MedPAC recommended a 3% reduction to FY2024 Skilled Nursing Facility Medicare prospective payment rates at its Dec 9th meeting. This recommendation was based upon MedPAC staff analysis on the adequacy of skilled nursing facility Medicare payments looking at comparisons of data for 2020 to 2021. MedPAC staff noted that admissions (-2.4%) and SNF days (-3.7%) were still down compared to pre-pandemic levels. However, SNF total margins were bolstered by state and federal COVID-19 funding and the sequester holiday. SNFs saw payments increase roughly 3% per day over this time period while cost increases averaged 4%. The main finding was that the average Medicare margin among SNFs was 17.2%. Staff expect CMS to increase SNF FY2024 rates by 3.3% after taking into consideration market basket adjustments, CMS adjustments to PDPM and other rate considerations.

Commissioners offered their support for the MedPAC chair’s recommendation to reduce Medicare rates by 3% in FY2024 (which would result in no increase in FY2024 based upon these assumptions) but they also expressed much trepidation about taking this position and the potential impact on the nursing home sector coming out of enormous challenges posed by the pandemic. It was noted that MedPAC’s charge is limited to Medicare program considerations, which in this case is the adequacy of Medicare SNF payments not overall financial health of SNFs, and cannot consider the bigger picture. All agreed that the nursing home financing system is broken but given that Medicare is but 10% of nursing home revenues, at present, even continued cross-subsidization would require substantial funding. In addition, several commissioners expressed interest in doing more to ensure quality and access to services for older adults, working to eliminate disparities and asked how they could help facilitate this within their charge, including raising awareness that the funding system for nursing homes is broken and must be addressed.

Many commissioners also support a desire to see the 3-day stay rule eliminated seeing no purpose for the requirement and noting how its waiver during the pandemic, helped the financial health of nursing homes by allowing Medicare beneficiaries to skill in place. Some commissioners asked if they could weigh in on the 3-day stay elimination but at a minimum, several commissioners wanted to further incentivize the use of the 3-day stay waiver in alternative payment models. The commission is also working on recommendations about a potential Safety Net Index that will be published in spring 2023.  Members should remember that MedPAC’s role is to advise Congress on issues affecting the Medicare program but rarely are those recommendations acted upon.