Skilled nursing facility trends contribute to improved Medicare outlook, Congressional report says

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The Medicare trust fund is on track to remain solvent until 2030, trustees of the program stated in a Congressional report released Monday. This improved outlook is due in part to revised expectations about the case mix in skilled nursing facilities.

The latest projection adds four years to the 2026 insolvency date that the trustees put forward in their May 2013 report. A “number of factors have changed since last year's report,” they wrote, including lower case mix increases for skilled nursing facilities and home health providers.

Case mix relates to billing affected by the clinical complexity of admissions. While it is generally agreed that skilled facilities are admitting more clinically complex residents than in the past, this does not mean that Medicare SNF expenditures have followed a straightforward upward trajectory. For example, implementation of a new Resource Utilization Group system caused a spike in case mix-related Medicare expenditures in 2011, the trustees' report states. This led to a 12.6% reimbursement reduction the following year, to bring reimbursements back in line with previous billing systems. The trustees now are assuming a 1.5% annual case mix increase, based on Medicare Review Panel recommendations.

The Medicare trust fund currently is projected to last 13 years longer than it was just prior to the passage of the Affordable Care Act in 2010. Reduced hospital readmissions and the formation of accountable care organizations are among the ACA-related changes that have slowed Medicare spending, Centers for Medicare & Medicaid Services Administrator Marilyn Tavenner argued in a statement Monday.

The ACA can be credited with some cost reductions, but it does not guarantee Medicare's solvency in the long-term, the report itself emphasized. “Absent other changes,” two-thirds of skilled nursing facilities would be looking at negative margins as of 2040, according to simulations cited in the report.

Lower-than-expected 2013 spending for most provider types, particularly inpatient hospitals, was another important factor behind the latest solvency projections, the 277-page report states.

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