Skilled nursing facilities (SNF) receive an annual Medicare "market basket" adjustment that reflects changes in the costs of providing quality care to beneficiaries. Approximately 70 percent of SNF costs relate to staffing. To ensure "program efficiency, quality and sustainability," the Centers for Medicare and Medicaid Services (CMS) determined SNF cost changes justify a 3.3 percent increase in fiscal 2008. This market basket increase went into effect on October 1, 2007. However, the House of Representatives passed legislation earlier this year that would eliminate this adjustment in 2008 - cutting $2.7 billion in Medicare funding for seniors in nursing homes over five years, according to the Congressional Budget Office (CBO).

As Congress returns to Washington on December 3rd to finally resolve this key health care policy matter, Congress should ensure that the 3.3 percent funding adjustment is preserved.

The Facts

Based on Clinical Experience, No Good Policy Justification for Medicare Cuts -- Based upon our collective clinical experience, we have a deep, growing concern that the implementation of Medicare cuts will endanger the quality of care and quality of life of America's most vulnerable Medicare beneficiaries. Consequently, there is no legitimate way to justify implementing cuts that would severely undermine the essential efforts of direct care staff responsible for the vast majority of the nation's three million Medicare beneficiaries.

Inadequate Medicaid Funding Forces Medicare Subsidy -- Together, Medicare and Medicaid pay for the care of three out of every four nursing home patients. Studies show that Medicaid, the largest single payer, fails to cover the cost of care for every Medicaid patient receiving care in a nursing home. A just-released study from BDO Seidman/Eljay shows that nursing homes receive an average of $13.15 less than the cost of care for every day of care provided to a Medicaid patient -- resulting in a facility operating loss of $4.4 billion nationwide. Since 1999, the funding gap has grown by 45 percent. As a result, Medicare has provided a funding safety net increasingly essential to preserving access to quality care.

MedPAC Fails to Consider the Impact of Inadequate Medicaid Funding -- MedPAC, the advisory group on Medicare payment issues, does not assess the impact of overall funding levels on nursing home economic sustainability. In making its annual recommendation to Congress on the need for a nursing home payment adjustment, the Commission looks only at Medicare performance -- in isolation from Medicaid. This narrow approach, while appropriate for other segments of health care, is inappropriate for nursing homes, since the overwhelming majority of patients are funded by just two government programs.

Quality Improvements Are Linked to Stable Medicare Funding -- In the years following widespread SNF bankruptcies in 1999 and 2000, Medicare SNF funding levels stabilized and with that stability came improvements in quality. Nursing homes engaged in a series of joint federal-provider initiatives and voluntary profession-wide quality initiatives have driven meaningful improvements in several key areas - such as reductions in the number of severe quality of care deficiencies and improved performance on many quality metrics. Additionally, GAO, HHS and other independent sources have found measurable improvements in several important clinical areas, including treating pain, pressure ulcers, dehydration, and managing weight loss.

Key Constituencies Harmed by Proposed Cuts

Women and Minorities -- Approximately three million elderly and disabled Medicare beneficiaries receive SNF care each year, nearly three quarters of whom are women. Two million workers nationwide provide direct care to this population. Direct care staff overwhelmingly -- are women (86 percent), and disproportionately minorities (30 percent). The nation's oldest, sickest patients and direct caregivers are constituencies directly affected by Medicare funding reductions.

Rural Seniors - In rural areas, nursing homes are often a far distance from one another, and when Medicare funding is slashed, rural facilities' ability to hire, train and retain key direct care staff is severely compromised. Consequently, rural seniors' ability to maintain access to quality nursing home care is negatively impacted. In addition, facilities are forced to choose between the urgent staffing needs that impact quality in the near-term versus refurbishing facilities, upgrading technology, and purchasing new equipment - which impacts future care quality. One of the key lessons that emerged from the wave of nursing home bankruptcies in the '99-'01 period is that some of the oldest, least mobile nursing home residents were forced to relocate to an available facility hundreds of miles from family and friends - and in some cases were even forced to relocate to other states.

Rural Jobs/Rural Economy - In rural communities, nursing homes are often the largest local employer. Our rural communities depend upon the strength and vitality of local long term care facilities for jobs and economic development, and the negative ramifications resulting from federal Medicare cuts quickly ripple through the local economic base from the standpoint of lost jobs, less hiring and more unemployment.

The Solution - To avoid a reversal of the progress made in recent years to SNF sector stability, and to continue the measurable progress on patient care quality SNFs are making, Congress should:

• Provide a full 3.3 percent market basket update for 2007.
• Implement a multi-year pilot project that ties a portion of the Medicare market basket to quality improvement.
• Require MedPAC to evaluate the adequacy of Medicare and Medicaid payments in making policy recommendations to Congress in order to reflect the true long term care funding marketplace.

The Coalition to Protect Senior Care consists of the American Association for Long Term Care Nursing (AALTCN); the American College of Health Care Administrators (ACHCA); the National Rural Health Association (NRHA); the American College of Health Care Administrators (ACHCA); the American Physical Therapy Association (APTA); the American Society of Health Care Administration Executives (ASHCAE); ASHCAE state affiliate members representing Arizona, Arkansas, Colorado, Idaho, Iowa, Kansas, Maine, New Hampshire, New Mexico, New York, North Dakota, Oregon, Texas and Utah; the American Health Care Association (AHCA); the American Health Quality Association (AHQA); the National Association for the Support of Long Term Care (NASL); the National Association of Health Care Assistants (NAHCA); the Alliance for Quality Nursing Home Care; and the Senior Clinician Group.