The President's Proposed FY 2011 Budget: Issues Affecting Long Term and Post Acute Care

On February 1, President Obama released his budget for Fiscal Year (FY) 2011. It includes $3.8 trillion dollars of spending and is focused on sparking job creation and building a new foundation for long term prosperity for all American families through targeted investments in education, clean energy, infrastructure, and innovation. Over ten years, the President’s Budget aims to reduce the federal deficit by $1.2 trillion. It also contains a three-year freeze in federal spending for certain areas beginning in 2011, resulting in over $250 billion in savings over ten years.

It is important to note that that President’s Budget serves only as a blueprint for Congress and does not bind the Congress in any way or hold the force of law. Congress will take these recommendations under advisement as the House and Senate craft their own budget resolutions over the next several months.

Regarding Medicare, the President’s Budget does not contain any reductions to skilled nursing facility funding unlike previous years; in fact, it does not include any provider cuts at all. For Medicaid, the President recommends extending the temporary increase in the Federal Medical Assistance Percentage for 6 months (January – June 2011) and suggests an additional $25 billion for this activity.

Please know that we still anticipate cuts to the long term and post acute sector to occur as part of health care reform.

Below are summaries of the provisions of the President’s FY 2011 budget proposal that are of interest to long term and post acute care providers. In many cases, the information below is the entirety of the details provided in the budget proposal.  As more information becomes available, these summaries will be updated.

Medicare and Medicaid

Six Month Extension of Temporary Federal Medical Assistance Percentage (FMAP)  Originally provided through the American Recovery and Reinvestment Act, the budget recommends extending this additional funding from January 1, 2011 through June 30, 2011 and suggests $25.5 billion in additional funding.

Medicare and Medicaid Program Integrity  The President’s Budget recommends a $250 million increase in funding for FY 2011 over FY 2010, for a total of $561 million for combating health care fraud and abuse. Specifically, additional efforts in 13 new locations will be undertaken by the new Health Care Fraud Prevention and Enforcement Action Team (HEAT) task force, a joint venture between the Department of Health and Human Services and the Department of Justice.  Furthermore, the budget also recommends the following seven new initiatives to address fraud and abuse:

1. Modify Medical Review Limitations: Modify existing statutory provisions that currently limit random medical review and place statutory limitations on the application of Medicare prepayment review. This must be done through a legislative change.
2. Establish a CMS-Internal Revenue Service (IRS) Data Match to Identify Fraudulent Providers: Authorize CMS to work collaboratively with the IRS to determine which providers have not filed Federal tax returns to help identify potentially fraudulent providers sooner. This must be done through a legislative change.
3. Extrapolate Medicare Advantage Plan Sample Error Rate to Entire Plan Payment in Risk Adjustment Audits: Clarify in statute that CMS can extrapolate the error rate found in the risk adjustment validation (RADV) audits to the entire MA plan payment for a given year when recouping overpayments. This must be done through a legislative change.
4. Track Drug Utilizers and Prescribers to Reduce Overutilization under Medicaid:  Require States to monitor and remediate high-risk billing activity. This must be done through a legislative change.
5. Consolidate Medical Review: Consolidate medical review activities into fewer Medicare Administrative Contractors (MACs). CMS may do this administratively.
6. Consolidate Medicare Provider Enrollment Activities: Create a limited number of MACs to carry out provider enrollment. Each contractor would enroll providers for designated regions of the country, standardizing the process and creating efficiencies. CMS may do this administratively.
7. Expand Medicare Revocations for Abuse of Billing Privileges: Allow CMS to revoke Medicare billing privileges. CMS may do this administratively.

Demonstration and Pilot Projects CMS plans to not only continue existing research efforts, but also expand its research agenda to additionaldemonstration and pilot project focusing on payment reforms.

Data Improvement Initiative The budget outlines a new Health Care Data Improvement Initiative, for which $110 million is requested. It aims to convert the focus of CMS’ data efforts from processing to analysis and information sharing. Key elements include: improving data timeliness and quality; transformation of payment systems to improve accuracy and allow for value-based purchasing and comparative effectiveness research; collecting, editing, and storing additional Medicare Advantage data; modernizing information technology infrastructure; improving security; and maintaining current systems until the new ones are fully operational. 

Survey and Certification  CMS requests $362 million for survey and certification activities.  While the frequency of skilled nursing facilities and home health agencies surveys will not increase (currently once a year and once every three years respectively), other types of health care facilities will be surveyed more often than at present.

Quality Improvement Organizations (QIOs)The work of the QIOs was highlighted, reinforcing the Administration’s interest in their activities to improve care quality and safety as well as reduce health disparities. Care coordination, reduction of unnecessary hospitalizations, and public reporting remain priorities.

Other Issues

Title VIII Health Care Workforce Development Programs The budget recommends $228 million for investments to increase the capacity of the nurse workforce.

Innovations for Seniors and Those With Disabilities The budget also supports increased collaboration between the Departments of Health and Human Services and Housing and Urban Development to facilitate increased access to home and community based services and housing for seniors and those with disabilities.

Eldercare Initiatives  The budget requests an additional $102.5 million for the Caregiver Initiative under the Administration on Aging, to support caregivers and help keep seniors in their communities.  The funding is broken down as follows: $50 million for caregiver services (counseling, training, and respite care for the families of elderly individuals); $50 million for transportation, homemaker assistance, adult day care, and personal care assistance for elderly individuals and their families; and $2.5 million for respite care for family members of people of all ages with special needs.

Advancing Excellence  The FY 2011 HHS Budget in Brief highlighted our Advancing Excellence initiative as part of successful efforts to reduce the use of restraints. Specifically, it states: “Performance Highlight  CMS has a goal to reduce the use of physical restraints in nursing homes, an indicator of low quality of care in nursing homes. The use of restraints has declined dramatically from the 1996 baseline of 17.2 percent of residents. CMS exceeded its FY 2008 target, achieving an historic low level of 4 percent. This recent success can be attributed to CMS’s major quality initiatives including CMS annual surveys, efforts of the Quality Improvement Organizations, and the national campaign entitled Advancing Excellence in Nursing Homes. The FY 2010 target is 3.8 percent, and the FY 2011 target is 3.7 percent.”

Disaster/Pandemic Preparedness and Response  The budget requests $1.1 billion for disaster preparedness and response programs. In addition, $302 million is requested for current and future pandemic preparedness efforts.

Small Business Incentives  The budget recommends eliminating the capital gains tax for investing in small businesses and extending for six months the provision of the American Recovery and Reinvestment Act allowing for the expensing of $250,000 of certain investments. It also creates a new Small Business Jobs and Wages Tax Cut.

Additional Reporting Requirements on Non-Wage Payments  The budget proposes that the Internal Revenue Service and the Treasury Department issue new regulations that will require additional information reporting by Federal, State and local governments on all non-wage payments used to procure property or services made after December 31, 2010, which would include payments to providers. Certain categories of payments would be excluded, including interest, real property, and intergovernmental payments.

Updated February 4, 2010