Scully shares industry insights changes on the horizon.

While the Medicare reform debate is ringing loud in the industry, at least one former Bush administration official doesn't expect it to be resolved in the near future.

Participants of the Executive Circle of the National Investment Center for the Seniors Housing & Care Industries (NIC) recently heard Tom Scully, who headed the Centers for Medicare and Medicaid Services (CMS) during the President Bush's first term, candidly express his thoughts on the direction of the second Bush administration.

Members of NIC's Executive Circle participate in an exclusive quarterly conference call where they hear the latest information from NIC, as well as industry executives who discuss the latest "hot topic" issues.

Scully, currently a senior adviser with the investment firm Welsh, Carson, Anderson and Stowe and senior counsel for the law firm Alston & Bird, addressed a wide range of topics, including the latest on Medicare funding, the proposed performance-based payments for Medicare, Resource Utilization Groups (RUGs) refinements, and he discussed who the dominant government players are in healthcare today.

On the potential passage of a Medicare bill this year, Scully said, "I'm not certain there's going to be a big Medicare bill this year, ... but I think there's going to have to be some kind of package at the end of the year. If there's anything thrown onto it in addition to fixing the therapy caps and the physician updates--which are probably both going to happen--it's likely to be some sort of pay for performance thing.

"So I think the odds of a big Medicare bill happening early this year are not high, but something big may happen late, just like what happened in 2000," he said.

On the proposed reform of Medicaid, the man noted for his instrumental role in passing Medicare reform and Medicare Rx legislation during his tenure at CMS told the call participants that Medicaid is a different story. "It's a hundred times harder than trying to reform Medicare. There are 50 different states and 50 different problems with 50 different state tax bases and economic results, and none of the states look much alike. So trying to come up and say 'let's reform Medicaid' with 50 different state programs is incredibly difficult. And that is unlikely to happen."

Scully was asked about the moving of people who really don't require true skilled nursing care out of nursing homes and into assisted living settings, and its financial implications. "It will open up Pandora's Box," he said. "Theoretically, everyone wants to get out of institutions and go on to assisted living or home health," he said. "Most people don't want to go to the nursing home until they have to. And until they go into the nursing home, it's private pay.

"If the states start paying for home health care or assisted living, they're obviously buying out a ton of private pay care, which they don't want to do. So I think there's a natural huge barrier to the states really going in a big way toward assisted living and home health care because their budget exposure is going to be enormous. Far, far more people are going to go on the state funding for assisted living and home health care if the state pays for it. Whereas, if it is private pay, they won't.

"One way to take pressure off that--and also help the nursing home sector--is to start to find ways to increase the level of private pay and get away from Medicaid spend-down," he said. "And that's really, in my opinion, largely going to come through reverse mortgages. I spent a lot of time pushing that at CMS, but I got so busy on the Medicare bill that I didn't have time to actually get it done."

Asked by one of the Executive Circle call listeners if a special commission should be formed to review long term care in the same way President Bush appointed a bipartisan commission to study Social Security, Scully said, "I've been involved in a lot of commissions, and I'm not sure I believe in commissions.... What you really need is somebody who really

is going to take this thing on and fix it, who is a powerful legislator ... lately it's been House Ways and Means Chairman Bill Thomas."

Scully was very complimentary of the California Republican, but term limits will force him from his Ways and Means leadership position in January, 2007. "I think that the next hope is that the guy who is most likely to replace him is Rep. Jim McCrery of Louisiana, who is very close to Thomas and is a very, very smart guy who cares a lot about health policy," Scully said.

"The best way to get things done is to have a strong, educated, committed, smart, tough chairman of Ways and Means or Finance who wants to shove something through," Scully said. "I think in the long run that the best hope is to educate Thomas or McCrery." He also pointed to Sen. Chuck Grassley, R-Iowa, chairman of the Committee on Finance as key to the long term care industry.

In Scully's opinion, the other key players who have shown an interest in long term care issues include Oregon senators Ron Wyden, Dem., and Gordon Smith, Rep., both members of the Finance Committee, and those who have potential to succeed Rep. Thomas on Ways and Means--Rep. Nancy Johnson R-Conn. and E. Clay Shaw, Jr., R-Fla.

Many other important topics regarding the seniors housing and care industry were addressed, and those who missed the live call can access the recording by visiting the Executive Circle member section of NIC's Web site.

The most recent Key Financial Indicators for the industry and results from NIC's recent SelectExec Poll are also found there. To become an Executive Circle member and join in on the next discussion, visit www. NIC.org. Or call NIC at [phone].

Robert G. Kramer is president of the National Investment Center for the Seniors Housing & Care Industries (NIC), which is based in Annapolis, Md.