Medicare Update

House Rules Committee Approves Resolution on Medicare Funding Warning Legislation

On July 23, 2008, the House Rules Committee approved H. RES. 1368, which would prevent the application of Section 803 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) during the remainder of the 110th Congress.  Section 803 of the MMA sets forth the procedures that the U.S. House of Representatives must follow after a Medicare funding warning is triggered.

Under the MMA, the Medicare Board of Trustees is required to include a finding in its annual report whenever it projects that general revenues will make up more than 45 percent of total Medicare funding within 7 years.  If the Board of Trustees make this determination for 2 consecutive years, a Medicare funding warning is triggered requiring that the President propose policies to reduce general revenues as a share of Medicare costs.  The Medicare funding warning was first triggered by the Board of Trustees' 2007 annual report.  Consequently, in February 2008, the President submitted the Medicare Funding Warning Response Act of 2008 to Congress. To date, Congress has not taken any action on such funding legislation. 

Section 803 of the MMA requires that Medicare funding legislation be voted on in the U.S. House of Representatives by July 30, 2008. If the U.S. House of Representatives has not voted on Medicare funding legislation by that date, Section 803 could allow a member favoring the legislation to make a motion to discharge the legislation from committee for consideration and ultimately force a vote. However, H. RES. 1368 is intended to prevent a member from using Section 803 to advance any Medicare funding legislation.

OIG Issues Policy Statement on Retroactively Waiving Beneficiary Cost Sharing Amounts

On July 23, 2008, the Department of Health and Human Services' Office of Inspector General (OIG) released a policy statement regarding the retroactive waiver of beneficiary cost sharing amounts attributable to increased payment rates under the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA).  According to the OIG, the purpose of the policy statement is to assure providers and suppliers, affected by the retroactive increase in payment rates under the MIPPA, that they will not be subject to OIG sanctions if they waive "retroactive beneficiary liability" subject to the conditions set forth in the policy statement.  See the policy statement for the definition of "retroactive beneficiary liability" and the conditions.

CMS to Host Special Open Door Forum on Developing Outpatient Therapy Payment Alternatives

The Centers for Medicare & Medicaid Services (CMS) recently announced that it will host a Special Open Door Forum intended primarily for providers of physical therapy, occupational therapy and speech language pathology services payable under Medicare Part B.  The Special Open Door Forum will take place from 2:00 p.m. - 4:00 p.m. (EDT) on August 6, 2008.

During the Special Open Door Forum, CMS will introduce the Developing Outpatient Therapy Payment Alternatives (DOTPA) project.  CMS reports that the DOTPA project will be a 5 year project to address the lack of therapy related information tied to beneficiary need and the effectiveness of outpatient therapy services.  According to CMS, the project will involve:

• The development of a data collection strategy, including creating a patient assessment tool and the recruiting of therapy providers to participate in data collection;
• Analysis of the resulting data to identify payment alternatives to therapy caps; and
• Close engagement with the stakeholder community throughout the project.

CMS reports that the ultimate goal is to develop payment method alternatives to the current financial cap on outpatient therapy services.  To participate in the Special Open Door Forum (onsite or by telephone), registration is required. The deadline for registration is 2:00 p.m. (EDT) on August 4, 2008.  Beginning on August 13, 2008, CMS will also make an audio recording of the Special Open Door Forum available on the Special Open Door Forums page of the CMS website.  The audio recording will be available for 30 days.

CMS Addresses Delay in DMEPOS Competitive Bidding, Accreditation Deadlines and Claims Processing

In separate listserv announcements, the Centers for Medicare & Medicaid Services (CMS) recently addressed the enactment of the Medicare Improvements for Patients and Providers Act of 2008 (H.R.6331) and its impact on DMEPOS accreditation deadlines and claims processing.

First, CMS reports that, because H.R.6331 has delayed the DMEPOS competitive bidding program, the accreditation deadlines for the second round of the program have been cancelled.  According to CMS, prior to the enactment of H.R.6331, DMEPOS suppliers must have been accredited or have applied for accreditation by July 21, 2008 to be eligible to bid in the second round of competitive bidding and must have obtained accreditation by January 14, 2009 to be eligible for a second round contract.  However, CMS reports that the September 30, 2009 deadline by which all DMEPOS suppliers must be accredited is still in effect.

Second, CMS reports that, in the 10 areas where competitive bidding was initiated, the Medicare program will pay for DMEPOS items, retroactive to June 30, 2008, using the standard DMEPOS fee schedule amounts.  CMS also reports that it will begin processing all incoming claims under standard FFS rules no later than July 28, 2008 and that any claims that were held will be processed no later than August 4, 2008.  The announcement indicates that, to the extent possible, CMS will automatically reprocess claims that were paid under the DMEPOS competitive bidding program and those claims denied solely due to DMEPOS competitive bidding program rules.  The announcement notes that in some instances suppliers will need to alert the contractor to claims that should be adjusted.  According to the announcement, CMS expects to issue contractor instructions and related MLN Matters articles with more information.

CMS Releases Fact Sheet on Medicare Improvements for Patients and Providers Act of 2008

On July 16, 2008, the Centers for Medicare & Medicaid Services (CMS) released a Fact Sheet and Press Release addressing aspects of the Medicare Improvements for Patients and Providers Act of 2008 (H.R.6331). 

As reflected in the Fact Sheet, the enactment of H.R.6331 will result in the scheduled 10.6 percent Medicare physician fee schedule rate reduction being replaced by a 0.5 percent update, retroactive to July 1, 2008.  H.R.6331 also reinstates and extends the therapy cap exception process through December 31, 2009, and delays the implementation of the Medicare DMEPOS competitive bidding program.  The Fact Sheet provides more details regarding the implementation of these changes, including the reprocessing of claims by Medicare contractors. CMS also reports that it will be implementing various H.R.6331 provisions in the coming months and will announce additional information as it become available.

H.R.6331 was enacted into law when Congress voted to override President Bush's veto on July 15, 2008.

CMS Announces Incentive Payments for 2007 Physician Quality Reporting Initiative

On July 15, 2008, the Centers for Medicare & Medicaid Services (CMS) issued a Press Release announcing payment of more than $36 million in bonus payments to health professionals who satisfactorily reported quality information under the 2007 Physician Quality Reporting Initiative (PQRI) program.

According to the Press Release, more than 109,000 professionals participated in the 2007 PQRI program.  Of those professionals, over 56,700 professionals met the statutory requirements for satisfactory reporting and will receive incentive payments.  Further, CMS reports that the average incentive payment for individual professionals is over $600 and the average incentive payment for a physician group practice is over $4,700 (with the largest payment to a physician group practice totaling over $205,700).  PQRI eligible professionals should receive their incentive payments by August 2008.

The PQRI program was authorized by the Tax Relief and Health Care Act of 2006, and establishes a financial incentive for eligible professionals who participate in the voluntary quality reporting program.

House Committee Chairmen Request GAO Study of Recovery Audit Contractor Program

On July 11, 2008, House Energy and Commerce Committee Chairman, John D. Dingell, and House Ways and Means Committee Chairman, Charles B. Rangel, sent a letter to the Acting Comptroller General requesting that the Government Accountability Office (GAO) undertake a study of the Medicare recovery audit contractor (RAC) program.  In the letter, the committee chairmen recognize that the Centers for Medicare & Medicaid Services has made changes to the permanent RAC program as a result of the RAC demonstration project.  However, the committee chairmen ask that the GAO examine the changes implemented in response to lessons learned from the demonstration project and the incorporation of such changes into nationwide rollout of the permanent RAC program, including:

• Provider outreach and actions the agency has taken to prevent future improper payments in areas identified by the RACs
• Coordination and interaction with other Medicare contractors
• CMS oversight of auditing efforts
• CMS oversight of the interaction between the RACs and providers done to quantify and minimize the total burden of compliance

Congress Overrides Veto of Medicare Improvements for Patients and Providers Act of 2008

Today, in a 383-41 vote of the U.S. House of Representatives and a 70-26 vote of the U.S. Senate, Congress voted to override President Bush's veto of the Medicare Improvements for Patients and Providers Act of 2008 (H.R.6331).  As enacted, H.R. 6331 prevents the 10.6 percent reduction in the Medicare payment rate for physician services (which was scheduled to take effect on July 1, 2008) and provides physicians with a 1.1 percent update for 2009.  On December 29, 2007, President Bush signed the Medicare, Medicaid and SCHIP Extension Act of 2007 into law preventing a reduction in Medicare physician payments that was scheduled for 2008 and giving physicians a 0.5 percent increase through June 30, 2008.  In a Press Release, Senate Finance Committee Chairman Max Baucus highlights some of H.R.6331's other provisions.

President Bush to Veto Medicare Improvements for Patients and Providers Act of 2008

The Wall Street Journal's Health Blog reports that President Bush is expected to veto the Medicare Improvements for Patients and Providers Act of 2008 (H.R.6331) today.  The Wall Street Journal's Health Blog also reports that action to override the veto could happen in the House of Representatives this afternoon. If enacted, H.R. 6331 would, among other things, prevent the 10.6 percent reduction in the Medicare payment rate for physician services (which was scheduled to take effect on July 1, 2008) and provide physicians with a 1.1 percent update for 2009.  H.R.6331 would also extend the therapy cap exceptions process through December 31, 2009.   

CMS Releases Report Evaluating Medicare Recovery Audit Contractor Demonstration

On July 11, 2008, the Centers for Medicare & Medicaid Services (CMS) issued a Press Release and released a report evaluating the 3-year Medicare recovery audit contractor (RAC) demonstration project. 

According to the report, the RAC demonstration resulted in RACs correcting more than $1.03 billion in Medicare improper payments and $693.6 million being returned to the Medicare Trust Funds.  Of the improper payments, CMS reports that 96 percent (or $992.7 million) were overpayments and 4 percent (or $37.8 million) were underpayments repaid to providers. Further, the report indicates that, as of March 2008, providers appealed 14 percent of RAC determinations and only had 4.6 percent of overpayment determinations overturned on appeal.  CMS also reports that RAC contingency fees were $187.2 million during the demonstration (and estimates the cost at 20 cents for each dollar collected). 

In the report, CMS indicates that many questions about the effectiveness of the RAC principles and methods were answered during the demonstration. In fact, CMS reports that the demonstration has shown, among other things, the following:

• It is possible to gradually expand the RAC program
• Claim RACs are able to find a large volume of improper payments
• Providers do not appeal every overpayment determination
• Overpayments collected were significantly greater than program costs
• Claim RACs are willing to spend time on provider outreach activities, developing relationships with provider organizations
• It is administratively possible to have a RAC work closely with a Medicare claims processing contractor
• RAC efforts did not disrupt Medicare anti-fraud activities
• It is possible to find companies willing to work on a contingency fee basis

The report also indicates that the RAC demonstration was an important tool in preparing for the implementation of the permanent RAC program and points out a number of changes that CMS has made to improve the permanent RAC program including:

• Having all new issues a RAC wishes to pursue for overpayments validated by CMS or an independent RAC validation contractor and to share the upcoming new issues with provider organizations
• Requiring each new RAC to hire a physician medical director and certified coders
• Requiring the RACs to pay back contingency fees when an improper payment determination is overturned at any level of appeal
• Changing from a 4 year look back period to a 3 year look back period
• Adding a maximum look back date of October 1, 2007
• Adding a web-based application that will allow providers to look up the status of medical record reviews

According to the report, CMS intends to implement the permanent RAC program gradually, beginning with a limited number of states in the summer of 2008.  CMS reports that outreach efforts will be undertaken before overpayment notices and medical record requests are issued. In fact, the Press Release states that "[w]hen a new RAC begins to issue its first overpayment notification letters, it will be limited to 'black-and-white' billing issues, such a duplicate claims and wrong fee schedule amounts." However, in Appendix R of the report, CMS cites key dates and indicates that the award of national RAC contracts and beginning of provider outreach is "TBD" or to be determined.

CMS intends to update the report to reflect updated appeals and other statistics on a monthly basis through the summer of 2008.