Update: Alliance, AHCA Battle House Proposal to Reduce Medicare “Bad Debt” Payments

On Tuesday night, Dec. 13, the U.S. House of Representatives passed legislation that included reducing Medicare bad debt payments, a proposal decried by the American Health Care Association (AHCA) and the Alliance for Quality Nursing Home Care as it will “unfairly impact” skilled nursing facilities, and further contribute to sector instability.

The provision, Section 2224 of HR 3630, fails to take into account that as much as 85% of the Medicare bad debt SNFs report results from state Medicaid programs not paying co-pays and deductibles for patients who are dually eligible for both Medicaid and Medicare, something federal Medicaid laws allow states to do, says the Alliance.

The bad debt generated by dual eligibles should be excluded from any changes to Medicare payment policies, the Alliance argues.


“Lawmakers argue that providers should do a better job of collecting bad debt from responsibly payers,” said Alan Rosenbloom, president of the Alliance, in a statement. “However, providers cannot collect bad debt from state Medicaid programs because federal law allows states to avoid such payments if they choose.”

Under current provisions, Medicare recognizes that bad debt for dual eligibles is uncollectible, and allows 100% of that “bad debt” to be reimbursed for certain providers, 70% for hospitals and skilled nursing centers. The House proposal would reduce that to 55% over three years, and this would result in a $2-3 billion cut in Medicare payments over the 10-year budget window, according to Rosenbloom.

AHCA’s estimates are even more severe, and it says the provision will “disproportionately affect” skilled nursing centers in 23 states, which will be impacted by average cuts of nearly 3% for an industry-wide loss of more than $4.5 billion.


Louisiana would feel the brunt of the reduction, with a 6.4% cut, followed by Mississippi, at 5.5%, and Georgia, at 3.7%, according to AHCA data.

The proposal, on top of previous cuts to Medicare reimbursements, comes at a time when “the SNF sector is reeling economically,” says the Alliance, and already faces further 2% cuts in January 2013 as a result of sequestration from deficit reduction efforts.

“The bottom line is that SNFs cannot refer a state Medicaid program to a collection agency, so there is no policy rationale for the proposed change as it applies to those dually eligible. This is truly uncollectible debt,” Rosenbloom said. “Yet another funding reduction will add to the many negative variables already contributing to the growing loss of staff which has a significant impact on care quality.”

The proposal has been passed on to the Senate, and some say the entire bill will be “dead on arrival.” Despite this, there’s still a possibility that some ideas will be salvaged, including the bad debt provision, says AHCA spokesperson Greg Crist, and the association is taking up its case with the Senate.

View HR 3630 here.

Written by Alyssa Gerace

Companies featured in this article: