1. Congress

House of Representatives

Energy and Commerce Hearing Features CMS Administrator Tavenner

On Thursday, the House Energy and Commerce Committee held a hearing entitled "PPACA Pulse Check," in which recently confirmed Administrator of the Centers for Medicare and Medicaid Services (CMS) Marilyn Tavenner appeared as the sole witness. During her testimony, and subsequently through responses to questions posed by members of the committee, Tavenner outlined the efforts her agency has undertaken in order to implement provisions of the ACA intended to reduce cost and improve quality of care, all while taking measures to expand access to health insurance through exchanges, which begin enrollment on Oct. 1, 2013.


Marilyn Tavenner


Centers for Medicare and Medicaid Services

U.S. Department of Health and Human Services

For more information, or to view the hearing, please visit: energycommerce.house.gov

Ways and Means Hearing on ACA Implementation

On Aug. 1, the House Ways and Means Committee held a hearing on the current status of the Obama Administration's efforts to implement the Affordable Care Act (ACA). The Committee heard testimony from Daniel Werfel, Principal Deputy Commissioner and Deputy Commissioner for Services and Enforcement at the Internal Revenue Service (IRS), and Gary Cohen, Deputy Administrator and Director at the Center for Consumer Information and Insurance Oversight within the Centers for Medicare & Medicaid Services at the U.S. Department of Health and Human Services (HHS).


Gary Cohen

Deputy Administrator and Director

Center for Consumer Information and Insurance Oversight (CCIIO)

Centers for Medicare & Medicaid Services (CMS)

Daniel Werfel

Principal Deputy Commissioner and Deputy Commissioner for Services and Enforcement

Internal Revenue Service

For more information, please visit: waysandmeans.house.gov

Draft Medicare Post-Acute Care Reform Released

The Ways and Means Committee has released draft legislation of the President's proposals to strengthen Medicare, following several hearings in the Health Subcommittee on bipartisan proposals to secure the future of the program. The draft legislative text can be found at www.waysandmeans.house.gov/entitlementreform. The latest legislative proposals mirror proposals on post-acute care (PAC) that were put forth by President Obama in his FY 2014 Budget as well as discussions by Simpson-Bowles and the Bipartisan Policy Commission. The draft specifically addresses the following changes to PAC:

  • Reducing market basket updates for home health agencies (HHAs), skilled nursing facilities (SNFs), inpatient rehabilitation facilities (IRFs) and long-term care hospitals (LTCHs);
  • Creating site-neutral payments between IRFs and SNFs for certain procedures;
  • Modifying the criteria required for IRF status (the so-called "75 percent rule");
  • Establishing a SNF readmissions program; and
  • Creating PAC bundled payments.

The committee is accepting public comments to any of the draft legislative proposals by email at entitlementreform@mail.house.gov. You can view the proposals, fact sheets, summaries and draft legislative text at www.waysandmeans.house.gov/entitlementreform.


Senate Budget Committee Holds Hearing on Health Care Costs

Last week, the Senate Budget Committee held a hearing entitled "Containing Health Care Costs: Recent Progress and Remaining Challenges" to examine differing explanations about the cause of the recent slowdown in health care spending and whether it will last. Dr. Antos told the committee that one study indicated 77 percent of the slowdown in health spending can be linked to the economy. However, Len M. Nichols, professor of health policy and director of the Center for Health Policy Research and Ethics at George Mason University in Fairfax, VA, cited research indicating the slowdown in health spending may have begun more than two years before the recession began. In her testimony, Dr. Kavita K. Patel noted that many of the reforms included in the Affordable Care Act are having an impact on the downward cost trends.


Dr. Len M. Nichols

Director and Professor

Center for Health Policy Research and Ethics, College of Health and Human Services, George Mason University

Dr. Kavita K. Patel

Fellow and Managing Director

Engelberg Center for Health Care Reform

The Brookings Institution

Dr. Joseph Antos

Wilson H. Taylor Scholar in Health Care and Retirement Policy

American Enterprise Institute

For more information, or to view the hearing, please visit: www.budget.senate.gov

Senate Finance Panel Seeks Comment on Barriers to Mental Health Treatment

On Aug. 1, the Senate Finance Committee wrote a letter to stakeholders seeking input on barriers that are preventing effective mental health care as well as what reforms are needed. In the letter, Chairman Max Baucus (D-MT) and Ranking Member Orrin Hatch (R-UT) wrote that one in four Americans is affected by mental illness, which accounts for $193 billion in lost earnings each year. The Senators asked stakeholders to respond to numerous questions about how to improve programs for those suffering from mental illness. Many mental health advocates commended the Committee for seeking their input. They said the request was timely because many of the Affordable Care Act's provisions are beginning to take effect. In addition, they hope the request will encourage Congress to focus on mental health legislation that has stalled in the recent months.

2. Administration


Inpatient Psychiatric Facility Payment Update Notice

CMS has issued an update to payment rates for 481 freestanding inpatient psychiatric facilities (IPFs) and 1,143 IPF units of acute care hospitals, including a small number of IPF units in critical access hospitals (CAHs) that are paid under the IPF Prospective Payment System (PPS). The new rates will apply to services furnished to Medicare beneficiaries during fiscal year (FY) 2014, beginning with discharges on or after Oct. 1, 2013.

CMS updates the payment rates under the IPF PPS annually using the Rehabilitation, Psychiatric, and Long-Term Care (RPL) market basket index, which reflects changes in the prices of goods and services in IPFs, Inpatient Rehabilitation Facilities and Long-Term Care Hospitals. For FY 2014, the RPL market basket estimate is 2.6 percent. The market basket is reduced by a 0.5 percent multifactor productivity (MFP) adjustment and a 0.1 percentage point reduction, both mandated by the Affordable Care Act. The net estimated increase to aggregate payments for FY 2014 is 2.3 percent.

CMS is also decreasing the outlier threshold amount for FY 2014 to $10,245 from $11,600 in FY 2013 to maintain outlier payments at 2.0 percent of total payments for FY 2014. CMS estimates the total impact of the FY 2014 payment rate update to be an increase of approximately $115 million.

The notice went on display July 29, 2013, at the Office of the Federal Register's Public Inspection Desk and will appear in the Aug. 1, 2013, Federal Register.

Final Skilled Nursing Facility Rule Released

Under a final rule published by CMS on July 31, payments to skilled nursing facilities (SNFs) will rise 1.3 percent, or $470 million. According to CMS, the final rule will also revise and rebase the base payment rate. Specifically, CMS said it will make changes to the components of the SNF market basket index by adding five new cost categories and dividing the existing Nonmedical Professional Fees cost category into labor-related and nonlabor-related Nonmedical Professional Fees (for a total of 29 cost categories), and revising several price proxies, including the price proxy for the Wages and Salaries and Employee Benefit cost component. The FY 2014 SNF PPS final rule will be published in the Federal Register on Aug. 6, 2013, and is available at www.federalregister.gov/public-inspection.

Final Inpatient Rehabilitation Facilities Rules Issued

On July 31, CMS released its final rule on Medicare payments for inpatient rehabilitation facilities (IRFs) for FY 2014. Under the rule, payments will increase by 2.3 percent or $170 million. Furthermore, CMS also made changes to the so-called 60 percent rule concerning IRFs, which requires an IRF to demonstrate that at least 60 percent of its patients require intensive services for one or more of 13 conditions. CMS said it will remove several codes from the compliance list because the codes alone "do not prove compliance in absence of additional facts that must be obtained from a patient's record." The change will be effective Oct. 1, 2014. CMS also said it will add three new quality measures to the IRF quality reporting system. The rule is expected to be published in the Federal Register Aug. 6.

Final Inpatient Prospective Payment System Rules Issued

On Aug. 2, CMS issued two final fiscal year (FY) 2014 payment rules today, one for hospitals paid under the Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital Prospective Payment System (LTCH PPS), and the other updating Medicare payment rates and the wage index for hospices serving Medicare beneficiaries.

Under the FY 2014 IPPS/LTCH final rule, CMS projects that Medicare aggregate payments (operating and capital) to acute care hospitals will increase by a projected $1.2 billion for FY 2014 relative to FY 2013. Medicare payments to LTCHs in FY 2014 are projected to increase by $72 million or 1.3 percent. The final rule provides greater clarity regarding when inpatient hospital admissions are generally appropriate for Medicare Part A payment. In addition, the rule includes provisions relating to the implementation of changes to the Medicare Disproportionate Share Hospital program and a new Hospital-Acquired Conditions Reduction program as required by the Affordable Care Act.

The final hospice rule increases payments to hospices by an estimated 1.0 percent ($160 million) in FY 2014, relative to FY 2013. Additionally, in accordance with the Affordable Care Act requirement to reform hospice payments, the final rule includes updates on Medicare hospice payment reform efforts, including a discussion of reform model options, highlights from recent reform research and an update on data collection efforts. The final rule also amends hospice quality reporting requirements, clarifies coding requirements and updates stakeholders on hospice payment reform.

To read the press release on the final FY 2014 IPPS/LTCH rule and the fact sheets on that rule and the FY 2014 hospice rule, please go to: www.cms.gov 

The rules can be downloaded from the Federal Register.

HHS Fact Sheets on State Exchanges

On July 31, the Department of Health and Human Services released fact sheets on health care exchanges for states and territories. Open enrollment starts on Oct. 1, 2013, with coverage beginning Jan. 1, 2014. Cecilia Munoz, director of the White House Domestic Policy Council, said that 80 percent of those who enroll in the exchange will have at least five choices of health insurance plans. In addition, Mike Hash, Director of the Office of Health Reform at HHS, said premiums are lower than expected.

Part D Premiums Up Slightly in 2014

On July 30, the Centers for Medicare & Medicaid Services released their 2014 projections for the Medicare drug benefit. CMS projected that the average basic premiums will remain at current levels, about $31 a month, although the actual base beneficiary premium is $32.42. CMS also announced that the national average monthly bid amount is $75.88. A CMS spokesman said that the agency is "seeing low utilization rates, higher rebates, and lower drug costs" as well as a competitive marketplace. The 2014 projections were based on bids submitted by Part D and Medicare Advantage plans for basic drug coverage during the 2014 benefit year. Enrollment is set to begin Oct. 15.  

3. State Activities

Ohio Announces Health Insurance Rates

According to Republican Ohio Lt. Gov. Mary Taylor, health insurance premiums in Ohio could rise as much as 41 percent under the state's ACA-facilitated exchange, though that figure does not account for the impact of tax credits aimed at helping lower-income individuals afford coverage. Rates for small businesses could rise an average of 18 percent. Open enrollment in the plans starts Oct. 1, and coverage takes effect in January.

California Announces Small Business Exchange Insurers

On Thursday, California officials announced that six insurers will offer coverage on California's insurance exchange for small businesses, with at least three options being available in each of the state's 19 regional markets. In addition, rates for the plans are expected to be consistent with current small business rates. The small business, or SHOP, exchange is intended to offer insurance options to an estimated 500,000 California businesses with fewer than 51 employees. Businesses with fewer than 25 full-time employees whose wages average $50,000 a year or less may be eligible for tax credits to help purchase insurance on the exchange, with enrollment set to begin on Oct. 1. The insurers offering plans are Blue Shield of California, Chinese Community Health Plan, Health Net, Kaiser Permanente, Sharp Health Plan and Western Health Advantage.

4. Regulations Open for Comment

Proposed Rule, Medicare Physician Fee Schedule (PFS) and Hospital Outpatient Prospective Payment System (OPPS)

CMS has issued the calendar year (CY) 2014 Medicare Physician Fee Schedule (PFS), Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System proposed rules. The proposed PFS regulation would continue to expand access to primary care services by proposing to provide payment for complex chronic care coordination services, beginning in CY 2015. It proposes to adjust payment rates for over 200 codes where Medicare pays more for services furnished in an office than in a hospital outpatient department or ASC, as part of the misvalued codes initiative. It also would make refinements to the Physician Quality Reporting System (PQRS) program, the Medicare Shared Savings Program and the Medicare EHR Incentive Program.

PFS: CMS projects an across-the-board reduction in payment rates based on the Sustainable Growth Rate (SGR) formula. If the SGR goes into effect, Medicare payment rates are projected to be reduced by 24.4 percent for services in 2014. The final projection, based on more recent data, will be made available in the final rule.

OPPS: CMS proposes to update the OPPS market basket by 1.8 percent for CY 2014. The proposed hospital market basket increase published in the fiscal year (FY) 2014 Inpatient Prospective Payment System (IPPS)/Long-Term Care Hospital Prospective Payment System (LTCH PPS) proposed rule is 2.5 percent. The Medicare statute requires a productivity adjustment reduction of 0.4 percentage points and a 0.3 percentage point reduction to the CY 2014 OPPS market basket, so the proposed CY 2014 OPPS market basket update would be 1.8 percent.

ASC: ASC payments are annually updated for inflation by the percentage increase in the consumer price index for all urban consumers (CPI-U). The Medicare statute specifies a multifactor productivity (MFP) adjustment to the ASC annual update. For CY 2014, the CPI-U update is projected to be 1.4 percent. The MFP adjustment is projected to be 0.5 percent, resulting in an MFP-adjusted CPI-U update of 0.9 percent for CY 2014. In addition, CMS is proposing that certain ancillary or adjunctive services that would be packaged under the OPPS for CY 2014 also would be packaged under the ASC payment system for CY 2014.

In the OPPS/ASC proposed rule, total CY 2014 OPPS payments are projected to increase by $4.37 billion or 9.5 percent, and CY 2014 Medicare payments to ASCs are projected to increase by approximately $133 million or 3.51 percent as compared to CY 2013. The CY 2014 OPPS/ASC proposed rule would also expand the categories of related items and services packaged into a single payment for a primary service under the OPPS; create 29 comprehensive APCs to replace 29 existing device-dependent APCs; streamline the current five levels of outpatient visit codes; and continue paying at ASP+6 percent for non-pass-through drugs and biologicals that are covered separately under the OPPS.

The proposed rule would add five new measures for the Hospital Outpatient Quality Reporting (OQR) program, affecting payment in CY 2016, with data collection beginning in CY 2014. It seeks comment on proposed changes to the Quality Improvement Organization regulations.

CMS will accept comments on these proposed rules until Sept. 6, 2013, and will respond to comments in final rules to be issued by Nov. 1, 2013.

IRS Proposed Rule For Tax Credits Issued on Exchanges

On June 28, the IRS issued a proposed rule on specific information regarding premium tax credits the insurance exchanges must report to IRS and to the person receiving the tax credit. Under the proposed rule, IRS explains what specific information regarding the tax credits the exchanges must report to IRS and to the person receiving the tax credit. Under ACA, tax credits can be made available to eligible recipients each month. The proposed rule would require the exchanges to report the required information to the IRS on a monthly basis and to the recipient on an annual basis. The information the exchanges must report would include, among other things, the name, address, taxpayer identification -- i.e., Social Security -- number (or date of birth if a taxpayer ID number is not available), the monthly premium for the applicable benchmark plan used to compute the tax credit and the monthly premium for the plan or plans in which a taxpayer, responsible adult or family member enrolls, without reduction for advance credit payments. According to the proposed rules, the exchange would report the information to the IRS on or before the 15th day following each month of coverage. The exchange must also send the tax credit recipient an annual statement including the same information on or before Jan. 31 of the year following the calendar year of coverage. Comments are due Aug. 31.

CMS Proposed Dialysis Payment Rule

CMS has issued the proposed End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) rule for renal dialysis services furnished to beneficiaries on or after Jan. 1, 2014. CMS projects the updated calendar year (CY) 2014 ESRD bundled market basket increase will be 2.9 percent, which is reduced by an estimated multi-factor productivity (MFP) adjustment for CY 2014 of 0.4 percent, for a projected update of 2.5 percent to the ESRD PPS base rate in CY 2014. Section 632(a) of the American Taxpayer Relief Act of 2012 requires the Secretary to make reductions to the ESRD PPS base rate to reflect the Secretary's estimate of the change in the utilization of ESRD-related drugs and biologicals by comparing per patient utilization data from 2007 with such data from 2012. This adjustment results in an overall 12 percent reduction in Medicare payments for CY 2014. The rule seeks comment on whether this change should be phased in over more than one year.

As a result of the application of the ESRD bundled market basket update reduced by the MFP adjustment, the wage index budget-neutrality adjustment and the drug utilization adjustment, CMS projects the proposed updates for CY 2014 would decrease total payments to all ESRD facilities by 9.4 percent compared with CY 2013.

The rule also proposes changes to the ESRD Quality Incentive Program (QIP) for payment year (PY) 2016.

The proposed rule also addresses issues related to the coverage and payment of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS), including clarification of the definition of routinely purchased DME; clarification of the grandfathering provision related to the three-year minimum lifetime requirement; and implementation of budget-neutral fee schedules for splints, casts and intraocular lenses (IOLs) inserted in a physician's office.

View the proposed rule. CMS will accept comments on the proposed rule until Aug. 30, 2013.

Proposed Rule on Home Health Payments

On June 27, CMS published a proposed rule to update Medicare's Home Health Prospective Payment System (HH PPS) payment rates and wage index for calendar year (CY) 2014. The rule proposes rebasing adjustments, with a four-year phase-in, to the national, standardized 60-day episode payment rates, the national per-visit rates and the NRS conversion factor. Payments to home health agencies (HHAs) are estimated to decrease by approximately 1.5 percent, or $290 million in CY 2014, reflecting the combined effects of the 2.4 percent HH payment update percentage ($460 million increase); the rebasing adjustments to the national, standardized 60-day episode payment rate; the national per-visit payment rates; the NRS conversion factor ($650 million decrease); and the effects of ICD-9 coding adjustments ($100 million decrease). This proposed rule would also establish home health quality reporting requirements for CY 2014 payment and subsequent years and proposes to specify that Medicaid responsibilities for home health surveys be explicitly recognized in the State Medicaid Plan, which is similar to current regulations for surveys of Nursing Facilities (NF) and Intermediate Care Facilities for Individuals with Intellectual Disabilities (ICF-IID). Comments must be received by Aug. 26.

Final CMS Rule on Improving Coordination Between Long-Term Care Hospitals and Hospices

CMS issued a rule June 26 that aims to improve care coordination between long-term care (LTC) hospitals and hospice facilities; the new rule, which goes into effect Aug. 26, 2013, clearly defines the role of each provider in delivering and maintaining the continuity of care for each patient. Because LTC facilities and hospitals provide many of the same services, there is a high possibility that residents could receive duplicative and/or conflicting services. In general, LTC facilities are usually responsible for nursing services, dietary services, physician services, dental service, pharmacy services, specialized rehabilitative services and, when necessary, laboratory and social services. The new rule mandates that LTCs that choose to arrange for the provision of hospice care enter into written agreements with Medicare-certified hospice providers of the specific services to be provided by each entity in order to reduce overlap. "We believe that a clear division of responsibilities and increased communication required by this rule will help eliminate duplication of and/or missing services," CMS said in the rule. As the rule stands, the written agreement of care will unanimously be applied to all residents within the LTC facility, not individual patients. Criticisms of the new rule are largely based on the extra burden to providers, as it will take staff time to develop the language for the one written agreement describing the allocated care services. It is estimated that the burden associated with first-year implementation of this rule is 80,695 hours or $5.5 million for the 16,139 LTC facilities affected.

Proposed Rule to Clarify Long-Term Care Ombudsman Program

The Administration on Aging (AoA) of the Administration for Community Living (ACL) within the Department of Health and Human Services (HHS) has issued a Notice of Proposed Rulemaking, with request for comments, to implement provisions of the Older Americans Act, the State Long-Term Care Ombudsman program. This proposed rule replaces AoA's 1994 Notice of Proposed Rulemaking. The proposed rule contains two main parts, both related to the ombudsman program:

An amendment to existing regulations promulgated under the Older Americans Act at 45 C.F.R. Part 1321, and a new Part 1327, which would be added to the existing regulations. The proposed amendment to existing regulations addresses responsibilities of state agencies housing long-term care ombudsman offices not to disclose the identity of any person sending a complaint to the ombudsman or the identity of any resident of a long-term care facility. In addition, the proposed amendment would extend the disclosure protections to include "files, records, and other information" instead of only "files" as the existing rule provides.

The newly proposed Part 1327 would define the following terms included in the Older Americans Act, including "immediate family," "office of the state long-term care ombudsman" and "representative of the office of the state long-term care ombudsman." Comments are due Aug. 19.

Tanning Bed Warning Label Proposal

The FDA issued a proposal that would elevate tanning beds from a low-risk to high-risk medical device and would add a warning label to them. If the order is finalized, manufacturers would have to submit a pre-market notification (510(k)) to the FDA for these devices, which are currently exempt from any pre-market review. Manufacturers would have to show that their products have met certain performance testing requirements, address certain product design characteristics and provide comprehensive labeling that presents consumers with clear information on the risks of use. The order proposes to include a contraindication against use on people under 18 years old, and the labeling would have to include a warning that frequent users of sunlamp products should be regularly screened for skin cancer.

The FDA will take comments on the proposed order until Aug. 7.

5. Reports


GAO Releases Report on Payment Updates for Government-Owned IPPS Hospitals

The Government Accountability Office released a report July 29 that found that 97 percent of government-owned hospitals received at least one form of increased payment in 2012 whereas only 80 percent of for-profit hospitals and 90 percent of nonprofit hospitals received payment updates under Medicare's Inpatient Prospective Payment System (IPPS). The report, entitled Medicare: Ownership Status of Inpatient Prospective Payment System Hospitals That Qualify for Payment Adjustments, also concluded that government-owned and nonprofit hospitals were more likely to receive two or three forms of additional payments, whereas their for-profit hospital counterparts were more likely to receive no or only one form of additional payment. Issued at the request of Sen. Tom Coburn (OK-R) and Sen. Richard Burr (NC-R), the study was conducted in direct response to another GAO report issued in May, which looked into which hospitals qualified for adjustments to or exemptions from IPPS in 2012.


Delay in Employer Mandate Will Cost $13 Billion

The Congressional Budget Office and the Joint Committee on Taxation released a report that found that the employer mandate delay will negatively impact the budget, including a $10 billion reduction in penalties collected from employers and $3 billion issued in exchange subsidies. However, $1 billion would be offset by taxes from fewer people enrolling in employer coverage. CBO and the Joint Committee on Taxation also estimated that 1 million fewer people will have employer coverage in 2014 than would have with the CBO's May 2013 baseline.


Loans to CO-OPs Need Further Oversight

According to a HHS Office of Inspector General (OIG) report out this week, loans made by the Centers for Medicare & Medicaid Services adhere to federal requirements, but additional oversight is needed. Applicants of the Consumer Operated and Oriented Plan (CO-OP) program had to state that they "provided an integrated care model, offered coverage across their entire state, and had private support." The CO-OPs that were reviewed by OIG were found to have met the qualifying criteria. OIG also concluded that additional oversight is needed with regard to CO-OP budgetary estimates and access to private funding. The report also found that in terms of budgetary estimates, 11 of the 16 CO-OPs estimated they would spend more on startup expenditures than they were provided by CMS. As for access to private funding, half of the CO-OPs reported "no private funding in their application."

Self-Referring Providers More Likely to Refer Patients for Expensive Treatments

According to a report issued by the Government Accountability Office (GAO), in 2009 53 percent of the patients of self-referred providers were referred for an expensive prostate cancer treatment -- intensity-modulated radiation therapy (IMRT) -- in comparison with only 33 percent of referrals for this same treatment by non-self-referring providers. With the rise in referrals, Medicare and Medicaid payments for self-referring providers who referred patients to IMRT treatment have also risen, increasing from $52 million in 2006 to $239 million in 2010. The GAO warned that the financial gains of self-referring IMRT services could incentivize self-referring providers to refer patients for treatments they don't need, leading to increased side effects for the patient and high expenses for Medicare and Medicaid. The GAO recommended that the Centers for Medicare and Medicaid Services require providers to indicate if IMRT services were self-referred and to also create a self-referral red flag on Medicare claim forms.