White House: Site-Neutral Payment System for Post-Acute Care Would Save Medicare $100B

The Trump administration’s proposed fiscal 2021 budget, released Monday, put a price tag on a long-floated plan to unify Medicare reimbursements for post-acute services under a single, site-agnostic system: more than $101 billion over a decade.

“The budget prioritizes use of the trust funds to pay for seniors’ healthcare and incentivizes quality and efficiency in Medicare,” the White House’s budget document — known as “A Budget for America’s Future” — reads. “The budget proposes to align payments for post-acute care with patients’ needs and the most clinically appropriate site of care, while expanding access to telehealth services. The budget would extend the solvency of the Medicare program by at least 25 years for America’s seniors.”

The exact line item in the budget refers to savings gained from addressing “excessive payment for post-acute care providers by establishing a unified payment system based on patients’ clinical needs rather than the site of care.”


The annual savings would start out slow, with $3.1 billion achieved in the hypothetical model’s second year, but then accelerate to nearly $17 billion by the end of the decade, according to White House projections.

The change isn’t at the center of the Trump administration’s attempts at aggressive spending reductions on social programs, which include $130 billion in cuts related to Medicare prescription drug costs and $292 billion in savings related to the implementation of work requirements for Medicaid benefits and food assistance, according to analyses in the Wall Street Journal and other publications.

But the inclusion of a site-neutral post-acute payment model in the budget document illustrates the kind of upheaval that the change could bring to the skilled nursing industry should it ever become law.


Long championed by groups such as the Medicare Payment Advisory Commission (MedPAC), a hypothetical one-size-fits-all payment for nursing homes, home heath agencies, inpatient rehabilitation facilities (IRFs), and long-term acute care hospitals (LTACs) would eliminate the sometimes vast differences in government reimbursements across the settings — a move that its supporters say would reduce waste while also potentially improving care.

“There is considerable variation in the supply and use of PAC providers across the country, as well as an absence of evidence-based criteria guiding decisions about which patients require PAC, which PAC setting is most appropriate for a given patient, and how much care is needed,” MedPAC wrote in a June 2016 report on the subject. “These factors undermine clear policies to guide PAC placement decisions.”

It’s important to note that the White House’s annual budget proposal represents more of a wish list than an actual projection of federal spending: Congress must approve any final budget, and presidential administrations use the documents as a starting point for negotiations. In past years, the Trump administration has pitched staggering Medicare and Medicaid cuts that did not ultimately come to fruition.

In addition, the White House’s savings figure of $101.45 billion assumes that a unified post-acute model would be the law of the land by fiscal 2021, which begins this coming October 1 — essentially an impossible task, given that the new Patient-Driven Payment Model (PDPM) for nursing homes alone took about 18 months from proposal to reality.

But with its focus on resident need rather than the volume of therapy provided, PDPM can be seen as a step toward bringing traditional Medicare fee-for-service payments into the value-based future that the Centers for Medicare & Medicaid Services (CMS) has frequently touted as necessary.

Coupled with the Patient-Driven Groupings Model (PDGM) for home health agencies, some leaders have used the PDPM shift to sound the alarm about the inevitability of a unified post-acute system, whether it arrives in years or decades.

“That sort of blinders-on way of looking at the post-acute care continuum is dangerous, because the regulators and the payers are not looking at it that way,” Bill Goulding, lead consultant at Aegis Therapies, told SNN earlier this month. “They’re clearly moving towards a setting-agnostic payment system. And the patients don’t experience it that way either. It is part of the continuum.”

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