Medicare Payment Policy

adjust for differences in patients’ needs for these services. Third, an outlier policy
would be added to the PPS. After the PPS is revised, in the following year, CMS
would begin a process of rebasing payments, starting with a 4 percent reduction in
payments.
This multiyear recommendation to revise the PPS in the first year and rebase
payments the next year was based on several factors:
• high and sustained Medicare margins,
• widely varying costs unrelated to case mix and wages,
• cost growth well above the market basket that reflects little fiscal pressure from
the Medicare program,
• the ability of many SNFs (more than 900) to have consistently below-average
costs and above-average quality of care,
• the continued ability of the industry to maintain high margins despite changing
policies, and
• the fact that in some cases Medicare Advantage payments to SNFs are
considerably lower than the program’s FFS payments, suggesting that some
facilities are willing to accept rates much lower than FFS payments to treat
beneficiaries.
No policy changes have been made that will materially affect the trajectory of these
findings going forward. Therefore, the Commission maintains its position with
respect to the SNF PPS and urges the Congress as soon as practicable to direct the
Secretary to revise the PPS and begin a process of rebasing payments.
Medicaid trends
As required by the Patient Protection and Affordable Care Act of 2010, we report
on Medicaid utilization, spending, and non-Medicare (private pay and Medicaid)
margins. Medicaid finances mostly long-term care services provided in nursing
homes but also covers copayments for low-income Medicare beneficiaries (known
as dual-eligible beneficiaries) who stay more than 20 days in a SNF. The number
of Medicaid-certified facilities decreased slightly between 2011 and 2012. In 2011,
estimates of non-Medicare margins and total margins indicate that both improved
over 2010. Non-Medicare margins ranged from an estimated –1 percent to –3
percent, and total margins ranged from 4 percent to 6 percent for all payers and all
lines of business. ■
Report to the Congress: Medicare Payment Policy | March 2013
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