Ten-Year Forecast for Nursing Home Sector: $65 Billion in Medicare Cuts

The nursing home sector is facing a cumulative $65 billion in cuts to Medicare payments in the next ten years, according to a data analysis by Avalere Health LLC that tallies the cumulative Medicare funding reductions resulting from several different budgetary actions and regulatory changes made by Congress and the Centers for Medicare & Medicaid Services (CMS) since 2009.

In fiscal year 2013-2014 alone, payment cuts will total nearly $4 billion, notes nursing home trade group the Alliance for Quality Nursing Home Care.

The Avalere study takes a national and state-by-state look into the skilled nursing sector’s upcoming funding environment and estimates the impact of the budgetary and regulatory changes. Key takeaways include: 

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  • Affordable Care Act (ACA) productivity adjustment will result in a $34 billion cut over 10 years ($1.3 billion cut in 2013)
  • Case-Mix Adjustment in FY 2010 CMS Rule will result in a $16 billion regulatory funding reduction over 10 years ($1.3 billion reduction in 2013)
  • Forecast Error Adjustment in FY 2011 CMS Rule will result in a $3 billion regulatory funding reduction over 10 years ($240 million reduction in 2013)
  • Sequestration Provision of Budget Control Act will result in a $9 billion cut over 10 years ($782 million cut in 2013)
  • Bad Debt Provision in March 2012 Middle Class Tax Relief and Job Creation Act will result in a $3 billion cut over ten years ($355 million cut 2013-14)

Florida, California, Texas, Illinois, and New York will be among the states hardest hit by Medicare funding cuts to skilled nursing facilities and regulatory changes in 2013-14, Avalere estimates, for a combined total reduction of $1.42 billion.

“The staggering level of SNF Medicare cuts resulting from budgetary actions and regulatory changes since 2009 has brought one of America’s most important health sectors to the brink of operational viability, and is at a tipping point,” said Alan Rosenbloom, president of the Alliance. 

Nearly 70% of nursing homes’ expenses are related to staffing, Rosenbloom notes, and the impact of federal Medicare cuts combined with Medicaid reductions to reimbursements in many states can cause significant difficulties in regards to hiring and retaining the direct care staff that impact care quality and patient outcomes. 

Despite CMS’ recent announcement of a 1.8% payment increase for skilled nursing facilities in fiscal year 2013, the Medicare cuts associated with the Middle Class Tax Relief and Job Creation Act of 2012’s ‘bad debt’ provision, effective Oct. 1, 2012, and the $782 million sequester cut, slated for Jan. 1, 2013, will effectively eliminate the update, says the Alliance. 

View Avalere’s list of how each state will be impacted by budgetary and regulatory changes in the next couple of years. 

Written by Alyssa Gerace

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