Lower SNF spending improves Medicare solvency outlook, report says

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Jacob J. Lew, Secretary of the Treasury, and Managing Trustee of the Trust Funds
Jacob J. Lew, Secretary of the Treasury, and Managing Trustee of the Trust Funds

Government officials released good news about the long-term solvency of the Medicare program Friday. The projections were based in large measure on lower projected reimbursements to skilled nursing facilities.

The Medicare Part A Trust Fund, also known as the hospital insurance (HI) fund, will be depleted in 2026, according to the annual report of the Medicare trustees. Last year's report predicted solvency only through 2024. 

“The more favorable outlook is primarily due to … lower projected spending for most HI service categories — especially for skilled nursing facilities — to reflect lower-than-expected spending in 2012 and other recent data,” the trustees wrote.

The report did not speculate as to why 2012 spending was lower than expected, but American Health Care Association spokesman Greg Crist said provider initiatives may be at work. Hard numbers are still forthcoming, but AHCA members have reported seeing fewer hospital discharges to SNFs, he told McKnight's. At the same time, members have been focused on reducing hospital readmissions from skilled facilities. 

Crist also floated the idea that increased use of observation status may be at play. Because observation stay days do not count toward the three-day hospital inpatient stay needed to qualify for Medicare-covered skilled care, more people under observation status could translate to fewer Medicare dollars going toward SNF stays.

There are also actuarial reasons for the revised outlook. The trustees said an “improvement to the methodology” used to determine increases in fee-for-service utilization resulted in “smaller projected increases” for SNFs.

The trustees explain their actuarial methodology in Part IV of the report. It is based on calculations of the Medicare Technical Review panel as well as legislative mandates, including the 2% reimbursement reductions called for by sequestration.

Data indicating Medicare Advantage costs are likely to be lower than previously anticipated also significantly impacted the trustees' forecast.

Click here to access the complete report.