Obama Administration Proposes FY 2015 Budget with Medicare, Medicaid Savings Provisions

On March 4, 2014, the Obama Administration released its proposed federal budget for fiscal year (FY) 2015. Virtually all types of health care providers, health plans, and drug manufacturers would be impacted by the budget provisions if adopted as proposed – an unlikely scenario given the Republican House leadership’s reaction to the document. Nevertheless, the Medicare and Medicaid savings proposals (many of which are carry-overs from prior budgets) could resurface as spending offsets in the pending negotiations on Medicare physician fee schedule reform legislation or in future budget negotiations. Highlights of the Administration’s Medicare and Medicaid legislative proposals include the following (all savings estimates are for the 10-year period of FYs 2015-2024):

Major Medicare Provider Payment Provisions

The proposed FY 2015 budget includes a package of Medicare legislative proposals estimated to save $407.2 billion over 10 years.

  • Reduce Medicare coverage of bad debts from 65% in most cases to 25% over three years starting in 2015 ($30.8 billion/10 years).
  • Reduce Medicare indirect medical education add-on payments by $14.6 billion (although a new targeted grant program would reinvest $5.2 billion of these savings).
  • Reduce critical access hospital (CAH) reimbursement to 100% of costs ($1.7 billion) and limit CAH designation eligibility for hospitals within 10 miles of another hospital ($720 million).
  • Reduce payment updates for inpatient rehabilitation facilities (IRFs), long-term care hospitals (LTCHs), skilled nursing facilities (SNFs), and home health agencies (HHAs) by 1.1 percentage points each year from 2015 through 2024 (the update could not fall below 0%). The SNF reduction would be accelerated, beginning with a -2.5% update in FY 2015, tapering down to a -0.97% update in FY 2022. These provisions would save $97.9 billion over 10 years.
  • Implement bundled payment for post-acute care providers, including LTCHs, IRFs, SNFs, and HHAs beginning in 2019, with rates set to produce a permanent and total cumulative adjustment of 2.85% by 2021, and beneficiary coinsurance equal to current levels ($8.7 billion).
  • Adjust the standard for classifying a facility as an IRF (at least 75% of patient cases admitted to an IRF must meet one or more of 13 designated conditions), saving $2.4 billion.
  • Reduce by up to 3% payments to SNFs with high rates of care-sensitive, preventable hospital readmissions, beginning in 2018 ($1.9 billion).
  • Equalize IRF and SNF payments for certain conditions involving hips and knees, pulmonary conditions, and other conditions selected by the Secretary ($1.6 billion).
  • Implement a budget neutral value-based purchasing program for additional provider types, including SNFs, HHAs, ambulatory surgical centers, and hospital outpatient departments beginning in 2016. At least 2% of payments must be tied to the quality and efficiency of care.
  • Align Medicare payment for clinical laboratory services with private sector rates and encourage electronic reporting of laboratory results ($7.9 billion).
  • Strengthen the Independent Payment Advisory Board (IPAB) by reducing the target rate of Medicare cost growth from gross domestic product plus one percentage point to plus 0.5 percentage point, which would make it easier to trigger ACA provisions requiring reductions to Medicare provider reimbursement ($12.9 billion).
  • The budget endorses reform of the sustainable growth rate formula used to update Medicare physician fee schedule payments, including a period of predictable payments followed by reimbursement tied to alternative payment models and value-based purchasing, along the lines of pending Congressional reform legislation.

Prescription Drug Provisions

  • Reduce payment for physician-administered Medicare Part B drugs from 106% to 103% of average sales price (ASP). If a physician’s cost for purchasing the drug exceeds 103% of ASP, the drug manufacturer would be required to provide a rebate to ensure that the provider’s net cost to acquire the drug equals 103% of ASP minus an overhead fee to be determined by the Secretary. The Secretary would be authorized to pay a portion of the entire amount above ASP as a flat fee rather than a percentage in a budget-neutral manner. This proposal is estimated to result in $6.8 billion in savings.
  • Provide Medicaid-level drug rebates for brand name and generic drugs provided to Medicare beneficiaries who receive Part D low-income subsidies, beginning in 2016 ($117.3 billion).
  • Effectively close the Medicare Part D coverage gap by 2016, rather than 2020, by increasing manufacturer “coverage gap” discounts from 50% to 75% beginning in plan year 2016 ($7.9 billion).
  • Allow the Secretary to suspend coverage and payment for Part D drugs (1) prescribed by providers who have misprescribed or overprescribed drugs with abuse potential, and (2) that pose an imminent risk to patients. The Secretary also could require additional information on certain Part D prescriptions, such as diagnosis and incident codes, as a condition of coverage.
  • Encourage the use of generic drugs by Part D low-income subsidy beneficiaries by modifying copayments ($8.5 billion).
  • Lower Medicaid drug costs by clarifying the definition of brand drugs, collecting an additional rebate for generic drugs when prices grow faster than inflation, and including certain prenatal vitamins and fluorides in the rebate program. The plan also would make a technical correction to the Affordable Care Act (ACA) alternative rebate for new drug formulations, limit to 12 quarters the timeframe for which manufacturers can dispute drug rebate amounts, exclude authorized generic drugs from average manufacturer price calculations for determining rebate obligations for brand drugs, and calculate Medicaid federal upper limits based only on generic drug prices. These proposals are projected to save $8.6 billion over 10 years.
  • Direct states to track high prescribers and utilizers of Medicaid prescription drugs ($540 million).
  • Require manufacturers to pay Medicaid rebate equal to the entire amount that the state has paid for the drugs in cases where the state improperly reported non-drug products as covered outpatient drugs, or where the state improperly reported drugs that the Food and Drug Administration (FDA) has found to be less than effective. In addition, the budget would allow more regular audits and surveys of manufacturers to ensure compliance with Medicaid drug rebate agreement requirements; require drugs to be electronically listed with the FDA to receive Medicaid coverage; and increase penalties for reporting false information for the calculation of Medicaid rebates.
  • Increase the availability of generic drugs and biologics by authorizing the Federal Trade Commission (FTC) to stop companies from entering into “pay for delay” agreements ($9.1 billion) and modifying the length of exclusivity on brand name biologics ($4 billion).

Major Program Integrity/Efficiency Provisions

  • Expand funding for the Health Care Fraud and Abuse Control (HCFAC) program, the Medicaid Integrity Program, and Medicaid Fraud Control Units, and other Department of Health and Human Services (HHS) program integrity efforts.
  • Expand the current authority to exclude individuals and entities from federal health programs if they are affiliated with a sanctioned entity by closing a “loophole” that allows an officer, managing employee, or owner of a sanctioned entity to avoid exclusion by resigning his or her position or divesting his or her ownership; and extending the exclusion authority to entities affiliated with a sanctioned entity ($60 million in savings).
  • Authorize civil monetary penalties or other intermediate sanctions for providers who do not update enrollment records ($90 million).
  • Expand authority to investigate and prosecute allegations of abuse or neglect of Medicaid beneficiaries in non-institutional settings.
  • Exclude radiation therapy, therapy services, advanced imaging, and anatomic pathology services from the in-office ancillary services exception to the prohibition against physician self-referrals (Stark law), except in cases where a practice meets certain accountability standards, as defined by the Secretary effective for calendar year 2016 ($6 billion).
  • Expand the authority of the Centers for Medicare & Medicaid Services (CMS) to require prior authorization for all Medicare fee-for-service items, and mandate prior authorization of advance imaging services and power mobility devices ($90 million).
  • Allow the Secretary to create a system to validate practitioners’ orders for certain high-risk items and services.
  • Increase reporting and review of so-called “higher-risk” banking arrangements to receive Medicare payments (such as “sweep accounts” that immediately transfer funds from a financial account to an investment account in another jurisdiction, preventing Medicare from recovering improper payments).

Other Medicare & Medicaid Provisions

  • Increase the minimum Medicare Advantage (MA) coding intensity adjustment ($31 billion).
  • Modify documentation requirement for face-to-face encounters for durable medical equipment (DME), orthotics, prosthetics, and supplies (DMEPOS) to allow certain non-physician practitioners to document the face-to-face encounter.
  • Revise beneficiary cost-sharing requirements, including increased income-related premiums under Parts B and D, a new home health copayment, increased Part B deductible for new enrollees, and increased premiums for beneficiaries with Medigap policies with particularly low cost-sharing requirements.
  • Base Medicaid rates for DME on Medicare rates ($3.1 billion).
  • Rebase future Medicaid Disproportionate Share Hospital (DSH) allotments to account for levels of uncompensated care under ACA coverage expansion ($3.3 billion).

Congress Approves 1-Year Extension of Medicare Sequestration

On February 11, 2014, Congress approved a one-year extension of Medicare sequestration cuts as part of a bill (an amendment to S. 25) to restore certain military retiree pension benefits.  Under the legislation, current 2% across-the-board cuts to Medicare provider payments would be extended through 2024 (instead of 2023).  While the savings from the sequestration extension would primarily be used to finance the military pension benefits, $2.3 billion would be set aside to help finance pending Medicare physician fee schedule reform legislation (a fraction of the estimated cost of reform).  The measure now awaits the President’s signature.

There is obviously hope that Congress will reach an alternative budget solution in the intervening years before the sequestration extension would be imposed.  Nevertheless, this is the second time in two months that Congress has turned to an extension of Medicare sequestration as a funding mechanism -- a troubling new trend for Medicare providers. 

SGR Reform/IPAB Connection - Will Medicare Physician Fee Schedule Fix Trigger IPAB Provider Cuts?

The Congressional Budget Office (CBO) has raised the specter that pending legislation to reform the Medicare physician fee schedule statutory update formula could increase the likelihood that the Affordable Care Act’s (ACA) Independent Payment Advisory Board (IPAB) mechanism would be triggered – potentially resulting in as much as $0.6 billion in Medicare provider cuts during the 2015-2023 period. 

As previously reported, House and Senate panels are proceeding with plans to reform the unpopular “sustainable growth rate” (SGR) formula – the statutory provision that outlines how Medicare physician fee schedule rates are updated annually.  In recent years, the formula has called for deep cuts in Medicare rates – although Congress has routinely stepped in with temporary patches to avert the full application of the formula.  Most recently, the SGR contributed to a 20.1% cut in the Medicare physician fee schedule update for 2014 – but Congress approved the Bipartisan Budget Act of 2013 in December to replace that cut with a 0.5% increase for services provided only during the first three months of 2014.  The temporary patch is intended to give lawmakers time to finalize pending bipartisan proposals to permanently repeal the SGR policy and replace it with a period of stable payment followed by reimbursement linked to quality of care.

Congressional panels tasked with drafting the SGR legislation have not yet revealed how they intend to pay for the costs of their bills.  In the absence of such offsets, the CBO has estimated that the version of the legislation approved by the House Ways and Means Committee in December (H.R. 2810) would increase spending by about $121 billion over the 2014-2023 period, while the Senate Finance Committee package (S. 1871) would increase direct spending by $150.4 billion during that period.  According to the CBO, such spending increases would result in the IPAB mechanism being triggered.

By way of background, under the ACA, the IPAB is charged with submitting detailed proposals to Congress and the President to reduce Medicare per-capita spending if projected spending growth exceeds a specified target based on inflation and growth in the economy, beginning in 2015.  IPAB’s proposals will go into effect automatically unless Congress enacts alternative legislation to achieve the required savings (with certain exceptions).  The IPAB is barred from submitting proposals that reduce Medicare payments prior to 2020 for providers that had reimbursement cuts under the ACA beyond a productivity adjustment (such as acute care hospitals, long-term care hospitals, inpatient rehabilitation facilities, and outpatient hospital services, among others), thereby potentially increasing the impact of the IPAB cuts on physicians and Medicare Advantage and Part D plan sponsors.  Note that none of the 15 members of the IPAB have actually been nominated yet, so the panel currently exists in name only (but failure to appoint a panel would not forestall the cuts – if IPAB does not submit a plan, the responsibility falls to the HHS Secretary).  

Last May, the CBO had projected that Medicare per-beneficiary spending would be below the IPAB triggers for fiscal years 2015 through 2023.  In budget estimates released last week, however, the CBO estimates that under the House SGR reform bill, the IPAB mechanism would be required to produce a $0.5 billion reduction in Medicare spending over the 2015-2023 period.  The Senate Finance SGR package would require even higher IPAB savings -- $0.6 billion over the same period. 

Congressional negotiators finalizing the SGR package are expected to eventually identify their own spending offsets, which could impact spending on a potentially broader range of health care provider types, health plans, and drug manufacturers, but minimize the potential that the IPAB makes those decisions.  The question now – if SGR reform actually proceeds -- is whether it will be Congress or the IPAB panel that identifies the offsetting savings.  Either way, however, it appears that SGR reform could be a good news/bad news proposition, with long-overdue SGR reforms adopted, but at a currently-unknown price. 

CMS Loosens Restrictions on Disclosure of Physician-Specific Medicare Payment Data

As part of its ongoing efforts to make Medicare data more transparent and accessible, CMS has ended its blanket restriction on disclosure of information about Medicare payments to individual physicians when requested under the Freedom of Information Act (FOIA).   Instead, CMS will now consider on a case-by-case basis whether exemption 6 of FOIA, which requires CMS to balance the privacy interest of individual physicians against the public interest in disclosure of such information, applies to a given request for information pertaining to Medicare payments to individual physicians.  CMS notes that since “the outcome of the balancing test will depend on the circumstances, the outcomes of these analyses may vary depending on the facts of each case.”  In a blog post, CMS contends that potential benefits associated with release of such information could include:

  • Allowing providers to collaborate on improved health care management and delivery at lower costs;
  • Giving consumers broader, more reliable measures of provider quality and performance to drive innovation and competition while informing consumer choice; and
  • Enabling journalists and others to identify waste, fraud, abuse, and unsafe practices.

In addition to reiterating its commitment to protecting the privacy of Medicare beneficiaries, CMS states that it intends “to consider the importance of protecting physicians’ privacy and ensuring the accuracy of any data released as well as appropriate protections to limit potential misuse of the information.” The official version of the notice will be published on January 17. 

OIG Examines Inappropriate Medicare Payments on Behalf of Deceased or Unlawfully-Present Beneficiaries

According to the HHS Office of Inspector General (OIG), the Medicare program continues to make inappropriate payments on behalf deceased beneficiaries and beneficiaries who are unlawfully-present in the country. First, despite safeguards intended to prevent and recover Medicare payments made on behalf of deceased beneficiaries, Medicare inappropriately paid $23 million in 2011 for claims with service dates after beneficiaries' deaths. The majority of the improper payments were made under Medicare Part C. The OIG recommended a series of steps to improve payment safeguards in this area and to address providers and suppliers identified by the OIG with high numbers of claims with service dates after beneficiaries' deaths.

In a separate report, the OIG found that CMS did not adequately prevent Medicare Part D payment for unlawfully-present beneficiaries for calendar years 2009 through 2011. As a result, CMS inappropriately accepted 279,056 prescription drug event records submitted by Part D sponsors with unallowable gross drug costs totaling $29.0 million on behalf of 4,139 unlawfully-present beneficiaries. CMS used those records to make final payment determinations to sponsors. The OIG recommended that CMS resolve improper Part D payments made for drugs provided to unlawfully-present beneficiaries and take steps to develop and implement controls to prevent inappropriate payments in the future.

Continuing Resolution for FY 2014 Adopted; Budget Panel Could Take Up Medicare Issues

On October 16, 2013, the House and Senate approved H.R. 2775, the Continuing Appropriations Act of 2014. Under the resolution, the federal government was reopened, after being closed since October 1, 2013. The resolution also funds government operations through January 15, 2014 and suspends the debt limit through February 7, 2014. In the only health care policy provision, HHS is directed to verify the income of individuals applying for premium tax credits under the ACA. As part of the agreement, the House and Senate also agreed to go to conference on a budget resolution to establish the Congressional budget for FY 2014, which started October 1, 2013, and to set budget levels for FY 2015. Conferees are directed to present a budget agreement to Congress by December 13, 2013. As part of the conference deliberations, lawmakers are expected to address Medicare funding to some extent, particularly as lawmakers seek to avert an upcoming steep reduction in Medicare physician fee schedule payments and to extend certain Medicare provisions that expire at the end of the year. Any increases in Medicare program spending are typically offset by other health program cuts, so a wide range of Medicare policies could still be in play this year.

2013 MedPAC Data Book Released

The Medicare Payment Advisory Commission (MedPAC) has released its 2013 Data Book on Health Care Spending and the Medicare Program. The publication provides information on national health care and Medicare spending and utilization, Medicare and dual-eligible beneficiary demographics, Medicare quality, Medicare beneficiary and other payer liability, and related issues.

CMS Releases Data on Medicare Outpatient Hospital Payments

CMS has posted estimated hospital-specific charges and average Medicare payments for 30 Ambulatory Payment Classification (APC) Groups paid under the Medicare Outpatient Prospective Payment System (OPPS) for calendar year 2011. National and state-level summaries are also available.

Medicare Trustees Forecast Longer Medicare Solvency

On May 31, 2013, the Medicare Board of Trustees released its annual assessment of the financial condition of the Social Security and Medicare trust funds. The Board projects that the Medicare hospital insurance trust fund will remain solvent until 2026, which is two years later than forecast last year. The Board attributes the improved outlook in part to lower-than-expected Medicare Part A spending in 2012 (particularly for skilled nursing facilities) and lower projected Medicare Advantage costs. The Board points out, however, that projections of Medicare costs are highly uncertain due to a number of factors, including questions about whether Congress will continue to override the Medicare physician fee schedule/sustainable growth rate (SGR) formula and how the ACA will impact spending.

CMS Releases Hospital Charge Data

CMS has posted data on hospital charges associated with the 100 most common Medicare inpatient stays. In a fact sheet announcing the availability of the data, CMS highlighted the “significant variation in charges from hospital to hospital -- including those within the same community -- for inpatient services that may be provided in connection with a given inpatient stay.” For instance, a CMS fact sheet notes that the range in average inpatient charges for services associated with joint replacement (MS-DRG 470) range from $5,300 to $223,000.
 

CMS Issues First Guidance on Sequestration Impact on Medicare

As required by law, on March 1, 2013, President Obama issued a sequestration order triggering automatic cuts to a wide range of federal programs, including Medicare payments to providers and health plans. On March 8, 2013, CMS released its first guidance on sequestration, in the form of an “e-News” message to providers. CMS confirms that Medicare fee-for-service (FFS) claims with dates-of-service or dates-of-discharge on or after April 1, 2013 generally will incur a 2% reduction. Claims for DMEPOS supplies – including claims under the DMEPOS competitive bidding program – also will be reduced by 2%, if the date of service, or the start date for rental equipment or multi-day supplies, is on or after April 1, 2013. CMS notes that the sequestration adjustment will be applied to claims after determining coinsurance, any applicable deductible, and any applicable Medicare Secondary Payment adjustments. Moreover, while beneficiary deductible and coinsurance payments are not subject to sequestration, Medicare’s payment to beneficiaries for unassigned claims is subject to the 2% cut. CMS encourages Medicare providers and suppliers who bill claims on an unassigned basis to discuss with beneficiaries the impact sequestration will have on Medicare reimbursement. Additional details on how sequestration affects Medicare are provided in our recent client alert

Medicare and Sequestration - What Happens Now?

Due to continuing budget gridlock in Washington, sequestration has been triggered – meaning automatic cuts to a wide range of federal programs, including Medicare payments to providers and health plans. While the Centers for Medicare & Medicaid Services has not yet announced detailed plans for implementing the sequester requirements for its programs, this Alert answers some basic questions about sequestration and how it will impact the Medicare program. Among other things, the Alert addresses what Medicare spending is impacted by sequestration, when the Medicare cuts start, and how long sequestration will last.

Fiscal Cliff Deal Includes Medicare Cuts and Other Health Policy Changes

On January 2, 2013, President Obama signed into law (via autopen) the “fiscal cliff” deal, H.R. 8, the American Taxpayer Relief Act of 2012 (ATRA). In addition to making well-publicized changes to the tax code, the new law includes numerous Medicare payment provisions. Most notably, the law includes a one-year Medicare physician fee schedule (MPFS) fix that is paid for by approximately $30 billion in other health care (mainly Medicare) spending reductions over 10 years. ATRA also delays until March 2013 the automatic, across-the-board “sequestration” cuts in federal spending imposed by the Budget Control Act of 2011, which was expected to reduce Medicare provider payments by more than $11 billion in fiscal year (FY) 2013 and $123 billion over the period of FY 2013 to 2021 (CBO subsequently estimated  that the 2013 cut to Medicare payments now will be approximately $9.9 billion due to changes in the sequestration targets under the ATRA). The delay in sequestration, coupled with the government again reaching its debt ceiling, sets up another near-term battle on federal spending, during which Medicare, Medicaid, and other health care programs could be targeted for even more significant cuts.

The health provisions of ATRA are summarized in our Client Alert.

CMS Posts Outpatient Hospital Payment Information under "Value-Driven Health Care" Initiative

CMS has released updated data on Medicare payments to hospitals for commonly-performed outpatient procedures as part of its initiative to make more cost and quality data available to consumers. The updated hospital outpatient department information reflects calendar year 2011 data.

Congress Clears Short-Term Government Funding Bill

The House and Senate have approved a temporary spending bill (H.J.Res. 117) to prevent a federal government shutdown in light of Congress’ failure to reach agreement on the regular appropriations bills before the start of the new fiscal year on October 1, 2012. The short-term measure funds the government until March 27, 2013, generally at spending levels set under last year’s Budget Control Act (BCA) with certain exceptions. The House first approved H.J.Res. 117 on September 13, 2012 and the Senate followed on September 22. The bill now awaits the President’s signature; the Administration is on record in support of the bill. With action on this “must-pass” bill completed, Congress has recessed until after the November elections, with a “lame duck” session tentatively scheduled to begin November 13, 2012. High on the Congressional agenda for November is addressing the automatic spending cuts scheduled to take effect in January 2003 under the BCA’s sequestration provisions (along with expiring tax provisions that will lead to sharp tax rate hikes in January). As discussed in our recent special alert, Medicare providers are facing $11.085 billion in cuts for FY 2013 under sequestration unless Congress and the Administration reach agreement on an alternative budget deal that supersedes the BCA.

Budget Sequestration ("Fiscal Cliff") to Cost Medicare Providers $11 Billion in FY 2013, White House Reports

Medicare providers are facing $11.085 billion in automatic, across-the-board cuts for fiscal year (FY) 2013 under the terms of last year’s political compromise regarding the debt ceiling. Pursuant to this legislation, known as the Budget Control Act (BCA), the Office of Management and Budget (OMB) issued a report on September 14, 2012 detailing the spending cuts, known as sequestration, that will be triggered under the BCA. The cuts will go into effect on January 2, 2013 unless Congress and the Administration reach agreement on an alternative budget deal that supersedes the BCA – action that is unlikely to be considered until after the November elections and possibly not until 2013.

By way of background, the BCA set a January 2012 deadline for a bipartisan Joint Select Committee on Deficit Reduction to propose and Congress to enact a plan to reduce the deficit by $1.2 trillion in FYs 2013 through 2021. Because the Joint Select Committee failed to produce such a plan, automatic cuts to achieve this level of savings will be imposed on January 2, 2013. The cuts must be apportioned equally among FYs 2013 through 2021, and divided evenly between defense functions and non-defense functions (including Medicare provider payments subject to a cap). Mandatory programs exempt from sequestration, include, among others, Social Security, Medicaid, the Children’s Health Insurance Program (CHIP), and veterans’ benefits.

The Budget Control Act imposes a number of special rules regarding the application of sequestration to the Medicare program. Most notably, Medicare cuts are limited to provider payments, and reductions are capped at 2% of individual provider payments under Medicare Parts A and B, and monthly payments under Part C (Medicare Advantage) and Part D prescription drug plan contracts. Medicare payment reductions must be made at a uniform rate across all programs and activities subject to sequestration. Sequestration reductions will be disregarded for purposes of computing adjustments to Medicare payment rates, including the Part C growth percentage, the Part D annual growth rate, and application of risk corridors to Part D payment rates. Also specifically exempt from sequestration are Part D low-income subsidies, Part D catastrophic subsidies, and payments to states for Qualified Individual premiums.

The new OMB report, which was mandated by the Sequestration Transparency Act of 2012, estimates the level of BCA sequestration cuts that will be applied January 2, 2013 for the remainder of FY 2013. With regard to Medicare, the report includes a discussion of mandatory provider spending subject to the 2% cap and other discretionary spending subject to sequestration (bringing the total Medicare cuts to more than $11.085 billion). The cuts are broken down as follows: Part A/Federal Hospital Insurance (HI) Trust Fund: Mandatory and discretionary spending cuts will total approximately $5.8 billion; Part B/Federal Supplementary Medical Insurance (SMI) Trust Fund cuts will total about $5.2 billion; and Part D prescription drug plan payments will be reduced by about $591 million (note that Part C/Medicare Advantage, funding is included in the HI and SMI trust fund reductions).

In addition to the Medicare provider cuts, OMB projects that for FY 2013, the BCA will impose cuts in other nondefense spending ranging from 7.6% to 8.2%, along with 9.4% to 10.0% cuts in defense programs (depending on whether the programs are classified as discretionary or mandatory). The nondefense cuts apply to a number of health care programs, including: a $2.5 billion cut in National Institutes of Health funding; a $605 million reduction in funding for the Health Resources and Services Administration; a $319 million cut in the Food and Drug Administration budget; a $66 million cut in Affordable Care Act (ACA) Affordable Insurance Exchange Grants; and a $78 million reduction in Health Care Fraud and Abuse Control Account funding.

It is uncertain at this time whether the sequestration cuts actually will be imposed, or if an alternative budget scheme – with potentially more dramatic Medicare and Medicaid impact – ultimately will be enacted. We will continue to post updates on budget activities impacting the Medicare program on our blog, where you also can find our previous reports on this topic.

MedPAC Issues 2012 Data Book

MedPAC has released its 2012 Data Book on “Health Care Spending and the Medicare Program.” The publication provides information on national health care and Medicare spending, Medicare and dual-eligible beneficiary demographics, Medicare quality, and Medicare beneficiary and other payer liability. It also includes data regarding various provider types, such as data on Medicare spending, beneficiary utilization of the service, number of providers, volume, length of stay, and Medicare profit margins. The Data Book also covers the Medicare Advantage and Part D drug programs.

Congressional Health Policy Hearings

Recent hearings on health policy issues include:

In addition, the Senate HELP Committeehas scheduled hearings May 15 and 16 on HIV/AIDS drug costs and health care delivery reforms, respectively. In addition, the House Judiciary Subcommittee on Intellectual Property and Competition is holding a hearing May 18 on health care consolidation and competition after the ACA

House Approves Sequestration Replacement Plan with Health Provisions

On May 10, 2012, the House of Representatives approved H.R. 5652, the Sequester Replacement Reconciliation Act of 2012, on a largely party-line vote. The legislation would replace certain across-the-board cuts to defense and domestic spending scheduled to begin in 2013 under last year’s Budget Control Act with a new package of domestic spending reductions made through the budget reconciliation process (note that the scheduled 2% across-the-board cut to Medicare provider payments would be retained). Among many other things, the House bill would: repeal certain ACA funding (including the Prevention and Public Health Fund, funding for the Consumer Operated and Oriented Plan program, funding for state insurance exchanges, and state bonus payments for increasing Medicaid enrollment); repeal ACA Medicaid maintenance of effort requirements; revise Medicaid provider tax provisions; and provide for various medical malpractice reforms.  The Obama Administration strongly opposes the House bill, and consideration in the Senate is unlikely.  Any legislative action to block the scheduled sequestration and revise spending/tax policy is not expected until much later in the year – potentially after the November elections.

House Approves GOP Budget with Medicare, Medicaid Provisions

On March 29, 2012, the House of Representatives approved on a 228 - 191 vote H.Con.Res. 112, House Budget Chairman Paul Ryan’s proposal establishing budget targets for fiscal year 2013. The resolution (which was approved with no Democratic votes) would direct various House committees to develop legislation to, among other things: repeal the ACA; establish a Medicare “premium support” program (under which beneficiaries turning 65 on or after January 1, 2023 would receive a premium support payment to offset the cost of the traditional Medicare program or a private plan); provide a 10-year Medicare physician fee-schedule fix (no details are provided); raise the Medicare eligibility age starting in 2023 to conform with Social Security eligibility; expand Medicare means testing; and convert Medicaid to a block-grant program. Senate Finance Committee Chairman Max Baucus has voiced strong opposition to the House Medicare proposals.  Moreover, the Senate is not expected to act on any budget resolution this year, since Senate Leader Reid has indicated that he plans to rely on the budget parameters set forth in last summer’s debt ceiling agreement.
 

Older Entries

February 28, 2012 — President Obama Signs Payroll Tax Bill with Medicare/Medicaid Provisions

February 14, 2012 — President Obama Proposes FY 2013 Budget

February 8, 2012 — CMS Call on New Medicare Hospital Spending Per Beneficiary Measure (Feb. 9)

January 25, 2012 — National Health Care Spending Slowing, CMS Finds

January 25, 2012 — CBO Examines Raising Medicare Eligibility Age

January 5, 2012 — New Law Provides Short-Term Medicare Physician Fee Schedule Fix and Extends Expiring Medicare Provisions for Two Months

December 13, 2011 — House Approves Tax/Jobs Bill with Medicare Provisions; Fate Uncertain

December 13, 2011 — MedPAC to Discuss Medicare Payment Policies (Dec. 15 & 16)

November 30, 2011 — Deficit Reduction Super-Committee Fails to Reach Agreement, Stage Set for Sequestration

November 15, 2011 — CMS Posts 2012 Medicare DMEPOS Fee Schedule Files

September 30, 2011 — MedPAC Offers Medicare SGR Proposal, With Offsetting Medicare Cuts

September 30, 2011 — Legislative Language Released for President Obama's Deficit Plan

September 19, 2011 — President Obama Outlines Proposal to Deficit Reduction Super-Committee; Medicare Provisions Loom Large

August 16, 2011 — Deficit Reduction "Super-Committee" Members Appointed; Panel Expected to Consider Medicare Spending

August 1, 2011 — Congress Nearing Vote on Debt-Ceiling Agreement, Including Potential Medicare Provider Cuts

July 29, 2011 — MedPAC 2011 Data Book Released

July 19, 2011 — Administration, Congress Wrestle with Debt Limit Extension that Could Include Medicare/Medicaid Cuts

June 24, 2011 — Congressional Hearings on Health Policy Issues

May 31, 2011 — Senate Opposes House FY 2012 Budget Resolution, Obama Budget Plan

April 29, 2011 — Budget Update: Obama Signs FY 2011 Budget, House Adopts 2012 Framework

April 13, 2011 — President Obama Outlines Plans for Deficit Reduction/Entitlement Reform

February 18, 2011 — President Obama Proposes FY 2012 Budget

February 18, 2011 — HHS Offers States Ideas for Cutting Medicaid Costs

January 13, 2011 — MedPAC Reports on Regional Variation in Medicare Service Use

January 10, 2011 — MedPAC to Examine Medicare Provider Payment Adequacy (Jan. 13-14)

December 28, 2010 — GAO Report on Government Fiscal Challenges

December 15, 2010 — Medicare Physician Fee Schedule Fix/Extenders Bill Awaits President's Signature

December 9, 2010 — Congress Clears One-Year Medicare Physician Fee Schedule Fix and Other Health Policy Revisions

November 29, 2010 — MedPAC Meeting on Medicare Payment Adequacy (Dec. 2-3)

September 17, 2010 — MedPAC Policy Meeting

August 31, 2010 — Listening Session on ACA Provision on Use of Medicare Data for Performance Measurement (Sept. 20, 2010)

August 13, 2010 — Other Recent ACA Guidance and Reports

August 13, 2010 — Medicare Trustees Report Assesses ACA Impact on Trust Funds

July 28, 2010 — Analysis of Improper FY 2009 Medicare Payments

July 28, 2010 — MedPAC Data Book

June 17, 2010 — MedPAC Report On Aligning Incentives In Medicare

April 30, 2010 — Federal Medicaid DSH, Part B Qualifying Individual Allotments

February 12, 2010 — House and Senate Pass "PAYGO" Budget Rules, Include Funding for Physician Fee Schedule Fix

February 11, 2010 — President Obama Releases FY 2011 Budget Request

February 11, 2010 — CMS Projects Rising Health Spending Growth in 2009

December 19, 2009 — Senate Leaders Release Health Reform Compromise; Congress Clears 2-Month Delay of 21% Medicare Physician Fee Schedule Cut

December 14, 2009 — National Health Spending to Increase Under Senate Health Reform Plan, Says CMS Actuary

December 4, 2009 — Improper Medicare/Medicaid Payments; Executive Order on Waste/Fraud/Abuse

December 4, 2009 — MedPAC Report on Regional Variation in Service Use

October 9, 2009 — CBO Score of Finance Committee Health Reform Bill Released

September 4, 2009 — Update on CMS Medicare Value-Based Purchasing Demonstrations

May 27, 2009 — Medicare Trustees' Report