This letter provides State Directors of State Units on Aging (SUAs) with information regarding the CMS decision to reduce Medicare skilled nursing facility (SNF) payments by 11.1% for FY 2012 (a reduction of $3.87 billion). The decision is supposed to create more efficiency in the Prospective Payment System (PPS). The memo describes the implications of such a decision coupled with frozen or reduced Medicaid payments to SNFs and Long Term Care Hospitals (LTCHs).