Nursing homes brace for impact from fiscal cliff and Obamacare

As nursing homes and assisted living facilities throughout southeastern Wisconsin plan for the future of their services under the Obama administration’s second term, many are focusing on the potential impacts of the fiscal cliff and the implications of the Patient Protection and Affordable Care Act.

The fiscal cliff is a series of federal tax increases and spending cuts set to take effect next year, unless Congress acts to prevent them. Medicare reimbursements made to nursing homes are slated to be cut by 2 percent, said John Sauer, president and chief executive officer of the nonprofit membership association LeadingAge Wisconsin.

“If Congress doesn’t act, then Medicare is going to be cut by over $700 billion, and within that $700 billion cut, nursing homes would receive a 2 percent reduction in their Medicare reimbursements,” Sauer said.

That 2 percent reduction would come on the heels of a near 12 percent reduction in Medicare reimbursements that took effect for nursing homes in October 2011, he said.

With the potential for further cuts in Medicare reimbursements, the fiscal cliff remains Sauer’s top concern.

“That’s our main concern – that we avoid this fiscal cliff, but it’s going to take some congressional action and the president to agree with that action,” Sauer said.

The fiscal cliff represents a hurdle in the certainty of the future of nursing home care, said Rick Johnson, chief executive officer of Wauwatosa-based assisted living facility St. Camillus. He worries that further cuts in reimbursements to nursing homes in the state could begin to affect resident care.

“I think the important thing that we’re watching is because the government reimbursement for nursing homes has not kept up with the cost necessary to provide the care…any talk of reducing Medicare or Medicaid payments to nursing homes further would jeopardize the level of care that the residents are expecting to receive,” Johnson said.

Medicare provides funding for care for the elderly and disabled individuals. Medicaid provides health care funds for low income individuals.

Sauer, Johnson and other executives in the skilled nursing care industry such as David Fulcher, chief executive officer of Milwaukee Catholic Home, also have concerns about how cuts in Medicare reimbursements will impact dollars available to subsidize the underfunding in the Medicaid program.

“The reimbursement structure under Medicaid continues to be a significant issue,” Fulcher said. “Medicaid reimbursement does not cover the actual costs of providing care to our most vulnerable senior residents. Many rural providers in Wisconsin are struggling to stay open and remain financially viable. This dynamic needs to change as our population ages and needs increase for this vulnerable population.”

Many nursing homes attempt to offset the lack of adequate funding from Medicaid by hiking private pay residents’ fees, said the Rev. David Keller, president and chief executive officer of Wauwatosa-based Luther Manor,.

“The state of Wisconsin helps balance its Medicaid budget for nursing homes on the backs of the private pay residents,” Keller said.

Congress knows that the reimbursements they provide for Medicaid do not meet the need for all skilled nursing care facilities’ costs, and the way those facilities make up for it is by increasing payments of private pay residents, he said.

So, in addition to paying for their personal care, private pay residents also are having to cover the losses from the Medicaid program.

About two thirds of Medicaid spending goes toward long-term care, said Barbara Gay, director of governmental affairs at LeadingAge’s national headquarters in Washington, D.C. Making the private pay resident pay more, she said, eventually leads to their own dependency on Medicaid.

“The more the private pay residents have to pay, the faster they exhaust their money and the sooner they, themselves, become eligible for Medicaid,” Gay said.

Gay points out that among the elderly care benefits inspired by the Patient Protection and Affordable Care Act is the Community Living Assistance Services and Support (CLASS) Program, which offers a new mechanism for financing long-term care. The CLASS program has been adopted under the Patient Protection and Affordable Care Act but still needs to be implemented. While Medicaid has become the default means of financing long-term care, the CLASS Program is attempting to create a structure for people to plan for their own long-term care needs, Gay said.

“What we think is important about CLASS is it would be a new means of bringing more private financing into our field,” she said.

LeadingAge is urging the Obama administration to continue moving forward with carrying out the CLASS program for financing long-term care, Gay said.

With the presidential election past, she would like to see lawmakers cooperate and shift their focus to resolving the issues at hand.

“Now we’re hopeful that members of Congress and the president will come together and work on the problems facing the country,” Gay said.

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