Fiscal Cliff Averted; Significant Health Policy Changes Enacted
On January 1, Congress sent President Obama H.R. 8, the American Taxpayer Relief Act, legislation to avert the so-‐called fiscal cliff. This bipartisan legislation (Senate vote 89–8, House vote 257–167) was developed in the Senate in the final days of 2012. In addition to making permanent numerous tax provisions and postponing for two months the scheduled across-‐the-‐ board spending cuts (“sequestration”), the bill contains significant health care provisions.
Section I of this alert summarizes the major health policies and their budget impacts. Section II outlines noteworthy omissions. And Section III provides a brief look at likely health policy legislation in 2013.
I. Health Provisions in H.R. 8The Congressional Budget Office projects that the health provisions in H.R. 8 will increase federal spending by $13 billion in FY2013 and $5 billion in FY2014 but reduce such spending by $16.4 billion in FY2015–FY2022. (Note: due to interaction effects among provisions and with respect to other health policies, the sum of the budgetary impacts below does not match these net impacts.)Extension of Certain Current Policies
Sec. 601. One-‐year extension of Medicare physician payment 0% update (“Doc Fix”). The pending 27% cut to physician reimbursement is eliminated for 2013 through a one-‐year “fix” to the Sustainable Growth Rate (SGR). Cost: $25.2 billion .
Sec. 602–610. Various Medicare extenders. Extension of the 1.0 floor on the geographic adjustments to the work portion of the physician fee schedule through 2013; outpatient therapy service caps through 2013 (extends current two-‐tier therapy cap exceptions process ($1,900 automatic KX modifier process, $3,700 manual medical review, and application of therapy cap to hospital outpatient department for one year); ambulance add-‐on payment (through 2013 for ground ambulance, through June 30, 2013, for air ambulance, and mandated study by Secretary); Medicare inpatient adjustment for low-‐volume hospitals through 2013; and Medicare-‐dependent hospital program through October 1, 2013. Also, one-‐year extension of Medicare Advantage Special Needs Plans and Medicare Cost Contracts, and extension of contract with so-‐called consensus-‐based entity for its services related to performance improvements, with modifications and mandated studies. Cost: $2.5 billion.
Sec. 621–625. Other health extenders. The Qualifying Individual (QI) Program with additional funding allocation, extension of Transitional Medical Assistance (TMA), Medicaid and CHIP Express Lane, Family-‐to-‐Family Health Information Centers, and Special Diabetes Programs extended through 2013. Cost: $1.7 billion.“Pay-‐Fors”
Sec. 631. IPPS documentation and coding adjustment for MS-‐DRGs. Inpatient reimbursement is reduced through 2018 to adjust for past “overpayments” to hospitals resulting from a perceived excess increase in case mix due to the transition to a more sophisticated Medicare Severity Diagnosis Related Groups (MS-‐DRGs). Savings: $10.5 billion (largest health care pay-‐for in the bill).
Sec. 639. Medicare Advantage coding intensity adjustment. The coding intensity adjustment minimum rate is increased by 0.2 percentage points. Savings: $2.0 billion.
Sec. 632. Rebased end-‐stage renal disease (ESRD) bundle. CMS is instructed to rebase ESRD bundled payment in 2014; implementation of oral drugs in the payment bundle is delayed for two years. Savings: $4.9 billion. (Note: while it was generally assumed that CMS had authority to rebase in 2014, GAO recently reported that was not the case. Hence, this provision mandates that CMS take such action, which CBO estimates will save almost $5 billion.)
Sec. 637. Reduced payment for nonemergency ambulance transportation of ESRD beneficiaries. Payment rates for ambulance services for individuals with ESRD obtaining nonemergency basic life support services involving transport is reduced by 10%. Savings: $0.3 billion.
Sec. 633. Reduced multiple service payment for therapy services. Applies the multiple procedure payment reduction (MPPR) to therapy services at 50%, up from 20% for office settings and 25% for facility settings, beginning April 1. Savings: $1.8 billion.
Sec. 634. Reduced payment for stereotactic radiosurgery in certain hospitals. Payments are equalized for stereotactic radiosurgery services provided under Medicare hospital outpatient payment systems other than for rural hospitals and sole-‐community hospitals. Savings: $0.3 billion.
Sec. 635. Increased equipment utilization rate assumption for advanced imaging services. The utilization factor used in setting of payment for imaging services in Medicare is increased from 75% to 90%. Savings: $0.8 billion.
Sec. 636. Competitive bidding for certain diabetic supplies. Competitive bidding is applied to diabetic test strips purchased at retail pharmacies. Savings: $0.6 billion.
Sec. 638. Increased statute of limitations for recovering overpayments. The statute of limitations in sec42 U.S.C. § 1395gg(b) and (c) for recovering overpayments and waiver of liability is increased from three to five years. Savings: $0.5 billion.
Sec. 640. Medicare Improvement Fund. Funding is eliminated for Medicare fee-‐for-‐service Improvement Fund. Savings: $1.7 billion.
Sec. 641. Rebased Medicaid Disproportionate Share Hospital (DSH) payments. Changes from the Affordable Care Act (ACA) are extended for an additional year (through 2022). Savings: $4.2 billion.
Sec. 644. Consumer Operated and Oriented Plan (CO-‐OP) Program. Unobligated CO-‐OP funds from ACA are rescinded; a contingency fund of 10% of the current unobligated funds is established to assist approved CO-‐OPs. Savings: $0.2 billion.Other Provisions
Sec. 642. CLASS Program. The Community Living Assistance Services and Supports (CLASS) program established by ACA is repealed. (Note: HHS had previously suspended implementation of this authority due to budgetary issues.)
Sec. 643. Commission on Long-‐Term Care. A Commission on Long-‐Term Care is established to develop a plan for the establishment, implementation, and financing of high-‐quality systems that ensure the availability of long-‐term services and support for individuals.Beyond the extenders and pay-‐fors, there are other provisions that build on the work of Congress and CMS over the past several years to move toward more “value-‐based” payment. For example, Sec. 609 sets up a process for CMS to develop a performance improvement strategy with stakeholder input. The process this section establishes is similar to Congress’ and CMS’ development of the Hospital Value-‐Based Purchasing system. Such a system may be attached to an eventual SGR reform, as well as further efforts to restrain spending in home health and inpatient rehabilitation facilities (IRFs).
II. Provisions Not Included in H.R. 8H.R. 8 extended numerous expiring Medicare and other health care provisions. However, over the past few years we have seen regular extender provisions fall off the list, even with strong support and advocacy from trade groups and facilities to return provisions such as extension for those hospitals that qualified for area wage index geographic reclassification pursuant to Section 508 of the Medicare Modernization Act of 2004 (MMA) and extension of payment for the technical component of certain physician pathology services. Both of these former annual extenders expired in mid 2012 and were not addressed in H.R. 8. The annual Medicare extender list is shrinking, and if there is ever to be a permanent SGR “fix,” to which the extenders typically attach themselves, an annual list may no longer exist—especially in this budget environment.In addition, the medical device tax, enacted in the ACA, takes effect on January 1, 2013. Efforts to delay its implementation were unsuccessful.
III. Health Policy Legislation in 2013As dramatic as this bill was in the making, it is just a prelude to what is coming in 2013. The broader sequestration, including a 2% cut to all Medicare payments, that had been scheduled to take effect on January 1 has now been postponed until March 1, 2013. And, in a likely reprise of what we saw last year, the debt limit will also require Congressional consideration this spring—late February to mid-‐March. On top of all this, the Continuing Resolution that funds much of the government will need to be extended by the end of March.
We expect the House of Representatives to again try to pursue additional structural reforms to Medicare, such as age of eligibility, and other entitlement spending in conjunction with increasing the debt limit and stopping sequestration. However, even absent structural reform, there are a number of cost-‐saving Medicare provisions that have been floated before and will likely be considered again. For example, there is growing concern about the rise in cost of E&M services in the hospital outpatient setting and the continued viability of provider Medicare bad debt reimbursement.For additional information, please contact our legal staff or government relations and public policy staff or attorneys as follows: Martin Corry, Kelly Lavin or Alex Brill (non-‐lawyer professionals) or Robert Roth (attorney) in Washington D.C. at 202.580.7700; or attorneys John Hellow in Los Angeles at 310.551.8111; Mark Reagan in San Francisco at 415.875.8500; or Stephen Treadgold or Mary Norvell in San Diego at 619.744.7300.
Copyright © 2013 by Hooper, Lundy & Bookman, PC. Reproduction with attribution is permitted.
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