House Bad Debt Provision: Yet More Medicare Reductions for Skilled Nursing Facilities (SNFs)

To Help Stem Growing SNF Job Losses and Sector Instability, AQNHC Urges Lawmakers to Preserve Bad Debt Payments for Duals, Help Facilitate Phase-In of CMS Regulation Reducing Medicare Funding by 11.1 Percent

WASHINGTON, Dec. 12, 2011 /PRNewswire-USNewswire/ -- Commenting on legislation introduced Friday in the U.S. House of Representatives that reduces Medicare bad debt payments to help pay for the Sustained Growth Rate (SGR) fix, the Alliance for Quality Nursing Home Care (Alliance) today expressed dismay that on a policy basis, the provision unfairly impacts SNFs, and further contributes to sector instability.

As proposed, the provision fails to recognize that as much as 85 percent of the Medicare bad debt SNFs report is due to state Medicaid programs not paying co-pays and deductibles for patients dually eligible for Medicare and Medicaid – something federal Medicaid law allows states to do. The Alliance appealed to lawmakers of both parties in both chambers to exclude bad debt generated by this dually eligible population from any changes to Medicare payment policy.

"Lawmakers argue that providers should do a better job of collecting bad debt from responsible payers," Alliance President Alan. G. Rosenbloom said. "However, providers cannot collect bad debt from state Medicaid programs because federal law allows states to avoid such payments if they choose."  Currently, Medicare recognizes that bad debt for dual eligibles is uncollectable as a matter of federal law and therefore allows 100 percent of that bad debt to be reimbursed. Rosenbloom noted that "the proposal would reduce this to 55 percent over three years, resulting in a $2-3 billion cut in Medicare payments over the 10-year budget window."

This proposal comes at a time when the SNF sector is reeling economically due to substantial Medicare payment reductions adopted through regulations and other legislative changes since 2009.  Recently, SNFs saw Medicare payments cut 11.1 percent on October 1, 2011 -- a change that Avalere Health has estimated could result in 20-25,000 lost jobs and another 20-25,000 jobs that simply won't be created over the next year.  These Medicare reductions come on top of a series of state Medicaid payment cuts in 2010-11 that likely will continue in 2012 due to continuing fiscal challenges facing the states. Additionally, SNFs face an additional 2 percent cut on January 1, 2013, as a result of sequestration.  

The Alliance leader noted "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 truly is uncollectable debt." Rosenbloom continued:  "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. SNFs are already slated to absorb a staggering $127 billion in Medicare funding cuts and reductions in the FY 2012-21 budget window due to legislative and regulatory changes over the past five years."

To help stem growing sector instability and the loss of SNF jobs, Rosenbloom also urged House and Senate lawmakers to temper a regulation imposing an 11.1 percent Medicare funding reduction that went into effect on October 1, 2011, by transitioning the implementation over three years. These recent changes in Medicare payments for SNFs took too much out of the funding system too fast, and did so at a time of significant underfunding by state Medicaid programs payments," Rosenbloom reiterated. "Seventy percent of all patients in nursing facilities nationwide rely on Medicare and Medicaid funding for care. A gradual phase-in of the federal regulation – which has been done in the past for other provider sectors – can help alleviate this documented threat to local jobs, facility stability, and the care of beneficiaries nationwide."

SOURCE Alliance for Quality Nursing Home Care