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August 19, 2013

Senate Finance Committee
House of Representatives, Committee on Ways and Means
United States Congress

Submitted electronically to: and

Re: Comments on Post Acute Care (PAC) Reform Proposals

Dear Committee Members:

The undersigned organizations, the Center for Medicare Advocacy, the National Senior Citizens Law Center, the National Committee to Preserve Social Security and Medicare, and the National Consumer Voice for Quality Long-Term Care are all independent, non-profit organizations with extensive experience representing older adults and people with disabilities who rely on Medicare for basic health and economic security.

We recognize the long-term fiscal challenges facing Medicare and our nation’s health care system, and appreciate the need to explore reforms to Medicare payment and delivery systems, including in the post acute care setting.  We stand willing to work with members of Congress to identify health care savings that do not burden American families with added health care costs or compromise beneficiary access to needed care. Towards this end, we support cost saving solutions that build on the efficiencies of the Affordable Care Act and reduce the rate of increase in federal health spending by addressing the systemic causes of health care cost growth.  In these comments we offer suggestions for policy reforms in the post acute setting, including some that are not addressed in the Committees’ PAC document, and raise concern about some the proposals that are raised in the document.

Options for Reforming PAC

Given our focus on Medicare beneficiaries, we provide the following feedback, starting with the last category for which comments were requested.

Beneficiary Protections and Issues

Protect people with Medicare from cost shifting. Any legislative proposal to reform PAC must not be paid for by shifting costs to Medicare beneficiaries.

We urge Congress to first, do no harm:  do not increase costs on Medicare beneficiaries.  Many of the Medicare “redesign” proposals offered by various entities over the last several years have included provisions that would shift additional costs on to Medicare beneficiaries, including further income-relating Part B and D premiums, and increasing the Part B deductible.  Most people with Medicare cannot afford to pay more for heath care. Half of all people with Medicare—nearly 25 million—live on annual incomes of $22,500 or less, and one quarter live on annual incomes of $14,000 or less.[1] Health care costs are already a significant expense for Medicare beneficiaries and are increasing. In 2010, Medicare premiums consumed 26% of the average monthly Social Security benefit compared to only 7% in 1980. Today the average Medicare household spends 15% of their income on health care, three times that of non-Medicare households.[2]

Some of the most potentially devastating cost-shifting proposals, particularly applicable to post-acute care, are those that seek to impost cost-sharing or otherwise restrict coverage in the home health setting.  Such cost-shifting undermines the policy goal of rebalancing long-term services and supports, which seeks to support and encourage care in non-institutional settings.

  • Do not impose home health copays or otherwise restrict home health coverage.  Congress should oppose any copay proposal for Medicare home health services. Congress eliminated the home health copayment in 1972 for the very reasons that it should not be imposed now – such out-of-pocket costs would deter care at home and create incentives for more expensive institutional care.[3]  Further, Congress should also oppose any proposal to cap payments for episodes of care that would reduce beneficiary access or otherwise restrict the number of home health visits to which beneficiaries are entitled.

Ensure beneficiaries are held harmless from payment adjustments.    Because beneficiary premiums and cost sharing are based on overall Medicare expenditures, provider payment adjustments should not lead to increased Medicare spending. Instead, innovative reimbursement and delivery models should be implemented, which reduce Medicare expenditures by incentivizing quality and value, rather than quantity and volume.

Improve beneficiary access to post acute (and long-term) care.  There are a number of policy changes that can be made within the Medicare program to improve beneficiary access to and coverage of post acute care.

  • Eliminate outpatient therapy caps.  Medicare coverage of outpatient therapy is currently capped on an annual basis at $1,900 for physical therapy (PT) and speech-language pathology (SLP) services combined, and $1,900 for occupational therapy (OT) services.  These  arbitrary caps  are aimed at federal cost-savings rather than providing clinically appropriate services, and disproportionately impacts the most vulnerable Medicare beneficiaries who require ongoing therapy services.   At a minimum, the therapy cap exceptions process should be permanently extended and revised. Rather than addressed as an annual “extender” along with Medicare physician payment (sustainable growth rate, or SGR), absent repeal of the cap, the exceptions process should be permanently extended.   Further, the review process for services that exceed $3,700 should be revised. In our experience, the manual review process imposed at $3,700 is extremely burdensome for providers.  As a consequence, it  creates a chilling effect on the willingness of many providers to use  the exceptions process, resulting in beneficiaries with chronic conditions who need ongoing therapy the most going without therapy services until the beginning of the next calendar year.  The court approved settlement in Jimmo v. Sebelius[4] confirms the right of Medicare beneficiaries to therapy to maintain function, slow deterioration and prevent avoidable decline. Limiting Medicare reimbursement for therapy through arbitrary caps and a complicated exceptions process, while not in direct violation of this settlement, undermines beneficiaries’ ability to receive medically necessary maintenance therapy services.
  • Eliminate the three day prior hospitalization requirement for coverage of post-acute skilled nursing facility (SNF) care.  Since this three day requirement was created along with the Medicare program in the 1960s, medical advances have shortened hospital stays, making this arbitrary barrier to SNF coverage even more unnecessary and outdated.   Medicare coverage of SNF services would still have to meet medical necessity requirements, including the need for daily skilled care.  At a minimum, count all days in the hospital – including those spent in “observation status” – towards the three day requirement.[5]  The increased use of observation status in the hospital (when someone is deemed to be an “outpatient” rather than in “inpatient”) has led to many people who spend three or more days in the hospital being denied Medicare coverage of subsequent SNF stays.[6]

Focus incentives on providers.   Many Medicare redesign or reform proposals seek to change both provider and beneficiary incentives to access higher value and lower cost services.  Most proposals that aim to “encourage more appropriate use” or selection of services by beneficiaries unduly place the burden on beneficiaries to reduce health care costs by making wiser choices.  Such proposals often overlook the fact that once beneficiaries seek care and are engaged in the health system, doctors and other medical providers, not patients, generally drive the number and types of services that are delivered.[7]


Quality measurement is a market-based approach to ensuring quality.  The expectation is that patients will be given information and will choose for themselves where they want to receive health care.  The questions under this section ignore a different approach to quality, a regulatory approach that relies on the government to set and enforce quality of care standards.

The federal government sets and enforces quality of care and quality of life standards for nursing facilities.  See Smith v. Heckler, 747 F.2d 583, 589 (10th Cir. 1984)

After carefully reviewing the statutory scheme of the Medicaid Act, the legislative history, and the district court’s opinion, we conclude that the district court improperly defined the Secretary’s duty under the statute.  The federal government has more than a passive role in handing out money to the states.  The district court erred in finding that the burden of enforcing the substantive provisions of the Medicaid Act is on the states.  The Secretary of Health and Human Services has a duty to establish a system to adequately inform herself as to whether the facilities receiving federal money are satisfying the requirements of the Act.  These requirements include providing high quality patient care.  This duty to be adequately informed is not only a duty to be informed at the time a facility is originally certified, but is a duty of continued supervision.

This language was codified and expanded by the federal Nursing Home Reform Law enacted in 1987.  42 U.S.C.§§1395i-3(f)(1 ) (Medicare).  The Medicaid statute is virtually identical.  Id. §1396r(f)(1) (“It is the duty and responsibility of the Secretary to assure that requirements which govern the provision of care in skilled nursing facilities under this title, and the enforcement of such requirements, are adequate to protect the health, safety, welfare, and rights of residents and to promote the effective and efficient use of public moneys.”)

State courts as well recognize the important of the government setting and enforcing standards.  See California Association of Health Facilities v. Department of Health Services, 16 Cal.4th 284, 940 P.2d 323, 65 Cal.Rptr.2d 872, 885 (1997) (“the primary responsibility for enforcing compliance with statutes and regulations governing long-term health care facilities has been given to the Department through its licensing inspection, and citation regime”).

  • Enforce the Nursing Home Reform Act of 1987

Quality of care in post-acute care settings, particularly in skilled nursing facilities, can be improved through enforcement of laws already in place, in particular the regulatory structure of the 1987 Nursing Home Reform Act. We encourage Congress to fully enforce the nationwide quality standards and the state survey and certification process defined in the Act.

  • Reliance on Facility Self-Reporting on Quality is Ineffective

Particularly in the arena of skilled nursing facility quality, self-regulation cannot replace independent surveys and government oversight. Because self-reporting is not an accurate or adequate quality measure, we encourage Congress to promote strong state and federal oversight and support independent post-acute care quality assessment.

  • Incentivize Discharge Planning

Robust discharge planning is vital to ensuring safe and appropriate transitions from acute care settings to post-acute care settings.  Much has been written about how to best incentivize quality discharge planning.  We encourage Congress to include support for discharge planning in any legislative package addressing post-acute care and in particular to provide rigorous oversight and monitoring of discharge planning as a condition of participation in the Medicare program.

  • Alfred Chiplin, Breathing Life into Discharge Planning, 13 Elder L. J. (2005)
  • The Center for Medicare Advocacy, CMS Updates Guidance for Hospital Discharge Planning, (2013) (attached pp. 15-17)
  • Payment Reforms to Incentivize Quality of Care Should Not Mirror Medicare Advantage Bonus Payments

Bonus payments to Medicare Advantage for quality improvement should not serve as a model for payment reforms to incentivize improvement in quality of care. According to a recent Government Accountability Office report, the Medicare demonstration providing bonus payments to Medicare Advantage plans mainly benefits plans whose performance is no more than average. Congress should ensure that payment reforms intended to incentivize quality of care reward more than average performance.


  • The Primary Purpose of Any Uniform Assessment Tool Should Not Be to Pay the Lowest Rate Possible

Assuring accurate and comprehensive assessments so that Medicare beneficiaries get the care and services they need in the appropriate setting of their choice is an important public goal of uniform assessments and could be an improvement over today’s system. However, if paying the lowest rate possible is the primary public goal of uniform assessments, beneficiaries may not be served well and it may create a false sense of savings if costs are simply shifted elsewhere.

  • The Center for Medicare Advocacy, Statement to the Subcommittee on Health, Committee on Ways and Means, U.S. House of Representatives Hearing on Post Acute Care (June 16, 2005) (attached pp. 19-25)

Value Based Purchasing

As noted by the Center for Medicare Advocacy in 2007, “there is little evidence that pay-for-performance systems leads to significant improvements in quality of care for patients … and some evidence that unintended negative consequences occur.”  See The Center for Medicare Advocacy, Value Based Purchasing in Medicare: Just Another Gimmick?  (February 2, 2012), (attached pp. 26-28)

Some of these unintended consequences of value based purchasing and bundling include “increased incentives for selection of the most profitable patients, withholding of patient care, so-called upcoding (that is, coding patients’ conditions so that they trigger higher reimbursements), and fraud, along with the technical difficulties of adjusting for the severity of patients’ illnesses and measuring and monitoring quality.”  Vincent Mor, et al., The Revolving Door of Rehospitalization From Skilled Nursing Facilities Health Affairs, Vol. 29 no. 1 57-64 (January, 2010) (see online version)

Reducing Hospital Admissions

Writing in The New England Journal of Medicine, Joseph G. Ouslander, M.D. and Robert A. Berenson, M.D. recognize the high cost of unnecessary hospitalization of nursing home residents and support the reduction of such hospitalization, but they add a cautionary note:

Multifaceted strategies will be needed to address the current incentives for hospitalization if we are to improve nursing home care and prevent unnecessary hospitalizations, with their related complications and costs. Two caveats are critical. First, not all hospitalizations for conditions that can theoretically be managed outside an acute care hospital are preventable. Second, given fiscal constraints and the dearth of health care professionals trained in geriatrics and long-term care, not all nursing homes have the capacity to safely evaluate and manage changes in the condition of the clinically complex nursing home population. Setting unrealistic expectations and providing incentives to poorly prepared nursing homes to manage such care rather than transferring residents to a hospital could have unintended negative effects on the quality of care and health outcomes.

Joseph G. Ouslander and Robert A. Benerson, Reducing Unnecessary Hospitalizations of Nursing Home Residents, N Engl J Med 2011; 365:1165-1167 (Sep. 29, 2011), (see online version)

Dr. Ouslander developed a tool, INTERACT II (Interventions to Reduce Acute Care Transfers), that can carefully and successfully reduce unnecessary hospitalization of nursing home residents.

However, “the goal of INTERACT is to improve care quality, not to prevent all hospital transfers” and INTERACT “can result in more rapid transfer of residents who need hospital care” (bold font and italics in original, slide 16).  INTERACT‘s goals are to avoid hospitalization that should be avoided and to support hospitalization that is medically necessary.

We have several concerns about reducing hospitalizations as a free-standing goal.

  • First, if nursing homes are encouraged not to hospitalize residents, many residents who need hospital care will be endangered.
    • California Advocates for Nursing Home Reform, Comments on Skilled Nursing Facility Readmission Measure (July 24, 2013) (attached pp. 29-30)
    • National Consumer Voice for Quality Long Term Care, Comments on Skilled Nursing Facility Readmission measure (July 25, 2013) (attached pp.31-33)
    • The Center for Medicare Advocacy, Comments on Skilled Nursing Facility Readmission measure (July 24, 2013) (attached pp. 34-38)
    • California Department of Public Health, Incident/Complaint No.(s): CA00278625, citing nursing facility for failing to hospitalize nursing home resident after staff mistakenly gave a resident another resident’s Methadone.  State imposed the highest fine under state law, $100,000. (attached pp. 39-41)
  • Second, as discussed in the Center for Medicare Advocacy’s comments on the rehospitalization quality measure, any effort to avoid rehospitalization must recognize observation status and other long outpatient stays as types of hospitalizations.  Observation status refers to patients in acute care hospitals being called outpatients, even though, like inpatients, they receive nursing and medical care, diagnostic tests and procedures, therapy, prescription and over-the-counter medications, and food and the patients may remain in a hospital bed for multiple days.  The care provided to inpatients and observation status patients is indistinguishable.    Any effort to reduce hospital admissions must recognize observation status as a hospital admission by another name.[8]​​
  • Third, numerous studies show that improving staffing levels in nursing homes can reduce the perceived (and actual) need to hospitalize nursing home residents.  Dr. Ouslander’s INTERACT II tool demonstrates the need for better staffing as do additional studies cited in the Center’s Weekly Alerts, attached here:

Bundled Payments

Hospitals receiving a bundled payment that includes post-hospital care for 30 days following discharge should be motivated to conduct good discharge planning and to identify the appropriate setting.  However, as noted by Judy  Feder, bundled payment for a set of services “potentially promotes skimping on care or avoidance of costly patients.”   Judy Feder, Bundle with Care – Rethinking Medicare Incentives for Post-Acute Care Services New England Journal of Medicine (August 1, 2013) (see online version).

As noted above under Value Based Purchasing, some of the unintended consequences of value based purchasing and bundling include “increased incentives for selection of the most profitable patients, withholding of patient care, so-called upcoding (that is, coding patients’ conditions so that they trigger higher reimbursements), and fraud , along with the technical difficulties of adjusting for the severity of patients’ illnesses and measuring and monitoring quality.”  Vincent Mor, et al., The Revolving Door of Rehospitalization From Skilled Nursing Facilities, Health Affairs Vol. 29 no. 1 57-64 (January 2010), (see online version).

Site Neutral Payments

We are wary of site neutral payments in the PAC setting.  A main premise of site neutral payments is that the same level and quality of care is provided to the same individuals across different care settings with the same outcomes achieved and therefore payment, regardless of setting, should be the same.   We disagree with this premise.

As the Center for Medicare Advocacy noted earlier this year regarding a site neutral payment proposal in the  President’s FY2014 Proposed Budget,

Equalizing payments between IRFs and SNFs is poor policy.  Rate equalization will result in Medicare beneficiaries being denied medically necessary care and is unlikely to achieve the cost savings anticipated.  Although IRFs and SNFs may treat some patients with similar conditions, the care that they provide, and their patient outcomes, are different.  Compared to patients in SNFs, patients in IRFs have shorter lengths of stay and better outcomes at discharge and are more likely to be discharged to home (rather than to another health care setting).[9]  Recent reports by the Inspector General[10]  and the Department of Justice’s intervention in litigation against SNFs for fraudulent billing of therapy[11]  underscore SNFs’ overbilling Medicare and the frequent inadequacy of therapy in the SNF setting.

The Center for Medicare Advocacy, The Impact of the President’s Budget on People Who Depend on Medicare and Social Security (April 11, 2013) (attached pp. 55-60)

Also see the Center for Medicare Advocacy’s 2007 Weekly Alert describing the phase-in of the “75% rule” that requires 75% of an IRF’s patients to have one or more of 13 specified conditions and otherwise require intensive rehabilitation services.


We appreciate the opportunity to provide feedback on reforming Medicare’s coverage of and payment for post acute care.  We urge Congress to place the needs of beneficiaries, as discussed above, at the forefront of any reform efforts.


Center for Medicare Advocacy
The National Senior Citizens Law Center
The National Committee to Preserve Social Security and Medicare
The National Consumer Voice for Quality Long-Term Care

[1] J. Cubanski, “An Overview of the Medicare Program and Medicare Beneficiaries’ Costs and Service Use” (Kaiser Family Foundation: February, 2013)
[2] Kaiser Family Foundation, Policy Options to Sustain Medicare for the Future (January 2013).  Also see Leadership Council of Aging Organizations (LCAO) Fact Sheet “Medicare Beneficiary Characteristics and Out of Pocket Costs” (May 2013), available at:
[3] See Leadership Council of Aging Organizations (LCAO) Issue Brief “Medicare Home Health Copayments: Harmful for Beneficiaries” (December 2012), available at:
[4]  Jimmo v. Sebelius, No. 11-cv-17 (D.VT), filed January 18, 2011.  Settlement approved January 24, 2013.  For more information, see:
[5] A bill currently before Congress would count all days spend in a hospital towards the three day stay requirement: “Improving Access to Medicare Coverage Act” (H.R.1179, S. 569). 
[6] For more information about observation status and the impact on Medicare beneficiaries, see Center for Medicare Advocacy website:
[7] See, e.g, National Association of Insurance Commissioners (NAIC), Senior Issues Taskforce, Medigap PPACA (B) Subgroup,  “Medicare Supplemental Insurance First Dollar Coverage and Cost Shares” (October 2011), available at:
[8] See additional information on observation status at
[9] This Weekly Alert cites to the CMA Weekly Alert from 3/8/07, referenced above.
[10] Office of Inspector General, Inappropriate Payments to Skilled Nursing Facilities Cost Medicare More Than a Billion Dollars in 2009, OEI-02-09-00200 (Nov. 2012),
[11] United States of America v. Life Care Centers of America, Civil Action No. 1:08-CV-251, Civil Action No. 1:12-CV-64 (E.D. Tenn. Nov. 28, 2012),

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