WASHINGTON, March 23 (UPI) -- Nursing homes may have dodged a bullet when the U.S. Senate reversed Medicaid and Medicare cuts last week, but the worst may not be over for the embattled industry, long-term-care lobbying groups said this week.
Struggling under tight state budgets and beset by hurricanes, long-term-care facilities are in poor financial health, just as the first baby boomers turn 60.
"What we're looking to do is get the economic stability to do a better job," said Bruce Yarwood, president and chief executive officer of the American Health Care Association, a long-term-care industry group, at a congressional briefing on Tuesday.
And while the industry was granted a reprieve in the Senate, the Medicare/Medicaid cuts could still be revived on the House side in the coming weeks, Yarwood told United Press International.
The briefing came just days are the Senate voted not to include a $36 billion cut to Medicare over the next five years in its 2007 budget.
The reduction, originally in the president's budget proposal, would have been achieved by eliminating an automatic cost-of-living increase and by ending federal reimbursement for uncompensated care.
"We got what we thought was one heck of a curveball in the president's budget," Yarwood said. "The government pays for people in long-term care, and cuts in Medicare and Medicaid directly impact what happens to us."
Currently, Medicaid reimburses care providers an average of $125 per day -- just $5 per hour per patient -- and in some states, the figure is substantially lower.
That is not enough to cover expenses, Yarwood said, and nursing homes rely on Medicare rates, which are somewhat higher, to fill the hole.
Moreover, one of the most damaging cuts could take place without any vote at all, said Toni Fatone, executive director of the Connecticut Association of Health Care Facilities.
Since the 1980s, 33 states and the District of Columbia have received approval from the Centers for Medicare and Medicaid Services to charge state long-term-care providers a fee, called a provider tax, to generate much-needed additional revenue.
The 6-percent tax was used by states to secure additional Medicaid matching funds and shore up crumbling long-term-care infrastructure, but a simple regulatory change by the Bush administration could lower the cap to 3 percent, resulting in a first-year loss of $1.57 billion to cash-strapped state Medicaid budgets.
"No state would pass the fee unless it had its back against the wall," Fatone said. Her own state of Connecticut enacted the tax only after two years of tight state budgets, and a corresponding lack of nursing-home reimbursement rate increases, led to a record number of nursing-home closures. "Our Medicaid system was on the verge of imploding," she said.
Due to the fees, there has been an influx of cash and corresponding improvement in facility financial health, she said, but those gains could be reversed if the 3-percent cap is enacted. The Connecticut Medicare program would lose $45 million the first year under the change.
Many nursing-home facilities are still trying to recover from the financial impact of Hurricane Katrina, said Francis Kirley, president and CEO of Nexion Health Inc., which operates 144 facilities in six states, including Louisiana and Texas.
Nexion is still recovering from the $500,000 cost of evacuating all 890,000 affected residents, Kirley said, and every aspect of operations is now more expensive.
"Over the last five months, the cost of doing business in Louisiana has gone up $6 a day," he said.
Wages, which are the greatest bulk of costs, are particularly difficult to manage, he said. The wage for certified nursing assistants, the backbone of the workforce, has increased from $8.50 to $12.50 per hour.
Moreover, in the competition for workers, the industry is having trouble competing with fast-food restaurants that are offering signing bonuses and paying workers $15 per hour.
"We can't find employees, we can't pay them, and they have to be able to find a place to live," he said.
The Medicare and Medicaid programs are also poised to require much more stringent tracking of quality data -- with accompanying quality improvements -- but both of those things will be difficult to achieve, the industry groups said, without enough revenue to cover the cost of capital investments like computers and building improvements.
Patients living in nursing homes, on average, are also becoming older and sicker, Yarwood said, and thus require more treatment, further straining budgets.
But skewed financial incentives are at least partially to blame for the industry's financial woes, said Douglas Besharov, a resident scholar at the American Enterprise Institute, a conservative think tank in Washington.
Changes in demographics have been steadily moving for years and should not require abrupt changes in business models, he told UPI.
What has changed, he said, is the fact that seniors have become increasingly adept at dispersing their assets in order to qualify for government programs like Medicare and Medicaid.
The knowledge that the government programs will be there to pay for long-term care creates a disincentive to purchase private long-term-care insurance, which, if it became widespread, could solve many of the industry's problems, Besharov said.
"I think if people were buying their own insurance policies, they would be more careful about buying coverage that would meet their own needs," he said.
Compounding the problem is the fact that most people do not even think about their future long-term-care needs until it is too late, Yarwood said.
"Long-term care insurance isn't even on young people's radar," he said. "No one even thinks about it until they get close to retirement age and the premiums are high."
But, whatever the solution, something must be done, he said. "This is one of those industries you have to have."
