New Economic Impact Study: Obama Administration Implementation of Bush-Era Medicare Regulation Will Cost U.S. $2.5 Billion in Business Activity, Cut Over 30,000 Jobs

AHCA, Alliance Warn Sizable Job Losses in Key Economic Sector Undermines Obama Administration’s Economic Stimulus Objectives, Contrary to Broader Health Reform Goals

Washington, DC — In releasing a new economic impact study detailing the importance of the skilled nursing facility (SNF) sector to the nation’s economic activity and employment base, leaders of the American Health Care Association (AHCA) and Alliance for Quality Nursing Home Care today warned implementation by the Centers for Medicare and Medicaid Services (CMS) of a Bush-era Medicare regulation will substantially undercut the Obama Administration’s economic stimulus and job creation policies, and undermine the stability of an important platform for effective health care reform. While AHCA and the Alliance applaud and support the Administration’s efforts to reduce the national debt, the leaders cautioned of the unintended consequences of the proposed Medicare cutes on patients and caregivers.

The economic impact analysis finds the Administration’s proposed one-year $1.05 billion reduction in Medicare Part A SNF expenditures – projected to be a $7.23 billion five-year cut by the Administration’s proposed budget – has a substantial, negative impact on America’s local, state, and national economies. The estimated economic impact on the U.S. economy in the year ahead, according to the study, will be a reduction of $2,538,574,941 in business activity, a reduction of $1,102,133,619 in labor income, and a loss of 30,323 jobs. AHCA and the Alliance will also be releasing state-specific economic and job loss data in the days ahead.

The following schedule illustrates the direct, indirect, and induced impact of the proposed Medicare cut on the U.S. economy for FY 2010:

Economic Impact of Medicare Nursing Facility Payment Cutback for Fiscal Year 2010

United States

	Direct	Indirect	Induced	Total
Business Activity Impacts	($) 1,050,000,000	457,958,967	1,030,615,974	2,538,574,941
Income Impacts	($) 640,413,737	139,085,410	322,634,472	,102,133,619
Employment Impacts (Jobs)	20,219	2,842	7,262	30,323

Direct Effect represents the impact (e.g., change in employment or revenues) for the expenditures and/or production values specified as direct final demand changes.
Indirect Effect represents the impact (e.g., change in employment) caused by the iteration of industries purchasing from industries resulting from direct final demand changes.
Induced Effect represents the impacts on all local industries caused by the expenditures of new household income generated by the direct and indirect effects of direct final demand changes.
Total Impact is the sum of the direct, indirect, and induced effects.
Labor Income is the sum of employee compensation and proprietary income.
Economic Impact Analysis: Impact Analysis For Planning (IMPLAN) software, Minnesota IMPLAN Group, Inc., 2007 data.

Prepared by Research Department of American Health Care Association using IMPLAN software, 2007 claims data, and components ofproposed SNF PPS rule for fiscal year 2010.

“While we are and will remain strong allies in the effort to help create good-paying jobs, stimulate badly-needed economic activity and reform health care, the Administration, Congress, and the public-at-large needs to know implementation of this Bush-era Medicare regulation will, in fact, cut good health jobs, undermine economic stimulus initiatives, and derail badly-needed delivery system reforms already benefitting beneficiaries and taxpayers,” said Bruce Yarwood, President and CEO of AHCA.

Alan Rosenbloom, President of the Alliance for Quality Nursing Home Care, said the proposed CMS rule is inconsistent with the Administration’s central economic and health reform policy objectives. “The proposed rule would not only slow the creation of new jobs in one of the few sectors showing job growth, it also would make it much harder for SNFs to deliver the kind of long term reductions in costs so crucial to effective health care reform.  SNFs are caring for a growing number of short-stay post-acute patients, at substantial savings to the Medicare program.  The proposed rule could halt this movement in its tracks and limit reform efforts aimed at caring for post-acute patients into the lowest cost setting most appropriate to their needs.”

Yarwood and Rosenbloom said that as the nature of America’s nursing home patient population continues to evolve, all stakeholders should embrace efforts to facilitate the ability of nursing homes to care for higher-acuity, post-acute Medicare beneficiaries. SNFs, the long term care leaders point out, have invested heavily in recent years to increase capabilities to admit, treat and return to home a growing number of patients requiring intensive rehabilitative care, and care for patients with multiple chronic illnesses. In addition to cutting jobs and damaging already fragile local economies, implementing the rule would inhibit continued investments in cost effective care – again, contrary to the Obama Administration’s stated health policy objectives.