Medicare Payment For Nursing Home Increases

July 23, 2010.  The Centers for Medicare & Medicaid Services (CMS) announced nursing home payment rates for fiscal year 2011 will increase 1.7%.

This increase will result in an estimated $542 million increase in Medicare payments to nursing homes across the country during the 2011 fiscal year.

Medicare pays nursing home costs typically for short stays notes Jesse Slome, executive director of the American Association for Long-Term Care Insurance.  For longer periods of care individuals must pay from their savings or have long-term care insurance to cover costs.


The Centers for Medicare & Medicaid Services updates the payment rates annually, using a market basket index reflecting changes in the prices of goods and services used to furnish covered care in nursing homes. In addition, CMS makes a forecast error adjustment whenever the difference between the forecasted and actual change in the market basket exceeds a 0.5 percentage point threshold for the most recently available fiscal year for which there is final data. In initially establishing the forecast error adjustment, CMS noted that it would reflect both upward and downward adjustments, as appropriate.


For FY 2009 (the most recently available fiscal year for which there is final data), the estimated increase in the market basket index was 3.4 percentage points, while the actual increase was 2.8 percentage points. This resulted in the actual increase being 0.6 percentage point lower than the estimated increase.


Accordingly, as the difference between the estimated and actual amount of change exceeds the 0.5 percentage point threshold, the payment rates for FY 2011 include a negative 0.6 percentage point forecast error adjustment. This adjustment, when combined with the FY 2011 market basket increase factor of 2.3 percent, yields a net update of positive 1.7% for FY 2011.

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