The Trump Administration’s proposed fiscal year (FY) 2021 budget calls for significant cuts to federal health spending, including a 10% decrease in Department of Health and Human Services (HHS) discretionary spending in FY 2021 and a $1.6 trillion net reduction in health entitlements over the next decade.  House Budget Committee leaders have blasted the HHS provisions, and the package as a whole is unlikely to be advanced by Congress.  Nevertheless, the document reflects the Administration’s current Medicare and Medicaid priorities, some of which are administrative and could be advanced without Congress.  Furthermore, Medicare provider/supplier cost-saving recommendations could be incorporated into future budget agreements or potentially other entitlement reform efforts down the road.

Highlights of the Trump Administration’s major Medicare and Medicaid budget proposals are presented below.

Medicare Payment Policies

The Administration estimates that its proposed Medicare legislative package would result in $756 billion in Medicare Trust Fund savings over 10 years (net impact after offsets of $450 billion/10 years).  Many of the legislative recommendations have been made in previous budget proposals.  Budget provisions that would result in significant net Medicare savings include the following (net savings figures are over the 10-year period of FYs 2021-2030):  

• Elimination of the Medicare Advantage (MA) benchmark cap and quality “double bonus” for plans in eligible counties [$1.2 billion].
• Reform of hospital uncompensated care payments, including basing payments on a hospital’s share of charity care and non-Medicare bad debt [$87.9 billion].
• Establishment of site neutral payments between on-campus hospital outpatient departments and physician offices for certain services (e.g., clinic visits) [$2 billion] and payment for all off-campus hospital outpatient departments under the physician fee schedule [$47.2 billion].
• Adoption of a unified post-acute care system for skilled nursing facilities (SNFs), home health agencies, inpatient rehabilitation facilities, and long-term care hospitals (LTCHs) beginning in FY 2026, with reduced annual Medicare payment updates from FYs 2021-2025 [$101.5 billion].
• Elimination of Medicare reimbursement for disproportionate share hospital (DSH) bad debt, with an exemption for rural hospitals [$33.6 billion].
• Reduced Medicare payment for hospice services under the SNF routine home care level of care. [$4.5 billion].
• An increase in the intensive care unit minimum stay threshold from three days to eight days to qualify for LTCH prospective payment system payment [$9.4 billion].
• Expansion of the durable medical equipment (DME), prosthetics, orthotics, and supplies competitive bidding program to all geographic areas and to inhalation drugs, payment of contract suppliers based on their own bids, and elimination of the surety bid bond requirement [$7.73 billion Medicare savings, $435 million in Medicaid savings]. Separate from the bidding program, the Centers for Medicare & Medicaid Services (CMS) would be authorized to update DME rates based on retail prices through rulemaking, without using the inherent reasonableness process [$1.6 billion Medicare savings, $85 million in Medicaid savings].

Other legislative proposals are intended to promote value-based care; in some cases, these proposals also would result in cost savings.  For instance, the budget proposes the following:

• Basing Medicare beneficiary accountable care organization assignment on a broader set of non-physician primary care providers [$80 million].
• Consolidation of the four Medicare inpatient hospital quality programs into a single hospital quality payment program [budget neutral].
• Implementation of hospital outpatient department and ambulatory surgical center (ASC) value-based programs, with 2% of payments linked to quality/outcomes performance. Payment would be risk adjusted based on patient diagnosis severity to promote site neutrality [budget neutral].
• Creation of a risk-adjusted monthly Medicare Priority Care payment for providers eligible to bill for evaluation and management (E/M) services who provide ongoing primary care to beneficiaries. The payment would be funded by a 5% annual cut in valuations of non-E/M services [budget neutral].

Medicare Transparency, Quality, Coverage, and Benefits

The budget includes a series of proposals intended to increase access to price and quality information and/or clarify Medicare coverage and payment processes.  For instance, the budget would: Continue Reading