AHCA’s Summary of the President’s FY 2016 Budget

Today the President released his FY2016 budget proposal. There’s no question that a president’s budget wields considerable influence on how our government sets and defines its priorities, as well as to what Congress should subsequently pay attention. However, any changes must be implemented through the legislative process by Congress.

As it regards our profession, this budget looks similar in many ways to past years. As was true for last year’s budget, the Administration did not include cuts to provider taxes. We applaud President Obama for his continued efforts to protect Medicaid for the hundreds of thousands of our residents who rely on the program for their care.

When it comes to Medicare, however, the budget’s proposed cuts are ill advised. 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 reports from MedPAC that our centers operate on a thin 1.9% margin. AHCA/NCAL will continue to oppose these arbitrary, deep cuts, and we don’t expect them to become law. In the past, our profession has worked with the White House and Congress to offer better ways of finding Medicare savings, and we will continue to do so.

Below is a short summary of the budget provisions in the President’s FY2016 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 2016 through 2025, with the floor set at a rate freeze. The budget reduces market basket updates for all PAC providers, but accelerates SNF cuts beginning with a -2.5% update in FY2016 and a reduction to -0.97% in FY2023. This is projected to save $102.1 billion from 2016-2025.

Reduce Medicare coverage of bad debts
• The President proposes reducing bad debt payments from 65% to 25% for all eligible providers over three years beginning in 2016. This proposal will save approximately $31.1 billion from 2016-2025. This proposal was included in the President’s FY2015 budget.

Implement bundled post-acute care payment
• Beginning in 2020, 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% cut would be applied by 2022. This proposal is projected to save $9.3 billion from 2016-2025.

Implement value-based purchasing for PAC providers
• 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 2017. At least 2% of payments must be tied to the quality and efficiency of care in the first two years of implementation, and at least 5% beginning in 2019. This proposal has no budget impact.

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 $20.9 billion from 2016-2025.

Encourage appropriate use of inpatient rehabilitation facilities
• The President proposes adjusting the standard for classifying a facility as an inpatient rehabilitation facility (IRF) by requiring that at least 75% of patient cases admitted to an IRF meet one or more of 13 designated severity conditions beginning in 2016. The current standard is set at 60%. This proposal is projected to save $2.2 billion from 2016-2025.

Provider Assessments not cut in the President’s Budget:
• As was the case last year, the President’s budget does not propose reducing or eliminating the provider assessments. Since Congress is likely to consider such cuts as an area to save money, it is a positive that the President did not include it in his recent budget.

Structural changes for delivery of long term services and supports:
• The budget includes a number of proposed changes that would promote the use of home and community based services. These proposals were not included in last year’s budget. It is important to note that even if these options were to be passed into law, states would have to choose to include them in their Medicaid program.

Strengthening program integrity

• The budget includes new investments in program integrity totaling $201 million in FY2016 and $4.6 billion over ten years. These investments include continuing to fund the full Health Care Fraud and Abuse Control discretionary cap adjustment, increasing mandatory Medicaid Integrity Program funding, and providing more funding to recovery auditors to undertake more corrective actions that will help reduce improper payments. In total program integrity investments would yield an estimated $21.7 billion in savings to Medicare and Medicaid over ten years.

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 athttp://www.whitehouse.gov/omb/budget/Overview.