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Medicare Announces Increase in Nursing Home Payments July 26, 2002 - The Centers for Medicare & Medicaid Services today announced a 2.6 percent increase in payments to skilled nursing facilities for fiscal year 2003. The increase will result in nearly $400 million more in payments to nursing facilities. The increase reflects higher rates under Medicare's nursing home prospective payment system, which covers certain skilled nursing and rehabilitation care for Medicare beneficiaries recovering from serious health problems. The notice, to be published in the Federal Register on Wednesday, July 31,2002, also codifies an earlier decision by CMS to leave in place for the present time the current classifications system that establishes daily payment rates to nursing homes based on the needs of Medicare beneficiaries. This decision will result in nursing homes continuing to receive an estimated $1 billion in temporary add-on payments next year. Congress has encouraged CMS to make case-mix refinements, as the classification changes are known, in an effort to reimburse nursing homes more fairly and accurately. The case-mix refinements are intended to ensure that Medicare pays appropriately for patients that require more complicated care. After careful review of the available data, CMS determined that the research is not sufficiently advanced at the present time to implement the refinements this year. Today's increase for Medicare skilled nursing facilities will be offset, however, by the expiration of two temporary add-on payments to nursing homes required by Congress. Expiration of the two payments results in a decrease in fiscal year 2003 payments of about $1.4 billion. The combined effect of the $400 increase and the expiration of the temporary payments will result in an estimated net decrease of $1 billion in fiscal 2003 nursing facility payments. The payment updates are based on increases in the cost of care and provisions of three laws-the Balanced Budget Act of 1997, the Balanced Budget Refinement Act of 1999 and the Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000. The BBA established the nursing facility prospective payment system in 1998. Under the system, each facility is paid a daily rate based on the relative needs of individual Medicare patients, adjusted for local labor costs. The individual classification groups are known as the Resource Utilization Groups or RUGs. The daily payment rate covers the costs of furnishing most covered nursing home services, including routine services such as room, board, nursing services, and minor medical supplies; related costs such as therapies, drugs and lab services; and capital costs including land, buildings and equipment. "We are committed to providing high quality care to those in nursing homes," said Tom Scully, administrator of CMS. "We are currently working with Congress to insure that nursing homes payments provide adequate funding for the proper care of nursing home patients."
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