protects the Medicaid program and omits provider taxes, however, Parkinson said.

Home health

The National Association for Home Care & Hospice (NAHC) said it “strongly opposes” the budget’s cuts to home health copayments and payments. “Previously enacted changes will cut Medicare spending on home health services by more than $100 billion over 10 years—while less than $20 billion is spent each year,” the organization’s president, Val J. Halamandaris, said in a statement. “As a result of these cuts, Medicare will pay home health agencies less than their costs, meaning that 56 percent of all Medicare home health agencies will be under water by 2017. Congress should therefore reject any additional cuts and any home health copay whether the reason is postponement or elimination of scheduled cuts in physician fees or deficit reduction.”

Halamandaris said the administration’s estimate that instituting a $100 home health copay for new beneficiaries beginning in 2018 would reduce Medicare spending by $830 million through 2025 is contrary to research and that the move would shifts costs to vulnerable citizens. “A home health copay will take Medicare spending in the wrong direction—forcing patients out of high-quality, cost-effective care into much more costly care settings such as hospital, [emergency department] and assisted living-based treatment,” he said.

The Medicare payment updates for post-acute providers include a 1.1 percentage point reduction for home healthcare, reducing home health reimbursements by more than $15 billion, according to Halamandaris. “If they take effect, these payment reductions would be in addition to the rebasing of home health, home health productivity adjustments and sequestration that lower payment rates by more than 14 percent starting in 2015,” he added.

NAHC said that billions of cuts related to home health, even though such programs can save Medicare billions over institutional options, have led thousands of providers to declare bankruptcy at a time when aging baby boomers will be looking for such care to help them age in place.