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

The Medicare Payment Advisory Commission (MedPAC) recently voted on recommendations it will make to Congress regarding Medicare payment updates for 2011. At the meeting, MedPAC voted to recommend increasing acute inpatient and outpatient prospective payment system reimbursement in 2011 by the projected rate of increase in the hospital market basket index (MBI). This rate increase would be coupled with implementation of a quality incentive payment program, along with an offset in 2011 through 2013 to recover payments attributable to hospital documentation and coding improvements. MedPAC also recommends that Congress increase payments for physician services in 2011 by 1.0%. For ambulatory surgical centers (ASCs), MedPAC recommends a 0.6% increase in rates, together with a requirement that ASCs to submit cost and quality data. MedPAC recommends updating the end stage renal disease (ESRD) composite rate by the ESRD MBI increase minus a productivity growth adjustment. MedPAC approved a series of recommendations regarding home health services, including elimination of the inflation update for 2011, rebasing of home health rates with provisions to protect quality of care, development of quality outcomes measures, and implementation of certain program integrity safeguards. With regard to other post-acute services, MedPAC recommends no payment update in 2011 for skilled nursing facilities, inpatient rehabilitation facilities, or long-term care hospitals. MedPAC also recommends updating hospice rates by the projected MBI for 2011, minus an adjustment for productivity gains. These recommendations will be included in MedPAC's March 2010 report to Congress. While the recommendations are not binding, MedPAC’s assessments often help shape federal policy. 

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On January 15, 2010, CMS issued a transmittal on “Various OIG Reports that have Medical Review Implications.”  The transmittal instructs Medicare contractors to take steps to strengthen program safeguards to prevent improper payment in areas identified by the HHS Office of Inspector General (OIG). Specifically, reports highlighted by CMS address negative pressure wound therapy pumps, ambulance transportation for skilled nursing facility residents, pressure reducing support surfaces, and hospice services. CMS instructs contractors to use the information contained in the OIG reports and follow the processes and procedures already in the Medicare Program Integrity Manual concerning data analysis, contractor strategies, and the progressive corrective action process.

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The OIG has issued a report entitled “Medicare Part B Services During Non-Part A Nursing Home Stays: Enteral Nutrient Pricing.” The OIG found that Medicare's fee schedule amounts for nutrients provided during non-Part A stays in 2006 exceeded prices available to nursing home suppliers and other purchasers by more than 50%. Consequently, the OIG recommends that CMS adjust Medicare fee schedule amounts for enteral nutrients to more accurately reflect supplier prices. CMS agreed with this recommendation. The agency also cited the resumption of the competitive bidding program and consideration of adjustment of the Medicare fee schedule for enteral nutrients, once sufficient data is available from the bidding process, as opportunities to address enteral pricing concerns.

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The GAO has issued two recent reports on nursing home quality of care and sanctions. The first report found that a substantial percentage of state nursing home surveyors and state agency directors identified general weaknesses in the nursing home survey process, including both the survey methodology and guidance on identifying deficiencies. The GAO makes a series of recommendations to CMS to address concerns about CMS’s survey methodology and guidance, workforce shortages, insufficient training, inconsistencies in supervisory review of deficiencies, and state agency practices and external pressure that may compromise survey accuracy. Accompanying the report, “Nursing Homes: Addressing the Factors Underlying Understatement of Serious Care Problems Requires Sustained CMS and State Commitment,” is a document with additional information regarding the feedback the GAO received from nursing home surveyors and state agency directors. The second report, “Nursing Homes: Opportunities Exist to Facilitate the Use of the Temporary Management Sanction,” notes that the federal temporary management sanction has been used successfully by some states where there was some combination of immediate jeopardy, a history of noncompliance with CMS quality requirements, or the failure of other sanctions to bring about compliance. Several obstacles to using federal temporary management were identified, however, including time constraints, a lack of qualified temporary managers, and inadequate funding to pay for a temporary manager. In response, the GAO recommends that CMS: (1) create and maintain lists of qualified temporary managers; (2) identify best practices, such as when and how to use the sanction; and (3) develop guidance for states to help ensure the longer-term compliance of homes that have undergone temporary management. 

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The General Accounting Office (GAO) has issued a report entitled "Nursing Homes: CMS’s Special Focus Facility Methodology Should Better Target the Most Poorly Performing Homes, Which Tended to Be Chain Affiliated and For-Profit." In this report, the GAO provides an overview of the Special Focus Facility (SFF) program, which targets nursing homes with severe and persistent quality of care problems, and examines potential refinements to CMS’s methodology to more accurately identify the most poorly performing homes. The GAO recommends that CMS consider a home’s relative performance nationally when allocating SFFs across states and refine its methodology for the identification of SFFs. CMS generally agreed with the GAO’s recommendations.

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On September 25, 2009, CMS published a notice correcting technical errors in the August 11, 2009 Medicare skilled nursing facility (SNF) PPS final rule (two typographical errors and a technical error in the wage index values).

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The OIG has issued two reports regarding Medicare hospice services for beneficiaries in nursing facilities based on a sample of 2006 claims. The first report concentrates on Medicare coverage requirements for hospice services in nursing facilities. Based on its review, the OIG concludes that 82% of hospice claims for beneficiaries in nursing facilities did not meet at least one Medicare coverage requirement, and Medicare paid approximately $1.8 billion for these claims. The OIG recommends that CMS provide more education and guidance to hospices and strengthen monitoring in this area. The second report outlines the types and frequency of hospice services provided to beneficiaries residing in nursing facilities.

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The OIG has issued a report on “Payments for Ambulance Transportation Provided to Beneficiaries in Skilled Nursing Stays Covered Under Medicare Part A in Calendar Year 2006.” The OIG concluded that ambulance suppliers did not always comply with skilled nursing facility (SNF) consolidated billing requirements in calendar year 2006, resulting in an estimated $12.7 million in potential overpayments.  The OIG recommends that CMS recover the overpayments, provide additional guidance for ambulance suppliers and SNFs, and either establish additional claims edits or post-payment reviews to prevent and detect overpayments.  CMS concurred with the recommendations. 

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CMS has recently issued guidance to state survey agencies on a number of issues, including: Interpretive Guidelines for Long-Term Care Facilities (infection control programs); Surveying Facilities That Use Electronic Health Records; EMTALA Requirements and Options for Hospitals in a Disaster; Clarification of Ambulatory Surgical Center Interpretive Guidelines; Initial Surveys of CAH Distinct Part Units Changed to Tier 4 Priority Status; and Priority Order of Quality Indicator Survey National Implementation in States. In addition, CMS has issued guidance to State Medicaid Directors on the ARRA “prompt pay” requirements.

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The OIG has issued a report entitled “Part B Services During Non-Part A Nursing Home Stays: Durable Medical Equipment.” The OIG found that $30 million was inappropriately allowed for DME during non-Part A skilled nursing facility stays in 2006, most of which were also certified by Medicaid. Also, the OIG found that nearly $11.9 million more was inappropriately allowed by Part B during Medicaid nursing facility stays and distinct-part nursing home stays providing primarily skilled care. The OIG recommends that CMS take a number of steps to prevent inappropriate payments.

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The final FY 2010 Medicare skilled nursing facility (SNF) prospective payment system (PPS) rule, which was released by CMS on July 31, 2009, reduces rates by 1.1% compared to FY 2009 levels. CMS adopted its controversial proposal to recalibrate case mix weights to compensate for increased expenditures resulting from refinements made in 2006. The recalibration reduces overall SNF PPS payments by 3.3% ($1.050 billion) in FY 2010. This decrease is partially offset by a 2.2% market basket index (MBI) update (a $690 million increase), resulting in the 1.1% negative update ($360 million). In the rule, CMS also finalizes its plans to establish a new Resource Utilization Groups, version 4 (RUG-IV) case-mix classification model for FY 2011, reflecting updated staff time measurement data from CMS’s Staff Time and Resource Intensity Verification (STRIVE) project and using the updated Minimum Data Set (MDS) 3.0 resident assessment instrument.  The official version of the rule is scheduled to be published August 11, 2009. The rule is effective October 1, 2009.

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CMS has issued a memo to State Survey Agency Directors announcing the release of a report entitled “Evaluationof the Quality Indicator Survey (QIS)," a staged nursing home survey process for the systematic review of all regulatory areas. The memo also outlines CMS' action plan for future QIS evaluation initiatives. 

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CMS has announced revisions to its guidance for nursing home surveyors, effective June 12, 2009. The new guidelines emphasize resident rights in areas such as: ensuring residents live with dignity; offering choices in care and services; accommodating the environment to each resident’s needs and preferences; and creating a more homelike environment for residents, including access for visitors.  Separately, CMS has issued a memo on the use of nursing facility civil money penalty (CMP) funds by states.  Specifically, the memo: clarifies that states may direct collected CMP funds to entities other than nursing homes as long as funds are used in accordance with statutory intent; shares innovative practices for states to consider when deciding how to use CMP funds to improve the quality of care and life for nursing home residents; and announces that CMS will consider reporting CMP amounts that have been returned to each state. 

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The OIG has issued a report entitled “Medicare Part D Payments for Beneficiaries in Part A Skilled Nursing Facility Stays in 2006.” The OIG concluded that the majority of the $75 million in Medicare Part D payments on behalf of beneficiaries in Part A SNF stays in 2006 “were most likely inappropriate,” since they may have been used in the facility or to facilitate the beneficiaries’ discharge, in which case they should have been excluded from Part D (with certain exceptions). The OIG recommends that CMS: provide additional guidance about when Parts A and D can pay for drugs for beneficiaries preparing for discharge; educate SNFs, pharmacies, and Part D sponsors that drugs covered under Parts A or B for beneficiaries in SNF stays are not eligible for Part D coverage; implement retrospective reviews; and follow up with the SNFs and pharmacies responsible for a large percentage of Part D payments for beneficiaries in Part A SNF stays.

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CMS has released a draft version of the Minimum Data Set (MDS) 3.0 resident assessment instrument item set for nursing home residents. The final version is scheduled for publication in October 2009. In the May 12, 2009 proposed skilled nursing facility prospective payment rule, CMS has proposed requiring Medicare skilled nursing facilities and Medicaid nursing facilities to use MDS 3.0 effective October 1, 2010.

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On May 1, 2009, CMS released its proposed skilled nursing facility (SNF) PPS rule for FY 2010, which would reduce Medicare SNF PPS payments by $390 million, or 1.2%, compared to FY 2009 levels. CMS is again proposing a controversial provision considered but not adopted for FY 2009 that would recalibrate case mix weights to compensate for increased expenditures resulting from refinements made in 2006. The recalibration would reduce overall SNF PPS payments by 3.3% ($1.050 billion) in FY 2010.  This decrease would be partially offset by a 2.1% market basket update (a $660 million increase), resulting in the 1.2% negative update. In the rule, CMS also proposes establishing a new RUG-IV case-mix classification model for FY 2011 reflecting updated staff time measurement data from CMS’s Staff Time and Resource Intensity Verification (STRIVE) project and using the updated Minimum Data Set (MDS) 3.0 resident assessment instrument. CMS also requests public comments on: a possible requirement for quarterly reporting of nursing home staffing data; a possible new rate component to account for the use of non-therapy ancillaries; and quality monitoring for rural swing-bed hospitals. The official version of the rule is scheduled to be published on May 12, 2009. CMS will accept comments on the rule until June 30, 2009.

** 5/11/09 update:  The official Federal Register version is posted here.

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The OIG has issued a report entitled "Nursing Home Corporations Under Quality of Care Corporate Integrity Agreements."  The OIG reviewed all nursing homes that were placed under CIAs between June 2000 and December 2005, and found that all 15 corporations enhanced quality of care structures and processes while under their CIA and cited positive effects of the CIA, although challenges were encountered when implementing the CIA requirements. All 15 corporations had written policies and procedures regarding quality of care, codes of conduct, and training required by their CIAs; monitored their quality of care using standardized data, internal self-assessment tools, and by tracking complaints; and created or expanded their compliance infrastructures to integrate quality of care. Based on the report’s findings, areas that OIG will explore for its oversight of future CIAs include: responding swiftly to noncompliant corporations and those that fail to address quality problems; including in the CIAs specific requirements for documentation of nursing home Quality Assessment and Assurance activities; and sharing lessons learned by corporations and quality monitors with other corporations placed under subsequent CIAs.

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CMS has announced its plans to implement the Minimum Data Set (MDS) 3.0 skilled nursing facility (SNF) patient assessment instrument. The goals of the MDS 3.0 revision include introducing advances in assessment measures, increasing the clinical relevance of items, improving accuracy and validity, including more resident interview items, shortening the tool, and improving user satisfaction to encourage quality improvement implementation. CMS plans to begin implementing the MDS 3.0 on October 1, 2010, including collecting national data using MDS 3.0 and basing the SNF PPS on MDS 3.0 data. Public SNF quality reporting using MDS 3.0 data will begin in October 2011. 

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CMS is launching the Nursing Home Value-Based Purchasing demonstration, which will test if incentive payments improve the quality of care and efficiency of nursing home operations. Under the demonstration, which is expected to run from July 2009 through June 2012, CMS will assess quality of care in selected nursing homes based on selected measures, and make additional payments to facilities with the highest scores or the greatest improvement in score. Savings generated by the project, such as reducing the number of avoidable hospitalizations, will fund state bonus payment pools. Nursing homes in Arizona, Mississippi, New York and Wisconsin are eligible to participate, and CMS will mail an application kit to each Medicare-certified nursing home in these states.

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The GAO has issued a report entitled “Medicare and Medicaid Participating Facilities: CMS Needs to Reexamine Its Approach for Funding State Oversight of Health Care Facilities.” The GAO identified a number of weaknesses in the health facility survey system, including state funding inequities, limited data on the impact of funding on facility oversight, and limited oversight of state spending. The GAO recommends that CMS broadly reexamine its current approach to funding and conducting surveys, and makes a number of specific suggestions for addressing identified these weaknesses. CMS concurred with most of the GAO’s recommendations.

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On April 6, 2009, CMS is hosting a Special Open Door Forum on the Nursing Home Value-Based Purchasing (NHVBP) demonstration. The primary audience for this call is Medicare certified nursing homes from the states that have been selected to host the demonstration: Arizona, Mississippi, New York and Wisconsin.  

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On March 24, 2009, the Senate HELP Committee will examine addressing insurance market reform in national health reform. On March 25, the Senate Finance Committee has scheduled a hearing on the "Role of Long-Term Care in Health Reform," and the Senate Aging Committee is holding to receive an update from the Alzheimer's Study Group.

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On February 27, 2009, MedPAC released its March 2009 Report to the Congress: Medicare Payment Policy. The report includes a series of recommendations for Medicare payments designed to assure beneficiaries’ access to care and preserve Medicare’s long-term sustainability, particularly through reductions in payment updates for 2010. The report also includes recommendations to increase transparency of physician financial relationships. A listing of key recommendations follows after the jump. 

Hospitals

• The Congress should increase payment rates for the acute inpatient and outpatient prospective payment systems in 2010 by the projected rate of increase in the hospital market basket index, concurrent with implementation of a quality incentive payment program.
• The Congress should reduce the indirect medical education adjustment (IME) in 2010 by 1 percentage point to 4.5 percent per 10 percent increment in the resident-to-bed ratio. The funds obtained by reducing the IME adjustment should be used to fund a quality incentive payment program.

Physicians and Ambulatory Surgical Centers

• The Congress should update payments for physician services in 2010 by 1.1 percent.
• The Congress should establish a budget-neutral payment adjustment for primary care services billed under the physician fee schedule and furnished by primary-care-focused practitioners. Primary-care-focused practitioners are those whose specialty designation is defined as primary care and/or those whose pattern of claims meets a minimum threshold of furnishing primary care services. The Secretary would use rulemaking to establish criteria for determining a primary-care-focused practitioner.
• The Congress should direct the Secretary to increase the equipment use standard for expensive imaging machines from 25 to 45 hours per week. This change should redistribute RVUs from expensive imaging to other physician services.
• The Congress should increase payments for ambulatory surgical centers (ASC) services in calendar year 2010 by 0.6 percent. In addition, the Congress should require ASCs to submit to the Secretary cost data and quality data that will allow for an effective evaluation of the adequacy of ASC payment rates.

Dialysis Services

• The Congress should maintain current law and update the composite rate in calendar year 2010 by 1 percent.

Skilled Nursing Facility Services

• The Congress should eliminate the update to payment rates for skilled nursing facility services for fiscal year 2010.
• The Congress should require the Secretary to revise the skilled nursing facility (SNF) prospective payment system by: adding a separate nontherapy ancillary (NTA) component, replacing the therapy component with one that establishes payments based on predicted patient care needs, and adopting an outlier policy.
• The Secretary should direct SNFs to report more accurate diagnostic and service-use information by requiring that: claims include detailed diagnosis information and dates of service, services furnished since admission to the SNF be recorded separately in the patient assessment, and SNFs report their nursing costs in the Medicare cost report.
• The Congress should establish a quality incentive payment policy for SNFs in Medicare and to improve quality measurement for SNFs, the Secretary should: add the risk-adjusted rates of potentially avoidable rehospitalizations and community discharge to its publicly reported post-acute care quality measures; revise the pain, pressure ulcer, and delirium measures currently reported on CMS’s Nursing Home Compare website; and require SNFs to conduct patient assessments at admission and discharge.

Home Health Services

• The Congress should eliminate the market basket increase for 2010 and advance the planned reductions for coding adjustments in 2011 to 2010, so that payments in 2010 are reduced by 5.5 percent from 2009 levels.
• The Congress should direct the Secretary to re-base rates for home health care services in 2011 to reflect the average cost of providing care.
• The Congress should direct the Secretary to assess payment measures that protect the quality of care and ensure incentives for the efficient delivery of home health care. The study should include alternative payment strategies such as blended payments and risk corridors and outcome-based quality incentives.

Inpatient Rehabilitation Facilities

• The update to the payment rates for inpatient rehabilitation services should be eliminated for fiscal year 2010.

Long-Term Care Hospitals

• The Secretary should update payment rates for long-term care hospitals for fiscal year 2010 by the projected rate of increase in the rehabilitation, psychiatric and long-term care hospital (RPL) market basket index less the Commission’s adjustment for productivity growth.

Recommendations on Medicare Advantage Payments

• The Congress should: Eliminate the stabilization fund for regional PPOs. Remove the effect of payments for indirect medical education from the MA plan benchmarks. Set the benchmarks that CMS uses to evaluate MA plan bids at 100 percent of FFS costs. Pay-for-performance should apply in MA to reward plans that provide higher quality care. Clarify that regional plans should submit bids that are standardized for the region’s MA-eligible population.
• The Secretary should calculate clinical measures for the FFS program that would permit CMS to compare the FFS program with MA plans.

Recommendations on Public Reporting of Physician Financial Relationships

• The Congress should require all manufacturers and distributors of drugs, biologicals, medical devices, and medical supplies (and their subsidiaries) to report to the Secretary their financial relationships with: physicians, physician groups, and other prescribers; pharmacies and pharmacists; health plans, pharmacy benefit managers, and their employees; hospitals and medical schools; organizations that sponsor continuing medical education; patient organizations; and professional organizations.
• The Congress should direct the Secretary to post the information submitted by manufacturers on a public website in a format that is searchable by: manufacturer; recipient’s name, location, and specialty (if applicable); type of payment; name of the related drug or device (if applicable); and year.
• The Congress should require manufacturers and distributors of drugs to report to the Secretary the following information about drug samples: each recipient’s name and business address; the name, dosage, and number of units of each sample; and the date of distribution. The Secretary should make this information available through data use agreements.
• The Congress should require all hospitals and other entities that bill Medicare for services to annually report the ownership share of each physician who directly or indirectly owns an interest in the entity (excluding publicly traded corporations). The Secretary should post this information on a searchable public website.
• The Congress should require the Secretary to submit a report, based on the Disclosure of Financial Relationships Report, of the types and prevalence of financial arrangements between hospitals and physicians.

Recommendations on Reforming the Hospice Benefit

• The Congress should direct the Secretary to change the Medicare payment system for hospice to: have relatively higher payments per day at the beginning of the episode and relatively lower payments per day as the length of the episode increases; include a relatively higher payment for the costs associated with patient death at the end of the episode; and implement the payment system changes in 2013, with a brief transitional period. These payment system changes should be implemented in a budget neutral manner in the first year.
• The Congress should direct the Secretary to: require that a hospice physician or advanced practice nurse visit the patient to determine continued eligibility prior to the 180th-day recertification and each subsequent recertification and attest that such visits took place, require that certifications and recertifications include a brief narrative describing the clinical basis for the patient’s prognosis, and require that all stays in excess of 180 days be medically reviewed for hospices for which stays exceeding 180 days make up 40 percent or more of their total cases.
• The Secretary should direct the Office of Inspector General to investigate: the prevalence of financial relationships between hospices and long-term care facilities such as nursing facilities and assisted living facilities that may represent a conflict of interest and influence admissions to hospice, differences in patterns of nursing home referrals to hospice, the appropriateness of enrollment practices for hospices with unusual utilization patterns (e.g., high frequency of very long stays, very short stays, or enrollment of patients discharged from other hospices), and the appropriateness of hospice marketing materials and other admissions practices and potential correlations between length of stay and deficiencies in marketing or admissions practices.
• The Secretary should collect additional data on hospice care and improve the quality of all data collected to facilitate the management of the hospice benefit. Additional data could be collected from claims as a condition of payment and from hospice cost reports.

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On February 13, 2009, the House and Senate approved the conference report to accompany H.R. 1, the American Recovery and Reinvestment Act.  President Obama signed the bill into law on February 17, 2009.  The $790 billion economic stimulus package includes a number of health care policy provisions.  Among other things, the final agreement includes:

• $19 billion to accelerate the adoption of health information technology systems;
• Strengthened federal privacy and security provisions to protect personally-identifiable health information;
• Approximately $87 billion in additional federal matching funds over two years to help states maintain their Medicaid programs in the face of state budget shortfalls;
• $1.1 billion to support comparative effectiveness research;
• $1 billion for a new Prevention and Wellness Fund; and
• Provisions to help unemployed workers maintain health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) law.
• A provision blocking a fiscal year 2009 reduction in Medicare payments to teaching hospitals related to capital payments for indirect medical education;
• A provision blocking a fiscal year 2009 Medicare payment cut to hospice providers related to a wage index payment add-on;
• Technical corrections to the Medicare, Medicaid, and SCHIP Extension Act of 2007 related to Medicare payments for long-term care hospitals;
• A temporary increase in states’ annual disproportionate share hospital allotments;
• An extension of moratoria on Medicaid regulations for targeted case management, provider taxes, and school-based administration and transportation services through June 30, 2009, and a new moratorium on a Medicaid regulation related to hospital outpatient services through June 30, 2009;
• An extension of Transitional Medical Assistance and the Qualified Individual program; and
• Medicaid prompt payment requirements for nursing facilities and hospitals.

Information on the versions of the measure approved earlier by the House and Senate is available here.    

Update:  On February 17, 2009, President Obama signed into law H.R. 1, the American Recovery and Reinvestment Act (the “ARRA”).  Reed Smith's Health Care Memorandum summarizes the major health policy provisions of the Act.

 

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On February 11, 2009, the House of Representatives approved H.R. 448, the Elder Abuse Victims Act of 2009.  The legislation would direct the Attorney General to: (1) study and report to Congress on state laws and practices relating to elder abuse, neglect, and exploitation (including laws requiring reporting of nursing home deaths); (2) develop a long-term plan for elder justice programs and activities; (3) award grants to support and train state and local prosecutors, courts, and law enforcement personnel handling elder justice-related matters; and (4) establish the Elder Serve Victim grant program to facilitate and coordinate programs to provide emergency services to victims of elder abuse.

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The Medicare Payment Advisory Commission (MedPAC) is meeting January 8-9, 2009 to discuss a variety of Medicare payment and policy issues, including payments to hospitals, physicians, ambulatory surgical centers, dialysis providers, skilled nursing facilities, home health agencies, inpatient rehabilitation facilities, long-term care hospitals, hospices, and Medicare Advantage plans.  

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On December 18, 2008, CMS posted quality ratings for the nation’s Medicare- and Medicaid-participating nursing homes on the CMS Nursing Home Compare Web site. Each facility has been assigned a “star rating” based on health inspection results, quality measures, and staffing levels. CMS acknowledges certain limits to its rating system, including, among other things, state variations in inspection and licensing requirements, the fact that the staffing levels represent just a “snap-shot in time,” and lack of adjustments in quality measures for differences in nursing home patient populations. CMS recommends that the nursing home quality rating system be used with other sources of information. 

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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 November 14, 2008, CMS issued a letter to state Medicaid directors to gauge interest in the upcoming “Medicare Nursing Home Value-Based Purchasing" demonstration. The three-year “pay-for-performance” initiative seeks to assess the quality of care in nursing homes, based on selected measures of quality, and then make additional payments to those nursing homes with higher quality performance. States interested in hosting the demonstration are asked to provide certain information to CMS by January 9, 2009. CMS expects to select up to five demonstration states in February 2009, and then CMS will solicit nursing homes within those states to participate in the demonstration. 

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On October 10, 2008, CMS released details on the scoring methodology it uses to identify those nursing homes that become candidates for the “Special Focus Facility” (SFF) initiative by virtue of their more serious history of severe and persistent quality of care problems. 

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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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