One on the most important achievements

this Committe

have is to chart a course for Medicare to address its beneficia need for long term care coverage. Mindful of budget pressu we would like to present some specific opportunities or consid tions for improving Medicare's long term care policies and pract:

Prospective Payment System for SNFs

AHCA recommends that the Medicare program can achieve si ficant savings and enable beneficiaries to receive the approp services in the least costly setting by implementing a prospec reimbursement system for skilled nursing facilities. spective payment system must include incentives for effici and cost containment.

The

We are pleased the Health Care Financing Administrat has reported its intention to submit to Congress by July SNF prospective proposal. It is hoped the HCFA proposal SNFs, like their proposal for hospitals, will earn provi support and easy Congressional consideration.

A

There is a serious problem with the lack of participat by long term care facilities in the Medicare program. result, many Medicare beneficiaries in need of SNF care not able to receive the appropriate care and are "backedin expensive hospitals longer than necessary awaiting SNF placeme

mmittee can

eficiaries

Medicare's inappropriate payment system is the major reas

for the lack of participation by SNFs in Medicare.

pressures,

considera

practices.

eve signiappropriae

prospective

The pro

efficiency

are bei

At any given time there are 19,000 Medicare beneficiari "backed-up" waiting for a SNF bed and Medicare dollars wasted. A national survey undertaken by the American Associati of Professional Standards Review Organizations in 1980 indicat that Medicare was paying for more than 6 million days of hospit per year for patients for whom a bed in a SNF could n be found. A recent study by the Urban Institute confirms th

care

estimates.

nistration

y July 1 a oposal for

n provider

It should be noted that the hospital proposal, which appea set for early enactment, will provide a strong incentive f discharge of Medicare patients as early as possible. It wi be important that a new payment system for SNFs attract mo provider participation and be implemented no later than t hospital plan. The coordination of these two initiatives necessary to avoid a hospital "back-up" crisis and to facilita the continuity of post-hospital care.

The current retrospective reimbursement system is unsatisfacto because it is inflationary, contains no incentives for efficienc and no financial incentives for SNFs to participate. A reimburseme method that allows providers simply to pass costs through t system without providing them with any real incentive to C

those costs must be considered inflationary.

Much of the dram

increase in costs for all health services over the last years can be attributed to the use of retrospective cost re bursement. When costs are retrospectively determined, can determine at any moment what they will be reimbursed and he link the level of care being provided with the reimbursem they will receive. A nursing home that contains costs and increa efficiency is penalized by having its reimbursement level redu by the size of the saving. Cost reductions only reduce income

4

The use of a prospective payment system for nursing ho is not a new, untried idea. The virtues of prospective reimbursem are known. Over two-thirds of the state Medicaid programs h successfully employed prospective payment systems for nursi homes for several years.

The prospective method must provide incentives for efficie operation in order to restrain the growth in costs. Provide able to keep their costs below a pre-determined rate or a targ level would retain the savings. Conversely, providers unab to keep their costs below the rate should be responsible f incurring the loss. As in any viable business, an opportuni for adequate return on investment and fair recognition of proper costs are needed for renovation, upkeep, and development. Addi tionally, the system should reduce administrative "red tape

reduce

unnecessary paperwork, and be easy to administer, i contrast to the current system which is complicated and burdensom

for the provider and the program.

SNP Patient Cost Sharing

The present cost sharing for SNF patients is excessive especially relative to other Medicare services. Currently SNF patient, after already have paid the hospital deductibl and possibly coinsurance, must pay $38 per day from the 21s day to the maximum 100th day. In many areas of the country a $38 fee approaches 100 percent of the facility's reimbursement In contrast, home health recipients pay nothing and hospita patients pay nothing beyond the deductible until the 61st day An erosion of the SNF benefit has occurred because it is linke to the faster rising hospital costs. The SNF coinsurance i fixed at 12.5 percent of the hospital deductible.

the

O

The President, apparently recognizing the unfairness present SNF cost sharing, proposes the rate be reduce to 5 percent of the hospital deductible, that is $15.20 in 1983 AHCA supports the President's intention to reduce the SNF patient' cost sharing. However, when a SNF prospective payment is implemente the SNF coinsurance should be set at a percentage of the SNF' payment rate, rather than perpetuate the artificial linkag to inflationary hospital costs.

Skilled Nursing Care Definition

One of the major ways for Medicare to provide more eco and appropriate services is to allow SNF coverage for a b range of nursing home services. Medicare carrowly limits co to patients who require daily skilled nursing care or have r litation potential. The Medicare program has not adapt coverage to take better advantage of the services whic be provided in today's long term health care facilities.

Medicare provides no Coverage, for example, of the utilized nursing home service intermediate care. Med

is a heavy user of ICF services, which are less intensiv skilled nursing. Although not оде of the mandatory Med services, ICF services are utilized by each state pro It is expected that Medicare will finally begin to take adv of ICFS as a qualified care site under the new hospice cove

AHCA supports HCFA having the authority and encoura to develop cost-effective and appropriate applications c and other SNF services. Medicare should learn from Med

and close the service gap between its restrictive SNF defin and home health. An example of a cost-effective opport utilizing SNFs and ICFs for Medicare patients receiving chemot or radiation therapy to stay in non-hospital settings. SI nursing and intermediate

care facilities would be well S