Debt Ceiling, Budget Sequestration in 60 Days Are Next Threats to Health Care Funding

For those of you thinking that much of health care dodged a  bullet in the New Year’s tax bill and SGR (Sustainable Growth Rate formula used to determine physician payments under Medicare) fix, you might want to think again. The federal government reached its debt limit last week and the Treasury Department says it can juggle the books until sometime in February when Congress will have to vote whether or not to increase the debt limit. Republican leaders said yesterday they want to cut spending $1 for every $1 increase in the debt limit. Democrats said there should be no link between the debt limit increase vote and spending cuts. Click here for a CNN report. Click here for the story from the NYTimes.

Budget sequestration was delayed in the tax deal until March  1.  Unless Congress acts by then, a 2% across-the-board Medicare cut takes effect. Additional deeper cuts would impact health care programs other than Medicare. Medicaid and Social Security remain exempt. For a refresher on sequestration, click here for the White House report on what and how much will be cut.

Hospitals Bear Brunt of Cuts in SGR New Year’s Deal

A 27% Medicare pay cut to physicians was averted in a New Year’s legislative deal. Physicians will see the status quo in Medicare payments calculated by the SGR through 2013. To pay for this fix costing about $30 billion, Congress cut a variety of programs with about half the funds coming from hospitals. Click here for an excellent two-page summary prepared by our policy team. Here are the key changes:

  • Authority for CMS to collect $11 billion in ‘overpayments’ through the inpatient PPS payments by applying documentation and coding adjustments to payments during fiscal years 2014-2017. No specific guidance is given on the schedule of collections within that window.
  • Reform of the ESRD bundled payment rate in response to a December 7th GAO report suggesting that reduction in drug spending under the new bundled payment methodology resulted in CMS overpaying for dialysis services by as much as $650-$880 million in 2011. Given that total dialysis payments are about $10 billion annually, such a large reduction in the bundled payment could generate significant savings over a 10-year window.
  • Reduction in payment for second and subsequent services starting April 1, 2013. CMS finalized a policy in their 2013 physician fee schedule rule to apply the multiple procedure reduction for the second service at 25%.  The legislation sets the reduction for the second service to 50% and applies a similar policy to therapy services as well.
  • Reducing payment for imaging services in physician office settings by increasing the utilization rate assumption in the calculation of the rates to 90% through 2014.
  • Cutting ambulance payments for non-emergency (BLS) transport of renal dialysis patients to dialysis facilities by 10%. This provision is in direct response to recent MedPAC analysis suggesting that certain geographic areas have extraordinarily high rates of ambulance transports of dialysis patients between facilities.
  • Extending the period in which CMS can recapture overpayments from three years to five years.
  • Increasing the case mix coding adjustment to reduce payments to Medicare Advantage plans (similar to the IPPS documentation and coding adjustment)
  • Eliminating the Medicare Improvement Fund resources in 2014 and 2015. The fund was established in the Affordable Care Act to provide the Secretary with a pool of dollars to supplement payments for physician services if they were negatively affected by the SGR formula.
  • Rebasing of state DSH allotments starting in 2020.

There was an obscure provision in the cliff deal that reset payment for a single APC that would save Medicare about $400 million over 10 years. CMS will make payment for stereotactic radiosurgery, complete course of treatment of cranial lesion(s) that is multisource Cobalt 60 based (HCPC 77371 in APC 0127) in the same manner in which it pays for HCPC G0173 in APC 0067.  Right now, CMS pays for 77371 in an APC with only one HCPC at a rate more than twice what it pays the other similar treatment. Practically speaking, if a hospital had invested in the GammaKnife technology instead of the CyberKnife or LINAC product (which produce a comparable clinical outcome), you were getting paid about $4,600 more. This change ‘levels the playing field’ between the two products, and not surprisingly, at the lower rate.

There was also a provision that repealed the Community Living Assistance Services and Supports (CLASS) Act and created a commission to study and make recommendations on improving long-term services and supports for people with disabilities nationally. Click here for a more detailed report.

On a side note, it looks like Wall Street gave thumbs up to the deal as publicly traded health care companies fared well after the deal was done. Click here for the report.

Health Insurance Rates on a Double-Digit Growth Spurt

Health insurers across the country are seeking and receiving big double-digit increases in health insurance rates, according to a report out yesterday in the New York Times. Click here for the story. According to a new PricewaterhouseCoopers report, growth in health care spending in the United States has slowed considerably since 2009 and PwC’s Health Research Institute projects medical costs will increase 7.5% for 2013, the fourth year in a row of relatively flat growth. Click here for their study.

ObamaCare Brings Major Changes in 2013

The Affordable Care Act has some major changes in store for providers and consumers in 2013. A story in the Washington Post details five of the biggest changes. Click here to read. One less-noted provision in the law requires insurers to cover breast pumps and visits to lactation consultants. As a result, that “industry” is now booming. Click here for the report.

NEJM: Hospitals in States that Don’t Expand Medicaid Will Take A Big Financial Hit

Hospitals in states that don’t expand Medicaid could face cuts to disproportionate share hospital (DSH) payments, as well as higher uncompensated care costs, according to an article in the New England Journal of Medicine. Regardless of Medicaid expansion, the Affordable Care Act will cut Medicaid DSH payments by $18.1 billion between 2014 and 2020. Even in a state that cuts its uninsured rate in half, a hospital could see DSH payments drop 38%. Click here.

New IRS Rules: Family Coverage Does NOT Have to be “Affordable”

New rules issues by the IRS over the holidays say that employers must offer health insurance to employees and their children, but will not be subject to any penalties if family coverage is unaffordable to workers. Click here for the NY Times report. Click here for a good Q&A summary from the IRS.

96 Million Enrolled in BCBS Plans: Report

Blue Cross and/or Blue Shield (BCBS) organizations along with their affiliates enrolled 96 million people as of September 30, 2012, according to a new report. That’s more than 30% of the population in the United States and nearly 46% of those commercially insured. Linked together through the Blue Cross and Blue Shield Association (BCBSA), the Blues are a national federation of 37 local Blue Cross and Blue Shield entities. Click here for the report.

More Exchanges Approved; More Federal Guidance Issued

California, Hawaii, Idaho, Nevada, New Mexico, Vermont and Utah were conditionally approved last week to operate a state-based exchange, and Arkansas has conditionally approved to operate a State Partnership Exchange. HHS also provided more guidance to states on marketplaces that will be operated in partnership with the federal government. For example, states that want to transition from a partnership exchange to a fully state-based exchange in 2015 must file a blueprint with HHS by Nov. 18, 2013. Click here for more from CMS. Click here for the Washington Post story.

New Major Health Care Worker’s Alliance Formed

The 85,000-member California Nurses Association is forging an alliance with the 10,000-member National Union of Healthcare Workers to form a new union made up entirely of health sector workers. A top priority for the new alliance is to lure 43,000 unionized workers at Kaiser Permanente in California away from the SEIU and into the new union. Click here for the report.

Actuaries Outline Biggest ACO Issues

Another report out last week on what makes a successful Accountable Care Organization, but this one has a new twist…it’s from the American Academy of Actuaries. The 12-page report outlines the most important financial and actuarial issues in creating an ACO. Click here to read.

CMS Awards States $306 Million in Bonuses for CHIPRA Successes

CMS awarded nearly $306 million in Childrens Health Insurance Program Reauthorization Act (CHIPRA) Performance Bonuses to 23 states for FY 2012. One additional state, Utah, qualified for a bonus for the first time in 2012. Colorado received the largest award of almost $43 million. Click here for a chart showing information about the awarded states and how much each state received.

Hospice Issues: Data Breach Settlement; New Admission Barriers; Need for Change 

A hospice in Idaho has agreed to pay HHS $50,000 to settle potential violations of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Security Rule. This is the first settlement involving a breach of unprotected electronic protected health information affecting fewer than 500 individuals. Click here for more. A new study out shows that many patients are not getting hospice care because of an increasing number of barriers. Click here for the report. And, for an excellent story on end of life care and the need to change it, click here for the recommendations from Ezekiel Emanuel, a former health care adviser to President Obama.