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'No Regrets' In Nursing Home Industry For Health Law Support—The KHN Interview

May 24, 2011

Nursing homes have little to gain directly from the 2010 health law’s expansion of health coverage to 32 million uninsured Americans. That’s because nursing homes have few uninsured residents, as nearly all have private or government insurance.

Yet to help finance the law, the nursing home industry will have to absorb a $14.6 billion cut in Medicare reimbursement over the next decade. Medicare, which covers some beneficiaries for a very limited period of time, pays for about 19 percent of nursing home costs. In comparison, Medicaid, which covers two-thirds of all nursing home residents, pays for 41 percent of nursing home costs.

And, starting in 2014 nursing homes that don’t provide health coverage to their full-time employees will have to pay a penalty as a result of the health law's employer mandate that affects firms with 50 or more workers. About one in four nursing home employees is uninsured. Between 10 to 25 percent of nursing homes don’t offer coverage, and even among those that do, some workers decline it because they can’t afford the premium.

At a recent briefing with reporters, Mark Parkinson, head of the American Health Care Association, the largest nursing home lobby and a group that threw its support behind the health law last year, said the employer mandate would be a challenge for some nursing homes. He added that the industry would seek changes before 2014, including making the penalty tax deductible or lowering the penalty for financially distressed facilities.

Parkinson

That raised eyebrows from opponents of the overhaul. Neil Trautwein, a vice president at the National Retail Federation, told CQ’s HealthBeat that the nursing homes' request "reaches new heights of chutzpah." He said nursing homes should be given no special consideration that other employers don’t receive.

KHN staff writer Phil Galewitz sat down with Parkinson, the former governor of Kansas, last week to get his views on the issues facing the industry. This is an edited version of that interview.

What is the position of the association on the employer mandate and the impact it will have on the nursing home industry?

We supported the Affordable Care Act and we continue to do so. The employer mandate is very manageable for the vast majority of our members. I think all of our providers want to provide health insurance for their employees. The challenge is that a minority of our members -- those nursing homes that tend to be in rural areas or very poor urban areas and have a disproportionate share of Medicaid residents (which frankly they lose a lot of money on) -- those are the members that find it challenging to provide health insurance, insurance that would meet the standard of the Affordable Care Act.

So we are working with the [Obama] administration to figure out if there is some accommodation that can be made for these very high-Medicaid-population facilities so that they can be also in compliance with the law. 

The employer mandate issue is a challenge not just for restaurants and retailers, but for a small segment of the nursing home population, it is an issue as well. The administration has indicated that it is interested in our comments and our thoughts.

Why did your association support the health care law, particularly as the industry doesn’t gain by the reduction in uninsured? And do you have any regrets?

No. There are no regrets. On balance the membership felt the Affordable Care Act was an improvement on the current health care delivery system. Whether you support the Affordable Care Act or not, when you look at the status quo you know the growth we have had on health care costs is simply not sustainable. We have to make efforts to bring those costs under control because there is a limited amount of money that society is going to be willing to spend on health care financing whether on Medicare or Medicaid.

Although we did not receive some of the direct benefits that you may argue that other sectors of the health care industry received, we are part of the overall health care world and if costs don’t come under control generally, then our sector can’t succeed either.

What is biggest impact of the law on nursing homes? 

The potentially largest impact has to do with changes in payment models that may be developed with accountable care organizations and the continued move by the federal government to shift to episodic payments for post-acute residents, perhaps on a bundled basis. That is really an area of the Affordable Care Act that offers an opportunity for a cost savings.

The current system of reimbursement is on a daily basis. The longer you are in post acute setting, the more it costs. The Affordable Care Act provides the Health and Human Services secretary an opportunity to develop regulations to shift those incentives to payments based on performance and quality. If we head to a system like that, it could reduce costs. With ACOs, it's very critical that our membership has a seat at the table because we are concerned that ACOs will be created that will leave out nursing homes as a post-acute provider and if that would happen it would be quite bad for the sector. 

How is the nursing home industry faring as states move to cut Medicaid costs to balance their budgets? 

Nursing homes are struggling with Medicaid payments. The headline news early in the year is that there would be dramatic cuts at the state level for nursing homes and unfortunately that headline has proven to be the case. I don’t think nursing homes have been targeted. It’s because of the general fiscal situation that states have faced. In many states, our association and members were able to reduce the initial size of those proposed cuts, but there are still states out there where cuts are very significant.

Do you welcome the growing trend of states to shift their Medicaid long-term care recipients into private managed care companies?

Conceptually, it is both good and bad. Moving the program to a group of entrepreneurs who may have more ability at cost cutting and efficiency, that is attractive. On the negative side, what it is doing is creating another layer of infrastructure before payments get out to the facilities. There are mixed results. 

Federal officials have said that because a new payment formula this year led to an unexpected spike in Medicare costs, it might cut nursing home rates 11.3 percent. But they have also said they may increase Medicare rates.

How would you describe the financial health of the nursing home industry? 

If we had some certainty about what our Medicare reimbursement rates would be at the end of year, I could answer in better way. Going into the year if we were to poll our membership, most would say we are doing OK for now. We are at our historical margins of 2 percent. For now, everyone is worried what happens this year and next year.

If we have a one-time 11.3 percent decline, then the state of the profession will not be healthy. If it is something less or something phased in over three years we will be back to a position where the profession is in OK shape.

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