Obama, HUD 2014 Budgets a Mixed Bag for Senior Housing & Care

Proposed budgets released Wednesday by President Obama and the Department of Housing and Urban Development (HUD) include pros and cons for senior housing and care: cuts to Medicare providers and Social Security beneficiaries, but millions in funding for supportive housing for the elderly.

Obama’s fiscal year 2014 budget seeks to trim $1.8 trillion from the national deficit in the next 10 years, cutting billions of dollars from the federal Medicare program in the process and thereby impacting senior care providers.

Those senior care providers may see their Medicare reimbursements decline, but will likely maintain their ability to get federally-insured financing with no plans to raise premiums on new Federal Housing Administration-insured loans. Additionally, HUD’s 2014 budget includes millions in proposed funding for low-income senior housing.

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Medicare, Medicaid, & Social Security

On the one hand, the president’s budget, if approved, would replace the sequester—which reduced the debt deficit by $1.2 trillion—and thus the 2% cuts to Medicare providers. On the other hand, the president’s proposed $400 billion in “healthcare entitlement savings” over a 10-year span translates to substantial cuts to projected Medicare spending.

That includes about $5.6 billion in Medicare payment cuts in fiscal year 2014 alone, although they’ll mostly be from a drug-rebate program for Medicare and Medicaid dual eligibles. Payment cuts for drug companies and other healthcare providers will total $306 billion, including $25 billion in reduced bad debt payments and $80 billion in reduced reimbursements for post-acute care providers, encompassing skilled nursing and short-term rehabilitation.

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The newly-proposed Medicare cuts are adding to billions more that have already been implemented for long-term and post-acute care providers, who are also dealing with “severe” Medicaid underfunding at a state level, said Mark Parkinson, president and CEO of nursing home trade group the American Health Care Association, in a statement.

“Unfortunately, the Medicare reductions proposed in the President’s 2014 budget only put added strain on our sector and risk jeopardizing access to care for millions,” said Parkinson. “These proposed reductions will not solve the underlying, structural problems with our nation’s budget.”

The Medicare program’s Hospital Insurance trust fund is expected to remain solvent through 2024, according to Congressional Budget Office projections, after which it will not be able to fully cover projected costs.

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President Obama’s budget also includes a proposal for chained CPI (consumer price index) for Social Security, which would primarily affect cost of living adjustments for beneficiaries but would also, according to Politico, “take a slice out of some Medicare provider payments.” Changing the way inflation is measured is expected to produce $230 billion in savings in the next decade.

Medicaid has largely been spared from cuts in a bid to reassure states considering implementing the Affordable Care Act’s Medicaid expansion but are worried they won’t get adequate federal funding.

In his budget presentation on Wednesday morning, President Obama admitted he doesn’t believe all the ideas in his proposal are “optimal,” but that he’s willing to accept them as a compromise to Republicans, “if and only if [the compromises] contain protections for the most vulnerable Americans.”

Healthcare Facility Programs

While the Federal Housing Administration (FHA) could require a $943 million taxpayer bailout this year, losses have mostly been contained in its Mutual Mortgage Insurance fund.

The agency’s multifamily programs in the General and Special Risk Insurance Fund are faring better, as are healthcare lending programs.

“Both healthcare programs maintain a negative credit subsidy rate and operate at no cost to the American taxpayer,” says HUD’s budget proposal of the Office of Healthcare Program’s Section 232 residential care facilities and Section 242 hospitals programs.

Healthcare and nursing home guaranteed loan levels supportable by subsidy budget authority are expected to total $224 million in 2014, about $21 million beneath 2013’s continuing resolution level, according to the president’s budget proposal.

The guaranteed loan level for healthcare refinances in 2014 is nearly $4.8 billion, about 13% beneath 2013’s $5.5 billion.

Premiums for FHA-insured loans aren’t expected to get higher.

“We do not believe it would be responsible to raise premiums on new FHA loans,” said HUD Secretary Shaun Donovan in a press briefing on HUD’s 2014 budget. “…We believe new loans FHA is making are safe and well-priced.”

Supportive Housing for the Elderly

HUD is requesting $400 million in its 2014 budget for the Section 202 Housing for the Elderly program. The bulk of the money—$310 million—would be for project rental assistance contract (PRAC) renewals to “protect elderly tenants and preserve affordability” for more than 77,500 existing units.

“We’re going to be able to get over 4,000 new apartments next year targeted to [the elderly and disabled],” said Donovan during the press call.

Another $70 million will go toward service coordinators, who are responsible for linking residents with supportive services to keep low-income seniors living independently and aging in place. The remaining $20 million is for elderly expansion activities that provide one-year operating assistance contracts to support approximately 3,400 new households.

“We applaud the president for including funding for new development of affordable, supportive senior housing,” said LeadingAge, a trade group for nonprofit senior living providers, in a statement. “We will work with the president and Congress on the appropriate scope and funding for this demonstration to address the growing need for senior housing and to show how this initiative can reduce downstream costs in Medicare and Medicaid.”

Written by Alyssa Gerace