AQNHC Says SNF Cost-Sharing Proposals Could Have Unintended Consequences: Increased Medicare Spending, Worse Beneficiary Outcome

"Savings" Must be Weighed Against Additional Costs to Medicare Program Such as Rehospitalizations

WASHINGTON, Oct. 18, 2011 /PRNewswire-USNewswire/ -- The Alliance for Quality Nursing Home Care, a coalition of 12 leading post-acute and long term care organizations providing skilled nursing care in approximately 1,400 facilities in 44 states nationwide, today warned that proposals to shift skilled nursing facility (SNF) Medicare costs to beneficiaries themselves could have serious unintended consequences, and said ostensibly-achieved "savings" must be weighed against additional costs to the Medicare program, such as rehospitalizations.

"Previous research suggests any savings that result from imposing additional out-of-pocket costs on beneficiaries must be weighed against the additional costs likely to occur in other areas of the Medicare system – particularly hospitalizations – that could increase Medicare expenditures in those areas while leading to poorer outcomes for beneficiaries," said Alan G. Rosenbloom, President of the Alliance. "In addition, imposing higher cost-sharing responsibilities on patients reduces both necessary and unnecessary care."

Medicare beneficiaries currently do not have co-sharing obligations for the first 20 days of a SNF admission, and the Super Committee may be considering implementation of a co-payment for the first 20 days of SNF care under Medicare. The rationale for this first-day SNF co-payment is that it would discourage medically unnecessary SNF utilization.(1) Although there are several sources for this proposal, the Congressional Budget Office (CBO) option paper provides the most detailed proposal. Under the CBO option, the co-payment would be $59 per day. The proposal would shift costs to patients while reducing federal Medicare spending.  


  • Medicare beneficiaries are likely to postpone needed care.  Research demonstrates that imposing higher cost-sharing responsibilities on patients reduces both necessary and unnecessary care - understandably, patients can't distinguish between the two.  
  • Medicare spending for hospital care is likely to increase.  If beneficiaries forego needed skilled nursing care due to first-day cost-sharing, and instead go home prematurely, they will be at higher risk for readmission.  For example, a 10 percent increase in hospital stays would increase Medicare inpatient hospital spending by $5 billion over 10 years.  
  • Cost-sharing can lead to adverse health outcomes in vulnerable populations such as the elderly and chronically ill (e.g., Medicare SNF users).(2)
  • Cost-sharing disproportionately affects lower-income beneficiaries, because the cost-sharing charges represent a higher percentage of their income or other resources. (3)
  • 1 in every 5 Medicare SNF users living in the community does not have supplemental coverage (Medigap, employer-sponsored insurance or Medicaid) and would have to pay the full first-day co-payment out of pocket.
  • Of Medicare SNF users with no supplemental insurance, 65 percent have incomes below $25,000. A co-payment of $1180 for the first 20 SNF days would amount to at least five percent of annual income for these beneficiaries.

1. Although there are several versions of this proposal, the most well known was included in a CBO document, Reducing the Deficit: Spending and Revenue Options.  March 2011.  
2. Manning WG, et al. Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment. American Economic Review, vol. 77, no. 3, June 1987; and Newhouse JP, the Insurance Experiment Group. Free for All? Lessons from the Rand Health Insurance Experiment. Cambridge, MA: Harvard University Press, 1993.
3. Goodell, Sarah and Katherine Swartz. Cost-Sharing: Effects on Spending and Outcomes. Robert Wood Johnson Foundation. Policy Brief No. 2. December 2010.

SOURCE Alliance for Quality Nursing Home Care