Health Care Reform/Medicare/Medicaid
House Democrats Introduce Physician Payment Legislation
House Energy and Commerce Committee Chair Emeritus John Dingell (D-MMI), along with Ways and Means Committee Chair Charles Rangel (D-NY), Energy and Commerce Chair Henry Waxman (D-CA), and Education and Labor Committee Chair George Miller (D-Calif.), have introduced legislation to avert the scheduled 21.2% reduction in calendar year (CY) 2010 Medicare physician payments. Health Subcommittee Chairs Pete Stark (D-CA), Frank Pallone (D-NJ), and Robert Andrews (D-NJ), also sponsored the Medicare Physician Payment Reform Act of 2009 (H.R. 3961).
The stand-alone bill is based on provisions that were approved as part of the House "tri-committee" bill on health care reform (H.R. 3200). Estimated to cost $210 billion over 10 years, H.R. 3961 eliminates the accumulated "Sustainable Growth Rate (SGR) deficit" associated with the CY 2010 cut and "rebases" Medicare physician payments using 2009 expenditures. In CY 2010, it establishes a conversion factor update based on the Medicare Economic Index. In CY 2011 and subsequent years, the bill establishes two distinct "service categories" that will have separate conversion factors and target growth rates:
- "Evaluation and Management" services (target growth rate of GDP per capita, plus 2 percent)
- All other services (target growth rate of GDP per capita, plus 1 percent)
Before holding a final House vote on the new SGR bill, House leaders plan to add statutory "PAYGO" provisions to H.R. 3961. The language would put into law the requirement that Congress must fully offset any new spending, but the requirement would not apply to the SGR fix. The House approved legislation (H.R. 2920) that accomplished similar goals in July but the Senate has not acted on the bill.
Currently, PAYGO is in place as a rule that can be waived by Congress. While enacting PAYGO is among the House leadership's top priorities, several key Senate Democrats are likely to oppose a PAYGO bill that excludes the SGR fix.
Capital IME Payments Restored, No Coding Offset in FY 2010 IPPS Final Rule
On July 31st , The Centers for Medicare and Medicaid Services (CMS) released the fiscal year (FY) 2010 Medicare hospital inpatient prospective payment system (IPPS) final rule, which reflects several recommendations made by the AAMC. The rule is scheduled to be published in the August 27th Federal Register and will take effect for discharges on or after October 1st, 2009.
Of particular importance to the academic medicine community, the final rule restores the capital indirect medical education (IME) adjustment to payment rates for teaching hospitals effective for FY 2010. Although these payments were scheduled by CMS to be eliminated entirely beginning October 1st, 2009, CMS states that in response to public comments and based on an updated analysis of hospital capital margins, the agency decided that teaching hospitals will continue to receive the full capital IME adjustment in FY 2010.
The final rule implements a 2.1% market basket update. CMS declined to implement a corresponding 1.9% point "documentation and coding" offset. The agency had proposed this offset to remove the effect of increases in aggregate payments caused by changes in hospital documentation and coding practices under the MS-DRG system that do not reflect increases in severity. The final rule states that CMS will wait until it has all the FY 2009 data before considering whether to phase in future adjustments beginning in 2011. The agency predicts that the net effect of the proposed rule will be to increase operating payments by $1.73 billion and capital payments by $171 million in FY 2010.
The final rule also contains several provisions affecting DGME and IME payments. Most importantly, the proposed rule adopts the proposed "clarification" of the definition of "new medical residency training program" when a new teaching hospital is attempting to establish its resident cap for IME and DGME payments. Many hospitals have relied solely on accreditation of a new program by the appropriate accrediting body for purposes of determining whether the program's residents could be included in the resident cap. CMS "clarifies" that the agency will look beyond accreditation to factors, including whether there is a new program director, new teaching staff, and new residents in the program; the relationship between the hospitals; and the degree to which the hospital with the original program continues to operate its own program in the same specialty. In the final rule, CMS also added that it will consider whether the new program was relocated from a hospital that closed and whether the program is part of any existing hospital's FTE cap determination.
Additionally, CMS finalized its proposals to increase flexibility in submission deadlines for new hospitals joining Medicare GME affiliated groups, and to exclude all observation beds from the available bed count used to determine the intern and resident-to-bed (IRB) ratio for IME payment purposes.
In the quality area, CMS made no additions or deletions to the list of conditions included in the Hospital-Acquired Conditions (HAC) program. In the interim, CMS will evaluate the impact of the HAC program in conjunction with the Agency for Healthcare Research and Quality (AHRQ) and the Centers for Disease Control and Prevention (CDC).
The final rule outlines changes to the measures required for reporting under the Reporting of Hospital Quality Data for Annual Hospital Payment Update (RHQDAPU) program. CMS adopted the four additional measures the agency proposed for FY 2011: two surgical infection prevention measures and two structural measures focused on participation in stroke and nursing care registries.
This rule also reiterates CMS's plans to build the infrastructure and develop the measure standards necessary to report quality measures through electronic health records (EHR). CMS currently is working with the Office of the National Coordinator for Health Information Technology to identify and harmonize standards for submission of emergency department, stroke, and venous thromboembolism measures through EHR submission.
Furthermore, the final rule lowered the outlier threshold from what was proposed (from $24,240 proposed, to $23,140 final) and reduced the decrease in the labor-related share (proposed decrease from 69.7% to 67.1%; final decrease to 68.8%). The final rule also contains provisions that affect long-term care hospitals, critical access hospitals, new technology payments, EMTALA waivers, and the wage index.
House Members Sign Letter Opposing IMAC
On July 31st a group of 75 House Republicans and Democrats signed a letter to Speaker Nancy Pelosi (D-CA) voicing their "strong opposition" to the establishment of an "Independent Medicare Advisory Council" (IMAC) as part of health care reform. They urged the Speaker to "reject" legislative language that would create such an IMAC. A concept supported by the Obama Administration and several Members of Congress, the IMAC would be part of the executive branch and operate with limited Congressional input. The IMAC would have broad authority to craft and execute new Medicare policies, including changes to provider reimbursement.
The letter, which was circulated by Rep. Richard Neal (D-MA), expresses concern that the IMAC would "severely limit" congressional oversight of the Medicare program. According to the letter, the IMAC would effectively eliminate the "open and transparent legislative process" Congress uses to improve the Medicare program. As such, beneficiaries and providers "would be greatly limited in their ability to help develop and implement new policies that improve the health care of our nation's seniors."
AAMC comments on Draft House Reform Package -- Medical School Deans and Teaching Hospital CEOs Urge Congress to Increase GME Support
On July 3rd, the AAMC submitted comments on a draft health care reform package issued by the House committees on Education and Labor, Energy and Commerce, and Ways and Means. Committee staff sought comments from stakeholder groups as it works to finalize bill language before the August recess. The AAMC comments praise the committees for working to expand coverage while improving the delivery of health care. In its comments, the AAMC also:
- Urges the House to add AAMC-supported language to increase the number of Medicare-supported GME training slots (H.R. 2251 and H.R. 2350) Opposes language directing the Government Accountability Office (GAO) to evaluate residency training programs (e.g., faculty expertise and curricular requirements) and assess the Accreditation Council for Graduate Medical Education (ACGME) accreditation process;Urges a full repeal of the sustainable growth rate (SGR) used to calculate Medicare physician payments;Expresses strong concern about language proposing a series of major reductions to Medicare and Medicaid hospital payments; and
- Supports provisions to reauthorize Title VII health professions training programs and expand the National Health Service Corps.
Focusing on the training slot issue, the day before, members of the AAMC Council of Deans (COD) and Council of Teaching Hospitals (COTH) sent a letter to members of the three House committees mentioned above and the Senate committees on Finance and Health, Education, Labor, and Pensions (HELP); as well as Congressional leadership; and the Obama Administration urging them to include AAMC-supported legislation to expand Medicare support for GME in any health care reform package. The letter was signed by 156 CEOs and deans from nearly every state including Dean Goldman.
The letter states, "Our medical schools are increasing enrollment but the number of physicians-in many specialties-will not meet the needs of our communities unless teaching hospitals are able to expand graduate medical education (GME) training." The letter continues, "Creating more residency training slots supported, in part, by Medicare is essential to increase the physician supply. We support the recently introduced 'Resident Physician Shortage Reduction Act of 2009' (S. 973/H.R. 2251)." In the letter, the AAMC members express a strong commitment to make comprehensive health care reform a reality.
Hospitals Reach Deal with Administration on Health Care Reform
On July 8th, Vice President Joe Biden announced a joint health care reform agreement with Senate Finance Committee Chair Max Baucus (D-MT.), the American Hospital Association (AHA), the Catholic Health Association (CHA), and the Federation of American Hospitals (FAH). The agreement phases in policies to expand health coverage to 95% of all Americans. To help achieve this goal, Medicare's hospital payment updates would be reduced by approximately $100 billion over ten years. Additionally, the agreement allows for up to $50 billion in Medicare and Medicaid Disproportionate Share Hospital (DSH) payment reductions starting in 2015, depending upon the rate of health care coverage increases. The agreement does not include any reductions in Medicare payments for graduate medical education (GME).
In a statement strongly supporting the agreement, AAMC President and CEO Darrell G. Kirch, M.D., praised the proposal for fulfilling two key AAMC health reform principles: covering all Americans and preserving the current safety net until new ones are in place. He stated that the AAMC greatly appreciates "the thoughtful approach this agreement takes to guarantee that the safety net remains intact during the transition to a better system." Earlier this year, President Obama had called for a nearly 75% reduction in DSH payments, so this agreement staves off potentially greater cuts.
House Releases Draft Health Care Reform Legislation
On June 19th the House of Representatives issued an initial "discussion draft" of its health care reform legislation. The draft "tri-committee" document is a joint product of the three committees of jurisdiction (Ways and Means, Energy and Commerce, and Education and Labor). The committees conducted a series of hearings on the legislation during the week of June 22nd tentative plans to mark-up the same broadly based bill shortly after the July 4th recess. The Congressional Budget Office (CBO) has not yet released the estimated cost of the health reform package.
The committees have invited a variety of stakeholders (including the AAMC) to submit comments on the draft bill language. The AAMC is expected to submit comments shortly. The discussion draft includes several provisions of particular interest to medical schools and teaching hospitals, including:
- A redistribution of unused graduate medical education (GME) training slots, the preservation and redistribution of Medicare-funded GME training slots when teaching hospitals close, and the elimination of regulatory barriers to placing residents in non-hospital settings for portions of their training;
- Medicare physician payment reform that fully eliminates the scheduled 215 cut, establishes a one-year inflationary update in CY 2010, and implements in CY 2011 newly rebased target growth rates for two distinct service categories. The first category includes evaluation and management (E&M) and Medicare preventative services, while the second category includes all other services. The annual target growth rates for the first and second service categories are set at 2% and 1%, respectively;
- The issuance of recommendations (no later than July 1st, 2016) on the "appropriate amount, targeting, and distribution of" Medicare and Medicaid disproportionate share hospital (DSH) payments that "take into account the impact of ... health care reforms;"
- An initiative to reduce "potentially preventable" hospital readmissions, starting in FY 2011;
- The extension of the Physician Quality Reporting Initiative (PQRI) through 2012, along with the creation of incentive payments for counties with low rates of Medicare per capita spending on physician services;
- Legislative language establishing that GME costs would qualify for federal Medicaid "matching" payments. The language also establishes greater accountability for "how such payments are being used;"
- Limits on the creation and expansion of physician-owned hospitals;
- Reauthorization of the Health Resources and Services Administration's Title VII health professions and Title VIII nursing education programs (see related story);
- Allows practitioners to practice part-time in the National Health Service Corps (NHSC);
- A new funding mechanism for certain Public Health Service programs, authorizing appropriators to provide funds from a mandatory Public Health Investment Fund for Title VII, Title VIII, NHSC, and other health programs; and
- A new program providing scholarship and loan repayment for physicians providing "primary health services" and other health professionals that agree to serve in shortage areas designated by the Secretary of Health and Human Services.
Medicare, Medicaid Savings to Fund Major Portion of President's Health Reform Reserve Fund
The President Obama’s budget assumes a health reform reserve fund of over $630 billion over 10 years. Financed in part by $309.1 billion in proposed Medicare and Medicaid savings over 10 years ($2 billion in FY 2010), the reserve fund is considered by the administration as a "significant commitment," but not "sufficient to fully fund comprehensive reform." The President's proposal states that he looks forward to "working with Congress to identify additional resources" to fund coverage expansions and reduce health care costs.
According to the budget summary documents, Medicare legislative proposals contribute $287.5 billion over 10 years to the health reform reserve fund ($520 million in FY 2010). Those proposals include the phase-in of a hospital quality incentive program. The phase-in would begin in FY 2011 by linking 5% of hospital payments to "performance on specified quality measures." By FY 2015, 15% of hospital payments would be linked to such measures. The President's budget assumes that a portion of the payments "not earned back" would be "split equally" between the Medicare Trust Fund and the quality incentive pool. The quality incentive program would save an estimated $2.98 billion over 5 years and $12.11 billion over 10 years.
The Medicare legislative proposals also include a 30% payment adjustment for hospitals with readmission rates for "targeted conditions and procedures" that exceed a national threshold. The budget assumes such action would save $2.45 billion over 5 years and $8.43 billion over 10 years. The adjustment would begin in FY 2012 and apply to patients readmitted within 30 days due to "complication or related diagnosis." Public reporting of hospital readmission rates would begin in FY 2013. Additionally, the President's budget assumes an FY 2013 implementation of bundled Medicare payments for inpatient hospital and post-acute care services (saves $820 million over 5 years and $16.1 billion over 10 years), as well as a prohibition on self-referrals to new physician-owned hospitals (existing hospitals would be "grandfathered," but face limits on expansions). According to the budget documents, a savings estimate for such legislation is "not yet available."
The President's budget assumes a $311.1 billion (over 10 years) "adjustment" to eliminate the 21% reduction in Medicare's CY 2010 physician payments. Intended to "promote more honest budgeting," the one-time adjustment is the administration's "best estimate of what the Congress has done in recent years for physician payments." The budget proposal states, however, that the adjustment "does not suggest it should be future policy." According to the budget materials, the administration "would support comprehensive, but fiscally responsible" physician payment reforms as part of broad health care reform efforts.
The budget assumes $1.5 billion in Medicaid savings over 5 years, and $22 billion over 10 years. It includes legislative proposals to reduce prescription drug payments, increase access to family planning services, and improve Medicaid program integrity.
Finance Committee Continues Discussion of Health Care Reform Options
On May 14th, the Senate Finance Committee released to the public the second of three papers outlining health care reform policy options. The paper focuses on options to provide "affordable coverage" to all Americans. According to the document, the options "are intended to spur discussion," and are not necessarily supported by Chairman Max Baucus (D-MT) or Ranking Member Charles Grassley (R-IA).
The policy proposals include various insurance market reforms, tax credits for the purchase of health coverage by small businesses and low-income families, and several public plan options. The document also includes an option that establishes an individual mandate, requiring that every individual obtains health coverage.
The proposals also include options to "improve public programs." One option changes policies affecting Medicaid Disproportionate Share Hospital (DSH) payments. Under the proposal, the Secretary of Health and Human Services would route Medicaid DSH payments directly to hospitals. The Secretary would determine through regulation services that would be eligible for DSH payments, as well as "appropriate reimbursement rates" for Medicaid services and uncompensated care. Additionally, hospitals would have to submit claims data for uncompensated care.
A "variation" of the DSH proposal would "reallocate DSH funds among states." Another option assumes a "diminish[ed] need" for the Children's Health Insurance Program (CHIP) if "access to private insurance increases."
Preceding the release of the document was a May 12th Finance Committee roundtable, during which a panel of tax policy experts, economists, and health policy discussed possible changes to the health care financing system, such as taxes on health benefits, improved efficiencies of care, and a more competitive insurance marketplace.
Assuming that health care reform would assure that "everyone has health insurance," Senator Grassley stated at the hearing that "presumably hospitals should see a steep decline or the elimination of their uncompensated care." In that context, he suggested that Congress and the Administration revisit the tax-exempt status of hospitals. Reportedly, the Committee's minority counsel on tax issues has previously stated that, under coverage mandates, "presumably you would see uncompensated care rates go down and charity care go down." She has asked what would then be "the primary distinction between a for-profit and nonprofit hospital?... maybe everyone should be taxable."
Senate, House Sign-on Letters Urge Preservation of Capital IME Adjustment
On May 5th Senators Charles Schumer (D-NY) and Pat Roberts (R-KS) sent a bipartisan letter to Centers for Medicare and Medicaid Services (CMS) Acting Administrator Charlene Frizzera, urging her to rescind the regulation eliminating (effective Oct. 1st) the indirect medical education (IME) adjustment under Medicare's capital reimbursement system. The Schumer/Roberts letter was signed by 56 senators including 15 Republicans. Additionally, Senator Arlen Specter (D-PA) sent his own letter opposing the scheduled Medicare IME payment cuts.
In the House, Representatives Richard Neal (D-MA) and Patrick Tiberi (R-OH) plan to send a similar letter. Both letters state that eliminating the IME adjustment "threatens the financial viability of teaching hospitals, which serve a high volume of Medicare beneficiaries and provide critical services unavailable elsewhere in communities across the country."
Finance Committee Hearing Focuses on President's FY 2010 Health Care Proposals
On March 10th, the Senate Finance Committee held a hearing on President Obama's FY 2010 budget health care proposals. While the President's budget proposes a $634 billion investment to reform the health care system, Director of the Office of Management and Budget (OMB) Peter Orszag suggested that "the Administration recognizes that the reserve is not sufficient to fully fund comprehensive reform, and we are committed to working with Congress to find additional resources to devote to health care reform." Orszag outlined the administration's guiding principles for health reform, which include: affordable, quality health care coverage for all Americans, portability of coverage, choice of doctors, prevention and wellness, safety and quality of care, strengthening Medicare through competitive payments, reducing drug prices, improving payment accuracy, reducing readmission rates, and expanding the hospital quality improvement program.
Finance Committee Chair Max Baucus (D-Mont.) expressed the need for "fundamental reform in cost, quality, and coverage. We need to address all three objectives at the same time. They are interconnected." Baucus also stated, "Senator Grassley and I have laid out a schedule … [that] calls for this committee to mark up a comprehensive health care reform bill in June. We should put a health care bill on the President's desk by July 4th."
Recovery Package Includes Medicare and Medicaid Relief
The American Recovery and Reinvestment Act (ARRA contains several Medicare and Medicaid provisions of particular interest to medical schools and teaching hospitals, including:
- An AAMC-supported restoration of the Fiscal Year (FY) 2009 Medicare capital IME adjustment ($191 million). According to the report language accompanying the legislation, the conferees "expect the hospital community to seek a permanent fix in the annual IPPS rulemaking cycle."
- A non-binding "Sense of the Congress" that the Secretary of Health and Human Services (HHS) "should not promulgate as final" the Medicaid proposed rules regarding GME and cost limits/units of government (the "IGT rule").
- In FY 2009, a temporary and retroactive 2.5% increase in Medicaid disproportionate share hospital (DSH) allotments. In FY 2010, Medicaid DSH allotments will reflect a 2.5% increase over FY 2009 levels. After FY 2010, allotments will be determined as though the temporary increases did not occur ($460 million).
- A temporary and retroactive 6.2% across-the-board increase in the federal medical assistance percentage (FMAP, also known as the "Medicaid match"). The increase will apply from October 1st, 2008 through December 31st, 2010. Additional quarterly FMAP increases (ranging from 5.5 percent to 11.5%) will be available to states with significant growth in unemployment. A state's FMAP level may not exceed 100 percent, and states must comply with existing "prompt pay" requirements under Medicaid ($86.6 billion).
Congress Takes Up CHIP Reauthorization Legislation
On January 14th, the House of Representatives voted to pass (289-139) the "Children's Health Insurance Program Reauthorization Act of 2009" (H.R. 2), which would reauthorize the Children's Health Insurance Program (CHIP) through September 30th, 2013. Without Congressional action, CHIP will expire on March 31, 2009.
According to House Energy and Commerce Committee Chair Henry Waxman (D-CA), H.R. 2 is expected to expand health care coverage to an additional 4 million uninsured children. In anticipation of the House vote, the Association of American Medical Colleges (AAMC), along with several other hospital associations weighed in to support H.R. 2.
According to Congressional Budget Office estimates, H.R. 2 would cost $32.3 billion over five years and $65.4 billion over 10 years. The bill is funded by increasing federal taxes on tobacco products and creating a prospective prohibition on self-referrals to physician-owned hospitals. The AAMC supports the ban for addressing inherent conflicts of interest, protecting patient access, and ensuring fair competition in the health care marketplace.
On January 15th , the Senate Finance Committee approved (12-7) similar CHIP reauthorization legislation. However, the Finance Committee bill does not contain language regarding self-referrals to physician-owned hospitals.
Upon passage of H.R. 2, House Speaker Nancy Pelosi (D-CA) stated that "We look forward to bringing this legislation to President Obama's desk as one of the first bills that he will sign." According to a press release from Finance Committee Chair Max Baucus (D-MT), the Finance Committee's bill "is expected to be considered by the full Senate this month so that final legislation may be negotiated with the House of Representatives."
Medicare/Medicaid Archives
