New 50 State Avalere Analysis: U.S. Nursing Home Sector Projected to Face $65 Billion in Cumulative Medicare Funding Reductions Over Next 10 Years; Nearly $4 Billion 2013-2014

WASHINGTON, Aug. 1, 2012 In differentiating between budget cuts and regulatory changes that result in less government funding, the Alliance for Quality Nursing Home Care (AQNHC) will utilize the new data over the August congressional recess to help inform U.S. Senate and House candidates how the successive battery of funding reductions undermine facility operations, disrupt staffing, and threaten seniors' care amid the growing influx of older, higher acuity patients. The Avalere study, the first retrospective national and state-by-state look at the dramatically negative funding environment faced by the U.S. SNF sector, estimates the 10 year impact of the budgetary and regulatory changes, and the 50 state 2013-14 budgetary impact of the following government actions since 2009:

• Affordable Care Act (ACA) productivity adjustment ($34 billion cut over 10 years; 1.3 billion cut in 2013);
• Case-Mix Adjustment in FY 2010 CMS Rule ($16 billion regulatory funding reduction over 10 years; $1.3 billion reduction in 2013);
• Forecast Error Adjustment in FY 2011 CMS Rule ($3 billion regulatory funding reduction over 10 years; $240 million reduction in 2013);
• Sequestration Provision of Budget Control Act ($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 ($3 billion cut over ten years; $355 million cut 2013-14)

"Sequestration and the reduction in reimbursement for bad debt, scheduled to take effect next year, are the latest in a series of legislative and regulatory cuts in Medicare payments to SNFs that will, we estimate, reduce those payments by a total of approximately $4 billion a year," said Avalere CEO Dan Mendelson.

For 2013-14 the Avalere estimates find the following states hardest-hit by the SNF Medicare funding cuts and regulatory changes: #1 Florida ($370 million), #2 California ($350 million), #3 Texas ($240 million), #4 Illinois ($240 million), #5 New York ($220 million), #6 Pennsylvania ($200 million), #7 Ohio ($200 million), #8 New Jersey ($190 million), #9 Michigan ($140 million), #10 Indiana ($140 million). Cumulative breakdown PDF chart attached, and also available at www.aqnhc.org (Note: 10 year projections methodologically valid only for national impact, not states).

Alan G. Rosenbloom, President of the Alliance, stated, "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. Over August, U.S. Senate and House candidates are touring facilities so they can see first-hand how the high-value, high quality care provided in SNFs can – if adequately funded -- help reign-in health costs, improve coordination among providers, and ultimately bring about more accountability for U.S. taxpayers." 

Rosenbloom said that with nearly 70 percent of facility expenses related to staffing, the impact of federal Medicare cuts combined with Medicaid reductions in a variety of states causes significant difficulties in regard to hiring and retaining the direct care staff that help make a significant difference in care quality and patient outcomes. "Facilities forced to reduce salaries and defer or alter benefits due to budget cuts place them at a significant competitive disadvantage in the local labor market, especially in rural America," he continued. "The growing threat to quality patient care due to staffing dislocation cannot be ignored," he said. 

Medicare and Medicaid, together, pay for the care of three out of every four SNF patients, and a previous Avalere study found that 40 states either cut or froze SNF Medicaid payment rates from FY 2009-11. "If government continues to pursue what amounts to a default policy of more cuts, the SNF sector will become unsustainable," Rosenbloom continued. "The unintended consequences of these cuts and regulatory actions will affect access, quality, and require that care increasingly be rendered in settings that actually increase the cost to government. This zero-sum status quo is wrong for seniors, providers, taxpayers and the future of our entire U.S. health care system."

Despite the recent announcement by CMS of a 1.8 percent payment update for U.S. SNFs, Medicare cuts associated with the 'Bad Debt' provision in the Middle Class Tax Relief and Job Creation Act of 2012 (commencing on October 1, 2012) and the $782 million sequester cut (slated for 1/1/13) will effectively eliminate the update.

For more information, please visit www.aqnhc.org.

Contact: Rebecca Reid 
410-212-3843

SOURCE Alliance for Quality Nursing Home Care