Contact:
Susan Feeney (AHCA) 202-898-9345
Amy Weiss (AQNHC) 202-203-0448

The Lewin Group Analysis of the Economic Impact of $770 million cutback from Medicare SNF Payment.

Draft memorandum

Date:    May 7, 2008
To:       William Hartung
From:   Namrata Sen, Al Dobson and Nader Hawit
Re:       Economic Impact of $770 million cutback from Medicare SNF Payment

The purpose of this memorandum is to demonstrate the economic impact of the proposed $770 million cutback from Medicare Part A skilled nursing facility (SNF) payments for FY 2009. Nursing homes serve not only the residents and their families, but also their communities in the form of increased economic activity, wages and jobs. Hence, a decline in revenues for nursing homes in the form of Medicare payment cutbacks will have a substantial impact on the local, state and national economies. 
Based on our analyses, we estimate that the proposed “Forecast Error” represents a direct cut of $770 million in FY 2009. Using the IMPLAN model database and software, we estimate that the direct cut of $770 million would result in a total economic impact of $4.5 billion in FY 2009 (refer to Table 1). In addition, the $770 million decline in revenue will impact approximately $1.8 billion in wages, 43,530 jobs and approximately $661 million in tax revenue in the first year. 

Table 1: Economic Impact of $770 million Medicare Nursing Home Payment Cutback on the U.S. Economy in FY 2009

In rural communities, where nursing homes are one of the largest employers, these economic effects are particularly noteworthy. Another consideration is the role of the informal caregivers. If nursing homes cut back on beds or their services are otherwise less available, the burden of care would shift more to informal caregivers. Such a phenomenon would have grave economic consequences in terms of fewer hours worked and expenditure outlays to family caregivers.

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