President Obama Releases His FY2015 Proposed Budget

Given its significance to our members, we are reproducing the content of a communication sent by American Health Care Association President Mark Parkinson on March 4th.

Today, President Obama released his FY2015 budget proposal. AHCA/NCAL will conduct a more detailed review and analysis of the President's budget proposal and keep you informed about our advocacy plans and any assistance we need reaching out to Members of Congress.

As it regards our profession, this budget looks similar in many ways to past years. We are happy to see that the President did not propose any cuts to the provider tax, as had been proposed in some previous years. This year’s budget does propose significant cuts to Medicare, including reducing the market basket, cutting bad debt reimbursement and more. We will continue to strongly oppose the arbitrary, deep Medicare cuts suggested in this budget. The proposed cuts are particularly outrageous given the recent MedPAC report that verified our centers operate on a thin 1.8 percent margin. AHCA/NCAL will continue to oppose these arbitrary, deep cuts and we don't expect them to become law.

It is important to note that introducing budgets such as this is largely a formality in the legislative process, but the President's budget does signal Administration priorities and priorities for many Congressional Democrats. In addition, many of the provisions that affect our profession have little detail to analyze and are broadly worded. Even in light of these facts, we do expect hearings to be held on the President’s budget in the House and Senate Budget committees as well as in the House Ways and Means and Senate Finance committees this week.

Below is a short summary of the budget provisions in the President's FY2015 budget that have direct impact on our profession.

  • Post-acute care market basket cuts

The budget reduces the home health, IRF and LTCH market basket update by 1.1% each year 2015 through 2024, with the floor set at a rate freeze. The budget reduces market basket updates for SNFs, but accelerates SNF cuts beginning with a -2.5% update in FY2015 and a reduction to -0.97 % in FY2022. This is projected to save $97.9 billion from 2015-2024.

  • Reduce Medicare coverage of bad debts

The President proposes reducing bad debt payments from 65 percent generally to 25 percent for all eligible providers over three years beginning in 2015. This proposal will save approximately $30.8 billion over 10 years.

  • Hospital Readmissions

The budget connects SNF payments to reduced hospitalizations. Beginning in 2018, payments to SNFs with high preventable readmission rates would be cut by up to 3 percent. This is projected to save $1.9 billion in the next 10 years.

  • Therapy multiple procedure payment reduction and therapy caps

The President's budget notes the already-enacted reduction to Medicare payments to physicians when multiple therapies are provided to the same patient on the same day. The budget notes that reduction is estimated to save $2.4 billion over 10 years.

The budget also notes the already-enacted extension for the exceptions process for outpatient therapy caps.

While both items are noted, nothing new is proposed for either area.

  • Equalize payment for certain conditions commonly treated in IRFs and SNFS

The budget's proposals include adjusting payment updates for certain post-acute care providers and equalizing payments for certain conditions commonly treated in IRFs and SNFs, which is estimated to save $1.6 billion over 10 years.

Specifically, the President's budget proposes to reduce payment disparities in the IRF and SNF settings for three conditions beginning in 2015:  hips and knees, pulmonary conditions, and other conditions as determined by the Secretary.

  • Implement bundled post-acute care payment

Beginning in 2019, at least half of the payments for LTCHs, IRFs, SNFs and home health services would be bundled. Payments would be bundled for at least half of the total payments for post-acute care providers. A permanent and total cumulative 2.85 percent cut would be applied by 2021. This is projected to save $8.7 billion from 2015-2024.

  • Value-based Purchasing

While it is budget neutral, it is important to note that the President’s Budget implements a value-based purchasing program for several additional provider types, including home health, SNFs, ambulatory surgical centers and hospital outpatient departments beginning in 2016. At least two percent of payments must be tied to the quality and efficiency of care.

  • Strengthen the Independent Payment Advisory Board

The budget requires IPAB cuts to take effect when Medicare spending growth exceeds Gross Domestic Product (GDP) +.5%. Current law is GDP +1%. This is estimated to save $12.9 billion over 10 years.

  • Medicaid

As was the case last year, there are no proposals to reduce or eliminate the provider assessment authority in the President's budget.

As always, AHCA/NCAL will continue to provide you all the latest information on the President's budget proposal, as well as other developments on Capitol Hill. If you'd like to read more about the President's budget, you can view it online

If you have specific questions for AHCA/NCAL, please contact Government Affairs at 202.898.6338.