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June 2016


The Centers for Medicare and Medicaid Services released its proposed rule for carrying out last year’s congressional overhaul of payments for doctors, physician assistants and other providers of care routinely delivered in medical offices. The rule is intended to further tie payments for the care of more than 35 million Americans in traditional government-run Medicare to judgments about the quality of care by doctors and other providers. Medicare paid about $69 billion in 2014 for services covered by the physician fee rule, which sweeps in many related fields. CMS is trying to reach out to as many interested parties as possible. CMS launched a Quality Payment Program website which CMS is using as its central repository for all webinars and information provided to the public during the rulemaking process. The website is available here.


The Hospital Inpatient Prospective Payment System and Long Term Acute Care Hospital Proposed Rule, which the Centers for Medicare & Medicaid Services (CMS) released on April 18, includes a plan for implementing the Notice of Observation Treatment and Implication for Care Eligibility (NOTICE) Act. The NOTICE Act requires that critical access hospitals (CAHs) and other institutions to provide notification to individuals who are receiving observation services as outpatients for more than 24 hours. Under the proposal, CAHs and other hospitals would be required to furnish the new CMS-developed notice, known as the Medicare Outpatient Observation Notice (MOON), to affected Medicare beneficiaries or enrollees no later than 36 hours after observation services begin. The notification should indicate why the patients are receiving these services, the cost-sharing implications, and post-hospitalization eligibility for Medicare coverage for skilled nursing facility services. The MOON must be provided to patients who are entitled to Medicare benefits, regardless of whether the outpatient observation services are payable under Medicare. A final rule will be issued no later than August 1, and the NOTICE Act’s requirements take effect August 6.


The nation’s uninsured rate fell below 10 percent for the first time in history last year, according to survey results published by the Centers for Disease Control and Prevention. The new figures, showing a 9.1 percent uninsured rate, are the latest to underscore the gains of the 2010 federal health overhaul (PL 111-148, PL 111-152). Before that law took effect, about 14.4 percent of Americans lacked health insurance, according to the same survey data. The study shows some 28.6 million Americans still go without insurance, about 16.2 million less than the tally before the law took effect. The Obama administration in February estimated that 20 million people gained coverage because of the overhaul. Among the insured, 9.1 million people gained private coverage through or the state-based exchanges, the study says. Those gains were slightly steeper among young adults, 18-24, than among older adults, and also slightly steeper among the poor and nearly poor than among wealthier Americans.


The U.S. Equal Employment Opportunity Commission on released two rules that largely endorse incentive provisions in employer wellness programs allowed under the 2010 health care overhaul. Genetic specialists, however, are at odds with employer groups over whether the rules penalize employees who choose not to participate in such programs. The rules also drew criticism from Congress, as one top lawmaker criticized the cap EEOC placed on allowable incentives and threatened legislative action to block them from going into effect. The health care law permitted employers, under employee wellness programs, to provide incentives based on the total cost of self-only coverage for consumers to meet health goals, such as reaching a certain body mass index or cholesterol level. The rules, which go into effect in 2017, largely amend Americans with Disabilities Act and Genetic Information Nondiscrimination Act policies to clarify the EEOC’s position on these incentives. Under the new rule, employers that run wellness programs that include medical examinations can offer incentives up to 30 percent of the cost of self-only coverage. The GINA rule caps the incentives for spouses at the same level of employees.


The Centers for Medicare & Medicaid Services (CMS) on April 15 released the 2014 Physician Quality Reporting System (PQRS) Experience Report, which summarizes the experiences of group practices and individual providers that participated in the PQRS program. A total of 585,037 providers within 45,723 practices successfully participated in PQRS in 2014, earning $224 million in PQRS incentive payments. The total number of PQRS participants increased by 28 percent between 2013 and 2014. Claims reporting was the most popular way to participate in PQRS in 2014, while the PQRS Group Reporting Option also saw a dramatic increase with nearly 3,000 practices registered to participate in 2014 versus 677 in 2013. Based on 2014 reporting, more than half of all providers avoided the 2 percent penalty on their 2016 charges. Providers who were unsuccessful or nonparticipants in PQRS in 2014 receive a 2 percent penalty on their 2016 claims.


Medicare intends to help doctors in solo or small practices adapt to the complex demands of a new system that will raise or lower their reimbursements, a federal official said. The Centers for Medicare and Medicaid Services is preparing to try to ease the burdens on small practices of the transition to a new physician payment system Congress created in an overhaul (PL 114-10) last year, said Kate Goodrich, director of the agency’s Center for Clinical Standards and Quality, on Friday. Doctors could face cuts of as much as 4 percent in 2019 if they do poorly next year on reporting measures and other requirements of the new system, known as the merit-based incentive payment system. The agency will soon put out a request for proposals for a $100 million pool of funds for technical assistance for small and rural practices and those in areas with shortages of doctors, she said. CMS also is seeking to establish informal partnerships with medical societies and companies that sell electronic health records systems to help doctors prepare for the change. CMS will release its decision on criteria for this exemption in the final rule. This is one of myriad decisions that the agency will need to hash out in the months ahead in order to have the rule done in time for use next year. CMS is accepting comments on the 962-page draft rule through June 27.


The Missouri Department of Insurance filed a preliminary motion opposing the merger, saying that the $37 billion proposed merger would “substantially lessen competition in the state” in the individual, small group, and Medicare Advantage markets. Twenty states — which do not include Missouri — have the power to stymie the merger. In those states, officials must agree to allow local Humana subsidiaries to be taken over by Aetna in what is known as a “change of control approval.” The Aetna-Humana deal has already been cleared by 15 of those 20 states. Those states and others where Aetna and Humana are major market players, like Missouri, can undertake a separate process to investigate the competitive impacts of the merger on consumers. If a state uses that process to oppose the merger, it can consider preventing the companies from combining within the borders of the state. State attorneys general can also launch their own antitrust investigations or work with the DOJ. In comments to the Missouri Department of Insurance, consumer advocates in the state outlined the higher premiums, fewer benefit choices and lessened quality they expect to result from the merger. Many focused specifically on the Medicare Advantage market, in which Humana is a major player and in which the two companies currently compete directly. Provider groups, including state and national hospital and physician organizations, also weighed in, opposing the merger.


The House Ways and Means Committee approved a package of changes to Medicare payment policies, including one designed to address long-standing concerns about how hospitals that serve poor communities are hit by readmission penalties. The panel first approved by voice vote a substitute amendment from House Ways and Means Chairman Kevin Brady, R-Texas, which was similar to the original bill (HR 5273). The committee then also approved by voice vote the legislative package. The legislation also would ease a new restriction on when hospitals can collect more generous Medicare outpatient reimbursements for off-campus offices. The measure would address cases where hospitals had substantial plans in place for new sites before the enactment of last year’s budget deal (PL 114-74), which required many hospital outpatient centers to receive the lower reimbursements that physicians get. The cut was projected to save $9.3 billion over a decade. Separately, certain hospitals and lawmakers have pushed for some flexibility in the Medicare rules on readmission penalties, which were established in the 2010 health law (PL 111-148, PL 111-152). Hospitals are penalized if the number of their patients that are readmitted within 30 days is considered excessive. The Ways and Means draft calls for officials to compare data among hospitals that serve a similar proportion of patients who are dually eligible for both Medicare and the state-federal Medicaid program for low-income people, according to a bill summary. The key for lawmakers and policy analysts is striking the right balance, which will maintain the benefits of the readmission penalty. The policy has given hospitals more incentive to help people obtain needed services to regain or maintain their health after treatment.


In an annual report to Congress, the Medicare Payment Advisory Commission took a comprehensive look at how the nation’s single biggest purchaser of health care can manage its prescription drug costs. MedPAC suggested steps for sharpening both the negotiations that insurers handle for the Part D program and Medicare’s approach to paying through the Part B program for drugs administered in doctors’ offices. The Part D guidance was within a set of formal recommendations, while MedPAC’s suggestions for addressing the prices of Part B drugs are not yet as developed. MedPAC suggested having Medicare remove two kinds of drugs, antidepressants and immunosupressants used by transplant patients, from the classes of medicines that are required to be broadly covered, which limits insurers’ ability to drive bargains. It also suggested making a Part D reinsurance program that shields insurance companies from steep losses less generous to insurers. Reinsurance provides funding to insurers when a customer of the Part D plans has pharmacy bills that top $7,517 a year, a threshold known as the catastrophic spending level. The reinsurance program accounted for about 38 percent of the $73.3 million Medicare spent for the Part D program in 2014, up from 17 percent of $46 billion in 2007, MedPAC said. In the report, MedPAC did not specifically address a controversial Medicare proposal regarding the payment for Part B drugs administered in doctors’ offices. Drugmakers and Republicans in Congress are pushing for Medicare to withdraw the plan, first released in March. Medicare has not given a timeline for when it will release a revised final version of the plan. The new report from MedPAC indicates a broader concern with the rising costs of drugs, beyond the relatively small initial step proposed in the Part B model. The proposal would switch some doctors away from the current reimbursement in which a premium of about 4.3 percent is added to the reported average sales price for medicine. They would instead get a premium of less than 1 percent with an added fee of $16.80 for administering drugs. Among the approaches MedPAC suggested is combining certain similar drugs into a single billing code, thus creating price competition. Drugmakers complain that this approach would erode the high prices, and thus profits, that manufacturers say they need to fund their research. MedPAC noted there’s not enough information for outside groups to assess how much money pharmaceutical companies require for these efforts, echoing a complaint that’s been raised by critics of the industry.


Chairman Orrin G. Hatch, R-Utah, ranking member Ron Wyden, D-Ore., and Sen. Richard M. Burr, R-N.C., highlighted a bill (S 2368) that would establish a separate appeals process and keep lower-cost cases out of court, among other changes. The Finance Committee advanced that bill last June, but it has not been scheduled for floor consideration. Their appropriations counterparts also are working to address the issue. The Senate Appropriations Committee on Thursday approved a $5 million increase to the $112.4 million budget for the Office of Medicare Hearings and Appeals, which handles the process, in a fiscal 2017 Labor-HHS-Education spending bill, although a tight budget cap makes it difficult to find extra funds. The report and the Senate action highlight an issue that has long plagued providers, who have seen billions of reimbursement dollars tied up in the appeals process. Just 2.4 percent of claims come from beneficiaries, who can get priority review for their appeals. Providers, meanwhile, often wait months for a decision. Medicare claims appeals at the third level, which are heard by administrative law judges after a case has gone through two prior reviews, skyrocketed by 936 percent between 2010 and 2014, GAO found. Many of those appeals came from appeals of hospital and other inpatient stays, which went up by 2,000 percent. Hospitals groups often attribute the increases to the so-called two-midnight rule, which determines when a hospital stay is paid under inpatient or outpatient reimbursements. That had been an area of intense scrutiny for contractors who audit Medicare claims. GAO also found that appeals are not being finalized within the 90-day timeframe required by current law — and emphasized that CMS won’t be able to keep up with the skyrocketing rates. GAO also said HHS could do a better job establishing procedures for repetitious claims to ensure that near-duplicate appeals need not go through the process over and over again. More recent HHS data shows that at the end of fiscal year 2015, some 884,000 third-level appeals were waiting to be adjudicated and another 14,874 were in limbo at the fourth level, the highest level of appeal. The agency can process about 75,000 third-level appeals and about 2,300 fourth level appeals in one year.


The Medicare Payment Advisory Commission this week made public its concerns about proposals in draft fiscal 2017 payment rules. These Centers for Medicare and Medicaid Services proposals are part of a broader effort to set the groundwork for a unified payment for so-called post-acute care, a roughly $59 billion annual expense for Medicare. Different reimbursement rules and rates cover similar care provided by four groups: skilled nursing centers, inpatient rehabilitation facilities, home health agencies and long-term care hospitals. The fragmentation can be needlessly costly for Medicare, while leaving people without information needed to choose the right care settings, analysts have said. The IMPACT Act of 2014 (PL 113-185) directed CMS and MedPAC to shape a robust set of data that would allow comparisons among the different settings. Through the draft fiscal 2017 payment rules, CMS proposed separate Medicare spending per beneficiary measures for each of the different post-acute settings as part of this work. MedPAC disagrees with this approach. The suggestions from MedPAC and the expected responses from CMS highlight some of the technical challenges ahead in carrying out the IMPACT Act. There may be intense lobbying by industry groups and companies, which will seek to influence how CMS carries out the mandates of the IMPACT Act. Congress seems intent on having the agency create a unified payment. The IMPACT Act had a level of bipartisan support rarely seen in recent years, given that Democrats and Republicans are bitterly divided on the 2010 health overhaul (PL 111-148, PL 111-152). It breezed through the House in Sept.16, 2014, on a voice voice and was cleared by the Senate by unanimous consent two days later. The cumbersome work in preparing to overhaul of post-acute care is meant to pay off for the people who need these services, according to the MedPAC letters on fiscal 2017 skilled nursing and inpatient rehabilitation payments. Owners and operators of post-acute care organizations will have more incentive to consider what will happen to the often frail people that they treat and then release to return to their homes.