HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services BUDGET FOR FISCAL YEAR 2013 Program Highlights: Medicaid Nationally, unreimbursed nursing home Medicaid costs were $6.3 billion in 2011.1 In 2012, the estimated total of unreimbursed costs is expected to increase due to state rate reductions. Research indicates that a total of 30 states restricted rates for nursing homes in FY 2011 (24 rate freezes and 6 cuts) while in state SFY 2012 31 states planned restrictions for FY 2012 (17 states plan to freeze rates and 14 states planned rate cuts). 2 An analysis found that nursing homes nationwide have razor-thin operating margins of 0.75 percent of revenues in 2009. The Moran study concluded that funding cuts can result in negative operating margins for skilled nursing care facilities. (Moran Company, 2011, “Assessing the Financial Implications of Alternative Reimbursement Policies for Nursing Facilities”). As the population ages and the Administration continues its focus on reducing unnecessary hospital readmissions as well as ensuring better quality, the FY 2013 budget includes $4.88 billion more Medicaid funding for states.3 Funding partially will be garnered by making no changes in the Medicaid provider assessment authority for the next five fiscal years to ensure time for state budgetary recovery. While all states and Medicaid participants will benefit, a key aim is to ensure that critical safety net providers for older adults, in particular nursing homes, are adequately funded. 1 A Report on Shortfalls in Medicaid Funding for Nursing Home Care (December 2011). Prepared for the American Health Care Association by Eljay, LLC. 2 Smith, V. et. Al. (October 2011). Moving Ahead Amid Fiscal Challenges: A Look at Medicaid Spending, Coverage and Policy Trends – Results from a 50-State Medicaid Budget Survey for State Fiscal. Kaiser Commission on Medicaid and the Uninsured. 3 AHCA trended the FY 2011 shortfall forward to 2013 using the fourth quarter 2013 skilled nursing market basket projections from Global Insight. That figure, $8.21 billion, then was multiplied by the average FMAP for 2013 to remove state matching dollars. The product is $4.88 billion in additional federal funds needed to address unreimbursed nursing home allowable costs. This critical funding is needed to ensure access to quality nursing home care. Core components of ensuring quality and adequate funding include investment in health information technology, direct care workforce training, and capacity to develop person centered services. While awaiting payment for services from a state, nursing home providers continue to care for their Medicaid residents and incur all the costs necessary to provide such care. AHCA/NCAL asks that prompt pay requirements for states be made permanent. Other solutions to consider include: capital injection to states for Medicaid support; develop a counter- cyclical rate structure; resolve Medicaid eligibility issues, especially with a timeline around determination of eligibility or allow for presumptive eligibility; increase funding for labor component of Medicaid. Nursing home providers also will explore new models of care taking advantage of Affordable Care Act opportunities via the Centers for Medicare and Medicaid Services Center for Medicare and Medicaid Innovation and the Medicare-Medicaid Coordination Office. Medicare Maintain the bad debt payment policy currently in place. The Federal Government should continue to reimburse fully for non-payment of mandated Medicaid co-pays by seniors dually eligible for both Medicare and Medicaid. Revise policy to reflect the cumulative impact of forecasting errors moving forward. Since labor accounts for 70 percent of SNF operating costs, it is challenging to operate without this update. Change in Resource Utilization Group classifications to account for adjustment for variability in non- therapy ancillary services (approx. $750 million). Allow observation stays in excess of 24 hours to count toward the Medicare’s three-day acute care stay requirement. This will allow earlier admission to lower cost settings such as a skilled nursing care facility. Sequestration will affect Medicare payments beginning in 2013. This will result in a cut of 2 percent to payments, or an estimated decrease of $670 million. Assisted Living 20% of assisted living residents currently utilize Medicaid to pay for long term care services. Fix proposed Medicaid rule that would eliminate assisted living as a home and community based choice. Unless fixed, the CMS proposed rule would force many residents into higher-cost institutional settings such as nursing homes, thereby adding significant costs for the federal and state governments. The Federal Government should consider providing vouchers directly to Medicaid beneficiaries to supplement cost of room and board in assisted living. This investment would save on overall Medicaid costs. Expand the Section 202 HUD program that provides interest free capital advances to finance the construction, rehabilitation or acquisition of structures that will serve as supportive housing for very low income elderly individuals, including the frail elderly. The Section 202 program reduces costs by decreasing hospitalizations and premature admissions.