MEDICARE/MEDICAID SUMMARY

JULY 31, 2008

MEDICARE

FY 09 Rates - CMS issued the proposed rule for FY 09 rate setting in the 5/2/08 Federal Register. The proposed rule included a full market basket update of 3.1%. However, it also included a proposed recalibration of case mix weights and non-therapy ancillary services to correcting "forecasting error" made by CMS in 2005 when converting to the expanded RUGS. The initial rule stated that expansion must kept budget neutral. Also included in the proposed rule are wage indexes updates. Most wage indexes seen a downward adjustment. Many associations such as AHCA and state healthcare associations have commented on the financial impact if the proposed rule is finalized with the forecasting error. Also about 150 Senators and Representatives recently wrote "Dear Colleague" letters to HHS Secretary Leavitt opposing SNF Medicare cuts. The letters specifically ask the Secretary not to proceed with the proposed "forecast error" correction.

SNF PPS Reform - On April 9th, 2008, the Medicare Payment Advisory Commission (MedPAC) held a public meeting to discuss three PPS issues. First, is the fact that PPS does not adequately distribute payments for nontherapy ancillary (NTA) services (such as drugs, IV medications, and respiratory therapy). Second, they claim because providers are paid more if they furnish more therapy services, the system does not include incentives for providers to furnish only the amount of therapy that beneficiaries need. Third, PPS does not include an outlier policy to defray the losses from exceptionally high-cost patients. At the April 9th meeting, MEDPAC Commissioners voted on the following recommendations:

- The Congress should require the Secretary to revise the SNF PPS by:
• - Adding a separate nontherapy ancillary component, replacing the therapy component with one
            that establishes payments based on predicted patient care needs, and adopting an outlier policy.

- The Secretary should direct Skilled Nursing Facilities to report
• - Diagnosis information and dates of service on their claims, separately record only the services
            furnished since admission on the patient assessment (MDS), and nursing costs on the Medicare
            cost report

Medicare Enrollment - new rules require providers without a complete Medicare 855 Application on file to supply new application. All Medicare applications will have to be revalidated at least once every 5 years. Providers will be notified when a revalidation application is required. Failure to file the revalidation application within 60 days may result in termination of the provider agreement. On cycle revalidation requests will not require a state survey. CMS may request "off cycle" revalidation applications if they suspect a change. A state survey may be conducted.

FY 09 - Proposed FY09 budget was released in March. The Bush Administration followed MedPAC’s recommendation of no market basket update. However they took it one step further by proposing no update for FY10 and FY11 as well and a cut in the market basket in FY12 and FY13. Proposed rates should be issued mid-May. AHCA estimates the effect of the FY09 budget and intended regulatory changes at $18.45 loss per day.

Revisit User Fee - The recent proposed FY09 budget includes the revisit survey user fee. If approved expect lobbying again to have the fees eliminated.

Medicare Spending Cuts - The Medicare Prescription Drug, Improvement and Modernization Act of 2003 has a provision that if Medicare spending exceeds 45% of Medicare expenditures for the two consecutive years than Congress and the Administration must reduce excess spending within a seven year period. FY08 spending is projected to surpass the 45% threshold of FY06 and FY07. The release of the proposed FY09 budget, President Bush called on Congress to reduce Medicare spending by .04%.

Medicare Code Creep - "Code Creep" is the trending of higher percentages in higher RUGs. The Balance Budget Act of 1997 allows the HHS to make regulatory changes due to "code creep". The Administration will look for ways to cut Medicare spending that does not need Congressional approval.

Medicare Bad Debt - Currently Medicare coinsurance relating to Part A stays are reimbursed to providers on the annual Medicare cost report if the claims could not be collected. The past few years the Administration has been attempting to eliminate the reimbursement of these claims. Starting with FY06, Medicare cut reimbursement for non-Medicaid secondary payors from 100% to 70%. The propose budget of FY08 including the elimination of bad debt reimbursement altogether through a phase out period. Congress voted no. The proposed FY09 budget once again has the bad debt phase out. MA and NH are lucky since Medicaid will pay these cross over claims. Medicaid programs are not required to pay for the cross over claims. Many states have eliminated the cross over claims.

MEDICAID

Economic Stimulus Package - The House is discussing the possibility of another stimulus package. Unlike the first package, this package would contain a temporary increase in Medicaid spending and could pass by the end of the summer. The A bill would include an increase of 2.95% to states' Federal Medical Assistance Percentage (FMAP) from April 1, 2008, to June 30, 2009 estimating about $5 billion in extra Federal Medicaid spending. The president earlier this year signed off on a economic stimulus package that offered $50 billion in incentives to businesses, but it did not contain a boost to states' FMAP.

MA MEDICAID

FY 09 - On July 13th Governor Patrick signed into law the FY09 budget. The budget provides for $45 million increase for nursing home care. It is important to note that the funding is not coming from increased funds to the senior care budget line but by expected decline in nursing home utilization. MECF has confirmed that Medicaid utilization has in fact been decline and they believe that this trend will continue. The Governor vetoed the Medicaid nursing clinical eligibility statutory protection. If not overridden Mass Health residents with lower intensive needs may not be eligible for nursing home services. MECF plans to work with the state legislatures to seek an override. MECF has also encouraged the Administration to issue rate increases. Proposed rates should be issued in July or August. Please forward to Fran Petricone for review.

Pay For Performance (P4P) - The Governor's proposed budget includes the language for the institution of P4P. His budget includes $35 million for P4P that will be paid to providers in the first quarter of FY10 (7/1/09-9/30/09). Mass Health is required to implement a P4P program for healthcare providers. MassHealth is collaborating with MECF on the creation and implantation of the P4P for nursing facilities

NH MEDICAID

HB 721 Excess Payout - The payment was supposed to be made by October 1. CMS is requiring DHHS to submit a State Amendment Plan. DHHS submitted the latest state plan amendment to CMS. Both DHHS and NHHCA believe CMS will approve the revised plan. Payment should be made 30-60 days after the submission of the SPA. Earlier this month, both the House and Senate had an opportunity to repeal HB721. Luckily this did not happen! At this point the only issue holding up paying out the HB721 monies is the approval of the SPA from CMS.

July 1, 2008 rates - New proposed rates were issued. Most facilities received a rate cut. The rate reductions stems mostly from the decrease in Medicaid funding in the FY09 budget. FY09 SNF Medicaid funding decreased by about $4 million. On an upside the FY09 has a note that SNFs must received a 2% increase on 1/1/09.

Rate Setting Change - The Department of Health and Human Services contacted NHHCA and requested ideas on a new rate setting methodology. NHHCA agreed to work with DHHS on the research of a potential methodology.