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Why Is Medicare Trying to Penalize Us for Something They Did Wrong?

July 7, 2008
by Bob Gatty, LTL Washington Columnist
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The skilled nursing facility (SNF) and assisted living community is pulling out all the stops to prevent a set of harmful Medicaid regulations from

In June, the American Health Care Association/National Center for Assisted Living (AHCA/NCAL) brought nearly 400 industry representatives to Washington, D.C., in hopes of persuading Congress to:

  • Oppose efforts by the Centers for Medicare & Medicaid Services (CMS) to proceed with proposed reductions to SNF Medicare services totaling $770 million in fiscal year (FY) 2009.
  • Support the 3.1% proposed FY 2009 SNF Medicare market basket increase estimated to equal $710 million.
  • Support extending the current exceptions process for Medicare Part B Outpatient Therapy Services, which were due to expire June 30.
  • Support a one-year moratorium on seven Medicaid regulations that would have the impact of reducing Medicaid funding. On June 30, when President Bush signed an Iraq war spending bill that delays six Medicaid rules until April 2009.

“We had several issues of concern to discuss with members of the House and Senate and their key staff people,” said David Hebert, senior vice-president for policy and government relations at AHCA. “But front and center were the Medicare proposed payment rate reductions that would take out as much as $4 billion over the next five years.” Other estimates have placed the cumulative impact of those cuts as high as $5 billion.
In effect, Hebert said, CMS is asking the industry to pay for its own forecasting error. “That’s not something we did,” he said. “Why is Medicare trying to penalize us for something they did wrong?” CMS’ explanation is that in 2006 the agency refined its case-mix indices (CMIs) to better account for the resources used in the care of medically complex patients, and SNFs have been paid based on these projections since then. Using a payment procedure to reflect a patient’s severity of illness and the kind of services required, the case mix, Medicare expenditures have increased, resulting in far higher payments than originally projected. Now, CMS wants to recalibrate the case-mix weights “in order to reestablish budget neutrality on a prospective basis.”
Hebert pointed out that those cuts come at a time when costs are skyrocketing for nursing homes, exacerbated by increasing fuel and energy expenses. “A lot of vendors are slapping nursing homes with fuel surcharges,” he said. Thus, AHCA is questioning whether the proposed 3.1% market basket increase for SNFs is accurate, and perhaps should be even higher. In early June, Sens. Kent Conrad (D-N.D.), Norm Coleman (R-Minn.) and Reps. Earl Pomeroy (D-N.D.), Shelley Moore Capito (R-W.Va.), and Shelly Berkley (D-Nev.) initiated a letter to Health and Human Services Secretary Mike Leavitt expressing their concern about the proposed Medicare cuts. In their letter, the lawmakers pointed out that the new payment policy implemented by CMS encouraged the movement of certain high-acuity patients to SNFs, an action that ultimately saved Medicare $709 million. “CMS’ proposal to correct a ‘forecast error’ will jeopardize the significant quality improvements made by the SNF community in recent years as well as the ability of SNFs to continue caring for high-acuity patients,” the letter cautioned. “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. We believe that if 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.” Meanwhile, the Medicaid regulations at issue raised a groundswell of opposition from across the economy, with hundred of community, educational, and health-related organizations and state agencies urging Congress to enact the moratorium, essentially halting their implementation.
Testifying before the House Energy and Commerce Health Subcommittee in April, AHCA and NCAL urged support for the moratorium legislation sponsored by Rep. John Dingell (D-Mich.) and Tim Murphy (R-Pa.).
Speaking on behalf of the industry, Dr. Stuart Shapiro, president and CEO of the Pennsylvania Health Care Association, said the proposed changes are “a unilateral attempt by the executive branch to cut Medicaid funding without adequate congressional oversight, without a complete understanding about how these changes will impact our most vulnerable seniors, and without the public policy transparency clearly called for considering the sweeping nature of the proposed changes. “The proposed Medicaid regulations which this legislation delays, are hard-hearted, shortsighted, and contrary to the needs and interests of our nation’s seniors and persons with disabilities,” he declared.

Four of the seven proposed regulations would negatively affect seniors, according to Dr. Shapiro:

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