Long-Term Care Facilities to Lose Millions in Medicare Bad Debt Reimbursement Cuts

Medicare cuts from the Middle Class Tax Relief and Job Creation Act of 2012 that became law in February will cost nursing homes and other skilled nursing facilities millions of dollars by burdening them with “uncollectable” bad debt, a new study finds.

Impact of Payment Reductions on Nursing Facilities, a survey commissioned by the Alliance for Quality Nursing Home Care, found that long-term care facilities in some states will be harder hit under the new law than facilities in other states. The survey, conducted by Avalere Health, found that skilled nursing facilities in 10 states – Florida, Ohio, Illinois, Pennsylvania, North Carolina, Louisiana, Indiana, Tennessee, Georgia, and New Jersey – will lose a disproportionate amount of revenue, a combined quarter-billion dollars under the new law.

Today Medicare reimburses health care providers anywhere between 70 and 100 percent of bad debt from eligible patients who fail to pay their deductible or co-pay bills. Under the new law, that percentage will now be cut to 65 percent across the board. The Alliance estimates that the skilled nursing facility industry across the nation will lose more than $3 billion through 2021.

The cuts in nursing home bad debt reimbursements were put in place to stave off other cuts in Medicare reimbursement, specifically a 27 percent reduction in reimbursements for physicians of Medicare patients that had been slated for March 1.

In a press release announcing the results of the study, Alan G. Rosenbloom, president of the Alliance, claims that the “bad debt” is “uncollectible.” The bad debt represents co-payments and deductibles from the poorest and most disadvantaged of citizens. These debts are within the purview of Medicaid, however state-managed Medicaid reimbursement programs have numerous loopholes in their regulations to avoid reimbursing Medicare co-payments. The Medicare bad debt reimbursement program bridged that gap between the two agencies – until now.

The Middle Class Tax Relief and Job Act reduced those reimbursements, which according to nursing home proponents leave them no way to collect the balance. “[Skilled nursing facilities] have no legal recourse to collect ‘bad debt’ from state Medicaid agencies — and is more accurately described as ‘uncollectible debt’ as mandated by federal law,” Rosenbloom stated.