Deparment of Health and Human Services

OFFCE OF

INSPECTOR GENERAL

INFLUENCES ON MEDICARE'S SKILLED

NURSING FACILITY BENEFIT

t.IlVJCES' 
Richard P. Kusserow 
INSPECTOR GERNERAL 
JUNE 1991 
1-
ollt"..JO  OFFICE OF INSPECTOR GENERAL

The mission of the Ofce of Insptor Genera (OIG), as madate by Public Law 95-452, as 
amended, is to protect the integrty  Deparent of Heath and Huma Serces' (HS) 
of the 
progrs  prgn. 
as well as the health and welfar of beneficiares seed by those  Ths 
statutory mission is caredt ohut  thugh a nationwide networ of audits, investigations, and 
insptions conducte by  OIG operatig components: the Ofce of Audit Serces, the 
inors 
Ofce of Investigations, and the Offce of Evaluation and Insptions. The OIG also  the
Secta of IfS of progr and maagement prblems and remmends coures to cmt 
them. 
OFFICE OF AUDIT SERVICES 
The OIG' s Ofce of Audit Servces (OAS) provides all auditig servces for IfS, either by 
conducting audits with its own audit resours or by oversing audit wor done by others. 
Audits exame the performance of IfS progr and/or its grtes and contrto 
carg 
out their resptive responsibilties and ar intende to provide independent 
IfS progr  orr 
assessments of  and operations in  to reuce waste, abuse, and 
Deparnt 
mismanagement and to promote economy and effciency thughout the 
OFFICE OF INVESTIGATIONS 
cral,  adstrtive 
The OIG' s Office of Investigations (OJ) conducts  civil, and 
IfS  IfS 
investigations of allegations of wrngdoing in  programs or to  beneficiares and of 
unjust enrchment by providers. The investigative effons of 01 lead to crminal convictions, 
admnistrative sanctions, or civil money penalties. The 01 also oversees State Medcaid frud 
progr 
contrl units which investigate and proseute frud and patient abuse in the Medcaid 
OFFICE OF EVALUATION AND INSPECTIONS 
The OIG' s Ofce of Evaluation and Inspetions (OEI) conducts shor-tenn management and 
progr evaluations (called inspetions) that focus on issues of concern to the Deparent, the 
Congress, and the public. The fmdings and reommndations contaned in these inspection 
repons generate rapid, accurte, and up-to-te information on the effciency, vulerabilty, and 
effectiveness of deparenta progrs. 
This repon was prepar in Chicago under the dition of Willam C. Moran, Regional 
Inspector Genera, Ofce of Evaluation and Inspctions and Nataie Coen, Deputy Regional 
Inspector Genera, Ofce of Evaluation and Insptions, Region V. Parcipatig in ths project 
were the following people: 
Project Leader  Headuarters 
John M. Traczyk,  Thomas Noplock, 

Margaret Shell 
Thoma F. Komaniecki Lead Analyst  Deparment of Health and Human Services 
OFFICE 
INSPECTOR GENERAL

INFLUENCES ON MEDICARE'S SKILLED

NURSING FACILITY BENEFIT

~ o;f.RVJCE$' 
Richard P. Kusserow 
INSPECTOR GERNERAL 
'0  OEI-05-89-01590 
".1: a  EXECUTIVE SUMMARY

PURPOSE 
To detenne whether recent changes to the Medicar skilled nuring facilty (SNF) benefit have 
left the program vulnerable to unpredictable growth in expenditurs. 
BACKGROUND 
Medicare policies and procedures used to determne SNF eligibility and program payments have 
undergone few changes since the early seventies. However, as the eighties drw to a close 
several changes occuned in rapid succession. In April 1988, the Health Car Financing 
Admnistration (HCFA) changed the SNF coverage guidelines used by SNFs and fiscal 
intermediares (FIs) to decide which patients qualifed for benefits. Less than 9 months later, in 
Januar 1989, implementation of the Medicare Catastrophic Coverage Act of 1988 (MCCA) 
changed SNF eligibility requirments and reduced out-of-pocket expenses for SNF patients. 
One year later, MCCA was repealed and previous SNF eligibility reuirements reinstated. 
METHODOLOGY 
Durg 
the course of this inspection, we surveyed 60 SNFs, 10 FIs and 10 Medicaid State 
agencies in 10 States. We also analyzed a 1 percent sample of Medicare patients who received 
SNF benefits between October 1, 1987 and June 30, 1990. The sample was analyzed to 
determne whether the guideline changes and MCCA had an effect on SNF admssions, average 
length of stay and Medicar payments. Additional data was obtained from the Monthly National 
Intermediar Benefit Payment Repon for the period Januar 1988 through December 1990. 
FINDINGS 
Medicare payments to SNFs more than trpled between 1988 and 1989. 
The 1988 SNF coverage guideline changes accounted for 27 percent of the increase in 
SNF payments. Smal increases in number of SNF admssions and slightly longer length 
of stays accounted for most of the increase. 
The MCCA had a significant impact on beneficiares, providers and Medicare program 
expenditures and resulted in an increase in Medicare expenditures which exceeded 300 
percent. 
Barng any unforseen changes, it appears unlikely that admissions and payments wil 
return to anywhere near the levels the Medicar program experienced before MCCA.  ........................... ..........,.............  ..
................................. ... ........................ ............. ................. .....". ."...".. ..........
TABLE OF CONTENTS

EXECUTIVE SUMMARY 
INTRODUCTION.................................................. .......... 

............. 1

Purose...... ...........................................................................................................

Background.......................................................................................................... 1

Methodology.. ................ ............ .............. 

FIND IN GS ......, ....................................................................................................... .... 

Medicare payments to SNFs more than trpled between 1988 and 1989. ...........

The 1988 SNF coverage guideline changes accounted for 27 percent of 
the increase in SNF payments. Small increases in the number of SNF 
admssions and slightly longer length of stays accounted for most of 
the increase......... ............ ...... ......  ....... 3 
The MCCA had a signifcant impact on beneficiares,providers and 
progr 
Medicare  expenditurs and resulted in an increase in Medicare 
expenditues which exceeded 300 percent .......................................................... 
Barng any unforseen changes, it appears unlikely that adssions 
and payments will retur to anywhere near the levels the Medicar 
progr 
experienced before MCCA. ................................................................... 
APPENDIX ........................................ ........  ............................................ A
 INTRODUCTION

PURPOSE 
To determe whether recent changes to the Medicar skilled nuring facilty (SNF) benefit have 
left the program vulnerable to unpredictable growth in expenditues. 
BACKGROUND 
progr 
The Medicare  assists patients in paying for extended care services provided by SNFs 
parcipatig in Medicare. These extended car services, commonly called SNF benefits, are 
progr 
covered under Par A of the Medicar  and include varous skilled nuring and 
ar 
rehabiltative services. The covered services provided by SNFs  similar to the services 
received by hospital inpatients, but at a lower intensity of care. 
Medicare assists patients in paying for their SNF car if the beneficiar meets several eligibility 
crteria. The criteria requi a beneficiar to have been hospitazed for at least 3 days before 
adtted 
admssion to a SNF. The beneficiar must be  to a SNF within 60 days of their hospital 
discharge. The admssion must be medically necessar and a SNF would be the best source to 
provide the medical car needed by the patient In addtion to these crteria, the beneficiar must 
be admtted to a certfied SNF which meets Medicare s defmition of skilled. The services a 
patient receives while in a SNF must be provided daly following a physician s order. 
Medicare allows up to 100 covered days of SNF car per beneficiar spell of ilness. A spell of 
illness would begi on the fist day the beneficiar received hospital or SNF services and would 
end when the patient has not been a hospital or SNF patient for 60 consecutive days. 
If a beneficiar is eligible for SNF car, Medicare pays for all covered SNF expenses for the first 
20 days. After the 20th day, patients ar required to pay for par of their SNF care. In 1991 
Medicare beneficiares ' copayments for days 21-100 wil be $78.50. After 100 days 
beneficiares are financially responsible for al of the expenses they incur for SNF care. 
Beneficiares whose personal resources do not allow them to pay for all of the care they need 
often tur to the Medicaid progrm for financial assistance. Total Medicare payments for SNF 
care are minor when compard to total Medicaid and out-of-pocket payments for SNF care. 
Many beneficiares entering SNFs are unable to meet all of Medicare s eligibility requirements 
for SNF coverage. The primar responsibilty for detennning whether a patient might be 
eligible for Medicare SNF benefits falls on SNF personnel. If a SNF believes a patient would 
qualify for Medicare benefits, it submits a claim for payment. 
Most of the decisions made by SNFs concerning SNF eligibility are not questioned by the fiscal 
intermediares (PIs) that adjudicate the claims for the government. About 20 percent of the 
coverage decisions made by SNFs are reviewed for accuracy. The FI reviews are intended to  ensure that SNFs make sound medical necessity decisions concerning whether or not an 
individual patient qualifies for Medicare coverage. The reviews also serve as a deterrent to 
discrinatory submission of claims. 
s clais. 
The Fls monitor the error rate of each SNF'  If a SNF' s error rate remains within 
acceptable toleraces, the SNF is granted what is caled a waiver. If a SNF exceeds the 
tolerances, it will lose its waiver and all of its claims could be subject to PI review. This 
intensified PI review could delay futur payments and might result in the SNF having to return 
money to the program. 
The policies and procedures used to determne Medicar SNF eligibility and program payments 
have undergone few changes since the early seventies. However, as the eighties drew to a close, 
several changes occured in rapid succession. In April 1988, the Health Car Financing 
Admnistration (HCFA) changed the SNF coverage guidelines used by SNFs and PIs to decide 
which patients qualified for benefits. Less than 9 months later, in Januar 1989, implementation 
of the Medicar Catastrophic Coverage Act of 1988 (MCCA) changed SNF eligibility 
requirements and reduced out-of-pocket expenses for SNF patients. One year later, MCCA was 
repealed and previous SNF eligibility requirements reinstated. 
METHODOLOGY 
Durg 
the course of this inspection, we sureyed 60 SNFs, 10 PIs and 10 Medicaid State 
agencies in 10 States. We selected the States at radom, based on a weighted sample of 
Medicare SNF beds in each State. Individual SNFs were selected based on bed size, type of 
Strctud 
ownership and other factors.  discussion guides were used to gather qualitative data 
on respondents ' recollections regarding SNF actions following HCFA' s coverage guideline 
clarfication, and following enactment and repeal of MCCA. 
We also analyzed a 1 percent sample of Medicare patients who received SNF benefits between 
October 1, 1987 and June 30, 1990. The records came from the Medicare Automated Data 
Retreval System which contains a complete Par A and Par B claims history for a patient. The 
sample was analyzed to determine whether the guideline changes and MCCA had an effect on 
SNF admssions, average length of stay (LOS) and Medicare payments. Additional data was 
obtained from the Monthly National Intermediar Benefit Payment Repons for the period 
Januar 1988 through December 1990.  "'.'."..'.. "..."..... '.....'.....' ...'..... ........................................... . ............... . .."............... ................... ....................... ......................-. .......................-....
............................................................................  ....................................  ........
FINDINGS

Finding 1.  Medicare payments to SNFs more than trpled between  1988  and 1989. 
Medicare payments to SNFs more than trpled between 1988 and 1989. In April 1988, HCFA 
revised the guidelines used by SNFs and FIs to determe whether or not a person would be 
eligible for Medicare SNF coverage. The revised gudelines provided a clearr understanding of 
progr 
the tyes of conditions the Medicar  would cover under its SNF benefit and added 
nearly $20 millon to Medcar s average monthly outlay for skilled care. 
Monthly SNF Payments

January 1987 - December 1990

Millons 
$350 
$300 ..........

$250 . 
tiCCA'" ......... . 

$200 .... 
Guideline Change

$150 

$100 
$50 
87  88  89  90 
JFMAMJ JASONDJFMAMJ JASONDJFMAMJ JASONDJFMAMJ JASOND
HCFA 456 
Enactment of MCCA, less than a year later, had an even grater impact on Medicar 
expenditurs for skiled care. The unprecedented $2 bilion expansion in Medicare SNF 
payments under MCCA was due to an incrase in the number of certfied beds, increased 
admssions, changes in coinsurance, increased covered days and longer lengths of stay (LOS). 
Repeal of MCCA, less than a year after its enactment, failed to significantly reduce the amount 
of money the Medicar program spent on skilled car. The changes in the coverage guidelines in 
progr 
1988, coupled with more skilled beds brought to the Medicare  by MCCA, have kept 
Medicare payments for SNF car high.  Finding 2.	 SNF coverage  percent of the in 
The  1988  guidline changes accounted for  27 
crease in SNF payments. Small increases in the number of SNF admissions and 
slightly longer length of stays account for most of the increase. 
In Apri 1988, HCFA revised the guidelines used by SNFs and FIs to determe whether or not a 
person would be eligible for Medicare SNF coverage. The revised guidelines provided a clearer 
understandig of the types of conditions the Medicar program would cover under it' s SNF 
benefit. 
The HCFA revised SNF coverage guidelines for many reasons. By 1988, HCFA was faced with 
ever increasing numbers of coun cases chalenging Medicare SNF coverage decisions. There 
was also growing concern within HCFA over inappropriate coverage decisions made by FIs and 
varation among PI reviewers. These concerns, along with a theatened petition for rulemakng 
that would have left changes in SNF coverage in the hands of the couns, prompted HCFA to take 
action to change coverage guidelines. 
Revised guidelines made it eaier for SNFs to obtain Medicare coverage for some 
beneficiaries. 
Revised guidelines brought the Medicar program some patients whose clinical or functional 
needs were previously addrssed in a different setting or not at all. Diagnosis or prognosis were 
no longer the sole factors in decidig whether or not a patient required skilled care. Even in 
cases where full or panal recovery is not possible, the revised guidelines instrcted FIs to 
consider coverage of skilled services that prevent patient deterioration or maintai a patient 
curnt capabilties. By providing SNFs and PIs with specific examples of the types of 
progr 
conditions the Medicare  would cover under the SNF benefit, SNF and PI coverage 
decisions became less subjective. 
For many patients, the SNF guideline revision did not make pursuing Medicare SNF benefits 
any more am'active than they had been previously. According to some SNFs, some patients 
chose to forego Medicar SNF benefits to avoid extr paperwork or to get other services not 
covered by Medicar, such as in-house laundr services. Other SNFs indicated that many of the 
patients they admtted were not interested in pursuing Medicar benefits when biling and 
reimbursement from Medicaid was much more predictable than under Medicare. 
Other forces also appear to have limted the number of patients who might have benefited from 
Medicare s more permssive coverage guidelines. Many SNFs operate at greater than 90 percent 
capacity and in some areas of the United States, the number of beds available for skiled care 
fals shon of demand. The types of patients likely to benefit from the revised guidelines were 
those who would probably require SNF services for a longer period of time. These long-term 
service-intensive and high-overhead patients may not have been attractive to some nursing 
homes. When Medicare ceased to pay for the entire cost of skilled care for these patients after 
20 days, SNFs would have to collect the cost of care from individual patients or settle for 
Medicaid payments which might not cover costs.  The SNFs and FIs varied in their acceptance of the revised coverage guidelines. 
Medicare encouraged SNFs to  program for patients whose coverage might have been 
bil the 
uncenan in the past. Following the changes to the coverage guidelines, 20 out of 60 SNFs 
interviewed stated that their admssions policies changed and that they actively pursued coverage 
for: (1) nasogastrc, jejunostomy and. gastrostomy patients, (2) insulin dependent diabetics who 
could not self admnister the injection, and (3) patients with multiple medical conditions which 
in the aggrgate, required a skilled level of car. These SNFs, and al of the FIs with whom 
spoke, attbuted the increases they saw in Medicare covered days dictly to the changes HCFA 
made in the SNF coverage guidelines. 
The changes in coverage guidelines did not effect all SNFs. Seven SNFs stated that they 
experienced little or no increases in their payments or admssions after HCFA moded SNF 
coverage guidelines. Severa more reponed that they were not able to meet the medical and 
social needs of patients found in the expanded pool. They felt that they did not have the staf nor 
the equipment to adequately care for the patients, especialy patients fed by tubes. The revisions 
to the SNF coverage guidelines did not provide suffcient financial incentive for SNFs to take on 
overhead to expand their existing capacities for skilled care. 
additional staf and other operating 
Other reasons also provide insight as to why some SNFs did not readily respond to the revised 
guidelines for SNF coverage. Several of the SNFs reportd that FIs were slow to infonn them of 
the guideline revisions. Analysis of data and SNF responses seems to show that the more readily 
an PI adopted the guideline changes and educated providers, the greater the increase in SNF 
admssions and payments. Those PIs that saw the change in guidelines as.not being a 
fundaental change, and made litte attempt to educate providers, saw little or no change in 
admssions or payments for SNF care. 
Some SNFs reponed a cenan amount of distrst of FI information regarding the guideline 
changes. This skepticism on the pan of some SNFs was also observed by some FIs, who 
reponed that they saw a reluctace by providers to bil for services covered under the revised 
guidelines. A few SNFs admtted that they proceeded slowly and cautiously in adopting the 
revised coverage guidelines. They feared loss of their waiver status. And, they did not wish to 
expand their overhead to accommodte the patients found in the expanded pool if the Medicare 
progr 
s commtment to revised guidelines would be shon lived. 
The small increase in SNF admissions, coupled with more covered days of care, 
added $20 millon to Medicare s average monthly outlay for SNF benefits. 
After the April 1988 guidelines revisions, Medicare s average monthly payment for SNF care 
rose 27 percent to $90 milion. Medicar s average monthly payment for SNF care was $71 
milion before the guideline changes. After the guideline changes went into effect Medicare saw 
a 16 percent increase in the number of SNF admissions and a 13 percent increase in the average 
00 
length of a patient s stay. On average, more than 31  patients were admitted to SNFs each 
00 
month after the guideline revision compard to 27, admissions per month before the change. 
The average LOS for the last 6 months of 1988 was 26 days, up 13 percent from the average 
LOS of 23 days before the guideline changes.  The natur of the medical conditions covered by Medicar after April 1988 probably accounts 
for the increase in average LOS. One out of thee SNFs attbuted increases in their Medicare 
covered days to patients fed by tubes, insulin dependent diabetics and patients with multiple 
debilitating medical conditions who often require SNF services for longer periods of time. 
The revised coverage guidelines did not have a uniform impact on all PIs. The average monthly 
SNF expenditur was not the same for all FIs indicating that the revised guidelines had different 
effects in different aras of the countr. Most of the FIs had increases in their SNF expenditures 
rangig from less than 1 percent to over 120 percent. A number of PIs had decreases in their 
SNF expenditues ranging from 3 percent to over 35 percent (See Appendix A). 
Finding 3.  The MCCA ha a signifcant impact on beneficiaries, providers and Medicare 
program expendires and resulted in an increase in Medicare expenditures 
which exceeded 300 percent. 
Less than a year after HCFA revised the SNF coverage guidelines, MCCA was implemented. 
Unlike the coverage guideline changes, MCCA had no impact on the medical conditions needed 
to qualify for SNF care. The MCCA liberalized earlier eligibilty requirments and reduced 
patient out-of-pocket expenses for SNF car. The MCCA: 
day prior hospital stay required before a SNF admission; 
Removed the 

Increased the numer ofSNF das covered by Medicarefrom 100 to 150; 
Eliminated spell of ilness providing a renewed benefit period of 150 days each 
year for any qualifing medical condition; and 
Changed patient coinsurance, reducing patient financial liabilty and shifing 
most of the cost to the Medicare program. 
The cumulative effect of these changes increased Medicare payments for SNF care dramatically. 
The significant reduction in coinsurance during MCCA provided an incentive for 
patients to pursue Medicare SNF coverage. 
The significant reduction in coinsurance during MCCA provided an incentive for patients to 
pursue Medicare SNF coverage. Before MCCA, Medicar paid the entire cost of patient SNF 
care for the first 20 days. After the 20th day, patients paid approximately $67.50 per day in 
coinsurance. A patient receiving SNF benefits for 100 days in 1988 would have paid $5400 in 
coinsurance. Under MCCA, patient out-of-pocket expenses were reduced to $25.50 per day for 
the first 8 days of coverage. The reduced coinsurace for SNF benefits in 1989 lowered a 
beneficiar s total financial liability to a maximum of $204.  ~~~
Out of Pocket Costs 
for a 1 00 day SN F stay

$ 540  $ 20 
$ 5920 
Before MCCA  During MCCA  After MCCA 
The MCCA not only reduced patient financial liabilty but also incrased the number of days 
Medicare would pay for SNF care. Before MCCA, Medicar covered up to 100 days per spell of 
illness. For most patients, permanently confmed to SNFs because of illness, the spell of ilness 
eligibilty requirement meant that in their  would probably never receive more than 
lifetie, they 
100 Medicar covered SNF days. Durng MCCA, patients who qualfied for SNF benefits could 
expect Medicare to pay for up to 150 days of SNF benefits each year. 
Before MCCA, approximately 5 percent of Medicar beneficiares admtted to SNFs had stays of 
100 covered days. Under MCCA, 12 percent of the beneficiares adtted to SNFs had covered 
stays equal to or greater than 100 days. 
The MCCA provided a financial incentive for SNFs to expand. 
Unlike the guideline revision 8 months earlier, MCCA provided a clear financial incentive for 
SNFs to bil Medicare. The financial incentives of MCCA were so strong that some nursing 
progr 
facilities which did not pancipate in the Medicare  reponed having had some of their 
beds certfied for parcipation in the Medicare progr. Other facilities, alady pancipating in 
progr, 
the Medicare  reponed that they increased their skilled care beds. More than 1300 new 
SNFs opened their doors to Medicar beneficiares between June 1988 and Januar 1990. Over 
57,000 additional skilled care beds were certed durg the same period.  New Medicare SNF Beds 
June 1987 - January 1990 
rea8e in SNF; Beds' 
6/87 - 6/88

+1.2% 
6/88 - 6/89

6/89 - 1/90  +2. 
20 
Thousands 
HCFA, 
Bureau of Data Management and Strategy 
durg 
Many of the patients admtted to SNFs  MCCA may have been receiving care in the 
facility before MCCA was enacted. Nearly 75 percent of the SNFs we interviewed reponed that 
they looked at their in-house patient population to see if any patients would qualify under 
MCCA and that most of their incrase in Medcar adssions durng MCCA came from their 
in-house patient population. Admssions from home, doctor s offces and emergency rooms 
were also reponed, but the incidence of such SNF adssions was not significant. 
Repeal of the 3 day hospitalzation requirment made obtaing addtional Medicare SNF 
benefits for qualfied patients aleady residing in nuring homes as easy as moving them from 
noncertfied beds to Medicar certfied beds. Nearly a third of all the patients who received SNF 
benefits in the first quarer of 1989 did not have a prior 3 day hospitalization, indicating that they 
probably were moved from noncenied to cenied beds within a SNF. 
Some SNFs felt they had a legal obligation to purue Medicare SNF benefits for any potentially 
Other SNFs saw it as a financially practical matter when 
eligible patients in their facilties. 
Medicare paid more than other sources. A few reponed that their Medicaid State agency advised 
them to bil Medicare for Medicaid recipients that might qualify under the MCCA. 
no change under MCCA. Most of the SNFs that reported litte or no 
Some SNFs saw litte  ot 
change were either hospital based or specialized in rehabiltation. Hospita based SNFs saw 
almost all their SNF admssions continue to come from the hospital. Other SNFs, especially  those specialzing in rehabiltation, continued to  same type of patient they had before. 
trat the 
The increased pool of patients and additional covered days allowed by the MCCA had minimal 
effect on these facilities. 
Before enactment of MCCA, the pool of Medicar beneficiares potentially eligible for SNF 
benefits was limited. Repeal of the 3 day hospitaization requirement increased the size of the 
pool from which SNFs could select potential admssions. Instead of limiting the pool to the 7. 
MCCA expanded the pool to include the entire 
millon beneficiares discharged from hospitas 
Medicare Par A population which in 1989 exceeed 30 millon individuals. Under MCCA 
every beneficiar in the Medicar program became potentially eligible for 150 days of SNF 
benefits each year, provided they had a qualifying medical condition. 
After MCCA's implementation, Medicare saw an imediate incrase in SNF admssions, 
covered days and LOS. In 1988, roughly 350,00 Medicar patients were admtted to SNFs. In 
1989, that number rose to 585,00, a 67 percent increase. Not only were more patients being 
admtted to SNFs in 1989, they were staying longer. Pror to the enactment of MCCA, the 
average LOS was about 26 days per admssion. In the fit 6 months following the enactment of 
adssion. 
MCCA, the average LOS had risen to 36 days per 
The increases in SNF admssions and longer stays accounted for nearly 87 percent of the $2 
billon increase in SNF spending Medicare experienced durng MCCA. The remaining 23 
percent of the increase in SNF spendig is accounted for by the changes in patient coinsurance 
that accompanied MCCA. 
Finding 4.	 Barrng any unforseen changes, it appears unlikely that admissions and pay
ments will return to anywhere near the levels the Medicare program experienced 
before MCCA. 
The enactment of MCCA provided the catayst which changed the SNF care environment by 
briging more skiled care facilities and beds into the Medicar program. The demand for 
skilled care remains high and it appear that keeping as many beds as possible certfied for 
skilled care would be in a SNFs best financial interest. 
Many SNFs made a considerable investment in the Medicar program durng MCCA. Nursing 
homes which had previously avoided parcipation in the Medicar program were lured into 
certfying some beds for skilled car. Other facilities expanded their cenified beds. Patient 
turnover, in these beds, should keep Medicar payIIent levels for SNF car high. 
The repeal of MCCA has reduced the amount Medicare pays for SNF car to some degree. The 
reduction is primary due to reinstatement of a $74.00 per day coinsurance for skiled care 
coinsurce wil probably deter some patients from pursuing SNF 
exceeding 20 days. This 
progr 
benefits beyond 20 days. This reduction in  outlays, brought about by increased 
coinsurance payments, is likely to be offset by increased use of the certfied beds brought into 
the program during MCCA. Stays are likely to be shoner. Patients wil leave cenified beds 
sooner only to be replaced by other patients.  A fragile mi of interdependent varables influences the future diection of Medicare SNF 
payments. This fragile mix includes: 
increases or decreases in hospital based or specialized SNFs, 
Federal, State and local changes in laws and regulations, 
tightening or relaxing of SNF claim reviews by payers,

changes in coverage and other program policies,

increases or decreases in the numer of certified beds; and,

increases or decreases in the amount paid for SNF care by Medicare, Medicaid

or other payers. 
Growth in Medicare SNF payments should remain predctable as long as these and other external 
and internal forces in the SNF community remain constat.  APPENDIX A

The following table shows the average monthly SNF payments made by 43 PIs. The table also 
shows the percentage of change between periods for these 43 FIs. Only PIs with 48 months of 
data were used in the analysis. The four period used to measur dierences in PIs are: 
pre- the period before HCFA changed 
guideline (January  1987 - April  1988), 
SNF coverage, 
post- the period after the SNF coverage 
guideline (May  1988 - December  1988), 
guideline changes, 
May 1990), the period during which MCCA was in
MCCA (January  1989 -
effect and includes 150 days after the repeal of MCCA, and; 
post- December 1990), the period after the 150 days grace 
MCCA (June 1990 
period mentioned above.

tang 
The percentage change was calculated by  the average monthly SNF payment of a later 
period and subtractig from it the average monthly SNF payment of an earlier period. This 
difference was then divided by the earlier period's average monthly SNF payment. 
The box below shows the lowest and highest percentage change in each period.  PRE- POST  POST 
FISCAL INTERMEDIARY  GUIDE  GUIDE  MCCA  MCCA 
BLUE CROSS OF ALABAM  $211, 179  $150,380  046,998  $855, 
28 8%  596.  18. 
BLUE CROSS OF ARIZONA  $414 673  $590,500  $2,355,279  747,563 
42.4%  298.  16. 
BLUE CROSS OF ARKASAS  $530,867  $630,375  $654 414  $616,065 
18. 
BLUE CROSS OF  $6,777,740  $7,240,019  $14 284,  $15,592,446 
CALIFORN  97. 
BLUE CROSS OF FLORIDA  $869,497  $1,208,013  743,227  $3,956,291 
38.  127. 1 %  44. 
BLUE CROSS OF GEORGIA  $148,  $236,978  $648,003  $766,912 
59.  173.4%  18.4% 
HEALTH CAR SERVICES  $2,394 245  $3,046,749  $6,533,240  $8680663 
ilINOIS  27.  114.4%  32. 
ASSOCIAJD INSURCE  326,312  . $1,767, 164  $5, 160, 192  $5,990,398 
INIANA  33.  192.  16. 
IASD HEALTH SERVICES  $1,466,026  528,349  $2,619,650  $3,028,748 
4.3%  71.4%  15. 
BLUE CROSS OF KASAS  $658,350  $574 895  $1,06,076  $1,311,893 
12.  85.  23.3% 
BLUE CROSS OF KENTCKY  $654 984  $768,767  152 175  796,293 
17.4%  180.  16. 
BLUE CROSS OF LOUISIANA  594 996  740, 192  $3,224 166  $4,034,460 
9.1%  85.  25. 
HAWAII MEDICAL  $203,  $218,299  $551,261  $613,908 
152.  11.4% 
BLUE CROSS OF MAIN  $196,  $350,697  $676,937  $494 760 
78.  93.  26.  BLUE CROSS OF  $630,712  $727,430  321,986  $1,455,373 
MASSACHUSETTS  15.
 81.7%  10. 
BLUE CROSS OF MICHIGAN
 $684,726  $777,685
 $1,410,410  $1,275,590 
13.  81.4% 
BLUE CROSS OF  $747,651  $1,396,780  $6,717, 137  $7,003,025 
MISOTA 
86.  380. 
BLUE CROSS OF  $180,956  $227,582  $406,573  $556,253 
MISSISSIPPI  25.  78.  36. 
BLUE CROSS OF MISSOURI  697,873  $3,06,547  196,201  $7,741 371 
13.  134. 
BLUE CROSS OF MONTANA  $246,585  $239,868  $821 241  $658,555 
242.4%  19. 
BLUE CROSS OF NEBRASKA  $11,347  $14 153  $94 062  $149,015 
24.  564.  58.4% 
BLUE CROSS OF  $122,849  $264,884  $301,338  $375,090 
NEW HASHIE-VERMONT  115.  13.  24.5% 
BLUE CROSS OF  $164,309  $271,847  851,545  $3,767,860 
NEW MEXICO  65.4%  581.1 %  103.5% 
EMPIR BLUE CROSS
 $4,649,  $5, 158,328  $10,732 640  $13,284,002 
NEW YORK  10.  108. 1 %  23. 
BLUE CROSS OF  $418,062  $433,449  525,485  $1,836,555 
NORTH CAROLINA  251.9%  20.4% 
BLUE CROSS OF  $161 865  $204,052  $60,504  $602,553 
NORTH DAKOTA  26.  194. 
COMMTY MUAL  $2, 184,  $2,421 110  $7,800,44 7  $8, 195,512 
INSURANCE OHIO  10.  222. 
BLUE CROSS OF  $912,560  $1,026,987  $985,070  $832 871 
OKLAHOMA  12.5%  -4.  15.5% 
BLUE CROSS OF OREGON
 $643,401  $983,401  740,901  $2,604,584 
52.  178. 
A- 3
 BLUE CROSS OF  $966,754  186,745  $2,611,751  $2,834 427 
PHlADELPHI, PA  22.  120. 1 % 
COOPERATIA  $86,523  $74 995  $109,305  $229, 141 
PUERTO RICO  13.  45.  109. 
BLUE CROSS OF  $189,220  $256,954  $1,279,789  139,088 
RHODE ISLAN  35.  398.  11.0% 
BLUE CROSS OF  $382 787  $353,002  $960,588  $949,288 
SOUT CAROLINA
 172. 1 %  1.2% 
BLUE CROSS OF TESSEE  $1,110,672  $1,224 131  $3,619,678  $3,016,784 
10.  195.  16. 
BLUE CROSS OF TEXAS  $2,304,  $2,524 985  $2,590,484  $3,485,399 
9.5%  34.5% 
BLUE CROSS OF UTAH  $416,283  $508,591  $1,485,970  $1, 105,014 
22.  192.  25. 
BLUE CROSS OF VIGINA  $517,577  $641 153  646,043  $1,620,768 
23.  156.  1.5% 
BLUE CROSS OF  $233,530  $243,951  $759,773  $887, 130 
WEST VIRGINA  211.4%  16. 
BLUE CROSS OF WISCONSIN  $870,318  081,803  $3,090,320  $3,368,907 
24.3%  185. 
BLUE CROSS OF WYOMIG  $34 507  $30,135  $99,205  $146,984 
12.  229.  48. 
TRAVELERS  $2,617,042  $3,809,356  $12,772,469  $13,205, 106 
45.  235.3%  3.4% 
MUAL OF OMA  $7,309,716  $8,556,090  $25,816,096  $24 575,832 
17.  201.7%  -4. 
AETNA TOTAL A  $12 043,225  $14 320,023  $56,863,843  $63,689,235 
18.  297. 1 %  12.