September 29, 2011

President’s Deficit Reduction Plan Proposes $42 Billion Cut to SNFs, Post-Acute Care Providers

President Obama’s recently released deficit reduction plan proposes to cut more than $320 billion dollars in Medicare and Medicaid spending over the next decade.  Within the planned cuts are proposals designed to curb $42 billion dollars of Medicare reimbursement to SNFs and other post-acute facilities.  According to the President, expenditures for services these facilities provide have “increased dramatically” and risen above “the costs of providing high quality and efficient care.”  In the end, he argues, reimbursement for these services has placed “a drain on Medicare.”

The President’s plan includes four specific means for cutting Medicare reimbursement to post-acute care providers.  Most significant of these proposals, at least in terms of savings sought ($32 billion over ten years), is that payment updates be adjusted for certain post-acute providers.  “MedPAC analysis indicates that Medicare payment significantly exceeds the cost of patient care in post-acute care settings, resulting in high Medicare margins.”  Thus, the President’s proposal “would gradually realign payments with costs through adjustments to payment rate updates in 2014 through 2021” for post-acute providers.  The other proposals include equalizing payments for certain conditions treated at both SNFs and IRFs, encouraging “appropriate” use of inpatient rehabilitation hospitals, and adjusting SNF payments to reduce hospital readmissions.

If implemented, the President’s wide-sweeping cuts could place numerous SNFs, their patients and their workforces at risk.  The plan, however, would reach beyond the SNF industry and effect virtually all health care provides.  For example, the American Hospital Association declared that the proposed Medicare cuts “would mean decreased access to care for our nation’s seniors and could overload emergency rooms, shut down trauma units and reduce patient access to the latest treatments.”  The potential ramifications are troubling.

For the full text of President Obama’s deficit reduction plan, click here.

This post was contributed by Aaron Mensh.