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Wednesday, August 4, 1999

Medicare Cuts May Be Saving More Than Hoped

Main Series Page: Troubled Times in Nursing Homes

By Thomas J. Cole
Journal Investigative Reporter
The Congressional Budget Office initially estimated that changes in Medicare reimbursements for nursing-home care would save $9.5 billion over five years.
This spring, the industry said a new estimate by the CBO showed savings would actually be $16.6 billion -- or $7.1 billion more than Congress and the Clinton administration intended in passing the Balanced Budget Act of 1997.
The industry demanded that reimbursements be increased.
That hasn't happened yet, and the industry has since acknowledged the claim of $7.1 billion in unintended savings was based on an incorrect analysis of CBO documents.
But nursing-home officials continue to argue the cuts were deeper than they were supposed to be. A recent estimate by the American Health Care Association puts the unintended savings over five years at $4 billion.
The industry has said it can live with a $9.5 billion reduction in Medicare reimbursements for nursing homes but no more.
Under the CBO estimate of $9.5 billion in savings, Medicare payments for nursing-home stays were projected to be $12.7 billion in 1999. Spending was $13.4 billion in 1998.
After this year, however, payments are projected to once again increase annually.
The CBO estimate doesn't include Medicare payments for nursing-home residents whose stays aren't covered by Medicare but still receive therapy and other services under the program.
The Health Care Financing Administration believes reimbursements for nursing homes might be running below those of the initial Congressional Budget Office estimate.
But Mike Hash, deputy administrator for the Health Care Financing Administration, said various factors -- including the Medicare cuts, government efforts to curb fraud and abuse and changes in the types of patients being treated in nursing homes -- are causing the lower-than-expected spending.