Health Industry Washington Watch : Washington DC Healthcare Industry Law Firm : Reed Smith : Health Industry Washington Watch : Regulations, Medicare/Medicaid, Governmental Organizations

On May 28, 2010, the House of Representatives approved an amended version of H.R. 4213, "The American Jobs and Closing Tax Loopholes Act of 2010.” The legislation would avert a more than 21% cut in Medicare physician fee schedule (MPFS) payments that went into effect June 1, 2010 under the statutory sustainable growth rate (SGR) formula (although CMS is exercising its authority to hold claims for the first 10 business days of June while legislative action is pending to avoid applying the negative update). Under the House bill – which still awaits Senate action -- MPFS rates would be increased by 2.2% for the rest of 2010 and by 1% in 2011, but there would be no relief from the SGR formula for 2012 or thereafter (the Congressional Budget Office estimates that in 2012, rates would be cut by about 33% in the absence of yet another legislative fix). The House bill also would, among other things: expand eligibility for the 340B drug discount program; repeal the delay in the use of RUG-IV for purposes of the Medicare SNF PPS; tighten restrictions on inpatient hospital billing under the “3-day payment window”; and establish a CMS-IRS data match to identify fraudulent providers. The House dropped from its package a 6-month extension of a temporary increase in the federal Medicaid matching rate and an extension of premium assistance for COBRA benefits to reduce the cost of the package. The prospects for Senate action on H.R. 4213 are still uncertain due to concerns that the new spending in the bill still is not fully offset by cuts, so additional shorter-term extensions of the previous physician fee schedule freezes are possible.

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Congressional leaders have been seeking support for a jobs bill with a number of Medicare and other health policy provisions, but to date have been unable to muster the necessary votes for passage before the Congressional Memorial Day break due to concerns about the cost of the package. Among other things, H.R. 4213, "The American Jobs and Closing Tax Loopholes Act of 2010,” would avert a more than 21% cut in Medicare physician fee schedule (MPFS) payments scheduled to take effect June 1, 2010 under the statutory sustainable growth rate (SGR) formula. Instead, Congressional leaders are proposing to increase MPFS rates by 2.2% for the rest of 2010 and by 1% in 2011, but would provide no relief from the SGR formula for 2012 or thereafter. The legislation also would, among other things: extend for 6 months a temporary increase in the federal Medicaid matching rate; expand eligibility for the 340B drug discount program; repeal the delay in the use of the Resource Utilization Groups (RUG IV) for purposes of the Medicare skilled nursing facility (SNF) prospective payment system (PPS); tighten restrictions on inpatient hospital billing under the “3-day payment window”; establish a CMS-IRS data match to identify fraudulent providers; and extend premium assistance for COBRA benefits.  Note that the legislative situation is very fluid, and leaders may revise the package further, including possibly holding a separate vote on the MPFS fix provision. Given the uncertainties of the Congressional outlook, CMS has ordered contractors to hold MPFS claims for the first 10 business days of June (CMS expects the hold to have minimum impact on provider cash flow since clean electronic claims are not paid before 14 calendar days after receipt).

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The Obama Administration has released its proposed federal budget for fiscal year (FY) 2011. In its budget documents, the Administration reaffirms its commitment to enacting health reform legislation, and it assumes $150 billion in federal savings attributable to health reform over the 2011-2020 period. The document states that the budget “supports health insurance reform” by expanding patient-centered health research on treatment effectiveness; increasing investment in health information technology, prevention, and wellness activities; and initiating Medicare payment reform demonstrations. Nevertheless, the budget does not outline comprehensive reform plans, nor does it repeat the sweeping Medicare and Medicaid budget savings proposals included in the Administration’s proposed FY 2010 budget. In other health policy areas, the budget would: expand funding for biomedical research, health centers for the medically underserved, and HIV/AIDS prevention and treatment; provide a six-month, $25.5 billion extension of the American Recovery and Reinvestment Act (ARRA) temporary increase in federal Medicaid matching funds; expand Medicare and Medicaid anti-fraud efforts; address high-risk billing activity associated with the Medicaid drug benefit; expand Food and Drug Administration (FDA) user fees; and fund an FDA to “provide regulatory pathways for new technologies such as biosimilars.”  A separate FDA press release on the budget proposal announces that the Administration is seeking $4.03 billion for the FDA in FY 2011, which is a 23% increase over the agency’s current $3.28 billion budget.  The following initiatives are the major components of the FDA's FY 2011 budget increase:  transforming food safety ($318.3 million); Protecting Patients Initiative ($100.8 million); advancing regulatory science ($25.0 million); and tobacco-related initiatives ($215.0 million).  Note that many provisions of the proposed budget would require Congressional approval to implement. To that end, Congress is holding a series of hearings on the proposal, including Senate Finance and House Energy and Commerce Committee hearings focusing on the health policy provisions of the budget. Several other budget hearings scheduled for the week of February 8 were postponed due to extreme weather conditions in the Washington, D.C. area.

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