Number 17: Congress Patches the SGR Yet Again

For the 17th time since the Sustainable Growth Rate (SGR) became law as part of the Balanced Budget Act of 1997, last week the Congress passed a short-term “patch” to prevent scheduled cuts from going into effect for physicians who provide care to Medicare beneficiaries.  Staving off the more than 20% in payment cuts, on April 1st, President Obama, signed into law the Protecting Access to Medicare Act of 2014.  In addition to preventing the scheduled payment reductions from going into effect, the new law continues a 0.5 percent update for physicians through December 31, 2014, and then maintains reimbursement levels for the first quarter of 2015.  The SGR, long-recognized by health care providers and policymakers as in serious need of reform, is the formula used by the Centers for Medicare and Medicaid Services (CMS) to control spending and growth related to physician services provided to Medicare beneficiaries. Over the past six months, leaders and members of the House Ways and Means, House Energy and Commerce, and Senate Finance Committee achieved a rare bipartisan, bicameral consensus with respect to how to repeal the SGR and replace it with a more appropriate payment policy.  The result of their efforts culminated in the introduction of the SGR Repeal and Medicare Provider Payment Modernization Act of 2014.  Despite agreement on the policy, Members of Congress unfortunately were unable to craft a deal with respect to how to pay for the estimated $140-180 billion price-tag.  Therefore, with the April 1st deadline looming, Congressional leaders negotiated a smaller package of health care policies, which included a short-term “patch” for the SGR.  The policies include (but are not limited to):  an extension of the partial enforcement delay for the Medicare so-called “two-midnight rule,” which effects payment for inpatient stays at acute care hospitals; a one-year delay in implementation of the new ICD-10 coding system; additional authorization for the Special Diabetes Program and the maternal, infant, and early childhood home visiting program; a Government Accountability Office study on Children’s Hospital Graduate Medical Education Program; a new program relating to value-based purchasing for skilled nursing facilities; and a new initiative related to quality, safety, and evidence-based care associated with diagnostic imaging.  The costs of the bill are paid for through a variety of policy changes, including:  extending the two percent Medicare sequestration; revaluing services under the physician fee schedule; reform of Medicare payment for clinical laboratory services; and rebasing of Medicaid Disproportionate Share Hospital payments.  Providers continue to urge Congress to take action to enact a permanent fix. Given that the latest “patch” expires March 31, 2015, prior to that date, Congress will need to take action on a permanent fix or enact the 18th patch.

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.)

Secretary Sebelius Testifies on ACA Implementation

After weeks of scrutiny, accusations, and calls for resignations by Republicans, Department of Health and Human Services (HHS) Secretary Kathleen Sebelius testified before the House Energy and Commerce Committee today to defend the Affordable Care Act (a.k.a. “Obamacare”) after a month of significant enrollment challenges.  She faced questions on the cost and management decisions associated with the challenged healthcare.gov website, the enrollment portal for the federal health care exchanges.  Ironically, the website was down and inaccessible as she gave her testimony.

Sebelius’ testimony follows an October 24, 2013 House Energy and Commerce Committee hearing where federal contractors hired by the Centers for Medicare & Medicaid Services (CMS) and HHS to manage the website and paper enrollment processes pointed the finger at HHS when asked who is responsible for the website’s flaws and challenges.  Today, Sebelius did not point the finger at CMS or HHS staff, stating that she and CMS Administrator Marilyn Tavenner have been responsible for decisions to date.  CMS Administrator Tavenner provided similar testimony before the House Ways and Means Committee yesterday.

Sebelius faced questions on costs expended to date, stating that approximately $118 million has been spent on the healthcare.gov website and about $56 million on additional IT to support it.  She offered to get back to the Committee by mid-November 2013 with numbers concerning enrollment in the exchange marketplaces.

While both political parties expressed concern or outrage over the massive exchange website problems to date, Republicans largely defined the problems as an illustration of how flawed Obamacare is overall, while Democrats overwhelmingly characterized the problem as a short-term, fixable glitch.

Some Democratic lawmakers likened the problems to those faced during implementation of the Medicare Part D prescription drug benefit.  However, several on the Committee also sought to distinguish the implementation challenges from those of past programs and mention other problems beyond the website, including data privacy.  The federal data hub meant to link exchange applicant data to determine eligibility for subsidies has become a political target.  Whether personal information is protected and for how long it is stored by the federal government is something of great question, which has resulted in varying answers from the Administration.

The Senate is planning similar hearings next week, with CMS Administrator Tavenner testifying before the Senate Health, Education, Labor, and Pension (HELP) Committee on Tuesday, November 5, 2013, and HHS Secretary Sebelius testifying before the Senate Finance Committee on Wednesday, November 6, 2013.  Additional hearings and scrutiny over the next several months are anticipated in the lead-up to the January 1 enrollment date for the exchange marketplaces.

CMS Clarifies Health Insurance Exchange Enrollment Deadline

On October 28, 2013, the Centers for Medicare & Medicaid Services (CMS) released guidance clarifying that individuals have until March 31, 2014 to enroll in the health insurance exchanges.  (More information on the health insurance exchanges is available here.)  

What’s the issue? 

The Administration has previously announced the open enrollment period for the new health insurance exchanges would run from October 1, 2013 through Mach 31, 2014.

The Affordable Care Act (ACA) also imposes an individual mandate requirement, which provides that beginning January 1, 2014, individuals must have health insurance coverage or face a penalty.  This penalty is assessed on the individual’s federal income tax return for the following year.  (More information on this requirement is available here.)  In establishing the individual mandate requirement, the Internal Revenue Service (IRS) determined the penalty would not apply to individuals who have a gap in health insurance coverage for less than three months.

So, what’s the problem?

The problem comes from fact that there is a lag between when an individual signs up for health insurance coverage and when the coverage begins.  Under the rules, if an individual selects a plan and pays his/her premiums between the 1st and the 15th of a given month, his/her coverage begins on the first day of the following month.  However, if the individual selects a plan between the 16th and the end of a given month, his/her coverage will not begin until the first day of the second following month.  Below are some examples to illustrate the issue.

Example 1:

Betty does not have any health insurance coverage and decides to sign up for coverage in the health insurance exchange operating in her state.  She signs up for health coverage and pays her premiums on February 10, 2014.  Her health insurance coverage will begin on March 1, 2014.

Because she experienced a gap in coverage of less than three months, she will not be assessed an individual mandate penalty.

Example 2:

Bobby does not have any health insurance coverage and decides to sign up for coverage in the health insurance exchange operating in his state.  He waits until March 20, 2014 (still within the open enrollment period) to sign up for coverage and pay his premiums.  His coverage will begin on May 1, 2014 (the second following month).

However, because he experienced a gap in health insurance coverage of more than three months, prior to the CMS guidance, he would be assessed an individual mandate penalty.

What does the CMS guidance do?

The CMS guidance clarifies that an individual mandate penalty would not be assessed against anyone who signs up for coverage and pays his/her premiums before the end of the open enrollment period.  So, Bobby in Example 2 would not be assessed an individual mandate penalty even though he was without health insurance coverage for more than three months.

CMS will be issuing additional guidance next year to provide additional information to people as they prepare and file their 2014 federal income tax return (which is due to the Internal Revenue Service (IRS) by April 15, 2015).

CMS Releases Hospital Outpatient Payment Rule

On July 8, 2013, the Centers for Medicare & Medicaid Services (CMS) released its proposed rule implementing changes to the Medicare Hospital Outpatient Prospective Payment System (HOPPS) and Ambulatory Surgical Center (ASC) Payment System for calendar year (CY) 2014.  According to CMS, relative to payments in 2013, Medicare payments for outpatient services are expected to increase 9.5 percent, or $4.37 billion, in CY 2014, and payments to ASCs are expected to increase by 3.5 percent, or $133 million.

Comments on the proposed rule are due September 6, 2013.  A copy of the proposed rule is available here and will be published in the Federal Register on July 19, 2013.  A CMS fact sheet on the proposed rule is available here.

CMS Releases Physician Payment Rule

On Monday, July 8, 2013, the Centers for Medicare & Medicaid Services (CMS) released its proposed rule implementing changes to the Medicare Physician Fee Schedule for calendar year (CY) 2014.  CMS estimates that absent Congressional action, physicians who treat Medicare beneficiaries will face a 24.4 percent cut in their reimbursement due to the Sustainable Growth Rate (SGR).  More information on the SGR is available here.

As part of this proposed rule, CMS is also proposing several changes to the Physician Quality Reporting System (PQRS), the Medicare Electronic Health Record (EHR) Incentive Program, the physician compare website, and the physician value-based payment modifier.  A CMS fact sheet on these proposed changes is available here.

Comments on the proposed rule are due on September 6, 2013.  A copy of the proposed rule is available here and will be published in the Federal Register on July 19, 2013.  A CMS fact sheet highlighting the proposed rule is available here.

CMS Releases ESRD Payment Rule

On Monday, July 1, 2013, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule implementing payment and other policy changes to the Medicare End-Stage Renal Disease (ESRD) Prospective Payment System (PPS).  The proposed rule seeks to implement the ESRD payment reductions provided under the American Taxpayer Relief Act (ATRA) enacted earlier this year.  (More information on the ATRA is available here.)

In addition, CMS also proposes changes to the ESRD Quality Incentive Program (QIP).  A CMS fact sheet highlighting the proposed changes to the QIP is available here.

Comments on the proposed rule are due on August 30, 2013.  A copy of the proposed rule is available here.  A CMS fact sheet highlighting the proposed rule is available here.

CMS Releases Proposed IRF Payment Rule

On Thursday, May 2, 2013, the Centers for Medicare and Medicaid Services (CMS) released its proposed rule implementing fiscal year (FY) 2014 Medicare payment rates and policies for the inpatient rehabilitation facilities (IRFs) prospective payment system and changes to the IRF quality reporting system.  The proposed rule calls for aggregate payment increases to IRFs of 2 percent.

A copy of the proposed rule is available here and will be published in the Federal Register on May 8th.  A CMS fact sheet describing the proposed rule is available here.  CMS will be accepting comments on the proposed rule until July 1, 2013.

CMS Proposed Rule on Medicare Payments to SNFs

On Wednesday, May 1, 2013, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule outlining fiscal year (FY) 2014 Medicare payments to skilled nursing facilities (SNFs).  Under the proposed rule, SNFs will see a 1.4 percent increase in their Medicare reimbursement compared to FY 2013 payment rates.

A copy of the proposed rule is available here and will be published in the Federal Register on May 6, 2013.  A CMS fact sheet on the proposed rule is available here.  Comments are due to CMS by July 1, 2013.

CMS Releases Proposed Rule on Hospice

On Monday, April 29, 2013, CMS released a proposed rule updating payment rates for hospices serving Medicare beneficiaries.  A copy of the fact sheet is available here and the 113-page proposed rule is available here.  The proposed rule will be published in the May 13th Federal Register.  Comments are due at the end of June.

Under the proposed rule, hospices would receive a 1.1 percent payment increase for fiscal year (FY) 2014.  The proposed rule also promulgates the ACA requirements that hospices that fail to meet certain quality standards will be subject to a two percent reduction in their reimbursement.

This proposed rule follows CMS’ Friday release of the inpatient prospective payment system (IPPS) and Long Term Care Hospital Prospective Payment System (LTCH PPS) – more information on that proposed rule is available here.  Stay tuned as DBR continues to provide updates as CMS releases its annual Medicare payment rules.