Medicare Update

President Bush Signs Medicare, Medicaid and SCHIP Extension Act of 2007

On December 29, 2007, President Bush signed the Medicare, Medicaid and SCHIP Extension Act of 2007 (Act) into law, extending the State Children's Health Insurance Program (SCHIP) and temporarily addressing a number of Medicare program issues.

As widely reported, the Act prevents the 10.1 percent reduction in Medicare physician payments that was scheduled for 2008 and gives physicians a 0.5 percent increase through June 30, 2008.  The 10.1 percent reduction in Medicare physician payments is driven by the statutory sustainable growth rate (SGR) formula, which is intended to control the growth in aggregate Medicare expenditures for physician services. Therefore, Congress will have to revisit the issue before July 1, 2008 or the 10.1 percent reduction will take effect at that time.  The 109th session of Congress passed similar legislation averting a 5 percent reduction in Medicare physician payments for 2007. The 5 percent reduction for 2007 was also driven by the SGR formula.

The Act also extends the Medicare therapy cap exception process through June 30, 2008.  The Balanced Budget Act of 1997 required that the Centers for Medicare & Medicaid Services (CMS) impose the therapy caps on Medicare payments for outpatient physical therapy (OPT), speech-language pathology (OSP) and occupational therapy (OOT) services in all settings, except hospital outpatient departments.  However, the Deficit Reduction Act of 2005 directed CMS to create a clinically-based exception process to the therapy caps for 2006. The Tax Relief and Health Care Act of 2006 extended that exception process through 2007. If Congress had not acted to extend the exception process through June 30, 2008, the Medicare Physician Fee Schedule Final Rule for 2008 would have imposed a combined therapy cap of $1,810 per beneficiary for OPT and OSP, and a separate cap of $1,810 for OOT, beginning January 1, 2008.  Unless Congress repeals the therapy caps or further extends the therapy cap exception process prior to July 1, 2008, the therapy caps will take effect when the Act's extension expires on June 30, 2008.

The Act also contains a number of other provisions impacting Medicare providers and suppliers, such as provisions freezing the inpatient rehabilitation facility compliance threshold at 60 percent and allowing certain comorbidities to count toward that threshold.

UPDATE: House Passes Medicare, Medicaid and SCHIP Extension Act of 2007

Today, the U.S. House of Representatives passed the Medicare, Medicaid and SCHIP Extension Act of 2007 (S.2499) in a 411-3 vote,  On December 18, 2007, the U.S. Senate passed the Act by unanimous consent.  The Act contains a number of Medicare provisions, including a provision that would prevent the 10.1 percent cut to Medicare physician payments beginning January 1, 2008, and instead gives physicians a 6-month 0.5 percent increase through June 30, 2008.

UPDATE: Senate Passes Medicare, Medicaid and SCHIP Extension Act of 2007

On December 18, 2007, the U.S. Senate passed the Medicare, Medicaid and SCHIP Extension Act of 2007 (S.2499) by unanimous consent.  Among other things, the Act would prevent the 10.1 percent cut to Medicare physician payments beginning January 1, 2008 and instead gives a 6-month 0.5 percent increase for physicians through June 30, 2008.  Under the Act, the physician payment changes would be offset, in part, by  an adjustment to the  Medicare  Advantage  stabilization fund.  The Act has been sent to the U.S. House of Representatives.

Congress to Consider Medicare Legislation Blocking Physician Payment Cuts

Today, Senate Finance Committee Chairman Max Baucus announced in Press Release that Congress will consider the Medicare, Medicaid and SCHIP Extension Act of 2007 (Act) this week.

If enacted, the Act would block the 10.1 percent reduction in the Medicare payment rates for physician services in 2008 for a period of 6 months.  In fact, the Act would replaced the scheduled 10.1 percent reduction with a 0.5% increase through June 30, 2008.  As reflected in the Press Release, the Act is expected to contain the following Medicare provisions:

• Increase in physician payment update; extension of the physician quality reporting system. Replaces the scheduled 10.1% cut to the Medicare physician reimbursement rate in 2008 with a 0.5% increase through June 30, 2008. Extends the physician quality reporting system. Revises the Physician Assistance and Quality Initiative fund.
• Extension of incentive payment program for physician scarcity areas. Extends a provision that provides a 5% bonus payment to physicians practicing in physician shortage areas through June 30, 2008.
• Extension of the floor on work geographic adjustment. Extends for six months the work geographic index (GPCI) floor of 1.0 through June 30, 2008.
• Extension of treatment of certain physician pathology services. Extends for six months the provision that allows independent laboratories to continue to bill Medicare directly for the technical component of certain physician pathology services provided to hospitals as authorized by the Balanced Budget Act of 1997 through June 30, 2008.
• Extension of exceptions process for therapy caps. Ensures Medicare beneficiaries access to therapy services through June 30, 2008.
• Extension of payment rule for brachytherapy; extension to therapeutic radiopharmaceuticals. Extends the current “charges to cost” methodology which provides a separate payment for brachytherapy services through June 30, 2008. Includes therapeutic radiopharmaceuticals in this provision.
• Extension of reasonable costs payments for certain clinical diagnostic laboratory tests in rural areas. Provides reasonable cost reimbursement for clinical lab tests performed by certain small rural hospitals as part of their outpatient services through June 30, 2008.
• Extension of authority of specialized Medicare Advantage plans for special needs individuals. Extends the authority of specialized plans to target enrollment to certain populations through 2009. Includes a moratorium on new plans and expanded service areas through December 31, 2009.
• Access to Medicare reasonable cost contract plans. Extends section 1876 authority for cost contracts through December 31, 2009.
• Adjustment to the Medicare Advantage stabilization fund. Removes $1.5 billion from the stabilization fund for regional preferred provider organizations in 2012.
• Medicare secondary payer reporting requirements. Requires the submission of data by group health plans and liability insurers to the Secretary of Health and Human Services that is necessary to appropriately identify individuals for whom Medicare is the secondary payer.
• Payment for Part B drugs. Implements HHS OIG recommendation to require CMS to adjust its Average Sales Price (ASP) calculation to use volume-weighted ASPs based on actual sales volume. Establishes an appropriate reimbursement rate for generic albuterol.
• Payment rate for certain diagnostic laboratory tests. Reimburses certain diabetes laboratory tests that are approved for home use at the same rate as other glycated hemoglobin tests beginning April 1, 2008.
• Long-term care hospitals. Provides regulatory relief for three years to ensure continued access to current long-term care hospital services, while also imposing a limited moratorium on the development of new long-term care facilities. Establishes new facility and medical review requirements to ensure patients are receiving appropriate levels of care at these facilities and freezes the market basket update for the last quarter of rate year 2008. Requires the Secretary to conduct a study on long-term care hospital facility and patient criteria.
• Payments for inpatient rehabilitation facility (IRF) services. Permanently freezes the inpatient rehabilitation services compliance threshold at 60%, effective for cost reporting periods starting July 1, 2006, and allows comorbid conditions to count toward this threshold. Sets the market basket update factor at 0% from April 1, 2008 through FY09. Requires the Secretary to study beneficiary access to inpatient rehabilitation services and care at IRFs and to make recommendations for classifying inpatient rehabilitation facility hospitals and units.
• Accommodation of physicians ordered to active duty in the Armed Services. Extends until June 30, 2008 a provision that permits physicians in the armed services to engage in substitute billing arrangements for longer than 60 days when they are ordered to active duty.
• Treatment of certain hospitals for payment under Medicare. Extends until September 30, 2008, provisions that have allowed certain hospitals to be eligible for wage index reclassification that were otherwise unable to qualify for administrative wage index reclassification.
• Medicare enrollment assistance. Provides $15 million to State Health Insurance Assistance Programs and $5 million for Area Agencies on Aging and Aging Disability Resource Centers for beneficiary outreach and assistance.

CMS Establishes Therapy Caps for Calendar Year 2008

In the Final Rule updating the Medicare Physician Fee Schedule for calendar year (CY) 2008, the Centers for Medicare & Medicaid Services (CMS) establishes a combined therapy cap of $1,810 per beneficiary for outpatient physical therapy and speech language pathology services, and a separate cap of $1,810 for outpatient occupational therapy services.

The Balanced Budget Act of 1997 required that CMS impose the therapy caps on Medicare payments for outpatient physical therapy, speech-language pathology and occupational therapy services in all settings, except hospital outpatient departments.  However, the Deficit Reduction Act of 2005 directed CMS to create a clinically-based exception process to the therapy caps for expenses incurred during CY 2006. The Tax Relief and Health Care Act of 2006 (TRHCA) extended that exception process through CY 2007.  However, the TRHCA's extension of the exception process is scheduled to expire at the end of CY 2007.  Therefore, absent Congressional intervention, the exception process will not apply to expenses incurred for services furnished beginning on January 1, 2008. 

Currently, there is legislation pending that would either repeal the therapy caps or extend the therapy cap exception process.  For instance, there is the Medicare Access to Rehabilitation Services Act of 2007 (S.450/H.R.748) and the Long-Term Care Quality and Modernization Act of 2007 (H.R.4082).  However, it remains unclear, at this time, whether legislation will be enacted to repeal the therapy caps or extend the exception process for CY 2008.

UPDATE: The Medicare, Medicaid and SCHIP Extension Act of 2007 extends the Medicare therapy cap exception process through June 30, 2008. See President Bush Signs Medicare, Medicaid and SCHIP Extension Act of 2007.

MedPAC Releases Updated Medicare Basics Documents

On October 5, 2007, the Medicare Payment Advisory Commission (MedPAC) released updated documents for its Medicare Basics and Medicare Payment Basics series.  The documents include a document entitled Medicare Benefit Design and the following documents which provide an overview of individual Medicare payment systems:

• Oxygen and Oxygen Equipment 
• Skilled Nursing Facilities
• Physician Services
• Psychiatric Hospital Services
• Rehabilitation Facilities
• Medicare Part D
• Outpatient Therapy Services
• Medicare Advantage Program
• Outpatient Dialysis Services
• Outpatient Hospital Services
• Home Health Care Services
• Hospice Services
• Hospital Acute Inpatient Services
• Long-Term Care Hospitals
• Clinical Laboratory Services
• Critical Access Hospitals
• Durable Medical Equipment
• Ambulatory Surgical Centers

MedPAC is an independent federal body established by the Balanced Budget Act of 1997 to advise Congress on issues affecting the Medicare program.

Congress Extends Therapy Caps Exception Process

Prior to adjourning, the 109th session of Congress approved the Tax Relief and Health Care Act of 2006, which extended the therapy caps exception process through calendar year 2007.  This legislation now goes to President Bush for signature.

The Balanced Budget Act of 1997 (BBA) required the Centers for Medicare & Medicaid Services (CMS) to impose annual financial limitations, known as therapy caps, on Medicare payments for outpatient physical therapy, speech-language pathology and occupation therapy services in all settings, except hospital outpatient departments.  However, due to a series of moratoria, the therapy caps were only imposed during 1999 and a few months of 2003.

In fact, to ensure beneficiary access to necessary therapy services, the Deficit Reduction Act of 2005 (DRA) directed CMS to create a therapy caps exception process.  CMS implemented the DRA's exception process.  However, absent Congressional action, the DRA's therapy caps exception process was scheduled to expire at the end of calendar year 2006.