[Congressional Record Volume 144, Number 99 (Wednesday, July 22, 1998)]
[Senate]
[Page S8782]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BURNS:
  S. 2342. A bill to amend title XVIII of the Social Security Act to 
exempt certain facilities from the 3-year transition period under the 
prospective payment system for skilled nursing facilities; to the 
Committee on Finance.


       the skilled nursing facility payment fairness act of 1998

 Mr. BURNS. Mr. President, today I am pleased to introduce 
legislation to put more equality into the Medicare payment system for 
skilled nursing facilities (SNFs). The Skilled Nursing Facility Payment 
Fairness Act of 1998 will allow certain SNFs--those which will suffer a 
real cut in Medicare payments--to use a more equitable payment formula 
that more closely reflects their actual costs.
  The Balanced Budget Act of 1997 required HCFA to develop a 
prospective payment system (PPS) for Medicare-covered services provided 
by skilled nursing facilities. Under the PPS, SNFs will be paid a 
single federal per diem rate for all routine, ancillary, and capital-
related Part A costs. For SNFs that participated in Medicare before 
October 1, 1995, there is a three-year transition period to the PPS. 
During this transition period, facilities will be paid a blended rate 
based on a facility-specific rate and a federal rate. In the first year 
of the transition, the blended rate will be 75% of the facility-
specific rate and 25% of the federal rate; in the second year the split 
will be 50%-50%; and in the third year 25%-75%.
  For facilities that have had a substantial change in the level of 
services they provide since 1995, the transitional blended payment rate 
will have a severe impact. And of those facilities adversely affected, 
a significant number are low-utilization SNFs is rural areas. For 
example, facilities in Montana provide fewer services as measured by 
Medicare patient days than the national average. They are hit in two 
ways: first, their utilization levels (length of stay, level of 
acuity), though still low, are higher today than they were in 1995, so 
the facility-specific rate which is based on 1995 cost reports does not 
reflect today's costs; second, the low-utilization facilities are less 
able to absorb Medicare payment reductions and are more likely to drop 
out of Medicare altogether. As a result, rural communities with few 
providers may have no post-hospital services. Patients will then have 
to leave their communities to seek services elsewhere or go without 
these services.
  The bill I'm introducing today will allow facilities to skip the 
transition period and go directly to the more equitable federal rate if 
(1) the Secretary of Health and Human Services determines that the 
facility's level of services has changed substantially since 1995, or 
(2) the facility had fewer than 1500 Medicare patient days in its last 
cost reporting period. By receiving payments based on the federal rate, 
which is adjusted for case-mix, geographic variations in wages, and 
inflation, facilities will be compensated in an amount closer to their 
actual costs. On the other hand, the facility-specific portion of the 
current blended rate bases costs in part on 1995 expenses, which does 
not reflect current costs.
  Rural areas will suffer under the current prospective payment system. 
In Montana alone, cuts in Medicare payments to skilled nursing 
facilities are estimated at $5.6 million in the first year of the 
prospective payment system, which began on July 1, 1998. It will result 
in decreased access to care for Medicare patients as fewer services are 
offered and fewer facilities participate in Medicare. This bill 
provides a straightforward, workable solution and is supported by the 
Montana Health Care Association and the American Health Care 
Association. It will correct the unintended negative consequences of 
the transition to a prospective payment system and restore fairness to 
the process.
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