MedPAC Friday recommended a 3% cut to Medicare base payments made to skilled nursing facilities in 2024.
The recommendations came on the second day of the advisory group’s December meeting, with staff citing the overall financial health of the sector and the size of the Medicare margin between Medicare payments and operator’s costs.
MedPAC members, while largely backing the recommendations, also expressed concerns about the sector’s sustainability given factors outside of Medicare.
“I want to double down on a comment I make every year,” said David Grabowski, PhD, a Harvard Medical School professor. “This way of paying and supporting nursing home care in this country is completely broken. 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.
That’s not a MedPAC problem per se, but it’s an industry problem and the issue is going to be magnified at the end of the PHE. I do worry that even though we’re not up against it this year, in the coming cycles there’s going to be some real challenges in this sector.”
Other MedPAC members acknowledged the effects the proposed cut could have, especially if the public health emergency ends sometime in 2023.
The Centers for Medicare & Medicaid Services’ Skilled Nursing Facility Prospective Payment System proposed rule for fiscal year 2023 cut 4.6%, or $1.7 billion to offset overpayments during the transition to the Patient Driven Payment Model. The result was a takeaway of about $320 million in Medicare Part A payments to SNFs.
A recalibration of PDPM’s parity adjustment factor of 4.6% includes a two-year phase in period in a win for providers — decreasing SNF spending by 2.3% in fiscal 2023 and 2.3% in fiscal 2024.
But MedPAC chairman Michael Chernew, PhD, a professor at Harvard Medical School, reminded the group of its mission.
“Our mission is to pay for the amount necessary to provide efficient care to Medicare beneficiaries for the services that Medicare is providing,” he said.
“There’s this tension between the mission of what we’re actually doing, which turns out to not be fixing a broken payment system for SNFs. We have a much more narrow job across this recommendation. We are not signaling that the sector is healthy long-term. We are doing a much more proscribed exercise.”
Staff reported the aggregate Medicare margin for freestanding SNF was 17.2%. They also cited a higher all-payer margin in 2021 at 3.4%, up from 3.1%, investor interest in the sector and the relative stability of government funding.
Also, the Medicare median margin for “relatively efficient” SNFs was 22%. Compared to other SNFs, MedPAC staff said relatively efficient SNFs had better discharge to community rates, lower hospitalization rates and standardized costs, and higher Medicare payments per day.
Another member supported the recommendations with the same caveats.
“Given the lack of adequate Medicaid payments and the low likelihood that many state programs will address them, such a steep cut has the potential to further destabilize a sector that is still reeling from the PHE’s effects on volumes, costs and staffing issues,” said Scott Sarran, M.D, chief medical officer at MoreCare. “I’m more comfortable with a more modest reduction.”
MedPAC physician fee recommendations
On Thursday, MedPAC made recommendations that Congress update 2024 Medicare payments for physicians and other health professional services by 50% of the Medicare Economic Index increase, and enact a non-budget-neutral add-on payment under the physician fee schedule to services provided to low-income Medicare beneficiaries. The idea is to incentivize primary care physicians to continue working, with data showing a steady decline of providers since 2016.
The targeted rate hike could affect providers who serve low-income skilled nursing populations. One expert told McKnight’s Long-Term Care News the possible add-on was “unheard of.”
The commission will vote on the recommendations in January before sending them to Congress.
