Nursing Home Industry To Receive $1.5 Billion Overpayment In 2009, USA

Main Category: Medicare / Medicaid / SCHIP
Also Included In: Seniors / Aging
Article Date: 29 Aug 2008 - 2:00 PDT

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Yielding to intense lobbying by the nursing home industry, the Centers for Medicare & Medicaid Services (CMS) is giving skilled nursing facilities (SNFs), nursing homes that provide nursing and rehabilitative services to Medicare beneficiaries recovering from a hospital stay, a two-part rate increase worth more than $1.5 billion next year.

"The windfall to skilled nursing facilities comes with no strings attached; there is no reason to believe this windfall will help improve the quality of care or quality of life for nursing home residents," said Toby S. Edelman, Senior Policy Attorney with the Center for Medicare Advocacy.

"The Center for Medicare Advocacy calls on CMS to recalibrate skilled nursing facilities rates, as it proposed in May, and to take steps to ensure that skilled nursing facilities use their Medicare dollars as Congress and CMS intended - for the care of skilled nursing facilities residents," said Ms. Edelman. "CMS bases skilled nursing facilities rates, in part, on costs for nurse staffing. The highest daily rate for an urban skilled nursing facility, $622.93, includes $288.31 for nursing. CMS must ensure that skilled nursing facilities actually spend their staffing dollars on staff."

The first component of the windfall to the nursing home industry is an inaccurate calibration of the Medicare rates used to pay skilled nursing facilities. "CMS admits it has over-paid skilled nursing facilities since January 2006 and that the overpayment for FY2009 will be $780 million, but it has backed down on its proposal, made just last May, to recalibrate Medicare rates prospectively," said Ms. Edelman.

The second part of the windfall is the "market basket" increase, which is an annual adjustment based on changes in the cost of living and inflation. The Medicare Payment Advisory Commission (MedPAC), an independent agency established by federal law to advise Congress on Medicare policy, reviewed the profit margins and operations of skilled nursing facilities and recommended to Congress in March 2008 that skilled nursing facilities receive no update at all for FY2009. Yet, in May, CMS proposed a market basket increase of 3.1%, increasing skilled nursing facility rates by an estimated $710 million.

In the final rules published in August, CMS gave skilled nursing facilities both the $780 million windfall, by backing down on its decision to recalibrate the rates, and an even larger market basket increase. The total overpayment to the nursing home industry is $1.559 billion.

The Center for Medicare Advocacy, Inc. is a national non-profit, non-partisan organization that provides education, advocacy, and legal assistance to help elders and people with disabilities obtain Medicare and necessary health care. The Center was established in 1986. We focus on the needs of Medicare beneficiaries, people with chronic conditions, and those in need of long-term care. The organization is involved in writing, education, and advocacy activities of importance to Medicare beneficiaries nationwide. The Center's central office is in Connecticut, with offices in Washington, DC and throughout the country.

Center for Medicare Advocacy, Inc.