In a final rule issued November 9, 2012, CMS implemented the across the board reductions to Medicare’s bad debt reimbursement percentages as prescribed by Sections 3201(a) and (b) of the Middle Class Tax Extension and Job Creation Act of 2012 (Pub. L. 112-96).  See 77 Fed. Reg. at 67518-519 (Nov. 9, 2012). Prior to the reductions, Medicare reimbursed hospitals 70 percent of the bad debt amounts associated with unpaid Medicare beneficiary deductibles or copayments and 70 percent of the bad debt associated with patients in skilled nursing facilities (SNFs) that were not dual eligible individuals.  Starting October 1, 2012, Medicare will only reimburse 65 percent of these bad debts costs.  Bad debt reimbursement for all other entities eligible to receive bad debt payments, which formerly received 100 percent reimbursement, including critical access hospitals, rural health clinics, Federally qualified health centers, end stage renal disease (ESRD) facilities, and patients that are dual eligible individuals in SNFs, will be reduced by approximately 12 percent per year, starting with FY 2013, until reimbursement plateaus at 65 percent in 2015.

Responding to comments, CMS said that it “appreciate[d] the concerns of the provider community regarding bad debt payments” but that “the percent reductions of bad debt payments are statutorily mandated.”  CMS provided a table, reproduced below, summarizing the reductions.

Click here to see table.