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have is to chart a course for Medicare to address its beneficiaries

need for long term



Mindful of budget pressures,

we would like to present some specific opportunities or considera

tions for improving Medicare's long term care policies and practices.

Prospective_Paynent System for SNPS

AHCA recommends that the Medicare program can achieve signi

Picant savings and enable beneficiaries to receive the appropriae

services in the least costly setting by implementing a prospective

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the appropriate care and

are "backed-up"

to receive

in expensive hospitals longer than necessary awaiting SNF placement.

Medicare's inappropriate payment system is the major reason

for the lack of participation by SNFs in Medicare.

At any given time there are 19,000 Medicare beneficiaries

"backed-up" waiting for a SNF bed and Medicare dollars are being

wasted. A national survey undertaken by the American Association of Professional Standards Review Organizations in 1980 indicated that Medicare was paying for more than 6 million days of hospital

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It should be noted that the hospital proposal, which appears

set for early enactment, will provide a strong incentive for

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to avoid a hospitai "back-up" crisis and to facilitate

the continuity o? post-hospital care.

The current retrospective reimbursement system is unsatisfactory

because it is inflationary, contains no incentives for efficiency,

and no financial incentives for SNFs to participate.

A reimbursement

method that allows providers simply to pass costs through the

system without providing them with any real incentive



those costs must be considered inflationary.

Much of the dramatic

increase in costs for all bealth services over the last


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be attributed to the use of retrospective cost reinwhen costs are retrospectively determined, cannot


determine at any moment what they will be reimbursed and hence

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are known.

Over two-thirds of the state Medicaid programs have

successfully employed prospective payment systems for nursing

homes for several years.

The prospective method must provide incentives for efficient

operation in order to restrain the growth in costs.


able to keep their costs below a pre-determined rate or a target

level would retain the savings.

Conversely, providers unable

to keep their costs below the rate should be responsible for

incurring the loss.

As in any viable business,

an opportunity

Por adequate return on investment and fair recognition of property

costs are needed for renovation, upkeep, and development.


tionally, the system should reduce adninistrative "red tape",


unnecessary paperwork, and be


to administer, 10

contrast to the current system which is complicated and burdensome

for the provider and the program,

SUP Patient cost sharios

The present cost sharing for SNF patients is excessive,

especially relative to other Medicare services.



SNP patient, after already have paid the hospital deductible and possibly coinsurance, must pay $38 pe day from the 21st

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a $38 fee approaches 100 percent of the facility's reimbursement.

Ia contrast, home health recipients pay nothing and bospital

patients pay nothing beyond the deductible until

the 61st


An erosion of the SNF benefit has occurred because it is linked

to the faster rising bospital costs.

The SNF coinsurance is

fixed at 12.5 percent of the hospital deductible.

The President, apparently recognizing the unfairness of present SNF cost sharing, proposes the rate be reduced


to 5 percent of the hospital deductible, that is $15.20 in 1983.

AHCA supports the President's intention to reduce the SNF patient's

However, when a SNF prospective payment is implemented Skilled Nursing Care Definition

cost sharing.

the SNF coinsurance should be

set at a percentage of the SNF'S

payment rate, rather than perpetuate the artificial linkage

to inflationary hospital costs.

One of the major ways for Medicare to provide more economical

and appropriate services is to allor SNF coverage for a broader

range of oursing home services.

Medicare carrowly limits coverage

to patients who require daily skilled nursing care or have rehabi

litation potential.

The Medicare prograd has not adapted its


to take better advantage of the services which


be provided in today's long term health care facilities.

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It is expected that Medicare will finally begin to take advantage

of ICFS as

a qualified care site under the new hospice coverage.

AHCA Supports HCFA having the authority and encouragement

to develop cost-effective and appropriate applications of ICF

and other SNF services.

Medicare should learn from Medicaid

and close the service gap between iis restrictive SNF definition

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nursing and intermediate


facilities would be well suited

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