Proposals by both the Obama Administration and House Republicans to lower states’ so-called “provider tax threshold” could negatively impact nursing home patient care and threaten key front-line nursing home staff jobs, according to an October issue brief by the Alliance for Quality Nursing Home Care.
Skilled nursing facilities are the leading provider of Medicare post-acute care services, treating 50 percent of all Medicare beneficiaries who are discharged from hospitals to post-acute care. The majority of patients are short-stay Medicare patients who are discharged from the hospital to the nursing facility, and need restorative and recuperative care before returning to their home and community.
Skilled nursing homes also treat a high volume of Medicaid patients, and since 2009 40 states have frozen or cut Medicaid-funded nursing home care. Currently, federal law allows states to use provider-specific tax revenues to help pay for the state’s share of Medicaid funding. The amount of such revenues that can be rebated to providers is capped at no more than 6 percent of net patient revenues. Traditionally, states have disproportionately relied on provider taxes for skilled nursing facilities to fund their Medicaid programs as compared to other Medicaid providers, according to the issue brief.
In addition, substantially more skilled nursing facility provider tax programs operate at or near the 6 percent federal ceiling than those for other providers. For example, in fiscal year 2012, 41 states and the District of Columbia used nursing home taxes, with 20 states operating at the 6 percent ceiling.
Lawmakers have made various proposals to reduce the provider tax ceiling. For example, House Republicans have proposed reducing the threshold from 6 percent to 5.5 percent in 2013, which would result in $11.3 billion in payments to all providers over 10 years. Meanwhile, the Obama administration has proposed reducing the threshold from 6 percent to 3.5 percent over three years, cutting $21.8 billion in payments to all providers over the same time period.
In addition to $65 billion in Medicare payment reductions over the next decade, skilled nursing homes face the possibility of billions more in Medicare cuts over the same time period due to deﬁcit reduction proposals. A measure in the Budget Control Act of 2011, called sequestration, will make automatic spending cuts if Congress does not take action to make at least $1.2 trillion in spending cuts.
According to the bipartisan nonprofit group Partnership for the Future of Medicare, sequestration would effectively wipe out a recent 1.8 percent payment update to U.S. nursing homes granted by the Centers for Medicare and Medicaid Services.
The Alliance for Quality Nursing Home Care said it is concerned that skilled nursing facilities will be hit hard by impending and potential cuts.
Studies have shown that lower Medicaid reimbursement rates can result in lower total stafﬁng levels, less qualiﬁed stafﬁng, and fewer nursing staff hours per patient. Nursing homes with lower stafﬁng levels have been shown to provide poorer quality of care on a number of indicators when compared to facilities with higher stafﬁng levels.
A reduction in Medicaid payments could also lead to layoffs at skilled nursing home facilities since about 70 percent of skilled nursing home facility costs are labor-related.
Recent studies project that state Medicaid programs already pay nearly $20 per patient per day less than the actual cost of providing care, according to the Alliance brief.
The gap between payment and reasonable costs has increased steadily since 1997, when Congress eliminated any federal requirement that state Medicaid programs pay reasonable rates for care.
Provider taxes have been the only vehicle available to states to avoid dramatic cuts to Medicaid payments to skilled nursing facilities, according to the issue brief.