On February 22, 2012, President Obama signed into law H.R. 3630, the Middle Class Tax Relief and Job Creation Act, which was approved by Congress on February 17. In addition to extending a payroll tax cut through the end of the year and extending unemployment benefits, the new law includes a number of Medicare and Medicaid provisions, including a provision temporarily averting a steep cut in Medicare physician payments. The following are highlights of the health policy provisions included in H.R. 3630 and accompanying conference report (House Report 112-399).

Medicare Extensions

  • Temporarily blocks a 27.4% cut in the Medicare physician fee schedule set to go into effect March 1, 2012 as a result of the statutory Sustainable Growth Rate (SGR) formula, and instead extends current Medicare payment rates through December 31, 2012. The conference report also requires the Secretary of the Department of Health and Human Services (HHS) to report on bundled or episode-based payments to cover physicians' services for one or more prevalent chronic conditions or major procedures, and it requires a Government Accountability Office (GAO) report examining private sector initiatives that tie physician payment rates to quality, efficiency, and care delivery improvement, such as adherence to evidence-based guidelines.
  • Extends Medicare Modernization Act (MMA) section 508 hospital geographic reclassifications through March 31, 2012.
  • Extends outpatient hold harmless payments through December 31, 2012 (except for sole community hospitals with more than 100 beds), and requires an HHS study on which types of hospitals should continue to receive hold harmless payments.
  • Extends the 1.0 floor used in the physician work geographic adjustment through December 31, 2012.
  • Extends the Medicare outpatient therapy cap exceptions process through December 31, 2012.  The provision also temporarily extends the therapy cap to services received in hospital outpatient departments through December 31, 2012. Effective with services provided on or after October 1, 2012, the Secretary must ensure that therapy claims for which an exemption is requested include appropriate modifiers indicating that such services are medically necessary. The National Provider Identifier (NPI) of the physician who reviews therapy plans also must be included on Medicare claims. In addition, the Secretary is directed to implement a manual medical review process for beneficiaries whose annual spending for therapy services furnished in calendar year 2012 reaches $3,700 for physical therapy and speech-language pathology, or $3,700 in occupational therapy (the GAO subsequently must issue a report regarding this manual review process). The law also directs the Medicare Payment Advisory Commission (MedPAC) to issue recommendations on how to improve the Medicare outpatient therapy benefit to reflect individual acuity, condition, and therapy needs of the patient. Finally, the Secretary is required to implement, beginning on January 1, 2013, a claims-based strategy to collect data on patient function during the course of therapy services in order to better understand patient condition and outcomes in order to assist in reforming the Medicare outpatient therapy payment system.
  • Extends authorization for independent laboratories to receive direct payments for the technical component for certain pathology services through June 30, 2012.
  • Extends the add-on payment for ground and air ambulance services, including in super rural areas, through December 31, 2012 and requires related MedPAC and GAO reports.

Health Offsets

  • Bad debt reimbursement for all Medicare providers is reduced gradually to 65%. Specifically, providers now paid at 100% will have a three-year transition of 88% in 2013, 76% in 2014, and 65% in 2015, while providers now paid at 70% will be reduced to 65% in 2013. (This provision saves $6.9 billion over 11 years).
  • ReducesMedicare clinical laboratory fee schedule rates by 2 percent in 2013, and the reduced fee schedules will serve as the base for 2014 and subsequent years (saving $2.7 billion over 11 years).
  • Extends Medicaid disproportionate share hospital (DSH) payment reductions under the Affordable Care Act (ACA) for an additional year (saving $4.1 billion over 11 years).
  • Makes technical corrections to the ACA “disaster recovery federal medical assistance percentage (FMAP) provision ($2.5 billion in savings over 11 years).
  • Reduces funding for the ACA Prevention and Public Health Trust Fund by $5 billion over 10 years.

Other Health Provisions

  • Extends through December 31, 2012 the Qualifying Individual (QI) program (which allows Medicaid to pay the Medicare Part B premiums for certain low-income Medicare beneficiaries) and the Transitional Medical Assistance (TMA) program (which allows low-income families to keep Medicaid coverage as they transition into employment).