Monday, December 12, 2011

A Breakdown on Bad Debt

As 2011 is winding down, everyone, even Congress, is trying to check off their end-of-year to do list. On a federal level, that means extending the provisions that need to be extended and issuing last minute bills before adjourning for the session. That is the case with the recently introduced House legislation you may have seen in the media. While this is not predicted to pass the Senate, the bill includes a provision that could have a disastrous effect on every nursing facility in the country.

Medicare bad debt, a little-understood and little-discussed issue, is cropping up now that it is included in this legislation as a pay-for to help offset the cost of the doc fix. Bad debt is easily explained but not easily resolved, and may only become more difficult in the years ahead.

On its surface, bad debt is fairly simply. Take two sisters – Mildred and Ingrid. Let’s imagine each sister lives in a different state, and Mildred is on Medicare, while Ingrid is on both Medicare and Medicaid. Both fall at home and are admitted into the hospital and then discharged to a skilled nursing facility where they receive comprehensive rehabilitative care. Medicare covers the first 20 days of a SNF stay, but on the 21st day they are required to pay a copayment to the facility. Mildred, who is not covered by Medicaid, must pay this copay - $141.50 in 2011 – out of pocket. Ingrid is not responsible for her copay, as she is a Medicaid beneficiary.

However, Mildred does not pay her copay, and after many attempts by the facility to collect this copayment, they submit it to the Medicare program as a “bad debt.” Medicare reimburses the facility 70% of Mildred’s copay.

As for Ingrid, the state she lives in has a choice – pay the full copayment or pay their typical daily rate for Medicaid nursing facility care. Her state’s Medicaid office chose to pay their daily rate, which is the less expensive option. The nursing facility, which is still caring for Ingrid at the same level of care, now has a hole to fill – the difference of the state’s daily Medicaid rate and the actual cost of the copayment. This is where Medicare steps in. Medicare will now pay 100% of that difference.

But if the House legislation is passed as currently written, every year that percentage of what Medicare will cover will decrease, ultimately hitting 55% in 2015 - and leaving facilities with a hidden tax. Not only does the provision affect dual-eligible reimbursement – those like Ingrid who qualify for both programs – but it reduces bad debt for private payers to 55% as well. So, facilities that have patients like Mildred will no longer receive 70% of their bad debt. The total affect to nursing facilities is devastating - $5 billion over ten years, an amount that our profession cannot afford and cannot recoup.

With the economy remaining stagnant and states facing economic crises, many even choose not to reimburse for bad debt at all – causing even more of a challenge to facilities. The last thing that needs to be added to it is a reduction in reimbursement for an already arguably unfair technicality. As more and more seniors are requiring skilled nursing care, this provision is bad for the patient, bad for the provider and a bad move by Congress.

Check out the impact the House’s bad debt provision would have on each state, and take action today to prevent this drastic cut from taking place.

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