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Susan Feeney (AHCA) 202-898-9345
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Medicare Cuts Pose Disproportionate Threat to Nation’s
Rural Seniors, Local Jobs Base

Analysis of CBO Data Finds Cuts Would Jeopardize Health, Well Being of America’s Rural Communities

Washington, DC – As Congress begins to consider possible cuts to seniors’ Medicare Part A nursing home benefit, an analysis of Congressional Budget Office (CBO) data finds five-year $2.7 billion cuts -- like those proposed several months ago at the onset of the SCHIP debate -- pose a disproportionate threat to America’s most vulnerable rural seniors, and to the jobs and employment base of the nation’s rural communities.

“If Medicare funding is slashed by Congress in the manner contemplated just several months ago, there will be a disproportionate, negative impact on America’s rural seniors and the facilities and staff who care for them,” warned Bruce Yarwood, President and CEO of the American Health Care Association (AHCA). “In America’s rural communities, nursing homes are not generally within close proximity to one another, and are more widely dispersed geographically. Consequently, rural facilities’ ability to hire, train and retain key direct care staff will be severely compromised if Medicare cuts are enacted into law.”

Alan Rosenbloom, President and CEO of the Alliance for Quality Nursing Home Care, noted that approximately 70 percent of nursing home operating costs are staffing-related, and that skilled nursing facilities are playing a growing, important role when it comes to providing the rehabilitative care patients require to return home to active, productive lives in their communities. “Medicare cuts would have a disproportionately negative impact on America’s rural facilities, and would make finding and retaining highly-credentialed staff still more challenging in an already difficult environment. Sustaining rural facilities’ quality improvement programs would be placed in direct jeopardy to the detriment of every resident.”

Rural Seniors Would Shoulder Approximately 25% of Total Five-Year, $2.7 Billion Medicare Cuts

Further analysis of previously-released CBO scoring data finds seniors in rural America would shoulder approximately 25 percent of the total five year, $2.7 billion Medicare cuts – yet in states with higher rural populations, rural seniors and the nursing homes that serve them would bear disproportionately greater cuts. In particular, Medicare beneficiaries in rural areas requiring skilled nursing care would suffer significant reductions in daily benefits. The average per-day Medicare cut over five years for rural seniors in states with the highest concentration of rural nursing homes is as follows:

In addition, the national long term care leaders emphasized, rural facilities would be increasingly forced to choose between the urgent staffing needs that impact quality in thenear-term versus refurbishing facilities, upgrading technology, and purchasing new equipment – which impactsfuture care quality. “One of the key lessons that emerged from the wave of nursing home bankruptcies during the 1999-2001 period is that some of the oldest, least mobile nursing home residents were forced to relocate hundreds of miles from family and friends – and in some extreme cases, seniors were even forced to relocate to other states,” Yarwood continued.

Pointing to how Medicare cuts would negatively impact rural America’s local economic base, Rosenbloom observed that nursing homes are often the largest local employer: “America’s rural communities depend upon the strength and vitality of local long term care facilities for jobs and economic development, and the negative ramifications resulting from federal Medicare cuts would quickly ripple through the local economic base from the standpoint of lost jobs, less hiring and marginally higher unemployment.”

Rural Impact of Medicare Cuts Compounded by Medicaid Rates That Fail to Cover Facility Care Costs

A study released in October, 2007 from BDO Seidman/Eljay shows that nursing homes receive an average of $13.15 less than the cost of care for every day of care provided to a Medicaid patient -- resulting in a facility operating loss of $4.4 billion nationwide.   Since 1999, the funding gap has grown by 45 percent.  As a result, Medicare has provided a funding safety net increasingly essential to preserving access to quality care. The disproportionate negative impact on rural seniors if Medicare cuts are enacted would be exacerbated by the ongoing Medicaid underfunding phenomenon.

In further explaining the role of Medicare in subsidizing Medicaid shortfalls, Joseph Lubarsky, the BDO Seidman/Eljay study author said, “Medicare continues to play an important role in the cross-subsidization of Medicaid deficits… un-reimbursed Medicaid allowable costs are projected to exceed $4.4 billion, and providers must continue to substantially rely on Medicare prospective payment in an attempt to break even from government funded programs. Any major slowdown in state economies or changes in federal policies or interpretations regarding federal revenue enhancement programs could easily reverse the positive trends of the past few years.” (To view entire BDO Seidman/Eljay Medicaid Underfunding study, go to www.ahca.org).

Rural data methodology note: The data used to compute the rural impact data was analyzed and compiled by the American Health Care Association’s (AHCA) Reimbursement and Research Department using CBO data from Preliminary CBO Estimate of the Effects on Direct Spending and Revenues of H.R. 3162, the Children's Health and Medicare Protection Act of 2007 as of July 25, 2007, and Medicare day distribution data from CMS Skilled Nursing Facility 100% claims data from 2005. The AHCA data was further analyzed by United Bio Source (UBS) to compile the PPD rural impact data. 

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The Alliance for Quality Nursing Home Care is a coalition of 16 national skilled nursing providers that deliver care to hundreds of thousands of patients each day at roughly 2,000 skilled nursing facilities in 49 states and the District of Columbia.   For more information, please visit www.aqnhc.org.

The American Health Care Association is the nation's leading long term care organization.  AHCA and their membership are committed to performance excellence and Quality First and represent nearly 11,000 non-profit and proprietary facilities dedicated to continuous improvement in the delivery of professional and compassionate care provided daily by millions of caring employees to more than 1.5 million of our nation's frail, elderly and disabled citizens who live in nursing facilities, assisted living residences, subacute centers and homes for persons with mental retardation and developmental disabilities. For more information on AHCA, please visit www.ahca.org.