Health Care Reform/Medicare/Medicaid
Representatives Schock and Schwartz Proposal Offers Progress toward GME Reform
According to the Association of American Medical Colleges (AAMC), the “Physician Shortage Reduction and Graduate Medical Education Accountability and Transparency Act” introduced by Representative Aaron Schock (R-IL) and Allyson Schwartz (D-PA) is a significant step toward easing the nation’s doctor shortage crisis.
The bill, H.R. 6352, would expand the number of residency training positions supported by Medicare by 15,000 slots. The proposal also would establish transparency and accountability measures to demonstrate the extent that resident training programs address priorities for improving patient care, such as providing training in a variety of settings, using health information technology, and developing interdisciplinary care teams.
“The new residency positions created by this legislation, along with the thoughtful approach to achieving transparency and accountability for graduate medical education, represent the beginning of a comprehensive strategy to make sure Americans have access to the care they need,” said Darrell G. Kirch, M.D., AAMC president and CEO.
According to AAMC estimates, the United States faces a shortage of more than 90,000 physicians by 2020 – a number that will grow to more than 130,000 by 2025. While the nation’s medical schools are on track to increase enrollment by 30% by 2016 to meet the needs of a growing and aging population, the overall supply of U.S.-trained physicians cannot increase without more residency training slots. Congress capped the number of residency training positions supported by Medicare fifteen years ago this month with the passage of the Balanced Budget Act of 1997. Recent proposals to reduce the deficit, such as the Simpson-Bowles plan, call for reducing federal funding for GME, which will worsen the physician shortage.
“The significant shortfall in trained doctors and medical professionals will only continue to grow if we don’t begin to address the problem now,” said Congressman Schock. “The primary way our country can address the physician shortage is by ensuring we increase the number of graduate medical education slots. By doing so, we are increasing the number of medical school graduates who will receive hands-on training in a patient setting and gain the experience needed to become a practicing physician.”
“Our nation’s graduate medical education system trains the world’s best physicians who serve patients in practice settings ranging from renowned teaching hospitals, to community hospitals, to small primary care practices across the country,” Congresswoman Schwartz said. “This bipartisan effort reflects the pressing need for reforms to our nation’s graduate medical education system that will not only expand training capacity, but also improve the quality of physician training in this country.”
The legislation would result in 4,000 new U.S. doctors each year for the next ten years. While this is only one-third of the estimated number of physicians needed to avert the shortage, medical schools and teaching hospitals also are implementing new, innovative models to improve the efficiency of care delivery, Dr. Kirch added.
AAMC Submits Comments to Ways and Means Committee on SGR Replacement
On May 25th the Association of American Medical Colleges (AAMC) submitted a comment letter to the House Ways and Means Committee in response to the committee’s request for input from the physician community regarding how best to replace the sustainable growth rate (SGR) formula and move towards a Medicare physician payment model that incorporates value-based measures and practice arrangements that improve health outcomes and efficiency. The request was similar to the call for reforms to the SGR in March 2011 but sought more detail on ways to reward physicians for cost and efficiency, alternative payment models, engage patients, and address regulatory relief.
The AAMC letter states that “AAMC members actively are participating in new payment models including the Pioneer Accountable Care Organizations (ACOs), the Medicare Shared Savings Program, and the Bundling Payments for Care Improvement initiative. In addition, academic medical centers received half of the [Department of Health and Human Services (HHS)] Health Care Innovation grants that were awarded.” The letter also stresses, “Each of these programs is in its infancy and should be given time to develop and be evaluated before Congress considers changes based on the concepts that they are testing.”
The letter states that the goal “should be the creation of a payment system that adequately compensates physicians based on such factors as the services provided, complexity of the patients served, and geographic area where the physician practices, while accounting for increased costs due to inflation.” The AAMC also recognizes the efforts at the Centers for Medicare and Medicaid Services (CMS) to implement several programs that move toward pay-for-performance or a system that pays for value. The letter cautions, “While the AAMC supports measuring the cost and quality of services provided, we are concerned that several technical issues related to the physician value modifier have yet to be resolved. Many private payers have implemented successfully pay-for-performance programs, but they do not work under the same constraints as CMS.”
Finally, the letter also raises concerns that CMS is unable to duplicate private payers’ models as they “do not need to work within the budget neutrality constraints of the physician value modifier, and can provide ‘upside only’ models that allow practices to be incentivized to meet certain cost and quality targets.” The letter continues, “In contrast, the CMS physician value modifier is based on relative performance, which leaves open the possibility that a financial penalty can be imposed despite improved performance of a physician or group practice.” The AAMC urged Congress “to take into account the numerous challenges related to this value modifier as it considers alternatives to the SGR update.”
MedPAC Recommends SGR Repeal
On October 7, 2011 the Medicare Payment Advisory Commission (MedPAC) approved, by a 15-2 vote, a recommendation to repeal the Sustainable Growth Rate formula (SGR) and to pay for the repeal through the Medicare program. The recommendation would freeze payment rates for primary care services for ten years and decrease payment rates for other services by 5.9% for the first three years and then freeze them for the next seven years. The approved recommendation is similar to the draft discussed during the September meeting.
The reductions to physician services would decrease the cost of repealing the SGR from approximately $300 billion to $200 billion over ten years. The commission also produced a list of potential offsets to cover the remaining, but cautioned the offsets were not part of the formal recommendation.
Commission Chair Glenn Hackbarth, J.D., noted that MedPAC has recommended repealing the SGR formula since 2001; however, he felt that being “on the record” for SGR repeal was no longer sufficient and that the commission needed to provide a fiscally responsible way to replace the SGR. Hackbarth also noted that Congress ultimately is responsible for determining who pays for the repeal and that it can choose to fund the SGR repeal outside of Medicare.
Most commissioners expressed reservations with the proposal, yet acknowledged the importance of repealing the SGR. Two commissioners, Karen Borman, M.D., and Ronald Castellanos, M.D., both practicing physicians, opposed the recommendation, expressing concerns about potential unintended consequences. Dr. Borman also noted that the recommendation did not go through traditional MedPAC analysis and discussion. Representatives from several physician organizations also expressed opposition to the proposal.
The commission also passed three other recommendations. Two focused on improving the accuracy of the physician fee schedule through better data collection and identifying overpriced services. The final recommendation would use financial incentives to encourage physicians and other health professionals to participate in accountable care organizations.
New York Congressional Delegation Urges Protection for Graduate Medical Education
Representatives Eliot Engel (D-NY, Michael Grimm (R-NY), Christopher Gibson (R-NY), and Joseph Crowley (D-NY) led a bipartisan letter, signed by all members of the New York delegation, to the Joint Select Committee on Deficit Reduction, often referred to as the “Super Committee”. The September 16th letter expressed strong opposition to cuts to Medicare and Medicaid providers, specifically cuts to Graduate Medical Education (GME). This would affect funding for teaching hospitals and essential Medicaid services, which will have a serious impact on patient care and the economy.
“I understand the challenges the so-called ‘Super Committee’ is facing, and their task is not enviable.” said Congressman Engel, a senior member on the House Energy and Commerce Committee’s Subcommittee on Health. “However, deep cuts to Medicare and Medicaid would be devastating to New York’s economy. Statewide, hospitals are the largest employers in many communities. In addition, these reductions in funding would cripple our providers’ ability to maintain the exceptional quality of care enjoyed by our citizens. Cuts to Medicare-supported GME for our teaching hospitals are especially worrisome, as these hospitals not only train our next generation of physicians, but also provide highly specialized care not found in community hospitals. Teaching hospitals also provide the vast majority of uncompensated care to New Yorkers in need. I fear the consequences for doctors, patients and administrators are almost too terrible to fathom.”
"I am encouraged that the entire New York delegation was able to come together to protect Medicare and Medicaid providers and the patients they serve, proving that this is not about being a Republican or a Democrat, it’s about our constituents,” added Congressman Grimm. “While all savings should be on the table, we cannot forget that our hospitals, doctors’ offices, and nursing homes are vital economic engines to our community. They support more than 686,000 high quality jobs in our state, for the common good of providing a high quality of life for our families and neighbors. This letter to the 'Super Committee' is a reminder of the long-term value of this funding in sustaining patients’ access to health care and our country’s economic growth."
“New York’s teaching hospitals are part of our state’s economic backbone, but they are far more than economic anchors and top rate employers. They educate and prepare a large portion of our nation’s future physician workforce and provide cutting edge medical care to thousands every day. I know the mission of the Joint Select Committee on Deficit Reduction is a difficult one, but I hope they take stock of what is at stake if cuts are made to these critical medical institutions – jobs will be lost, medical services will be diminished and our physician shortage will be exacerbated,” said Congressman Crowley, a member of the Ways and Means Committee which has jurisdiction over Medicare.
With a nationwide physician shortage, expected to reach 130,000 physicians by 2025, hindering teaching hospitals’ ability to train new doctors is counterproductive. An aging population and diminishing physician population demands an influx of young doctors. Cuts to GME would not only force New York’s teaching hospitals to cut back on training doctors, but also reduce services to patients. Currently, one out of every seven physicians is trained by New York’s teaching hospitals.
Following the reduction of Medicaid Disproportionate Share Hospital (DSH) payments by $14.1 billion by the end of the decade, New York’s hospitals cannot handle more crippling cuts. Rural and small communities are also at great risk if the Committee recommends major cuts to such programs as Critical Access Hospitals (CAH), Sole Community Hospitals (SCH), or Rural Referral Centers (RRC).
"The New York State Congressional House Delegation’s strong, bi-partisan opposition to another massive round of cuts, sends a compelling message to the Super Committee, the full Congress and the White House that provider cuts hurt our communities,” stated Daniel Sisto, President of the Healthcare Association of New York State (HANYS). “Medicare cuts to rural, small community teaching hospitals, and academic medical centers along with deep Medicaid cuts will cause longer waits and more distant travel to access essential care along with tremendous job losses. We cannot address an economic crisis by harming our strongest growth sector and withholding health services to millions of New Yorkers who rely on them. HANYS and HANYS members across the state are grateful for the bipartisan leadership of Representatives Engel, Crowley, Gibson and Grimm.”
New York hospitals generate nearly $108 billion for state and local economies annually, and support more than 686,000 jobs through direct and indirect employment. Combined, hospitals pay more than $4.7 billion in state and local personal income and sales taxes.
"At a time when New York's hospitals are trying to do more with less, cuts to GME and Medicaid would have the disastrous twin effects of eliminating thousands of health care jobs and severely compromising access to care," said Greater New York Hospital Association president Kenneth E. Raske. "I applaud Congressmen Engel, Crowley, and Grimm for joining the entire New York Congressional delegation in protecting New York's hospitals and the patients and communities they serve."
Democratic House Members Warn House and Senate Leadership about Cuts to GME
Congresswoman Allyson Schwartz (D-PA) and sixty four House Democrats sent a letter to House and Senate leadership, urging Congress to “reject” cuts to Medicare’s graduate medical education (GME) program as part of a larger deficit reduction package.
The letter, addressed to Senate Majority Leader Harry Reid (D-NV), Senate Minority Leader Mitch McConnell (R-KY), House Speaker John Boehner (R-OH), and House Minority Leader Nancy Pelosi (D-CA), reminds Congressional leaders of the critical role of the nation’s teaching hospitals in training future physicians, as well as research and innovation, and warns that cuts to GME only would worsen the country’s growing physician shortage.
The letter also stresses that Congress should be increasing the number of residents trained in the nation’s teaching hospitals to meet the increasing need. The letter states, “[w]e are on the cusp of a crisis in access to both specialty and primary care physicians due to a growing physician shortage” and that with a 60 percent reduction to Medicare GME, “every academic medical center across the country would be affected,” and “we cannot afford to destabilize the foundation of medical care in our country.”
Ways and Means Committee Holds Hearing to Explore SGR Payment Reforms
The House Ways and Means Subcommittee on Health held a hearing on May 12th to explore new models for delivering and paying for physician services under Medicare. The bipartisan hearing was the first in a series focused on reforming the sustainable growth rate (SGR) formula. The committee’s focus will be on models that have the potential to improve quality and constrain the rate of cost growth. The House Energy and Commerce Committee also is exploring Medicare physician payment reform, and began hearings on May 5th.
In opening statements, Subcommittee Chair Wally Herger (R-CA) said that he believes “the future of Medicare depends on a transition away from the fragmented fee-for-service system to a system where the incentives are aligned with better patient care not just more patient care.” Similarly, Ranking Member Pete Stark (D-CA) stated, “the existing fee-for-service system merely incentivizes the provision of additional care.”
Witnesses represented groups currently participating in various health care delivery reform models. Dana Safran, Sc.D., Senior Vice President for performance measurement and improvement, Blue Cross Blue Shield of Massachusetts, described a payment model in Massachusetts that uses a budget-based methodology and a fixed population-based budget, with incentive payments for achieving specific quality measures. Stuart Guterman, Executive Director, Commission on a High Performance Health System, The Commonwealth Fund referenced several payment models that would veer away from traditional fee-for-service. He specifically mentioned primary care medical home fees, bundled acute case rates, and global fees, all in conjunction with organizational reforms like multispecialty physician group practices or primary care practice networks.
In a May 12th comment letter submitted to the committee, the Association of American Medical Colleges suggested that as the committee explores ways to preserve access for Medicare beneficiaries, it must also ensure that our nation’s medical schools and teaching hospitals are able to train enough physicians to meet an increasing demand. Congressman Bill Pascrell (D-NJ) affirmed the need by stating that we can’t ignore the physician shortage that we are facing and questioned the witness panel on how new payment models would affect the current physician and workforce shortages.
Additional witnesses included Lisa Dulsky Watkins, M.D., Associate Director, Vermont Blueprint for Health, Department of Vermont Health Access and Keith Wilson, M.D., Chair, Governing Board and Executive Committee, California Association of Physician Groups.
Medicare Part A Trust Fund to be Exhausted by 2024, Trustees Report
Trustees of the Social Security and Medicare trust funds released their 2011 Annual Report on the current and projected financial status of the Social Security and Medicare programs. In the report, the trustees conclude that the Medicare Hospital Insurance (Part A) Trust Fund is projected to become insolvent by 2024, five years earlier than the date forecasted in their 2010 Annual Report. Trustees attributed the Part A adjustment to weaker than expected economic growth and lower payroll tax revenues.
The Medicare Supplementary Medical Insurance (SMI) Trust Fund, which includes Part B and Part D accounts, is adequately financed for the next ten years according to the trustees, but they expressed concern that Part B costs have been rising rapidly and the annual growth rate is “unrealistically constrained” due to the nearly 30% reduction to the physician fee schedule that will go into effect in 2012 without congressional action.
While establishing that the Affordable Care Act (ACA, P.L. 111-148 and P.L. 111-152) will lower projected Medicare costs by approximately 25% over the next seventy five years, the trustees predict combined Medicare Part A, B, and D costs will continue to rise to 8.9% of GDP by 2035, and 10.3% of GDP by 2085.
The Trustees note that the projected long-run program costs for both Medicare and Social Security “are not sustainable under currently scheduled financing, and will require legislative corrections if disruptive consequences for beneficiaries and taxpayers are to be avoided.” According to the report, 2010 was the first year that both programs paid out more in benefits than was collected in revenue, requiring other government funds to make up the difference while adding to existing federal budget deficits.
The six-member Social Security and Medicare Board of Trustees include four representatives who serve by means of their positions in the federal government (Secretary of the Treasury Timothy Geithner; Secretary of Labor Hilda Solis; Secretary of Health and Human Services Kathleen Sebelius; and Commissioner of Social Security Michael Astrue). The two public trustees — Charles Blahous III, research fellow, Hoover Institution; and Robert Reischauer, Ph.D., president, Urban Institute — were appointed by the president and confirmed by the Senate.
CMS Releases Medicare Shared Savings "ACO" Proposed Rule
On March 31st, The Centers for Medicare and Medicaid Services (CMS) released the much-anticipated proposed rule for the Medicare Shared Savings Program, commonly referred to as the Accountable Care Organization (ACO) program, mandated by the Affordable Care Act (ACA, P.L. 111-148 and P.L. 111-152). The sixty day comment period for the proposed rule runs through June 6th.
In its press release, CMS states: “ACOs create incentives for health care providers to work together to treat an individual patient across care settings — including doctor’s offices, hospitals, and long-term care facilities. The Medicare Shared Savings Program will reward ACOs that lower growth in health care costs while meeting performance standards on quality of care and putting patients first.” ACOs may be formed by physician group practices, physician networks, hospitals employing physicians, and partnerships or joint ventures of hospitals and physicians.
Highlights from the ACO proposed rule include:
- ACOs would be required to enter into a three-year contract with CMS;
- While beneficiaries are free to receive care from any provider, for ACO purposes, beneficiaries would be assigned retrospectively to a particular ACO based on the plurality of primary care services received from a primary care physician within the ACO;
- Indirect Medical Education (IME) and Disproportionate Share (DSH) payments would not be removed from the ACO historical benchmarks or performance year expenditures; the rule is silent about Direct Graduate Medical Education (DGME) payments;
- Shared savings would be determined under either a “one-sided” or “two-sided” option. ACOs choosing the one-sided approach would not be responsible for costs above their expenditure target for the first two years, but will receive a lower share of the savings compared to ACOs that choose the two- sided option. ACOs choosing the two-sided option share in savings and risk liability for losses beginning in the first performance year. One-sided ACOs will be automatically converted to two-sided ACOs in the third year of the agreement; and
- ACOs would not receive any savings unless they meet requirements on 65 quality measures in five domains: Patient Experience of Care, Care Coordination, Patient Safety, Preventative Health, and At-Risk Population/Frail Elderly Health.
In response to provider concerns about the application of fraud and abuse, antitrust, and tax-exempt laws, other federal agencies also released three documents on which they are seeking comment:
- A joint CMS and Office of Inspector General (OIG) Notice and Solicitation of Public Comments on Waivers in Connection with Sections 1899 and 1115A of the Social Security Act;
- IRS Notice 2011-20 requesting comments on the need for guidance on participation in the program by tax-exempt organizations; and
- A joint Federal Trade Commission (FTC) and Department of Justice (DOJ) Proposed Statement of Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program (“Antitrust Policy Statement”).
Comments on the CMS/OIG notice will be accepted through June 6th, and comments on the IRS and FTC/DOJ documents will be accepted through May 31st.
One Year Physician Payment Fix Enacted Prevents Large Cuts in Medicare Reimbursement
Just prior to adjourning, both the House of Representatives and the Senate passed the Medicare and Medicaid Extenders Act of 2010 (H.R. 4994) by nearly unanimous, bipartisan votes. H.R. 4994 extends the current Medicare reimbursement rates for physicians through December, 2011, and prevented a 25% cut scheduled to go into effect on January 1st, 2011. President Obama signed the bill into law.
The $19 billion legislation is paid for by altering a provision in the Affordable Care Act (ACA, P.L. 111-148, P.L. 111-152), which provides subsidies to help people purchase health insurance in the state-run exchanges. Currently, if a subsidy recipient misstates his income, or if it changes over the course of the year, the recipient must repay a portion of the subsidy — up to $250 for an individual or $400 for families. H.R. 4994 would replace that flat repayment with a sliding-scale structure, requiring smaller repayments from those with lower incomes and larger repayments for those at higher income levels. The remaining $275 million is offset with funds from the Medicare Improvement Fund.
Secretary Sebelius Urges Congressional Action on SGR Extension at AAMC Annual Meeting
In a speech at the Association of Medical Colleges (AAMC) Annual Meeting, Secretary of Health and Human Services Kathleen Sebelius announced the Obama administration’s support for a proposed 13-month Sustainable Growth Rate (SGR) patch that would prevent a 23% cut in Medicare physician payments scheduled to take effect December 1st. An additional 1.9% cut is scheduled to occur on January 1st, 2011.
Secretary Sebelius urged Congress to “act quickly” and pass the extension during the first-week of an anticipated lame duck session scheduled to begin November 15th. She also stressed the President’s commitment to a “permanent fix” so that the “livelihoods of the hard-working doctors are no longer subject to politics.”
The estimated cost of enacting the 13-month patch is nearly $20 billion, which assumes a 30% cut in January 2012, and it is becoming increasing clear that addressing the issue before the scheduled Thanksgiving recess is highly unlikely. It is believed that Congress could attempt to pass a one-month extension at a cost of approximately $1.5 billion, and then revisit the SGR during an expected December lame duck session.
The AAMC has joined the American Medical Association (AMA) and nearly 120 additional physician and health care organizations in signing a letter to the House leadership urging Congress to take immediate action to avert the scheduled 23% cut and prevent a “Medicare physician access crisis.” The letter stressed that Congress must break the cycle of addressing cuts only a few months at a time, and should take action on legislation to permanently replace the SGR formula. The letter states, “Physicians are committed to taking the leadership in developing Medicare physician payment reforms to replace the SGR once and for all, and we are counting on Congress to make permanent reform a reality.”
Amendment to Rescind Prevention Funds Fails
On September 14th, the Senate rejected an amendment sponsored by Sen. Mike Johanns (R-NE) that would rescind mandatory funding for prevention and public health activities to pay for the repeal of a tax reporting provision in the Affordable Care Act (ACA).
The amendment, offered to the Small Business Jobs and Credit Act, sought to repeal an IRS 1099 reporting requirement that is expected to generate more than $19 billion in revenues over 10 years. To offset the revenue lost due to the repeal, the amendment proposed rescinding mandatory appropriations provided in the ACA for the Prevention and Public Health Fund. In FY 2010, $500 million from the fund supplemented federal workforce development and other public health activities. For FY 2011, the law provides $750 million that appropriators have proposed for public health programs throughout the Department of Health and Human Services.
In a September 10th letter, the AAMC urged Senators to oppose the amendment and use of the Fund as an offset. An alternative amendment, proposed by Senator Bill Nelson (D-FL) would have scaled back the tax reporting requirement using non-health funds; it also failed.
Senate Passes New SGR Patch Legislation
On June 18th, the Senate approved by unanimous consent legislation to postpone through November 30th, 2010, the 21% cut to Medicare physician payments and to provide a retroactive 2.2% increase beginning on June 1st.
Attempting to address the expired sustainable growth rate (SGR) patch and stymied by their inability to overcome Democratic and Republican moderates' opposition to increased deficit spending, Senate Majority Leader Harry Reid (D-NV) and Finance Committee Chair Max Baucus (D-MT) were forced to sever the SGR patch from yet another revised version of H.R. 4213, the American Workers, State and Business Relief Act of 2010. The new SGR legislation is fully offset. To help pay for the patch, the SGR bill uses a $4.2 billion cut in hospital Medicare reimbursement achieved by changing the Medicare policy known as the "72-Hour Rule". The Association of American Medical Colleges (AAMC) opposes this cut. The House of Representatives is expected to take up the legislation the week of June 21st.
Reacting to the Senate's inability to move the pending tax extenders/jobs legislation, the Centers for Medicare and Medicaid Services (CMS) had directed its contractors to hold claims until June 17th; but as that deadline has now passed, CMS will begin to process the reduced claims until Congress finalizes the SGR legislation.
The Senate expects to try to tackle the rest of the stalled jobs bill this week. The most recent version of the bill included AAMC-supported language directing CMS to consider affiliation agreements when identifying unused residency slots under the redistribution program. Without this provision, teaching hospitals that were at or over their caps under an affiliation agreement but were under their caps without the affiliation agreement were at risk of losing residency slots. Also, in the revised legislation is the AAMC-supported temporary FMAP extension.
Congress, Administration Address Medicare Physician Payments
On March 2nd, President Obama signed the Temporary Extension Act of 2010 (P.L. 111-114), which includes provisions temporarily reversing the March 1st cut (21%) to Medicare physician payments. The Act retroactively extends the January 1st freeze in 2010 physician payments until April 1st. That same day the Senate began consideration of an amendment (S.A. 3336) to the Tax Extenders Act of 2009 (H.R. 4213), which would add provisions to further extend the 2010 freeze until October. Offered by Senate Finance Committee Chair Max Baucus (D-MT), S.A. 3336 also includes electronic health record "clarification" provisions that would expand physician eligibility for the health information technology incentive payments established under the American Recovery and Reinvestment Act (P.L. 111-5).
Senators Plan to Introduce FMAP Extension Legislation
Senate Majority Leader Harry Reid (D-NV) and Senator Jay Rockefeller (D-WV) have announced plans to introduce legislation extending by six months the increase in the Federal Medical Assistance Percentage (FMAP) that states currently receive under the American Recovery and Reinvestment Act (ARRA). The FMAP increase under ARRA is set to expire at the end of 2010. On December 16th the House passed by a vote of 217-212 H.R. 2847, which included a six-month extension to increased FMAP funding.
In a press release, Sen. Rockefeller said, "We absolutely need this six months of relief while we weather this economic storm-too many families depend on this program for us to allow a shortfall of funding."
House Temporarily Delays Scheduled Medicare Physician Payment Cut
On December 16th The House of Representatives voted (395-34) to pass an amended defense appropriations bill (H.R. 3326), that temporarily delays until February 28th the scheduled 21.2% cut in Calendar Year (CY) 2010 Medicare physician payments. The bill provides a 0% update to the Medicare physician payment formula to allow Congress to establish a new permanent Medicare physician payment system upon returning in the new year. The Senate is poised to approve the defense spending bill in the coming days.
Members of the AAMC Council of Deans (COD) and Council of Teaching Hospitals (COTH) sent a December 11th letter to all Members of Congress urging "immediate congressional action" to avert the cut to Medicare physician payments. The letter states, "The cut will have an immediate and deleterious impact on the ability of the nation's medical schools and teaching hospitals to maintain their unique patient care, education, and research missions." The letter, signed by the leaders from more than 180 institutions, including Columbia, from nearly every state, also asks Congress to "establish a new payment system that will guarantee Medicare patients the stability and access to the care they deserve."
House Approves Physician Payment Legislation
On November 19th, the House of Representatives passed (243-183) AAMC-supported legislation that averts a scheduled 21.2% reduction in Medicare's 2010 physician payments. The Medicare Physician Payment Reform Act (H.R. 3961) establishes a 1.2% update for 2010 (the percentage increase in the Medicare Economic Index). It also eliminates the $210 billion sustainable growth rate (SGR) deficit, rebases physician payments, and establishes two new service-specific target growth rates.
In anticipation of the floor vote, a group of 127 physician organizations including the AAMC submitted a November 13th letter urging Speaker Nancy Pelosi (D-CA) to ensure swift passage of H.R. 3961. According to the letter, "Medicine can no longer support the sort of short-term patches that have been used in the past to postpone true payment reform." The letter adds that "swift passage" of the bill will replace a "physician payment system that is widely acknowledged to be dysfunctional."
The Congressional Research Service issued a report titled "Medicare Physician Payment Updates and the Sustainable Growth Rate (SGR) System," which analyzes H.R. 3961, among other legislation. The report cites the Congressional Budget office (CBO) cost estimate that H.R. 3961 would increase direct federal spending by approximately $210 billion over a 10-year period, but that the modification to the SGR system may "reduce the likelihood that future expenditures exceed target expenditures, since the growth rates would be more generous under this bill than under current law."
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."