On Aug. 7, 2023, the Centers for Medicare & Medicaid Services published its annual Medicare payment rule for nursing homes.  While the news that Medicare Part A payments for nursing home care will increase Oct. 1, 2023 is, of course, positive, it must be put into perspective.

A net gain of $1.4 billion for a sector comprised of over 15,000 nursing homes somewhat pales in comparison to a looming CMS staffing mandate estimated to cost nursing homes $11.3 billion a year.

The coming federal fiscal year will also be the second, and final, year of a “parity adjustment” intended to claw-back inadvertent overpayments under the Patient Driven Payment Model (PDPM) methodology.  As was explained in last year’s payment rule, CMS, mercifully, spread out the parity adjustment, “taking a more cautious approach in order to mitigate the potential negative impacts on providers, such as the potential for facility closures or disproportionate impacts on rural and small facilities.”

That this adjustment has been made is consistent with the fact that the transition to PDPM was “not intended to result in an increase or decrease in the aggregate amount of Medicare Part A payment to SNFs.” 

While I do not suggest this budget neutrality intent be ignored, the zeal with which CMS has pursued nursing home overpayments is in marked contrast to its laissez-faire attitude elsewhere.

Specifically, a June analysis by University of Southern California researchers estimated overpayments to Medicare Advantage insurers may be “$75 billion or more” in 2023 alone, which is almost three times higher than the apocalyptic figure that had been estimated ($27 billion) by the Medicare Payment Advisory Commission. Taxpayer subsidization of Medicare Advantage has started to look less like a rational payment program and more like the 1978 Lufthansa Heist.  Last February, the federal government even admitted in a rule that it was forfeiting claim to an estimated “$2 billion in improper payments” to insurers from 2011-17.

By itself, that generous gift easily exceeds the net Medicare gain nursing homes will see in the coming federal fiscal year.  The juxtaposition also makes jarring the CMS rejection in this year’s nursing home payment rule of the suggestion from “[a] few commenters . . . that the PDPM parity adjustment be delayed, reduced, cancelled or be phased in over an additional 2 years” to ease the burden upon providers besieged by costs.  

Not content to chisel only taxpayers, Medicare Advantage gluttony is also occurring at the expense of beneficiaries in nursing homes and their providers alike.  Marc Zimmet, president of Zimmet Healthcare Services Group, has created a dynamic “debt clock” calculating the losses from Medicare Advantage across the skilled nursing sector and broken out to the average facility.  This year’s aggregate loss will easily exceed the cost of the $11.3 billion staffing mandate scenario.    

Indeed, the day may come when the annual, much-anticipated Medicare payment rule – the product of so much concern and input by providers and their advocates – is largely irrelevant.  After all, it speaks to fee-for-service payments at a time when most Medicare beneficiaries will soon be in managed care. 

Even New York City tried to dump a quarter-million municipal retirees and their dependents into Medicare Advantage to save the city $600 million a year – an effort that has, to date, been blocked by a judge’s ruling.  Zimmet had estimated this single change alone could cost nursing homes $100 million annually.

As I write this, the prospective CMS staffing mandate is still abstract.  However, the pain inflicted upon the skilled nursing sector by Medicare Advantage is quantifiable, unchecked, and will only grow.

Brendan Williams is the president & CEO of the New Hampshire Health Care Association.

The opinions expressed in McKnight’s Long-Term Care News guest submissions are the author’s and are not necessarily those of McKnight’s Long-Term Care News or its editors.

Have a column idea? See our submission guidelines here.