SGR Markups Move Forward

Thursday, December 12, 2013, promises to be a busy day for physician groups and other stakeholders interested in Congressional action to repeal and replace the Sustainable Growth Rate (SGR) system.  (Background on the SGR is available here).

The Senate Finance Committee will hold a hearing on the Chairman’s mark (available here) and the House Ways and Means Committee announced it will hold a markup of its version of the legislation (legislative language is available here and a section-by-section summary is available here).  Both Committees’ actions will take place at 10 am tomorrow.  Like the Energy and Commerce Committee proposal, neither the Senate Finance Committee nor the House Ways and Means Committee proposal includes any offsets.

Meanwhile, the House is considering legislation that would postpone the imposition of the SGR cuts for three months and would give physicians a 0.5% update in their Medicare reimbursement.  (A copy of the legislation is available here).  The three-month patch also provides for a number of Medicare extenders and would delay Medicare’s controversial new “two-midnight” policy for inpatient hospital stays.

Congress is slated to adjourn by the end of the week.  While a permanent fix may not be possible in 2013, enactment of a permanent solution remains likely for 2014, particularly as CBO continues to reduce the 10 year score of the legislation (background available here).

CBO Reduces Cost of SGR Fix

On Friday, December 6, 2013, the independent Congressional Budget Office (CBO) gave renewed hope for all those pushing for a permanent fix to the SGR (background information on the SGR is available here).  In May, CBO estimated the 10-year score for a permanent fix (without any payment updates for physicians) would cost $139.1 billion.  CBO’s latest score estimates the same policy to cost $116.5 billion.  According to a footnote in the report, CBO’s revision is based in part on changes made by the Centers for Medicare & Medicaid Services (CMS) in its Medicare Physician Fee Schedule Final Rule.

CBO’s latest report comes in advance of the Senate Finance Committee markup of legislation to repeal and replace the SGR, at 10:00 am on Thursday, December 12th.  In October, the Senate Finance Committee and House Ways and Means Committee released a joint discussion draft of their proposal to repeal and replace the SGR (background available here).  House Ways and Means Committee Chairman Dave Camp (R-MI) issued a statement indicating his Committee is making progress on its version of legislation and may hold a hearing this week, though so far the hearing has not been formally announced.  The House Energy and Commerce Committee also drafted a proposal to address the SGR, which was voted on by the Committee in July (more information available here).

Dewonkify – Medicare Part D

Medicare is a federal program that provides health insurance coverage for people who are age 65 or older.  Individuals younger than 65 may qualify if they have certain disabilities or have End-Stage Renal Disease (ESRD).  Medicare is comprised of four parts—Parts A, B, C, and D.  Over the past few weeks, Capitol Health Record has dewonkified each of the four parts.

Definition:  Medicare Part D is a voluntary benefit that provides outpatient prescription drug coverage to beneficiaries.  The Part D benefit is operated through private plans; beneficiaries have the option of choosing either prescription drug coverage as part of their Medicare Advantage plan (more information is available here) or as a stand-alone prescription drug plan (PDP) which can be purchased in addition to traditional Medicare (Part A and Part B).

Used in a Sentence: “The Medicare Part D benefit provides seniors a way to afford their medications when they do not have other affordable drug coverage options.”

History:  The Medicare prescription drug benefit was added to Medicare as part of the Medicare Modernization Act of 2003 (MMA).  Prior to the passage of the MMA, many Medicare beneficiaries lacked access to prescription drug coverage.

When it was enacted, the standard benefit structure was as follows:  the beneficiary paid a deductible.  Once the deductible was met, the beneficiary paid 25 percent of the costs of his/her drugs and the plan paid the other 75 percent of the costs, up to the initial coverage limit (which, in 2010, was $2830 in total drug costs).  At this point, the plan stopped covering the costs of the beneficiary’s drugs (otherwise known as the “doughnut hole” or “coverage gap”) until the beneficiary’s drug costs exceeded the catastrophic coverage limit (which was $6440 in total drug costs in 2010).  At this point, the beneficiary would pay 5 percent, the plan would pay 15 percent, and Medicare would pay 80 percent of the costs for medications.  This unusual benefit design was meant to provide some drug coverage for all beneficiaries.

Many beneficiaries were very frustrated with the gap in coverage (doughnut hole).  The Affordable Care Act (“ACA”) contained provisions to incrementally address the gap in coverage, and by the year 2020, beneficiaries will no longer experience such a gap.  More information about the doughnut hole and the ACA provisions is available here.

More information about the 2014 Medicare Part D program is available here.  An overview of the Medicare Part D payment system is available here.

When the benefit first launched in 2005, the then-Bush Administration encountered some initial issues related to the launch of the website and enrollment.  While much different in scope, some politicians have compared problems with the launch of the Part D program to the problems currently being experienced with the ACA rollout (more information is available here).

Premiums:  Medicare Part D premiums vary depending on the beneficiary’s plan choice and geography.  Some plans, called “enhanced plans” provide greater coverage for prescription drugs, but usually have a higher premium.  In 2014, the standard average Medicare Part D monthly premium is estimated to be $31.

Like Medicare Part B, individuals who lack prescription drug coverage either through a former employer, Medicaid, or some other source, will face a late enrollment penalty if they delay signing up for Part D.  (More information on the Part D late enrollment penalty is available here.)

Dueling Attempts to Address Cancelled Health Insurance Policies

Yesterday President Obama announced a new policy for health insurance plans offered in the individual market.  This announcement falls on the heels of less than ideal health insurance exchange enrollment figures released earlier this week.

This new policy does not require insurers to continue to offer these plans to individuals.  Whether individuals will be allowed to keep their plans will depend on two factors: (1) if the insurer decides it wants to continue to offer the product and (2) if the state insurance commissioner allows insurers to continue to offer these plans.  Plans will have to inform individuals of coverage options and the availability of tax credits available to them on the health insurance exchanges.  This new policy pertains to plans that are renewed in 2014.

Example 1

For three years Bob has purchased an individual health insurance policy from Acme Insurance Co.  This policy is very limited and does not cover maternity benefits.  Because his plan doesn’t cover all the ten essential health benefits (a list of such benefits is available here) that all plans offered in the exchange must provide, Bob receives a notice from Acme Insurance Co. canceling his policy.

Now, under the new policy, if Bob lives in a state where the State Insurance Commissioner will allow the sale of such policies AND Acme Insurance Co. decides to keep offering his policy, then Bob will be able to keep his health insurance policy.  However, Acme Insurance Co. will have to tell Bob what benefits are not included in the plan (in this case, maternity benefits) that are available to individuals on the health insurance exchanges.  Acme Insurance Co. will also have to inform Bob that depending on his income he may qualify for tax credits if he purchased health insurance on the exchanges.  

Example 2

For five years Janet has purchased an individual policy through RU Insured Co.  This policy is very limited and does not provide any prescription drug coverage.  Because her plan does not cover one of the ten essential health benefits (prescription drug coverage), she receives a notice from RU Insured Co. cancelling her policy effective January 1, 2014. 

However, unlike in the example above, Janet lives in a state where the State Insurance Commissioner is unwilling to allow companies like RU Insured to continue to sell plans that are not comparable to plans offered in the health insurance exchanges.  So, notwithstanding yesterday’s announcement, Janet will not be able to keep her existing health insurance policy from RU Insured. 

Over the past few months, individuals who had these plans have been receiving notices announcing their plans would be cancelled.  It is unknown exactly how many individuals have received such notices.  Some individuals who have received these cancellation notices are finding it more expensive to purchase health insurance coverage through the health insurance exchanges.

Shortly after details of this new policy were released, skepticism abounded as to whether this policy is the appropriate remedy to address the cancelled policies.  The American Health Insurance Plans (AHIP), the trade association for health insurance companies, released a statement warning that altering the rules after plans have had to comply with the Affordable Care Act (ACA) requirements “could destabilize the market and result in higher premiums for consumers.”  The National Association of Insurance Commissioners (NAIC) and the American Academy of Actuaries expressed similar concerns with the proposal.

At the same time, Rep. Upton (R-MI) has proposed legislation (H.R. 3350) that would not only individuals to renew these policies, but also would allow insurance companies to sell new policies that fail to meet the minimum requirements imposed under the ACA.  Such policies could be sold through 2014.

Example 3

Max has an individual health insurance policy from OK-R-US Insurance Co.  This is a catastrophic policy that doesn’t provide much coverage (only covers four out of the ten essential health benefits) and charges him more because of his pre-existing conditions.  Max’s friend Lauren would like to buy the same policy. 

Under the Administration’s proposal, Lauren would not be able to purchase this policy from OK-R-US because insurance companies would not be allowed to sell new policies to individuals.

Under H.R. 3350, OK-R-US would be allowed to sell Lauren a new policy. 

The White House released a Statement of Administrative Policy threatening to veto the legislation.

This afternoon, by a vote of 261-157, the House passed H.R. 3550; 39 Democrats voted in favor of the legislation and four Republicans voted against the bill.  The legislation now moves to the Senate, where Senator Mary Landrieu (D-LA) has introduced legislation (S. 1642) that would allow plans to continue offering policies only to current policy holders and, similar to the Administration’s proposal, these plans would have to inform policyholders about the availability of plan options on the health insurance exchanges.  However, unlike the Administration’s proposal, Senator Landrieu’s legislation would allow insurance companies to continue to offer these products beyond 2014.

CBO Releases Compilation of Offsets

On Wednesday, November 13, 2013, the Congressional Budget Office (CBO) released a 318-page report outlining 103 various options for decreasing federal spending.  CBO does not advocate for specific policy proposals; rather this document represents a compendium of the major proposals it recently has scored.  These reports are helpful because in addition to providing current cost estimates, CBO generally will include some language discussing the pros and cons of the specific policy option.  CBO also released a handy summary table of the options contained in the report.

In terms of health care savings, the report identified 16 options including:

  • Overall savings for Medicare-related policies ranged from $230 billion to $869 billion over ten years.  Included in the report are options related to converting Medicare to a premium support model ($22 to $275 billion), imposing restrictions on Medigap plans ($52 to $114 billion), increasing the age of eligibility for Medicare ($23 billion), increasing Medicare Part B and Part D premiums ($20 to $287 billion), imposing additional bundled payments on providers ($17 to $47 billion), and imposing rebates on prescription drug manufactures for Part D low-income beneficiaries ($123 billion).
  • Overall savings for policies related to health insurance exchanges and employer-sponsored coverage ranged from $476 billion to $823 billion over ten years.  Included in this report are options related to eliminating the subsidies for moderate-income individuals who purchase coverage in the health insurance exchanges ($173 billion), adding a “public option” to choices available in the health insurance exchanges ($37 billion), and reducing the tax incentives for employer-based health insurance coverage ($266 to $613 billion).
  • Overall savings for veterans’ health care policies ranged from $99 billion to $150 billion over ten years.  Included in the report were options related to adding out-of-pocket cost-sharing for TRICARE for Life ($31 billion), modifying TRICARE cost-sharing for working-age military retirees ($20 to $71 billion), and restricting Veterans’ Affairs (VA) Medical Care eligibility ($48 billion).
  • The remaining policy options included block granting Medicaid ($105 to $606 billion), limiting medical malpractice claims ($57 billion), reducing funding for National Institutes of Health (NIH) ($13 to $28 billion), and increasing the cigarette tax ($37 billion).

This compendium will prove useful as Congress continues to look for offsets to pay for various priority issues (like permanently addressing the SGR).  Of course, many of these proposals have been scored by CBO over the years (e.g., increasing the age of eligibility and imposing Medicare premium support model) and the prevailing wisdom thus far seems to be that such policies would be politically challenging to enact absent some grand bargain on entitlement reform.

Dewonkify — Medicare Part C

Medicare is a federal program that provides health insurance coverage for people who are age 65 or older.  Individuals younger than 65 may qualify if they have certain disabilities or have End-Stage Renal Disease (ESRD).  Medicare is comprised of four parts — Parts A, B, C, and D.  Over the next few weeks, Capitol Health Record will dewonkify each of the four parts.

Definition:  Medicare Part C is otherwise known as “Medicare Advantage” (formerly “Medicare+Choice”).  These are private plans that are approved by Medicare to cover all of the services provided by Part A and Part B.  Some Medicare Advantage plans offer coverage for items not otherwise covered by Medicare (like hearing aids and eyeglasses).

Used in a Sentence:  “The premiums of Americans enrolled in Medicare Part C (Medicare Advantage) have fallen by 16 percent since 2010, Health and Human Services Secretary Kathleen Sebelius has said.” From “Where is Republican anger over Obama’s health care law?” by Juan Williams, Washington Post, September 27, 2012

History:  Medicare Advantage began as an alternative to traditional Medicare.  Some policymakers believed that private insurance companies would be able to provide beneficiaries with better, more coordinated care at a lower cost to beneficiaries and the federal government.  Medicare Advantage plans operated by private insurance companies and are available in almost every county in the country.  Medicare Advantage plans can be either health maintenance organization (HMO) plans, private fee-for-service (PFFS) plans, or regional or local preferred provider organizations (PPOs).  (More information is available here.)

Premiums:  Medicare beneficiaries pay a premium to enroll in Medicare Advantage plans; premiums vary depending on the plan offerings in the area.  Most Medicare Advantage plans also offer prescription drug coverage (called MA-PD plans).  In 2012, the average premium charged for a Medicare Advantage plan offering drug coverage was $51.43 per month.  Approximately 87 percent of Medicare beneficiaries can choose an MA-PAD plan with a $0 premium (though beneficiaries would still have to pay their Medicare Part B premium).  More information is available here.

Enrollment:  In 2012, approximately 27 percent of Medicare beneficiaries chose to enroll in a Medicare Advantage plan.

Administration Releases Additional Guidance on Third-Party Payers

Since the establishment of the health insurance exchanges, there has been the lingering question of whether some so-called third-party payers (such as hospitals, health care providers, and commercial payers) would be permitted to assist with an individual’s premiums and/or other cost-sharing obligations (like deductibles, copayments, etc.).

Today, November 4, 2013, the Center for Consumer Information & Insurance Oversight (CCIIO) released additional guidance on this issue suggesting that such assistance is not permissible.  According to the guidance, “HHS has significant concerns with this practice because it could skew the insurance risk pool and create an unlevel field” in the exchanges.  The guidance concludes by stating that “HHS intends to monitor this practice and to take appropriate action, if necessary.”

Dewonkify – Medicare Part B

Medicare is a federal program that provides health insurance coverage for people who are age 65 or older.  Individuals younger than 65 may qualify if they have certain disabilities or have End-Stage Renal Disease (ESRD).  Medicare is comprised of four parts — Parts A, B, C, and D.  Over the next few weeks, Capitol Health Record will dewonkify each of the four parts.

Definition:  Medicare Part B primarily pays for care provided by doctors and other health care professionals (like nurse practitioners), outpatient services, durable medical equipment (DME), home health, and some preventive services.

Used in a Sentence:  “The premiums for Medicare Part B will remain flat in 2014 and seniors have saved $8.3 billion on Part D prescriptions since the Affordable Care Act was enacted in 2010, the Department of Health and Human Services announced Monday. Medicare Part B covers medically necessary services, as well as preventive services.” From “Medicare Part B Premiums Won’t Go Up in 2014,” by Kelly Kennedy, USA Today, October 28, 2013

History:  Medicare Part B began in 1965 under the same legislation that enacted Medicare Part A and the Medicaid program.

Enrollment:  In 2012, 46.4 million Americans were enrolled in Medicare Part B.

Financing:  Medicare Part B is financed through general revenues and premiums collected from beneficiaries.  Because of the way it is financed, technically Medicare Part B can never be insolvent.  However, because the federal government pays 75 percent of the cost of Part B, many policymakers have begun to grow concerned about the increased cost of the program and have proposed ways to reduce these federal expenditures.

Sustainable Growth Rate (SGR):  Medicare Part B pays for services provided by physicians and other health care professionals using the SGR formula.  Unless Congress acts by the end of this year, physicians who treat Medicare beneficiaries will see their reimbursement cut by approximately 24 percent (the exact amount will be determined when the Centers for Medicare and Medicaid Services (CMS) releases its final rule implementing the Physician Fee Schedule).

Over the past decade, Congress has enacted more than 15 short-term fixes to address the SGR (see infographic).  In July the House Energy and Commerce Committee passed legislation to permanently address the SGR.  Last week, the House Ways and Means Committee and Senate Finance Committee jointly released a draft discussion guide which closely follows the Energy and Commerce proposal.

Premiums:  Medicare beneficiaries pay monthly premiums, which are adjusted each year and account for roughly 25 percent of Part B costs.  Currently most beneficiaries pay a monthly premium of $104.90 per month.  Individuals with higher incomes pay a higher monthly premium.  (More information on Medicare Part B premiums is available here.)  Individuals who lack other coverage (generally through a current or former employer) who delay signing up for Part B may be assessed a permanent late enrollment penalty.  (More information on the late enrollment penalty is available here.)

Out-of-Pocket Costs:  In addition to the monthly premium, beneficiaries have an annual deductible of $147 for 2013.  Beneficiaries also are assessed a copayment of 20 percent of the Medicare-approved cost of the service.  (More information is available here.) 

Bicameral, Bipartisan SGR Proposal Released

On Thursday, October 31, 2013, the Senate Finance Committee and the House Ways and Means Committee released a draft discussion of their proposal to permanently fix the sustainable growth rate (SGR) formula, which Medicare uses to reimburse physicians and other health care professionals.  (More information on the SGR is available here.)  This discussion draft is similar to legislation that unanimously passed out of the House Energy and Commerce Committee in July 2013.  (More information on the Energy and Commerce legislation is available here.)

The discussion draft would prevent the imposition of the SGR cuts (estimated to be 24 percent for 2014), but does not call for any payment increases through 2023.  Beginning in 2024, health care professionals who participate in advanced alternative payment models (see below) would be eligible for a two percent update, while all other health care professionals would receive a one percent update.  The Energy and Commerce Committee legislation called for a 0.5 percent increase in reimbursement over 5 years.

The discussion draft also seeks to adjust reimbursement based in part on performance.  Beginning in 2017, penalties that would have been assessed under three quality incentive programs – the Physician Quality Reporting System (PQRS), the Value-Based Modifier, and the Electronic Health Record (EHR) Meaningful Use program – would be made available to health care professionals who have demonstrated ability to deliver high-quality healthcare.

In addition, the discussion draft encourages health care professionals to participate in alternative payment models (APMs) that involve two-sided risk and measure the quality of care provided (e.g., patient-centered medical homes, accountable care organizations (ACOs), etc.).  Providers who obtain a significant portion of their revenue from such APMs would be eligible for bonus payments.

Finally, the discussion draft contains provisions designed to encourage care coordination for individuals who have complex chronic care needs by developing new payment codes for these services beginning in 2015.  The discussion draft seeks to improve the accuracy of the valuation of services provided to beneficiaries and sets a target for the identification and revaluation of misvalued services.  Under the proposal, professionals would be required to consult with appropriate use criteria when ordering advanced imaging and electrocardiogram services.

Interestingly, like the Energy and Commerce Committee legislation, this discussion draft does not contain any offsets.  The Congressional Budget Office (CBO) previously estimated a ten year freeze to physician payments would cost $139.1 billion; the Energy and Commerce legislation was estimated by CBO to cost $175 billion over ten years.  While this discussion draft has not yet been officially scored by CBO, sponsors reportedly have been working to reduce the overall score of their proposal relative to the Energy and Commerce Committee’s legislation.

So far the discussion draft has received positive feedback from the House Energy and Commerce Committee.  The American Medical Association (AMA) and American Medical Group Association (AMGA) have issued statements indicating they are pleased the issue is moving forward and are currently reviewing the discussion draft.

Dewonkify – Medicare Part A

Medicare is a federal program that provides health insurance coverage for people who are age 65 or older.  Individuals younger than 65 may qualify if they have certain disabilities or have End-Stage Renal Disease (ESRD).  Medicare is comprised of four parts — Parts A, B, C, and D.  Over the next few weeks, Capitol Health Record will dewonkify each of the four parts.

Definition:  Medicare Part A pays primarily for inpatient hospital stays, care in skilled nursing facilities, home health care, and hospice care.

Used in a Sentence: “Republicans have suggested a push to reduce the deficit with entitlement cuts, such as means testing for Medicare and a possible merger of Medicare parts A and B for hospitals and doctor services.” From “GOP Senators Ready Entitlement, Tax Proposals for Budget Conference” by Alan K. Ota, published in CQ (subscription required).We also have a program called the Seal of Recognition that may be worth your time and consideration.  You could submit your materials supporting the Trigen SureShot and our nursing team would evaluate the content to make sure it is consistent with the AORN Recommended Practices.  If approved, you would receive the AORN Seal of Recognition logo to use on your documents for one year (can be renewed annually).

History:  Medicare Part A began in 1965 and was enacted at the same time as Part B and Medicaid.  At the time, older Americans who did not have health care coverage through their employers, had to either purchase health insurance on their own (which could be expensive) or rely on their families to help pay for their medical care.  More information on the history of the Medicare program can be found here.

Financing:  Medicare Part A is financed through a payroll tax paid by employers and employees.  Part A currently pays out more in claims than it collects in revenue and is projected to become insolvent by the year 2026.  In 2012, total expenditures (costs) for the Medicare program were $574.2 billion and total income was $536.9 billion.  Each year the independent Medicare Trustees releases a report projecting the solvency of the program.  Information on the most recent Trustees’ report is available here.

Enrollment:  Currently 50.7 million Americans are enrolled in Medicare Part A.

Eligibility:  In order to be eligible for Medicare Part A, you (or your spouse) must have worked at least 10 years (40 quarters) in Medicare-covered employment.  Some individuals under age 65 may be eligible for Medicare Part A if they are entitled to Social Security (or railroad retirement) disability benefits for at least the previous 25 months or qualify for ESRD benefits.  More information on eligibility requirements can be found here.

Out-of-Pocket Costs:  Beneficiaries enrolled in Part A pay a deductible when they are admitted to the hospital.  The amount of the deductible varies from year to year and is calculated to be $1,216 in 2014.  This deductible covers beneficiaries’ costs for the first 60 days of care within a benefit period.  Beneficiaries pay additional fees for hospitalizations longer than 60 days (for more information, see here).

Premiums:  About 99 percent of individuals who have Part A do not pay a premium.  However, some individuals may be able to enroll in Part A and pay a monthly premium:  individuals (and spouses) with fewer than 30 quarters (7.5 years) of Medicare-covered employment pay a premium of $426 and individuals (and spouses) with between 30 and 39 quarters of Medicare-covered employment pay $234.  (More information is available here.)