Long-term-care markets are expected to change significantly because of the federal balanced-budget law signed last week, which repeals Medicaid payment safeguards and reforms how Medicare pays providers.
Among other steps, the law revokes providers' ability to sue states for higher Medicaid fees. Nursing home groups now fear states will begin cutting their Medicaid rates.
Also contained in the law is the beginning of Medicare prospective payment for nursing homes and other long-term-care providers.
The "Boren amendment," which was repealed, required state Medicaid programs to reimburse providers at "reasonable and adequate" rates. Its repeal affects payments on or after Oct. 1, the beginning of federal fiscal 1998. That's expected to shave $1.2 billion from federal Medicaid spending through 2002.
Nursing homes and hospitals have used the Boren amendment to sue states for higher Medicaid fees; state governors have lobbied for its repeal.
Although the Boren amendment applied to all providers, nursing homes had the most at stake. Medicaid programs paid for almost half of all nursing home care in 1995. In contrast, Medicaid financed less than 15% of hospital care in 1995.
The balanced-budget law, however, requires HHS to report within four years on the repeal's effects on quality of care and access.
The law omitted a House-passed provision requiring that states set Medicaid fees at least equal to their levels on May 1, 1997.
Under the new law, states must publish proposed Medicaid fees and allow for public comment. But nursing home groups said they had hoped the law would include safeguards to ensure that rates are high enough for quality care.
"The threat of Boren has always been adequate for providers to negotiate reasonable rates with states," said Michael Rodgers, senior vice president for government relations and public affairs at the American Association of Homes and Services for the Aging. With its repeal, "there's absolutely no protection for providers," he said.
Meanwhile, under the law, Medicare will begin phasing in a prospective payment system for skilled nursing next July 1. That would cut about $9.5 billion from Medicare's skilled-nursing spending over five years. The basis of the new per-diem rates would be facilities' maximum allowable 1995 costs updated to 1998 by a measure of inflation, the skilled-nursing "marketbasket" less one percentage point.
In home-care spending, Medicare is expected to save $16.2 billion over five years partly by reducing reimbursement maximums by 15% on Oct. 1, 1999. That cut will take place regardless of whether HCFA is ready to implement a prospective payment system on that date, as called for under law.
Between Oct. 1 of this year and Oct. 1, 1999, HCFA will impose an interim payment system that reduces the maximum rate for home-care agencies.