United Front

With the current economic downturn and President Bush unveiling his Fiscal Year (FY) 2009 budget freezing Medicaid and Medicare funding, long-term care associations are voicing their approval of bipartisan congressional support to include a temporary increase in state fiscal relief through the Federal Medical Assistance Percentage (FMAP) in any economic stimulus plan. The Congressional “charge” is being led by Senator Jay Rockefeller (D-W.Va.).

Health and Human Services Secretary Mike Leavitt said in news reports that he opposes an increase in FMAP for Medicaid, noting that it could serve as a way to increase federal control over healthcare, something the White House doesn’t want to do.

In an effort to help our readers understand the impact of the current funding crisis, Long-Term Living Executive Editor Maureen Hrehocik asked two association insiders, Barbara Gay, director of advocacy information for the American Association of Homes and Services for the Aging (AAHSA) and Cynthia Morton, senior director of congressional affairs for the American Health Care Association (AHCA), to comment on some of the possible ramifications if FMAP is not included in an economic stimulus package.

Hrehocik: What will be the impact on long-term care if FMAP-type financing isn’t included in any economic stimulus package?

Morton: As the economy weakens, states will experience a downturn that will decrease tax revenue. Without that tax revenue, states could run significant budget deficits, which will require states to cut spending to offset the decline in revenue and maintain a balanced budget. Healthcare is usually a big target for states looking to cut spending since a state’s Medicaid program often represents a large portion of the state budget. Cuts to Medicaid are likely to affect long-term care facilities as the majority of patients/residents rely on Medicaid to pay for their long-term care needs.

Hrehocik: Do you foresee Medicaid long-term care payments shrinking in states hard-hit by the economic downturn?

Gay: Long-term care accounts for approximately 70% of Medicaid spending. If states have to cut their Medicaid programs, long-term care would be the obvious place to make reductions because that sector of the Medicaid program could yield the greatest savings. Especially in an election year, it seems likely that politicians would seek to make cuts that would affect consumers as little as possible, so cutting payments to providers would appear to be the most politically painless way of reducing state Medicaid spending.

Morton: Yes, Medicaid payments for long-term care are likely to shrink in states that are hard-hit by the economic downturn. Some states already expect smaller Medicaid payments from a scheduled decrease in the state’s federal medical assistance percentage rate—the amount of matching federal dollars for a state’s Medicaid budget—given the lag time related to calculation of the state’s FMAP rate.

Hrehocik: What was the impact of the previous FMAP “bonus” in 2003?

Morton: In 2003, the federal government provided $20 billion in fiscal relief to the states, including a $10 billion increase in FMAP rates in response to the post-September 11 economic downturn. The boost to FMAP rates allowed more than half of the states to avoid, delay, or reduce the size of the cuts to their Medicaid program according to a just-released Congressional Budget Office report entitled, Options for Responding to Short-Term Economic Weakness. These findings complement a recent analysis from Dr. Mark Zandi, chief economist for Moody’s Economy.com, who examined the effectiveness of the various stimulus options being considered by Congress. Zandi found that targeted state aid such as temporarily boosting FMAP rates would generate increased economic activity approximating $1.36 for each dollar of additional aid as it would reduce state budget cuts which, Zandi said, “are sure to become a substantial drag on the economy later this year and into 2009.”

Hrehocik: Do you see any legislative movement this year toward possibly a new Boren Amendment or relieved pressure on intergovernmental transfers (IGTs)?

Gay: While the 2003 FMAP bonus contained a maintenance-of-effort requirement that prevented states from cutting their Medicaid spending if they took the temporary increase in the federal match, there was no requirement that payments to providers be set at certain levels. Considering the difficulty of getting a temporary FMAP increase through the current Congress, it seems most unlikely that any effort to resurrect Boren-like reimbursement requirements will succeed. Last year, Congress delayed for one year the CMS rule that would eliminate intergovernmental transfers. Unless the moratorium is extended, the rule will go back into effect on May 28. Combined with the slowdown in state revenues due to the recession, the elimination of intergovernmental transfers would have a disastrous impact on state Medicaid programs. We are urging Congress to continue the moratorium on the IGT rule.

Morton: Advocates, including AHCA, are working with congressional champions to extend the one-year moratorium on implementation of the Centers for Medicare & Medicaid Services’ (CMS’) Medicaid Program: Cost Limit for Providers rule, which would reduce Medicaid funds by limiting IGTs. Senate Finance Committee Democrats have discussed amending the economic stimulus plan by boosting FMAP rates, as I have already mentioned, as well as by extending the cost limit rule moratorium, which is set to expire on May 25, 2008. We have yet to see any proposals that would mimic the Boren Amendment, which you will recall required Medicaid reimbursement to skilled nursing facilities be “reasonable and adequate to meet the costs” of providing quality care in efficient, economically run facilities.

Hrehocik: What do you see in terms of changes, if any, to Medicare reimbursement this year, especially with MedPAC being so conservative?

Gay: We have heard that the President’s fiscal 2009 budget proposal will call for a freeze on Medicare reimbursements to nursing homes, in line with MedPAC’s recommendations. MedPAC points to double-digit Medicare margins achieved by nursing homes generally, but its own report continues to show that not-for-profit nursing homes average Medicare margins approaching zero. We are proud of the quality of care that our members achieve through initiatives like Quality First and Advancing Excellence. However, continuous advances in quality do require adequate resources for staffing and other elements of excellent care. We therefore will work with Congress to ensure that nursing homes receive the appropriate Medicare payment update in 2009 and subsequent years. Because staffing is such a critical element of quality care, we have proposed that spending on staffing be broken out separately on Medicare cost reports. Rep. Marcy Kaptur (D-Ohio) has introduced our proposal as HR 3784, and we are pushing for the bill’s passage to enable policymakers and the public to see which facilities are using their resources to provide high-quality care.

Morton: The President’s proposed budget issued on February 4 reduced growing Medicare costs by cutting the annual marketbasket update for skilled nursing care, hospitals, and other providers. It is unclear whether Congress will oppose the President’s budget or follow through on last year’s efforts to cut Medicare funds for skilled nursing care that were contained in the House-passed Children’s Health and Medicare Protection Act (CHAMP Act). Hrehocik: What do you see as the real and substantial reform that is needed for long-term care provider reimbursement? Morton: We fully believe that the time is now for substantive reform of the long-term care system. AHCA/NCAL and others have stepped forward with a comprehensive plan, the Long Term and Post-Acute Care Financing Reform Proposal (https://https://www.ahcancal.org/advocacy/Documents/FinancingReformProposal.pdf), that would reorganize the Medicaid long-term care and Medicare post-acute care systems. Specifically, our reform proposal would centralize and streamline government services and make more private resources available to pay for care—steps we believe would benefit the consumer, provider, and taxpayer alike.

Gay: Looking ahead to the long-term care needs of the Baby Boom generation, it is obvious that Medicaid cannot possibly continue to carry its current share of long-term care costs. AAHSA’s Long-Term Care Financing Cabinet spent two years examining our projected future long-term care needs and financing systems that have been put into place by other countries already experiencing our future demographic challenges. The cabinet recommended a financially sound national insurance plan founded on three core principles:

• Consumer choice

• Financial responsibility—both personal responsibility and good stewardship of provider and public resources

• Equity of benefits

The goal is simple: to get as close to universal long-term care coverage as possible. With cash as one (if not the only) benefit, the poor and middle class will have greater choices in how and where to receive the care and services they need. Benefits would be tied simply to a determination of the individuals’ functional need. These elements would establish a consumer-centric model of care for all. The benefit would wrap around whatever other coverage an individual might have through private long-term care insurance or Medicaid. The primary goal of our Long-Term Care Solution Project is to alleviate excessive pressures on the Medicaid program by giving Americans a structure to plan for their own future long-term care needs. We are working to generate a groundswell of popular support for this plan as a foundation for congressional consideration. More information is available at https://www.thelongtermcaresolution.org/home.aspx.