Under a proposed settlement of the lawsuit, Jimmo v. Sebelius, in the federal district court in Vermont, the U.S. Department of Health and Human Services has agreed to relax Medicare’s requirements for coverage of skilled nursing and therapy services in institutional or home care settings.  This settlement would significantly alter when Medicare would reimburse for services that may be necessary for patients to maintain their current condition.  Under current practice, Medicare will only cover for certain services if they are needed to improve a patient’s condition, but not when the services are needed to maintain or prevent deterioration of the patient’s condition.

If the Settlement is approved, going forward the key condition for coverage will be a demonstrated need for skilled care—regardless of whether or not there is a recovery prognosis.

In the proposed settlement, the Centers for Medicare and Medicaid Services (CMS) would:

• Revise Medicare Manuals to clarify that under skilled nursing facility, home health and outpatient therapy services maintenance coverage standards, coverage of skilled therapy does not turn on the patient’s potential for improvement from the therapy.  Instead, the Manuals would clarify that skilled therapy services to maintain the patient’s condition (or slow any further deterioration) are covered when an individualized assessment of the patient’s condition demonstrates that the specialized judgment, knowledge and skills of a qualified therapist are necessary for a safe and effective maintenance program.
• Revise Medicare Manuals to clarify that skilled nursing facility and home health coverage of nursing care does not turn on the beneficiary’s potential for improvement from the care.  Instead, the Manual would clarify that skilled nursing services are covered when an individualized assessment of the patient demonstrates that the specialized judgment, knowledge and skills of a registered nurse or a licensed practical nurse are necessary.  Skilled nursing services would be covered to maintain the patient’s condition or prevent/slow deterioration as long as the beneficiary needs skilled care for the services to be safely and effectively provided.
• Revise Medicare Manuals to clarify that an inpatient rehabilitation facility claim would never be denied because: (1) a patient could not achieve complete independence with respect to self-care; or (2) the patient could not return to his or her prior level of functioning.

Before the changes will go into effect, the federal judge must approve the proposed agreement—a process that may take months.  After the settlement agreement is approved, CMS will revise the Medicare Benefit Policy Manual and other Medicare manuals to correct all suggestions that Medicare coverage is dependent on a beneficiary “improving.” New policy provisions will state that skilled nursing and therapy services necessary to maintain a person’s condition can be covered by Medicare.  CMS will then undertake a comprehensive nationwide Educational Campaign to inform health care providers.

The changes could lead to increased Medicare reimbursement opportunities for providers of skilled nursing care, home health and outpatient therapy services.