A key body that advises Congress on Medicare policy is calling for a 3% reduction in payments to skilled nursing facilities in fiscal year 2024.
While not unexpected, the formal recommendation belies concerns from several members of the Medicare Payment Advisory Commission regarding overall payments to skilled nursing facilities. MedPAC can only advise lawmakers on Medicare policy, despite a broad understanding among members that healthy margins among the Medicare population help offset the razor thin margins providers clear when treating their majority-Medicaid patient load.
The commission cited nursing homes’ financial performance, beneficiaries access to care and cost increases between 2020 and 2021. It did not account for more recent, explosive inflation.
“While the effects of the pandemic on beneficiaries and nursing home staff have been devastating, the combination of federal policies and the implementation of the new case-mix system resulted in improved financial performance for SNFs,” the report to Congress said. “Medicare’s payments need to be reduced to more closely align aggregate payments with aggregate costs.”
While MedPAC advises Congress on all things Medicare, its recommendations do not trigger any required action.
Between 2020 and 2021, Medicare’s fee-for-service spending on SNF services increased 0.5% to $28.5 billion, despite fewer covered SNF days. Payments per day increased over 3%, while costs per day grew 4%, the commission said.
The report noted that Medicare margin for freestanding SNFs was 17.2% in 2021, but that those margins have varied greatly across facilities.
“This profit is a strong positive indicator of beneficiary access to SNF care, though factors other than the level of payment (such as bed availability or staffing shortages) could challenge access,” the MedPAC report said.
And in what could be viewed as an acknowledgment of inflation and loss of revenue related to partial closures triggered by staff shortages, the commission predicted the aggregate Medicare margin would decline to 10% for 2023.
Revenues to tumble?
The report also acknowledged that overall, especially post-public health emergency, providers could see revenue decline. The all-payer margin increased during the coronavirus pandemic because of add-on funding and changes in Medicare and Medicaid payments, the report noted. But take those pandemic-related funds away, and the all-payer margin fell to –1.5%.
At a meeting in December, commission members had expressed concern about the nursing home system’s dependency on higher Medicare margins as a way of offsetting much lower rates paid for patients receiving Medicaid coverage, which account for more than 60% of stays.
“This way of paying and supporting nursing home care in this country is completely broken,” said David Grabowski, PhD, a Harvard Medical School professor. “From a Medicare perspective it’s healthy, but from an industry perspective this is a flawed model, overpaying with one public payer and underpaying with the other and hoping for the best. In certain facilities it might work but many are really struggling. They do very little Medicare and a lot of Medicaid.”
Grabowski has warned the payment conflict could become more problematic now that most COVID-related funding has dried up and the federal government is winding down the public health emergency.
In the same report, issued late Wednesday, the commission singled out Medicare Advantage plans for taking in excess payments to the tune of an expected $27 billion. That’s about 6% more than what the government would pay for patients to receive care through traditional Medicare plans.
