What Bleak Medicare Predictions Mean For Skilled Nursing

June 7, 2018, Maggie Flynn, Skilled Nursing News - The Medicare fund that helps pay for skilled nursing care is projected to run out of funds for full benefits three years sooner than predicted last year, according to a financial review by the Social Security and Medicare boards of trustees.

The situation isn’t quite as dire as some headlines have made it sound (one example: “Medicare to go broke three years earlier than expected, trustees say” from Politico).  But it still raises concerns for skilled nursing facilities, Nicole Fallon, vice president of health policy and integrated services at LeadingAge, told Skilled Nursing News.

“It’s the best of times or the worst of times, but there’s no in-between,” she said.  “But there’s been a lot of pressure on SNFs in general.”

The Medicare Hospital Insurance Trust Fund (HI) is projected to run out of money for full scheduled benefits in 2026, according to the annual financial review of the programs.  This is three years sooner than was projected in last year’s report.

The HI is better known as Medicare Part A, and helps pay for hospital services, home health services after hospital stays, skilled nursing facility care, and hospice services.

“After the HI trust fund is depleted in 2026, the share of scheduled benefits that can be paid from dedicated revenues is 91 percent for the remainder of 2026, declines slowly to 78 percent in 2039, and then rises gradually to 85 percent in 2092,” the Department of the Treasury’s fact sheet on the report said.

Several factors played into the change, and actions taken by any government administration will affect the results of the projections, Fallon said.  The Affordable Care Act, for instance, added years to the trust fund’s projected time, she noted.

“Now that we’re retreating from some of that activity, as well as the passage of the tax bill, those actions have led to some of this, because the trust fund depends on payroll taxes,” Fallon told SNN.

The trustees projected that Medicare costs will rise to 5.8% of the gross domestic product (GDP) by 2038 and gradually increase to about 6.2% of GDP by 2092.

While the new projections aren’t an immediate threat to SNFs, if the fund can only cover part of the costs of Medicare and the costs remain the same in the future, Congress and whatever administration is in place will face pressure to reset, Fallon said.

“Usually the most politically palatable solution, unfortunately, is reducing payments to providers,” she said.  “Another alternative is increasing Medicare beneficiary cost share.”

Some of the recently proposed changes to Medicaid, in which the current Congress and administration appear to be interested in making beneficiaries pay a bigger cost share, seem to suggest that the latter solution is a possibility, Fallon said — but she noted that since these projections are annual, there’s time to make adjustments and see the outlook change.

The current administration is likely to see the projections as an opportunity to suggest further reform, she said.  But even that has issues.

“Overall, ‘reform’ has primarily meant cuts, and so we would expect if they were going to address this … usually the first place folks go is provider cuts,” Fallon said.  “And that obviously worries us.”