House Democrats Outline Potential Medicare Cuts, Target Skilled Nursing Facilities

Democrats on the House Ways and Means Committee have outlined a proposal for potential Medicare cuts in healthcare spending for the Congressional supercommittee’s consideration, totaling $500 billion over the next 10 years.

According to the proposal obtained by SHN, skilled nursing facilities, home health agencies, inpatient rehabilitation facilities and long-term acute hospitals would have to absorb $28 billion in cuts over two years resulting from a freeze on Medicare rates during that period.

The proposal includes adding a co-payment to the first 20 days of a skilled nursing facility stays, which would raise $21 billion.

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Additionally, the democratic committee proposed a “value-based purchasing” program that would cut reimbursements to skilled nursing facilities by collecting payments from them to form a pool of money to pay for higher-quality facilities’ increased rates, which would result in some facilities receiving more funds, but an overall reduction in payments.

The outline also suggests Medicare recoup overpayments made to skilled nursing facilities in fiscal year 2011, which would provide up to $4.5 billion according to an estimate based on Centers for Medicare and Medicaid Services’ (CMS) analysis. The overpayments occurred as a result of changes made to RUG-IV, which caused payments to increase by 12.6% compared to the previous fiscal year.

While CMS said it was cutting payments to skilled nursing facilities by 11.1% in fiscal year 2012, the agency does not have the authority to make a retrospective adjustment.

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“SNFs will argue that this money has already been spent to pay for costs incurred for FY11 and that this repayment will threaten their financial viability, given Medicaid cuts at the state level, and possibly cause them to cut jobs,” the proposal said.  “While the policy is justified in terms of recouping funds the SNFs were not supposed to receive, it will be viewed by the industry going farther than the 2012 final rule, which they oppose and from which they are already considering requesting legislative relief.”

Industry groups have already said that the recent cuts will have dire consequences on the industry, claiming additional cuts will only make it worse.

“This is what happens when you only look at numbers, and not the policies or the implications,” said Greg Crist, a spokesman for the American Health Care Association during an interview with CQ HealthBeat. “[Skilled nursing facilities] have already faced three rounds of cuts this year. There’s only so much that can be absorbed or passed on. Access to our facilities would be jeopardized the way these proposals are structured now.”

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Other components of the proposal include raising the Medicare eligibility age to 67 by 2027 in two month annual increments, representing a savings of $125 billion.