Determination by CMS Chief Actuary; IPAB proposal

Starting no later than April 30, 2013, the IPAB’s annual review process will begin with a determination by the Chief Actuary for the Centers for Medicare and Medicaid Services (CMS) of the projected per capita growth rate under Medicare from one year (the “Determination Year”) to the next one (the “Implementation Year’).  If the projection for the Implementation Year exceeds the target growth rate for that year, the IPAB will be required to develop and submit during the first year following the Determination Year (i.e., the “Proposal Year”)[1] a proposal containing recommendations to reduce the Medicare per capita growth rate so that there will be a net reduction in total Medicare program spending that is at least equal to the savings target for the relevant year (which is calculated by the Chief Actuary), “while maintaining or enhancing beneficiary access to quality care.”

The IPAB’s proposal may not include any recommendation to ration health care, raise revenues or Medicare beneficiary premiums, increase Medicare beneficiary cost-sharing (including deductibles, coinsurance, and copayments), or otherwise restrict benefits or modify eligibility criteria. Recommendations must relate exclusively to the Medicare program.

No IPAB proposal submitted prior to December 31, 2018 may include any recommendation (applicable to items and services furnished prior to December 31, 2019) that would require providers[2] and suppliers[3] which receive reductions in their market basket updates under Section 3401 of the PPACA to receive a reduction to their inflationary payment updates in excess of that year’s productivity adjustment.

In addition to the IPAB’s recommendations to reduce Medicare’s per capita growth rate, the proposal must contain:

• an explanation of each recommendation contained in the proposal and the reasons for including it;

• an actuarial opinion by the CMS Chief Actuary certifying that the proposal meets the statutory requirements for cost reductions and that the its recommendations, if implemented, will not increase Medicare program spending;

• a legislative proposal that implements the recommendations; and

• other information determined appropriate by the Board.

The IPAB is also directed to include, “as appropriate,” recommendations in the proposal to reduce Medicare payments under parts C (Medicare Advantage) and D (outpatient prescription drugs), such as —

• reductions in direct subsidy payments to Medicare Advantage and prescription drug plans related to administrative expenses (including profits) for basic coverage;

• denying high bids or removing high bids for prescription drug coverage from the calculation of the national average monthly bid amount;

• reductions in payments to Medicare Advantage plans that are related to administrative expenses (including profits); and

• reductions in payments to Medicare Advantage plans that are related to performance bonuses for such plans.

In preparing its proposal, the IPAB is required to submit a draft proposal by September 1 of the Determination Year to MedPac and to the Secretary of HHS for their review.  The Secretary must submit a report to Congress on the results of such review by March 1 of the submission year (which is the same as the Proposal Year). The Board is also required to engage in regular consultations with the Medicaid and CHIP Payment and Access Commission.

Starting in 2014, the IPAB must submit a proposal to Congress and to the President annually on January 15, unless –

• It is a Proposal Year for which the Chief Actuary has made a determination that the projected Medicare per capita growth rate for the Implementation Year does not exceed the Medicare per capita target growth rate for such year; or

• It is a Proposal Year for which the Chief Actuary makes a determination in the Determination Year that the projected percentage increase (if any) for the medical care expenditure category of the Consumer Price Index for All Urban Consumers (United States city average) for the implementation year is less than the projected percentage increase (if any) in the Consumer Price Index for All Urban Consumers (all items; United States city average) for such Implementation Year.

The IPAB may not submit a proposal prior to January 15, 2014.

Congressional consideration

The PPACA requires that the IPAB’s proposal and the legislative recommendations be given expedited consideration by Congress.

The statute sets strict deadlines for committee consideration of the proposed legislation, and places limits on Senate rules that could be used to delay its consideration.

Neither house is allowed to consider any bill, amendment, resolution, or conference report that would –

• not meet the statutory requirements for cost reductions or the statutory requirement that the changes, if implemented, would not increase Medicare program spending;

• repeal or otherwise change the recommendations of the IPAB if that change would change the cost reductions or increase Medicare program spending;

• change the portion of the PPACA that imposes these prohibitions.

Congress does not have to enact the legislation proposed by the IPAB into law for the IPAB’s proposals to be implemented.  There are only two ways that Congress can stop the IPAB’s recommendations from going into effect:

• It can enact, prior to August 15 of the Proposal Year, legislation that includes the following provision: “This Act supersedes the recommendations of the Board contained in the proposal submitted, in the year which includes the date of enactment of this Act, to Congress under section 1899A of the Social Security Act.; or

• For Implementation Year 2020 and subsequent Implementation Years, it could both enact the provision described immediately above and also, no later than August 15, 2017, pass a joint resolution (introduced no later than February 1, 2017) to discontinue the Board.

If Congress fails to block implementation of the IPAB’s recommendations in a particular Proposal Year, the Secretary is required to implement those recommendations on August 15 of that year, and the Secretary may use interim final rulemaking to adopt the changes.

There is a limited additional exception to this implementation requirement.  The Secretary may not implement the recommendations contained in a proposal submitted by the Board or the President to Congress pursuant to this section of the law if in a Proposal Year (beginning with Proposal Year 2019) if –

• the Board was required to submit a proposal to Congress in the year preceding the Proposal Year; and

• the CMS Chief Actuary makes a determination in the Determination Year that the per capita rate of growth in national health expenditures for the Implementation Year exceeds the projected Medicare per capita growth rate for the Implementation Year.

This limited exception may not be applied in two consecutive years.

Effective dates of reimbursement changes

Assuming an IPAB proposal becomes effective on August 15, the actual reimbursement changes would take effect as follows:

• If the change involves payment for an item or service in which payment rates change on a fiscal year basis (or a cost reporting period basis that relates to a fiscal year), on a calendar year basis (or a cost reporting period basis that relates to a calendar year), or on a rate year basis (or a cost reporting period basis that relates to a rate year), the new payment rate will apply to items and services furnished on the first day of the first fiscal year, calendar year, or rate year (as the case may be) that begins after such August 15.

• If the change relates to payments to plans under parts C (Medicare Advantage) and D (outpatient prescription drugs), such recommendation shall apply to plan years beginning on the first day of the first calendar year that begins after such August 15.

• If the change doesn’t fall into either of these two categories, its effective date will be addressed  in the regular regulatory process timeframe and “shall apply as soon as practicable.”

Composition of the IPAB

The IPAB will consist of 15 members appointed by the President with the advice and consent of the Senate, plus the HHS Secretary, the Administrator of the Center for Medicare & Medicaid Services, and the Administrator of the Health Resources and Services Administration, who will serve as ex officio as nonvoting members.  For the appointed members, serving on the Board will be a full-time job (or at least they are not allowed to “engage in any other business, vocation or employment.”)

The appointed members “shall include individuals with national recognition for their expertise in health finance and economics, actuarial science, health facility management, health plans and integrated delivery systems, reimbursement of health facilities, allopathic and osteopathic physicians, and other providers of health services, and other related fields, who provide a mix of different professionals, broad geographic representation, and a balance between urban and rural representatives.”  They will include, but not be limited to “physicians and other health professionals, experts in the area of pharmaco-economics or prescription drug benefit programs, employers, third-party payers, individuals skilled in the conduct and interpretation of biomedical, health services, and health economics research and expertise in outcomes and effectiveness research and technology assessment. There must also be representatives of consumers and the elderly.  At least half of the appointed IPAB members must have no direct involvement in the provision or management of the delivery of items and services under Medicare.

Members will be appointed for not more than two six-year terms.

[2] Medicare  defines the term “provider of services” to mean a hospital, critical access hospital, skilled nursing facility, comprehensive outpatient rehabilitation facility, home health agency or hospice program.

[3] The term “supplier” is defined by the Medicare statute to mean (unless the context otherwise requires) a physician or other practitioner, a facility, or other entity (other than a provider of services) that furnishes items or services under Medicare.

A major element of these reductions is the insertion of a “productivity adjustment.” This is designed to bring these providers’ payment updates more in line with those given physicians,  whose Medicare  fee schedule’s annual updates include a sustainable growth rate (SGR) formula incorporating adjustments for gains in physician productivity.

The new productivity adjustments will be equal to the 10-year moving average of changes in annual economy-wide private nonfarm business multi-factor productivity, as projected by the Secretary for the 10-year period ending with the applicable fiscal year, year, cost reporting period, or  other annual period.

The Health Reform statute (otherwise known as the “Patient Protection and Affordable Care Act,” or “PPACA”) applies this productivity adjustment by —

• Including it in the annual updates for inpatient and outpatient acute-care hospital services, skilled nursing facility (“SNF”) services, inpatient rehabilitation facility services, dialysis, , ambulance services, and clinical laboratory services,  beginning in 2012;

• Including it in the annual update for hospice care, beginning in 2013.

• Applying it to the annual update of the base rates for long-term care hospitals (“LTCHs”) and for inpatient psychiatric hospital services, to the extent that either of those  base rates is subject to such an update, starting in 2012;

• Applying it to the annual market basket increase for home health agency services, beginning in  2015; and

• Including it in the annual percentage change factor applicable to ambulatory surgical center (“ASC”) services, to the extent such a factor applies, starting in 2011.

• Using it to reduce the consumer price index-based covered item update for durable medical equipment (“DME”) and other similarly based fee schedule updates, beginning in 2011.

The reductions in the annual update factor for each of the 15 types of provider and supplier imposed by the PPACA are detailed below.

(1)  Inpatient hospital services

After the regular update (including the productivity adjustment) is calculated, it will be reduced further by:

• 0.25 percentage point for each of fiscal years 2010 and 2011, and

• 0.2 percentage point for each of fiscal years 2012 through 2019.

These changes (including the productivity adjustment) with regard to inpatient hospital services are effective for discharges on or after April 1, 2010.

(2)  Skilled nursing facility services

Beginning with FY 2012 , SNF market basket updates will be reduced by the productivity factor only.

(3) Long-term care hospital services

The standard Federal rate for discharges for the hospital during the rate year, will be reduced —

• for rate year 2010, by 0.25 percentage point;

• for rate year 2011, by 0.50 percentage point;

• for each of the rate years beginning in 2012 and 2013, by 0.1 percentage point;

• for rate year 2014,by  0.3 percentage point;

• for each of rate years 2015 and 2016, by 0.2 percentage point; and

• for each of rate years 2017, 2018, and 2019, by 0.75 percentage point.

LTCH rate changes (including the productivity adjustment) are effective for discharges on or after April 1, 2010.

(4)   Inpatient rehabilitation facility services

Inpatient rehabilitation fees are entitled to an “increase factor” set by the Secretary once a year. The increase factor for fiscal years 2008 and 2009 was zero. Starting in fiscal year 2012, the productivity adjustment will be applied to this factor.

Once the factor has been established and the productivity adjustment has been applied, the PPACA directs that the increase factor be reduced —

• for each of fiscal years 2010 and 2011, by 0.25 percentage point;

• for each of fiscal years 2012 and 2013, by 0.1 percentage point;

• for fiscal year 2014, by 0.3 percentage point;

• for each of fiscal years 2015 and 2016, by 0.2 percentage point; and

• for each of fiscal years 2017, 2018, and 2019, by 0.75 percentage point.

Inpatient rehabilitation rate changes are effective for discharges on or after April 1, 2010.

(5)  Home health agency services

Starting in 2015, the otherwise-applicable market basket increase will be reduced (after the new HHA payment rates are calculated) by the productivity adjustment.   For each of 2011, 2012, and 2013, it will be reduced instead by 1 percentage point.

(6) Inpatient psychiatric hospital services

In addition to the productivity adjustment, any annual updates for inpatient psychiatric facility services will be reduced —

• for each of the rate years beginning in 2012 and 2013, by 0.1 percentage point;

• for the rate year beginning in 2014, by 0.3 percentage point;

• for each of the rate years beginning in 2015 and 2016, by 0.2 percentage point; and

• for each of the rate years beginning in 2017, 2018, and 2019, by 0.75 percentage point.

(7)  Hospice care

In addition to the productivity adjustment, which goes into effect for hospices in 2013, the hospice market basket rate will be reduced by 0.3 percentage point for each of fiscal years 2013 through 2019.

(8)  Dialysis

For dialysis services, the only cutback to the composite End-Stage Renal Disease (“ESRD’) market basket percentage increase factor will be the productivity adjustment, starting in 2012.

(9)  Outpatient hospital (“OPD”) services

In addition to the productivity adjustment, the OPD fee schedule increase factor will be reduced —

• for each of 2010 and 2011, by 0.25 percentage point;

• for each of 2012 and 2013, by 0.1 percentage point;

• for 2014, by 0.3 percentage point;

• for each of 2015 and 2016, by 0.2 percentage point; and

• for each of 2017, 2018, and 2019, by 0.75 percentage point.

(10)  Ambulance services

The percentage increase to the fee schedule will be reduced by the productivity adjustment only, starting in 2012.

(11)  Ambulatory surgical center (“ASC”) services

The annual update for ASC services will be reduced starting in 2011 by the productivity adjustment only.

(12)  Clinical laboratory services

In addition to the productivity adjustment, which goes into effect for laboratories in 2011, the CPI-based annual fee schedule adjustment will be reduced by 1.75 percentage points for each year from 2011 through 2015.

(13)  Certain durable medical equipment (“DME”)

For 2011 and each subsequent year, the covered item update will be calculated by starting with the percentage increase in the consumer price index for all urban consumers (United States city average) for the 12-month period ending with June of the previous year (“CPI”), reduced by the productivity adjustment.

(14)  Prosthetic devices, orthotics, and prosthetics

In 2010, suppliers of these devices will continue to enjoy the annual CPI increase (with no deductions) they have received since 2007.  Beginning in 2011, the applicable percentage increase will be calculated by starting with CPI, reduced by the productivity adjustment.

(15)  Items subject to fee schedule

Titled “Other Items,” PPACA § 3401(o) applies to various items or services for which CMS has established a statewide or other areawide fee schedule to replace reasonable-charge reimbursement.  Such items and services may include medical supplies; home dialysis supplies; parenteral and enteral nutrients, equipment, and supplies; electromyogram devices; salivation devices; blood products; and transfusion medicine. The Medicare Act already calls for annual CPI updates to these fees for years prior to 2011 (except for parenteral and enteral nutrients, equipment, and supplies in 2009).  Starting in 2011, the annual CPI update will be reduced by the productivity factor.

Reimbursement changes

Perhaps most important to HHAs themselves are a number of reimbursement changes.  The HHA prospective payment system (“PPS”) will be rebased starting in 2014.  HHA rates will be adjusted  by a percentage determined appropriate by the Secretary of Health and Human Services, to reflect such factors as changes in the number of visits in an episode, the mix of services in an episode, the level of intensity of services in an episode, the average cost of providing care per episode, and other factors that the Secretary considers to be relevant. The Secretary may also consider differences between hospital-based and free­standing agencies, between for-profit and nonprofit agencies, and between the resource costs of urban and rural agencies.

The new rates will be phased in over four years, in equal increments, with full implementation in 2017.  During each year of the phase-in, the rate of adjustment cannot exceed 3.5 percent of the amounts that would have been applicable without this amendment.

This adjustment is to be made prior to application of the following reductions in the market basket updates.

Starting in 2015, the otherwise-applicable market basket increase will be reduced by a  productivity adjustment.  (See here for details.)   For each of 2011, 2012, and 2013, it will be reduced instead by 1 percentage point.

In some previous years, Congress provided a percentage add-on to the PPS rates paid to rural HHAs.  PPACA provides for a 3 percent add-on for rural HHAs for visits and episodes of care ending after on or April 1, 2010, and before January 1, 2016.

The final change being made to HHA reimbursement is to reduce the total amount of outlier payments to HHAs from 5 percent to 2.5 percent of the total funds allocated to HHA payment and to add a program-specific outlier cap. Starting in 2011, the outlier cap will limit the amount of outlier payments any HHA can receive to no more than 10 percent of that HHA’s total PPS payments for the year.

Physician certification

In order to qualify for Medicare coverage, HHA services must be ordered by a physician or other appropriate practitioner.  Effective January 1, 2010, prior to making such certification, the physician must document either that the physician him/herself, or a nurse practitioner or clinical nurse specialist who is working in collaboration with the physician in accordance with State law, or a certified nurse as authorized by State law, or a physician assistant  under the supervision of the physician, has had a face-to-face encounter  (other than with respect to encounters that are “incident-to” services involved) with the Medicare beneficiary during the 6-month period preceding such certification, or such other reasonable timeframe set by the Secretary.  The face-to-face encounter may be by telehealth in circumstances under which the telehealth services would otherwise be reimbursable by Medicare.

Studies and reports

PPACA directs the Medicare Payment Advisory Commission (“MedPac”) to conduct a study on the implementation of the HHS PPS rebasing. The study must include an analysis of the impact of such amendments on access to care, quality outcomes, the number of home health agencies, and rural agencies, urban agencies, for-profit agencies, and nonprofit agencies.  MedPac must submit its report to Congress by January 1, 2015, together with “recommendations for such legislation and administrative action as the Commission determines appropriate.”

In addition, the Secretary of Health and Human Services is to conduct a study on HHA  costs involved with providing ongoing access to care to low-income Medicare beneficiaries or beneficiaries in medically underserved areas, and in treating beneficiaries with varying levels of severity of illness. In conducting the study, the Secretary may analyze items such as:

• Methods to potentially revise the HHA PPS to account for costs related to patient severity of illness or to improving beneficiary access to care, such as —

(1) Payment adjustments for services that may involve additional or fewer resources;

(2) Changes to reflect resources involved with providing home health services to low-income Medicare beneficiaries or Medicare beneficiaries residing in medically underserved areas; and

(3) Ways outlier payments might be revised to reflect costs of treating Medicare beneficiaries with high levels of severity of illness.

• Operational issues involved with potential implementation of potential revisions to the home health payment system, including impacts for both HHAs and administrative and systems issues for the Centers for Medicare & Medicaid Services, and any possible payment vulnerabilities associated with implementing potential revisions.

• Whether additional research might be needed.

In conducting this study, the Secretary may consider whether patient severity of illness and access to care could be measured by factors, such as, for example –

• Population density and relative patient access to care

• Variations in service costs for providing care to individuals who are dually eligible under the Medicare and Medicaid programs

• The presence of severe or chronic diseases, which might be measured by multiple, discontinuous home health episodes

• Poverty status, such as evidenced by the receipt of Social Security SSI benefits.

In conducting this study, the Secretary is required to consult with appropriate stakeholders, such as groups representing HHAs and groups representing Medicare beneficiaries.

The Secretary must shall submit to Congress a report on this study by March 1, 2014, together with recommendations for such legislation and administrative action as the Secretary determines appropriate.

Based on the results of the study, the Secretary may choose to provide for a demonstration project to test whether making payment adjustments for home health services under the Medicare program would substantially improve access to care for patients with high severity levels of illness or for low-income or underserved Medicare beneficiaries.  If the Secretary decides to conduct such a demonstration project, it will run from project for a four-year period beginning no later than January 1, 2015.

The PPACA also contains a lengthy provision that requires the Secretary to develop a plan to implement a “value-based purchasing program” for skilled nursing facilities and HHAs.  That program may be discussed in a later post.

Under the Access to Care Act (the government’s new name for the consolidated health reform statutes), there will be a number of changes to standard Medigap policies, effective for policies sold on or after June 1, 2010.  The Center for Medicare Advocacy, Inc. has published a good description of these changes, which you can access here.

Thanks to Alan Goldberg for the heads-up on this helpful document.

For a version of the health reform law that incorporates the Reconciliation Act’s provisions, click here.  (Warning: The site is a bit frustrating to use, as you’re pretty much limited to scrolling to find anything.)

• Improving quality and regulatory compliance in nursing homes
• Making it easier for the public to understand about quality of care in nursing homes

At the risk of  verging into the political sphere,  it seems to me at this point that we are going to end up very soon with one of just two alternative pieces of legislation.  First, there’s Reform Law #1, the House version, which will consist of H.R. 3590 , as amended by H.R. 4872 (the Reconciliation Bill).  If the Senate fails to enact the Reconciliation Bill, there is still Reform Law #2 — H.R. 3590 (Cornhusker Kickback and all).

President Obama signed H.R. 3590 into law on March 23, 2010.  (That means that where I refer elsewhere on this blog to a provision becoming effective so much time after the date of enactment, March 23, 2010 is where you start counting.)

Since there’s nothing in the Reconciliation Bill that would amend H.R. 3590′s substantial provisions affecting long-term care, I’ve focused first on those, which are now law regardless of whether we end up with Reform Law #1 or Reform Law #2.

For these physicians, Medicare rates will also apply to services related to immunization administration for vaccines and toxoids for which CPT codes 90465, 90466, 90467, 90468, 90471, 90472, 90473, or 90474 (as subsequently modified) apply.

The increased payment requirement would also apply to Medicaid managed care plans, “regardless of  the manner in which such payments are made, including in the form of capitation or partial capitation.”