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

On December 18, 2008, the Congressional Budget Office (CBO) released a major report entitled “Budget Options, Volume 1: Health Care,” which sets forth 115 policy options for Congress to consider as it addresses health care system reform. The CBO points out that Medicare is expected to grow from 2.8 percent of gross domestic product (GDP) in 2008 to nearly 9 percent of GDP in 2050. This spending growth will be fueled primarily by growth in per capita medical costs, according to the CBO, with the aging of the population playing a secondary role. In light of these trends, the CBO offers specific options addressing such areas as: health insurance (market reforms, tax treatment, access to federal programs); health care quality and efficiency; geographic variation in Medicare spending; paying for Medicare services (including hospital, physician, imaging, and post-acute care, and Medicare Advantage plan services, among others); financing and paying for services in Medicaid (including drug payment revisions) and SCHIP; premiums and cost sharing in federal health programs; long-term care; health behavior and health promotion; and closing the gap between Medicare’s spending and receipts.  The CBO also issued a separate report focusing on insurance reform, “Key Issues in Analyzing Major Health Insurance Proposals.” The CBO warns that without changes in policy, a substantial and growing number of nonelderly people are likely to be without health insurance. This issue cannot be addressed without making major changes in the financing or provision of health insurance and health care, which will involve "difficult trade-offs between the objectives of expanding insurance coverage and controlling both federal and total costs for health care." The report describes the assumptions that CBO would use in estimating the effects of key elements of proposals to modify the health insurance system on federal costs, insurance coverage, and other outcomes. In particular, it considers the types of issues that would arise in estimating the effects of proposals to: provide tax credits or other types of subsidies to make insurance less expensive to the purchaser; require individuals to purchase health insurance; require firms to offer health insurance to their workers or pay into a fund that subsidizes insurance purchases; replace employment-based coverage with new purchasing arrangements or provide strong incentives for people to shift toward individually purchased coverage; and provide individuals with coverage under, or access to, existing insurance plans such as the Medicare program, either as an additional option or under a “Medicare-for-all” single-payer arrangement.

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On October 1, 2008, CMS published a document correcting technical errors that appeared in the August 8, 2008 Medicare skilled nursing facility (SNF) prospective payment system final rule for FY 2009. 

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On September 30, 2008, the OIG published supplemental compliance program guidance (CPG) for nursing facilities, targeting quality of care, billing issues, and kickback concerns that have arisen since the OIG’s original CPG for nursing facilities issued in 2000. The guidance is designed to help nursing facilities develop effective compliance programs by identifying operational areas that present potential liability risks under several key federal fraud and abuse statutes and regulations. With regard to quality of care, the supplemental CPG addresses staffing, resident care plans, medication management, appropriate use of psychotropic medications, and resident safety. The new CPG also highlights submission of accurate claims, including proper reporting of resident case-mix data, billing for therapy services and restorative and personal care services, and screening for excluded individuals and entities. In addition, the CPG identifies types of business arrangements that could implicate the anti-kickback statute, including those involving free goods and services or discounts; certain contracts with physicians, suppliers, and hospices; and reserve bed payments with hospitals. Other potential risk areas identified in the supplemental CPG include working with beneficiaries to select Medicare Part D plans, physician self-referrals, anti-supplementation rules, and compliance with HIPAA Privacy and Security Rules.  

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The OIG has issued a report entitled "Trends in Nursing Home Deficiencies and Complaints." The study describes the nature and extent of nursing home deficiencies and complaints in 2007 and identifies trends from 2005 to 2007. According to the OIG, in each of the past 3 years, more than 91 percent of nursing homes surveyed were cited for deficiencies, particularly quality of care, resident assessment, and quality of life deficiencies. Additionally, 17 percent of nursing homes surveyed in 2007 were cited for actual harm or immediate jeopardy deficiencies, and 3.6 percent were cited for substandard quality-of-care deficiencies. The number of substantiated complaints decreased slightly (about 3 percent) since 2005.

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On October 1, 2008, CMS published a notice correcting technical errors that appeared in the August 8, 2008 SNF PPS FY 2009 final rule.

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On September 10, 2008, the Senate Finance Committee approved an amended version of S. 1070, the “Elder Justice Act of 2008.”  The legislation includes a number of provisions aimed at protecting residents of nursing facilities, including a requirement that crimes occurring in federally-funded long-term care facilities be reported to law enforcement agencies; increased funding for training of long-term care ombudsmen and surveyors investigating allegations of abuse, neglect, and misappropriation of property in long-term care facilities; notification and planning requirements in the event of an impending nursing facility closure; and incentives for individuals to train for employment as direct care providers in long-term care facilities. The panel also approved an amended version of S. 1577, the “Patient Safety and Abuse Prevention Act of 2008,” which would, among other things, expand requirements for background checks employees of long-term care facilities with direct patient access. Separately, on September 11, the Senate Judiciary Committee approved S. 2838, the "Fairness in Nursing Home Arbitration Act"; which would render unenforceable pre-dispute arbitration agreements between long-term care facilities and residents. The House Judiciary Committee approved its version of the measure, H.R. 6126, on July 30, 2008

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On August 8, 2008, CMS published the Medicare skilled nursing facility (SNF) prospective payment system (PPS) final rule for FY 2009, which includes a 3.4% inflation update that CMS estimates will increase overall payments by $780 million. Most notably, CMS did not adopt a controversial provision included in its May 7, 2008 proposed rule to recalibrate case mix weights to compensate for increased expenditures resulting from refinements made in January 2006. The recalibration would have cut overall SNF PPS payments by 3.3% ($770 million) in FY 2009.  The preamble to the final rule also addresses several SNF policy issues, including, among others, revisions to the Minimum Data Set (MDS), development of an integrated post-acute payment system, rehabilitative services in SNFs, and consolidated billing.

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On August 13, 2008, CMS published a final rule requiring all long-term care (LTC) facilities that participate in Medicare or Medicaid to be equipped with sprinkler systems by August 13, 2013, and to maintain their sprinkler systems once they are installed. 

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On July 15, 2008, the House Judiciary Subcommittee on Commercial and Administrative Law approved H.R. 6126, the “Fairness in Nursing Home Arbitration Act of 2008,” which would render unenforceable pre-dispute arbitration agreements between long-term care facilities and a residents.  The full Committee approved an amended version of the bill July 30.  The Senate Judiciary Committee is scheduled to vote July 31 on the Senate companion bill, S.2838.

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Congressional committees have held numerous hearings on health policy issues recently, including the following: 

• The House Oversight and Government Reform Committee held a hearing July 24, 2008, entitled, "The Medicare Drug Benefit:  Are Private Insurers Getting Good Discounts for the Taxpayer?" At the hearing, the Committee released a staff report that charges that prices paid for drugs used by the dual eligible beneficiaries under Medicare Part D are significantly higher than Medicaid prices for the same drugs. According to the report, the higher prices for the top 100 drugs resulted in a windfall of $1.7 billion for drug manufacturers in 2006 and $2 billion in 2007.   Separately, on July 24, the Joint Economic Committee held a hearing entitled "Small Market Drugs, Big Price Tags: Are Drug Companies Exploiting People With Rare Diseases?" 

• On July 24, the House Ways and Means Health Subcommittee held a hearing on options to encourage the adoption and use of a fully interoperable health information technology system. On July 15, the panel considered health care reform lessons learned at the state level. 
  
• The House Energy and Commerce Subcommittee on Health held a hearing July 22 on “State Fiscal Relief: Protecting Health Coverage in an Economic Downturn.”  The Subcommittee on Oversight and Investigations held a hearing July 24 on "Long-Term Care Insurance: Are Consumers Protected for the Long Term?"  Likewise, the House Small Business Committee held a hearing July 23 on "The Impact of Predators in Long-Term Care on Small Business Operators." 
  
• The House Budget Committee held a hearing July 16 entitled "Getting Better Value in Health Care."  Likewise, on July 17, the Senate Finance Committee held a hearing entitled "The Right Care at the Right Time: Leveraging Innovation to Improve Health Care Quality for All Americans."  
  
• The Senate Special Aging Committee held a hearing July 23 to examine person-centered health care at nursing homes.
  
• On July 22, the House Homeland Security Committee held a hearing on "Emerging Biological Threats and Public Health Preparedness: Getting Beyond Getting Ready." . The Committee also met to focus on the “Training of First Responders in Rural Communities." In addition, the House Agriculture Committee held a hearing July 23 on health care in rural areas.

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On June 11, 2008, the House Judiciary Committee approved H.R. 1783, the “Elder Justice Act," which would, among other things, require long term care facility personnel to report reasonable suspicions of crimes occurring in the facility, expand notification requirements regarding a facility's impending closure; and provide grants to long-term care facilities for training and purchase of standardized clinical health care informatics systems.

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On June 18, 2008, the Centers for Medicare & Medicaid Services (CMS) announced  that it is issuing a final rule to require all long-term care facilities to install sprinkler systems throughout their buildings within five years in order to continue serving Medicare and Medicaid beneficiaries. Under previous CMS regulations, only newly constructed and rehabilitated nursing homes were required to be equipped with sprinkler systems.  All new sprinkler systems will be required to meet National Fire Protection Association (NFPA) technical specifications.  CMS has not yet released the text of the rule or the date of publication.

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On June 18, 2008, CMS announced it will be launching a “five-star” rating system for nursing facilities to help patients and their families assess nursing home quality. CMS will begin publishing ratings in December 2008.  During June and July 2008, CMS is soliciting comments on the initiative, and the agency plans to hold an “open door” phone conference on the proposal on June 24, 2008. CMS plans to work with other health care providers and consumers to make similar rating systems available for hospitals, home health agencies, and end-stage renal disease (ESRD) facilities in the future. 

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On June 13, 2008, the Medicare Payment Advisory Commission (MedPAC) released its June 2008 report to the Congress on "Reforming the Delivery System." MedPAC discusses a variety of payment and delivery reforms to improve Medicare quality, coordinate care, and reduce cost growth. 

Major recommendations include the following:

• Primary Care -- MedPAC recommends a budget-neutral adjustment that increases fee schedule payments for primary care services furnished by clinicians focused on delivering primary care. It also proposes establishing a Medicare "medical home" coordinated care pilot program
• Resource Use Around a Hospitalization -- MedPAC recommends several changes in Medicare payment for care provided around a hospitalization (e.g., inpatient stay plus 30 days postdischarge) to encourage care coordination and efficiency. First, the Secretary should confidentially report to hospitals and physicians information about resource use around a hospitalization and readmission rates, followed by public reporting of the data in two years. Medicare also should reduce payments to hospitals with relatively high readmission rates for select conditions while allowing hospitals and physicians to share in the savings that result from providing care more efficiently. MedPAC also recommends that CMS conduct a voluntary pilot program to test bundled payment for all services around a hospitalization for select conditions.
• Skilled Nursing Facilities -- MedPAC recommends revising the SNF prospective payment system (PPS) to incorporate a nontherapy ancillary payment component, a therapy payment component, and an outlier policy based on exceptionally high ancillary costs per stay. MedPAC also recommends that CMS require SNFs to report on patient diagnoses, service use during the SNF stay, and nursing costs. MedPAC concurrently released a contractor report prepared by staff from the Urban Institute on "Model Alternative Designs for a Revised PPS".
• Cost-Effectiveness -- MedPAC examines issues associated with creating a comparative effectiveness entity, including issues related to the structure and governance of the entity. MedPAC endorses a dedicated, broad-based, public and private financing mechanism.
• Physician-Manufacturer/ASC Relationships -- MedPAC examines options for collecting data on physicians’ financial relationships with manufacturers, hospitals, and ambulatory surgical centers.
• Hospice -- MedPAC observes that Medicare hospice spending increases have been largely driven by more beneficiaries using the hospice benefit and increases in hospice length of stay, in part due to incentives in Medicare’s hospice payment system that financially reward longer lengths of stay. Overall, Medicare payments to hospices appear adequate, but MedPAC found that this assessment masks considerable variation. In 2005, nonprofit and provider-based hospices had small negative margins, while for-profit and freestanding hospices had large positive margins.

While MedPAC’s recommendations are not binding on Congress, lawmakers often consider MedPAC’s advice as they develop Medicare policy.

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The HHS Office of Inspector General (OIG) has issued two reports regarding Part D drugs for dual-eligible nursing home residents: “Availability of Medicare Part D Drugs to Dual-Eligible Nursing Home Residents,” and “Role of Nursing Homes and Long Term Care Pharmacies in Assisting Dual-Eligible Residents With Selecting Part D Plans.”

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