Medicare Program Changes in H.R. 3200,
America’s Affordable Health Choices Act of
2009
Sibyl Tilson, Coordinator
Specialist in Health Care Financing
September 11, 2009
Congressional Research Service
7-5700
www.crs.gov
R40804
CRS Report for Congress
P
repared for Members and Committees of Congress
Medicare Program Changes in H.R. 3200
Summary
Containing scores of provisions affecting Medicare payments, payment rules and covered
benefits, H.R. 3200 treats the Medicare program as both a funding source for health insurance
reform and a tool to shape future changes in the way that health services are paid for and
delivered. Preliminary estimates from CBO on the introduced bill indicate that, absent interaction
effects, net reductions in Medicare direct spending may approach $50.5 billion from 2010-2014
and $210.6 billion from 2010-2019. Major savings are expected from constraining Medicare’s
annual payment increases, linking payments for Medicare Advantage plans to fee-for-service
payments, and requiring drug manufacturers to provide drug rebates for certain low income
Medicare beneficiaries. These savings are offset by increased physician payments necessary to
reform the sustainable growth rate formula among other physician payment changes.
With respect to reshaping health care delivery, H.R. 3200 would provide financial incentives to
acute care and critical access hospitals to reduce potentially preventable readmissions and to
improve care coordination starting in FY2012. These policies would be extended to post acute
care providers starting in FY2015. Another provision would require the Secretary to develop a
detailed plan to bundle payments for post acute care services within 3 years of enactment. Also,
by January 1, 2011, the existing physician-hospital bundled payment demonstration would be
converted to a pilot program and expanded to include post acute services.
H.R. 3200 would alter Medicare payments to a range of providers, physicians, practitioners and
suppliers. Certain provisions address more systemic issues, such as increasing physician
payments for preventive services. Others provisions are time-limited extensions of existing
payment policies, such as 2-year extensions to Section 508 hospital reclassifications, the
physician geographic floor, and rural ambulance add-ons. H.R. 3200 would also change the
regulation of providers. For instance, Medicare providers would be subject to enhanced screening
and oversight in areas designated as high risk for fraud and abuse. Additionally, the Stark whole
hospital and rural exceptions for physician-owned hospitals would be eliminated except for those
existing physician-owned hospitals that qualify for an exception.
Finally, provisions in H.R. 3200 would improve Medicare benefits provided to individuals. For
instance, the Medicare Part D coverage gap for prescription drugs (the donut hole) would be
eliminated; certain low income subsidies would be amended by changing Medicare’s asset test.
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Medicare Program Changes in H.R. 3200
Contents
Introduction ................................................................................................................................ 1
Congressional Budget Office (CBO) Score.................................................................................. 1
Payment Rate Changes Affecting Medicare Fee-for-Service Providers......................................... 2
Hospitals and Other Part A Providers..................................................................................... 4
Acute Care Hospitals ...................................................................................................... 4
Skilled Nursing Facilities (SNFs) .................................................................................... 5
Home Health Agencies (HHAs) ...................................................................................... 6
Physicians and Other Part B Providers ............................................................................ 7
Payment and Administrative Changes Affecting the Medicare Advantage Program...................... 7
Changes Affecting Medicare’s Prescription Drug Benefit ............................................................ 8
Efforts to Reform Medicare’s Fee-For Service Payment Methods .............................................. 10
Changes to Address Fraud, Waste, and Abuse ............................................................................ 10
Concluding Observations .......................................................................................................... 11
Appendixes
Appendix. Selected Medicare Provisions in Division B of H.R. 3200 ........................................ 12
Contacts
Author Contact Information ...................................................................................................... 54
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Medicare Program Changes in H.R. 3200
Introduction
On July 14, 2009, H.R. 3200, the Affordable Health Care Act of 2009 was introduced into the
three Committees in the House of Representatives with jurisdiction over health policy
(Committees on Education and Labor, Ways and Means, and Energy and Commerce).1 The
proposed legislation with different amendments has been passed out of the full Committees of
Education and Labor (on July 17, 2009), Ways and Means (on July 16, 2009) and the Energy and
Commerce Committee (on July 31, 2009). Containing scores of provisions affecting Medicare
payments, payment rules and covered benefits, H.R. 3200 treats the Medicare program as both a
funding source for health reform and a tool to shape future changes in the way that health services
are delivered. Preliminary estimates from the Congressional Budget Office (CBO) on the bill
initially introduced to the Committees indicates that, absent interaction effects, net reductions in
Medicare direct spending may approach $50.5 billion from 2010-2014 and $210.6 billion from
2010-2019.
The proposed legislation includes 3 divisions; Division B contains the changes to the Medicare
and Medicaid programs. This report will discuss all of the proposed changes included in Titles I,
and VI and selected provisions in Titles II, III, and IX of Division B in H.R. 3200 concerning
payment and program modifications to Medicare’s fee-for-service program, its prescription drug
benefit, and the Medicare Advantage (MA) program; efforts to reform Medicare’s payment
methods, program integrity changes to address fraud waste and abuse, and other miscellaneous
Medicare changes. Provisions that would modify Medicare’s graduate medical education
payments to teaching hospitals, its preventive care benefits, its quality measurement efforts, and
other public health initiatives are not covered.2 The body of this report will include a discussion
of the financial impact on the Medicare program by H.R. 3200 that the CBO established (the
CBO score), then provide an overview of Medicare changes by provider type and program,
followed by a brief discussion of the program integrity changes.3 Appendix: Selected Medicare
Provisions in Division B of H.R. 3200 provides a brief current law description, explanation of
the proposed change, and where possible, the CBO score for most of the Medicare provisions in
H.R. 3200.
Congressional Budget Office (CBO) Score
On July 17, 2009, the CBO and the staff of the Joint Committee on Taxation completed a
preliminary analysis of H.R. 3200, as introduced on July 14, 2009.4 As explicitly stated by CBO,
its estimates were based on specifications provided by Committee staff rather than by detailed
analysis of legislative language. The estimates do not include certain administrative costs that
would be incurred by the government to implement the changes or H.R. 3200’s impact on other
1 H.R. 3200 has also been referred to House Budget and House Oversight and Government Reform Committees.
2 Those provisions are discussed in CRS Report R40745, Public Health, Workforce, Quality, and Other Provisions in
H.R. 3200, coordinated by C. Stephen Redhead and CRS Report R40741, End-of-Life Care Provisions in H.R. 3200, by
Kirsten J. Colello.
3 Background information on the Medicare program can be found in the CRS Report R40425, Medicare Primer.
4 The analysis does not reflect any changes made after that date. Changes that were made after July 14, 2009 discussed
in this report will be explicitly noted as such.
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Medicare Program Changes in H.R. 3200
federal programs.5 Also, additional provisions added by the Energy and Commerce Committee
were not scored.
CBO estimates that the provisions in H.R. 3200 that would affect the Medicare, Medicaid,
Children’s Health Insurance and other federal programs would reduce direct spending by $219
billion over the FY2010-FY2019 period.6 Of this total, Medicare (absent interaction affects)
accounts for $210.7 billion of the reduction. Spending reductions are offset by spending
increases. Medicare reductions in direct spending over the 10-year period are estimated to be
$495.8 billion, offset by Medicare payment increases of $285.1 billion. As noted by CBO, the
provisions that would result in the largest savings are:
• Permanent reductions in the annual updates to Medicare’s fee-for-service
payment rates (other than physicians’ services) would account for an estimated
budgetary savings of $196 billion over 10 years.7
• Using per-capita spending in fee-for-service Medicare to set rates for MA plans
would account for an estimated $156 billion (before interactions) over 10 years;
and
• Changing the drug rebate program and expanding drug coverage in Medicare’s
prescription drug program (Medicare Part D) would account for an estimated $30
billion in savings over the period.
There are differing views about whether (and to what extent) Medicare savings should be
considered as offsets to fund the expansion of health care coverage or, alternatively, should be
used to secure the financial solvency of the Medicare program. The latter position is captured in a
July 16 letter sent by 36 Republican Senators to the Senate Majority Leader discussing the need to
use potential monies resulting from Medicare reform to insure its future financial stability.8 The
alternative position that health insurance reform and the attendant changes to Medicare would
bolster the program’s solvency (and improve beneficiaries’ access to care) is asserted in an eight-
page report released by the Department of Health and Human Services (HHS) on August 27..9
Payment Rate Changes Affecting Medicare Fee-for-
Service Providers
Medicare is a federal program that pays for covered health services for most persons 65 years of
age and older and for most permanently disabled individuals under the age of 65. It consists of
5 The CBO score can be found at http://www.cbo.gov/ftpdocs/104xx/doc10464/hr3200.pdf
6 The estimated overall effect of the proposed legislation is a net increase in the federal budget deficit of $239 billion
over the FY2010-FY2019 period. The projected 10-year cost of increasing insurance coverage of $1,042 billion is
offset by the net spending decrease of $219 billion and by revenue provisions that are estimated to raise $583 over the
same period.
7 This estimate excludes interaction effects including the impact on these reductions to payments to Medicare
Advantage plans and on the collection of Part B premiums.
8 See http://corker.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=ad911e30-d2e2-43ae-9261-
ae1ebf6626b3 accessed 9/9/2009 for a copy of the letter.
9 See http://www.hhs.gov/news/press/2009pres/08/20090827a.html for the HHS press release and
http://www.healthreform.gov/reports/seniors/index.html for the report (both accesses on 9/9/2009).
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four parts, each responsible for paying for different benefits, subject to different eligibility criteria
and financing mechanisms.10 Under traditional Medicare, Part A and Part B services are typically
paid on a fee-for-service basis (each service or group of services provided to a patient is
reimbursed through a separate payment) using different prospective payment systems (PPS) or
fee schedules.11 Certain other services are paid on the basis of reasonable costs or reasonable
charges. In general, each year, regulatory decisions (some of which are mandated by Congress)
are implemented by the Centers for Medicare and Medicaid Services (CMS) which affect
Medicare’s payments to specific providers, physicians, practitioners and suppliers. For instance,
the program provides for annual updates of the program payments to reflect inflation and other
factors. In some cases, these updates are linked to the consumer price index for all urban
consumers (CPI-U) or to a provider-specific market basket (MB) index which measures the
change in the price of goods and services purchased by the provider to produce a unit of output.
In March of each year, the Medicare Payment Advisory Commission (MedPAC) makes payment
update recommendations concerning Medicare’s different fee-for-service payment systems to
Congress. To do so, MedPAC staff first examines the adequacy of the Medicare payments for
efficient providers in the current year and then assesses how provider costs are likely to change in
the upcoming year, including scheduled policy changes that will affect Medicare’s payment
rates.12 As stated by MedPAC, Medicare’s payment systems should encourage efficiency and that
providers can achieve efficiency gains similar to the economy at large. This policy target links
Medicare’s expectations for efficiency improvements to the productivity gains achieved by firms
and workers who pay taxes that fund Medicare. 13 The amount, if any, of MedPAC’s update
recommendations will depend on its overall assessment of the circumstances of a given set of
providers in any year.
In June of each year, MedPAC issues another report to Congress examining more systemic issues
affecting the Medicare program and making recommendations to increase Medicare’s value, to
promote its efficiency or payment accuracy, or to realign Medicare’s payment incentives.14 Most
recently, for example, MedPAC has stated that Medicare’s payment systems do not provide
incentives to produce appropriate, high-quality care at an efficient price. Rather, Medicare’s
incentives, particularly in its fee-for-service program, reward excessive care and do not encourage
10 Part A, the Hospital Insurance program, covers hospital services, up to 100 days of post-hospital skilled nursing
facility services, post-institutional home health visits, and hospice services. Part B, the Supplementary Medical
Insurance program, covers a broad range of medical services including physician services, laboratory services, durable
medical equipment, and outpatient hospital services. Part B also covers some home health visits. Part C provides
private plan options, such as managed care, for beneficiaries who are enrolled in both Parts A and B. Part D provides
optional outpatient prescription drug coverage.
11 Medicare has specific rules for fee for service payments under Parts A and B as well as capitation (or per person)
payments under Part C. Outpatient prescription drugs covered under Part D are not subject to Medicare payment rules.
Prices are determined through negotiation between prescription drug plans (PDPs), or Medicare Advantage Prescription
Drug (MA-PD) plans, and drug manufacturers. The Secretary of Health and Human Services is statutorily prohibited
from intervening in Part D drug price negotiations.
12 See pp. 35-41 of Medicare Payment Advisory Commission (MedPAC) Report to Congress: Medicare Payment
Policy, March 2009 (subsequently referred to as MedPAC’s March 2009 Report) for a discussion of their update
framework.
13 As noted by MedPAC, the Bureau of Labor Statistics’ estimate of the 10-year moving average rate of past growth in
total factor productivity for the economy as a whole is currently 1.3%.
14 Appendix A of MedPAC’s June report typically contains its review of CMS’s preliminary update for the physician
fee schedule as well.
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Medicare Program Changes in H.R. 3200
service coordination or quality care.15 Often considered as part of regulatory and legislative
changes to the program, MedPAC’s recommendations concerning Medicare are not binding and
are not automatically implemented. To differing extents, their analyses and recommendations
have shaped provisions in H.R. 3200; where possible, that influence will be noted, particularly in
the appendix to this report.
Hospitals and Other Part A Providers
Part A provides coverage for inpatient hospital services, post-hospital skilled nursing facility
(SNF) services, post-hospital home health services, and hospice care, subject to certain conditions
and limitations. Approximately 20% of beneficiaries enrolled in Part A use these services during
any year. CBO estimates that about $223 billion was spent on Part A benefits in 2008, an amount
that is projected to increase to $435.2 billion in 2019. In part because of its sheer size, provisions
reducing Part A spending comprise a significant proportion of the savings attributed to this
legislation either through constraining payment updates or by other payment changes.
Acute Care Hospitals
Generally, the provisions of H.R. 3200 affecting Medicare’s payments to acute care hospitals
would constrain payment increases to these hospitals, restructure payments to address treatment
inefficiencies, and then reshape Medicare’s disproportionate share hospital (DSH) hospital
subsidies. Also, the exception which permits physicians with ownership interests in a hospital to
refer Medicare and Medicaid patients to that hospital would be eliminated for new physician-
owed hospitals or those that did not meet certain criteria.
Specifically, H.R. 3200 would adjust Medicare’s annual payment updates to Part A providers to
account for economy-wide productivity increases for cost savings estimated to be $132.9 billion
(of the $196 billion total savings attributed to limits all Medicare’s fee-for-service payment
updates mentioned earlier) over 10 years. Under current law, the market basket component of the
physician update or the Medicare economic index (MEI) is adjusted to exclude productivity
gains. This provision uses the same measure of productivity improvement, the 10-year moving
average of all-factory productivity, that is included in the MEI. Savings from extending this
policy to acute care hospitals was not separately identified.
Under Medicare’s current inpatient prospective payment system (IPPS), acute care hospitals
receive a full payment for patient admissions even if the readmission is preventable and related to
the initial admission, the result of inadequate discharge planning at the treating hospital, or results
from inadequate post-discharge care coordination. MedPAC estimated that readmissions resulted
in $15 billion in additional Medicare expenditures in FY2007; however, this estimate includes
readmissions that may not have been related to the initial diagnosis, those that may not have been
preventable, where patients experienced complications or those caused by factors beyond the
hospitals’ control. As explained in the appendix, this provision would reduce payments for acute
care hospitals with excessive readmission rates relative to their expected readmission rate. CBO
has estimated this provision as saving $19.1 billion over a 10-year period.16
15 MedPAC’s Report to Congress: Improving Incentives in the Medicare Program, June 2009 also included a
Congressionally mandated report on the Medicare Advantage (MA) program.
16 See Option 31, Reduce Medicare Payments to Hospitals with High Readmission Rates, in CBO’s Budget Options,
(continued...)
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Since 1986, an increasing number of hospitals have received additional Medicare payments
because they serve a disproportionate share of low-income patients. The justification for this
subsidy has changed over time. Originally, the DSH adjustment was intended to compensate
hospitals for their higher Medicare costs associated with the provision of services to a large
proportion of low-income patients. Now, the adjustment is considered as a way to protect access
to care for Medicare beneficiaries. H.R. 3200 would reduce hospitals’ DSH payments starting in
FY2017 contingent upon a reduction in the number of uninsured individuals of eight percentage
points from 2012-2014. A hospital with higher levels of uncompensated care would receive
additional payments. CBO has estimated that this policy would save $10.2 billion from FY2017
to FY2019.
Skilled Nursing Facilities (SNFs)
Medicare covers nursing home services for beneficiaries who require skilled nursing care and/or
rehabilitation services following a hospitalization of at least three consecutive days. The Balanced
Budget Act of 1997 (BBA 97, P.L. 105-33) required the Secretary to establish a PPS for SNF care
to be phased in over three years, beginning in 1998. Under the PPS, SNFs receive a daily
payment that covers all the services provided that day, including room and board, nursing,
therapy, and drugs, as well as an estimate of capital-related costs. Any profits are retained by the
SNF, and any losses must be absorbed by the SNF. The daily base payment is based on 1995 costs
that have been increased for inflation and vary by urban or rural location. A portion of these daily
payments is further adjusted for variations in area wages, using the hospital wage index, to
account for geographic variation in wages. SNF per diem PPS payments are also adjusted to
include a temporary 128% increase for any SNF residents who are HIV-positive or have Acquired
Immune Deficiency Syndrome. Section 1888(e) of the Social Security Act requires that the base
payments be adjusted each year by the SNF MB update—that is, the measure of inflation of
goods and services used by SNFs.
In the final rule published on Friday, July 31, 2009, CMS describes its proposal to recalibrate the
case mix indexes to better account for the resources used in the care of the medically complex
and to improve upon its payment refinements made in 2006. According to CMS, the total impact
of these changes for FY 2010, accounting for a MB increase of 2.2 percentage points, would be a
decrease in Medicare payments to SNFs of 1.1% (or $360 million) below FY 2009 payments.
Some individual providers could experience larger decreases in payments than others due to case-
mix utilization. The proposed PPS and Consolidated Billing SNF payment regulation for FY
2010, describes how the Secretary would recalibrate the case-mix indexes (CMIs) for 2010 to
more accurately match the service needs of beneficiaries.
Although MedPAC finds that Medicare payments to SNFs overall are adequate, it has raised
concerns about the efficiency of the payment categories pertaining to nontherapy ancillary (NTA)
services (e.g., prescription drugs, medical equipment and supplies, IV therapy) and therapy
services. To better account for SNF stays with exceptionally high ancillary care needs, MedPAC
recommends, in a June 2009 letter to the Secretary17 and its March 2009 Report,18 that the
(...continued)
Volume I, Health Care, December, 2008, pp. 64-65 for additional information.
17 Letter from Glenn M. Hackbarth, J.D., Chairman, Medicare Payment Advisory Commission, to Charlene Frizerra,
Acting Administrator, Centers for Medicare and Medicaid Services, June 29, 2009.
18 MedPAC’s March 2009 Report, Section 2D, pp. 157-182.
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Secretary revise the PPS by separating payments for NTA from the bundled PPS rate and by
establishing an outlier policy for stays with exceptionally high NTA costs. In addition, MedPAC
explains that the current reimbursement system for therapy costs encourages the under provision
of therapy services to patients. To improve payments for therapy, MedPAC recommends that the
Secretary recalibrate the payment category for therapy costs so as to better match such payments
to the actual amount of therapy services needed by patients. MedPAC also recommends that the
market basket update for 2010 be eliminated.
The provisions contained in H.R. 3200 are consistent with MedPAC’s recommendations.
Specifically, the bill would eliminate the SNF MB update for 2010 and make all subsequent MB
annual updates subject to a productivity adjustment. Under the bill, the rate of growth in
payments to SNFs would likely slow but it would never fall below zero. H.R. 3200 would also
require that changes be made to the SNF payment categories pertaining to NTA and therapy
services, as are recommended by MedPAC. H.R. 3200 also contains provisions that would pay
reduced Medicare payments to SNFs on claims associated with certain persons who are
readmitted to a hospital from a SNF within 30 days of an initial hospital discharge. Finally,
certain Medicare-certified SNFs would also be part of the Post-Acute Care Demonstration
expansion to test bundled payments for hospitals and post-acute care providers.
Home Health Agencies (HHAs)
Home health agencies (HHAs) are paid under a prospective payment system (PPS) which covers
skilled nursing, therapy, medical social services, aide visits, medical supplies, and others. Durable
medical equipment is not included in the home health PPS. The base payment amount, or national
standardized 60-day episode rate, is increased annually by an update factor that is determined, in
part, by the projected increase in the home health market basket (MB) index. This index measures
the changes in the costs of goods and services purchased by HHAs. HHAs are required to submit
to the Secretary health care quality data. A HHA that does not submit the required quality data
will receive an update of the MB minus two percentage points for that fiscal year.
The proposed rule for calendar year (CY) 2010 reports that the HH MB will increase by 2.2% for
that year. In addition, in an effort to address potential fraud and abuse in the use of HH outlier
payments, CMS proposes to cap outlier payments at 10% of total HH PPS payments and to target
outlier payments to be no greater than 2.5% of total HH PPS payments, among other things.
In CY 2008, CMS made refinements to the home health (HH) PPS to try to improve payment
efficiencies. Specifically, this regulation established changes to the home health agency (HHA)
case-mix index to account for the relative resource utilization of different patients. These changes
modified the coding or classification of different units of service that do not reflect real changes
in case-mix. As a result, the national prospective 60-day episode payment rate was adjusted
downward by 2.75% for CY 2008, by 2.75% for each year of CY 2009 and CY 2010, and by
2.71% for CY 2011.
In its March 2009 Report,, MedPAC explains that payments to HHAs have exceeded costs by a
wide margin since the PPS was implemented in 2000. As a result, MedPAC recommends that the
MB increase for 2010 be eliminated and that the payment coding changes scheduled by the
Secretary be accelerated. Further, MedPAC recommends that HHA rates be rebased to better
reflect the average costs of care.
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H.R. 3200 would slow payment growth to HHAs, as is consistent with MedPAC’s
recommendations. Specifically, the bill would eliminate the MB update for 2010 and make all
subsequent MB annual updates subject to a productivity adjustment. Under the bill, the rate of
growth in payments to HHAs would likely slow but it would never fall below zero. H.R. 3200
would also require that the case-mix adjustments planned by the Secretary for CY 2010 and CY
2011 be fully implemented in 2010, resulting in a total downward adjustment of payments by
5.46% in 2010. Finally, H.R. 3200 would grant the Secretary the authority to adjust HHA
payments by a uniform percentage, as long as payments would not fall below the amount paid in
the previous year.
Physicians and Other Part B Providers
The bill would make several changes to how Medicare payments to physician are determined and
to physician reporting and feedback programs. These modifications include refinements to the
calculation of the payments, the introduction of new bonus payments, and adjustments to existing
programs for physicians. First and foremost, the method for determining the annual updates to the
Medicare physician fee schedule (the sustainable growth rate system, or SGR) would be modified
by resetting the baseline and making adjustment to how future updates would be calculated. CBO
estimates that these actions would require additional outlays of $228.5 billion over the period
from 2010-2019.
In addition, the bill as introduced would make a number of changes to how Medicare physician
payments are calculated under the fee schedule and modify reporting and bonus programs for
physicians. The Secretary (through CMS) would have additional flexibility to be able to review
and adjust potentially misvalued codes under the physician fee schedule, make adjustments to
Medicare payment localities in California to address imbalances created by uneven economic
growth, extend the floor for the index representing geographic variation in physician work used in
determining payments, create a new 5% bonus payment for physicians who practice in areas
where total Medicare per capita spending falls in the lowest 5% of all counties or equivalent
areas, extend the payment for the technical component of certain pathology services, and modify
the payment for imaging services to more closely reflect the actual use of the equipment. The bill
would also modify the physician quality reporting initiative program (PQRI) to include a
feedback program, integrate PQRI and extend the years of the bonus payments. In addition,
amendments approved by the Energy and Commerce Committee would modify the existing
resource-based feedback program for physicians by specifying in more detail the types of
information that would be reported under the program and how CMS could use the information.
CBO’s initial estimates are that the savings more than offset the costs of these modifications (by
$200 million), but this estimate excludes the effect of the Energy and Commerce amendments.
Payment and Administrative Changes Affecting the
Medicare Advantage Program
H.R. 3200 would reduce the maximum amount Medicare would pay private health plans in some
areas of the country19, in addition to other payment and administrative changes. Payments to
19 For a more detailed description of payments to private plans under Medicare, please see CRS Report R40374,
Medicare Advantage.
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private plans are determined by comparing a plan’s cost of providing required Medicare benefits
(bid) to the maximum amount Medicare will pay for those benefits in each area (benchmark).
Historically, Congress has increased the benchmark amounts, in part, to encourage plan
participation in all areas of the country. As a result, the benchmark amounts in some areas are
higher than the average cost of original fee-for-service (FFS) Medicare. Benchmarks exceed
average spending in original Medicare by an estimated 17% in 2009. As a result, Medicare is
projected to pay private plans an average of 14% more per beneficiary in 2009 than it does for
beneficiaries in the original Medicare program. 20 Starting in 2011, H.R. 3200 would phase-in MA
benchmarks equal to per capita FFS spending in each county. Starting in 2013, MA benchmarks
would be equal to per capita FFS spending in each county. This may result in reductions in access
to private plan options, or the supplemental benefits and reduced cost-sharing that some private
plans provide. It is estimated that this provision would save $48.1 billion over the FY2010-2014
period and $156.3 billion over the FY2010-2019 period. This is one of the provisions that would
result in the largest savings in H.R. 3200.
Starting in 2011, MA plans that provide quality health care in qualifying areas would receive an
increase in their benchmarks. Currently, MA plans are required to have quality improvement
programs before January 1, 2010, however, payments to MA plans are not contingent on the
quality of care provided to Medicare beneficiaries. This provision is estimated to cost $2.9 billion
over the 2010-2014 period and $9.6 billion over the FY2010-2019 period.
H.R. 3200 would extend the Secretary’s authority to adjust payments to plans for differences in
the way diagnosis coding of patients differs between MA plans and original Medicare. In general,
MA plan payments are risk-adjusted to account for the variation in the cost of providing care.
Risk adjustment is designed to compensate plans for the increased cost of treating older and
sicker beneficiaries, and thus discourage plans from preferential enrollment of healthier
individuals. The Medicare risk adjustment models take into account the variation in expected
medical expenditures of the Medicare population associated with demographic characteristics
(age, sex, current Medicaid eligibility, original Medicare eligibility due to a disability), as well as
medical diagnoses. The Deficit Reduction Act of 2005 (P.L. 109-171, DRA) required the
Secretary, when risk adjusting payments to MA plans during 2008, 2009, and 2010, to adjust for
patterns of diagnosis coding differences between MA plans and providers under parts A and B of
Medicare, to the extent that the Secretary identified such differences based on an analysis of data
submitted for 2004 and subsequent years. It is estimated that this provision would save $2.9
billion over the 2010-2014 period and $15.5 billion over the 2010-2019 period.
H.R. 3200 makes additional changes to the Medicare Advantage program which would result in
costs or savings of less than $0.5 billion over the 10-year period (2010-2019), as estimated by
CBO. Each of these provisions is explained in detail in the appendix to this report.
Changes Affecting Medicare’s Prescription Drug
Benefit
In January 2009, the Medicare prescription drug program began its fourth year of operation. The
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA, P.L. 108-173)
20 MedPAC’s March 2009 Report, p. 258, http://www.medpac.gov/chapters/Mar09_Ch03.pdf.
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created this voluntary outpatient prescription drug benefit under a new Medicare Part D, effective
January 1, 2006. At that time, Medicare replaced Medicaid as the primary source of drug
coverage for beneficiaries covered under both programs (called dual eligibles). Prescription drug
coverage is provided through private prescription drug plans (PDPs), which offer only
prescription drug coverage, or through Medicare Advantage prescription drug plans (MA-PDs),
which offer prescription drug coverage that is integrated with the health care coverage they
provide to Medicare beneficiaries under Part C. Medicare law sets out a defined standard benefit
structure under the Part D benefit. In 2009, the standard benefit includes a $295 deductible and a
25% coinsurance until the enrollee reaches $2,700 in total covered drug spending. After this
initial coverage limit is reached, there is a gap in coverage in which the enrollee is responsible for
the full cost of the drugs (often called the doughnut hole) until total costs hit the catastrophic
threshold, $6,153.75 in 2009.
A major focus of the drug benefit is the enhanced coverage provided to low-income individuals
who enroll in Part D. Individuals with incomes below 150% of the federal poverty limit and with
limited assets are eligible for the low-income subsidy (LIS). The LIS reduces beneficiaries’ out-
of-pocket spending by paying for all or some of the Part D monthly premium and annual
deductible, and limits drug copayments to a nominal price.
H.R. 3200 would make several changes to the Medicare Part D program to expand coverage and
reduce costs to the program. Specifically, the bill would gradually phase out the coverage gap and
completely eliminate it by 2022. During the coverage gap, consistent with a voluntary agreement
with the pharmaceutical industry, Part D enrollees would be provided discounts of 50% for brand
name drugs. However, the full drug price (the amount paid by the beneficiary plus the discount)
would be used to calculate a beneficiary’s out-of-pocket costs, thus enabling beneficiaries to
reach the catastrophic level more quickly, at which time most of the drug costs would be paid for
by Medicare. The bill would also establish a new prescription drug rebate program under which
drug manufacturers would provide Medicare with rebates for the cost of drugs dispensed to dual
eligible beneficiaries. CBO estimates that the combined savings from the discounts and the
rebates would more than offset the cost of reducing the coverage gap and reduce Medicare
expenditures approximately $30 billion for the 10 year period FY2010-2019. As CBO scored $0
savings for 2019 for these provisions, it is unknown whether savings would continue or costs
would increase beyond this date. Additionally, because enrollees pay for about 25% of the cost of
coverage through their premiums and the value of the prescription drug benefit would increase as
the doughnut hole is phased out, CBO estimates that premiums would increase faster than they
would under current law. However, CBO also estimates that, on average, the reduction in
beneficiary cost sharing would outweigh the increase in premiums. The Energy and Commerce
Committee version of H.R. 3200 would also require the Secretary to negotiate prices with
manufacturers. While some believe that the government would have greater leverage in
negotiations and would be better able to obtain lower prices than the plan sponsors, a CBO
scoring on similar legislation introduced in the prior Congress concluded that this requirement
would have a negligible effect on federal expenditures.
The bill also contains several provisions that would make it easier for beneficiaries to apply and
qualify for the low-income subsidy and would help to improve access to LIS plans. For example,
self-certification of income and assets would be allowed when applying for the subsidy, the asset
test for the low-income subsidy would be raised, and cost sharing would be eliminated for
individuals receiving care under a home and community based waiver who would otherwise
require care in a facility for the mentally retarded. Additionally, HHS would be given the
authority to auto-enroll subsidy-eligible individuals into plans using an “intelligent assignment”
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process instead of the random process currently used. The new process would be designed to
better insure that beneficiaries are enrolled in plans that are low cost and that cover the drugs the
beneficiaries are currently taking. The bill would also change the methodology used to determine
which plans are eligible to enroll low-income beneficiaries. This change may enable more plans
to qualify as low-income plans and help reduce the number of low-income beneficiaries who need
to change plans from year to year. CBO has scored the changes to the low-income subsidy
program at a cost of $11.9 billion over 10 years.
H.R. 3200 also includes a number of provisions aimed at expanding consumer protections for Part
D enrollees. For example, beneficiaries would be allowed to change drug plans outside of the
annual open enrollment period if their current plan makes a change to its formulary that reduces
coverage of needed drugs or increases cost-sharing. Additionally, the bill would enhance
oversight to better ensure that low-income beneficiaries receive retroactive reimbursement
payments owed to them by their drug plans (for cost sharing expenditures made by the
beneficiary after the date the beneficiary became eligible for the subsidy).
Efforts to Reform Medicare’s Fee-For-Service
Payment Methods
As noted by MedPAC, the Medicare program must overcome limitations with its existing fee-for-
service payment systems, by addressing its strong incentives to increase service volume and
broadening the scope of Medicare’s payment to encompass services provided by different entities
during a patient’s episode of care.21 The wide geographic variation in Medicare’s spending per
beneficiary that is not explained by measurable differences in health status adds layers of
complexity to any contemplated payment or health delivery reform proposal.
Certain provisions included in H.R. 3200 to establish pilot program to bundle payments for
physician and hospital as well as post acute care services represent a starting point with these
payment reforms. Other pilot programs will establish accountable care organizations and medical
homes in an effort to provide incentives to better manage the quality and cost-efficiency of health
care delivered to a population of chronically sick patients over an extended period of time. These
pilot programs would build on existing demonstration programs; unlike the existing efforts, if
assessed as successfully accomplishing care coordination while maintaining budget neutrality, the
pilot programs could be implemented on a permanent basis without further Congressional action.
Changes to Address Fraud, Waste, and Abuse
H.R. 3200 includes over 30 provisions aimed at reducing fraud, waste, and abuse in the Medicare
program. These provisions target the areas of fraud enforcement, program integrity, Medicare’s
enrollment and billing procedures, and funding for anti-fraud activities. Certain provisions would
also apply to providers and suppliers participating in the Medicaid and CHIP programs.
21 See MedPAC’s Report to Congress: Reforming the Delivery System, June 2008, pp 7-17 for framework to evaluate
the payment and delivery system reform
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In the area of enforcement, the legislation introduces new Civil Monetary Penalties (CMPs) for
certain types of infractions, including falsifying information on provider enrollment applications
and delaying investigations and audits by the Office of the Inspector General (OIG). The
legislation would also give CMS the authority to impose additional penalties on MA plans for
violating CMS marketing requirements and misrepresenting or falsifying information. In the area
of program integrity, the bill would authorize the Secretary to subject high-risk providers to
enhanced screening and oversight procedures, including moratoriums on enrolling new providers
and requiring providers and suppliers to adopt internal compliance programs. Finally, H.R. 3200
increases funding for the Health Care Fraud and Abuse Control Program (HCFAC) by $100
million annually. The aggregate CBO score for all fraud, waste, and abuse provisions is -$0.4
billion for FY2010-FY2014 and -$1.3 billion for FY2010-FY2019.
Concluding Observations
Under H.R. 3200, Medicare serves as both a funding source for health insurance reform and a
tool to shape future changes in the way that health services are paid for and delivered. Policy
makers are debating whether Medicare savings should be used to offset broader reform efforts or
whether these funds are more appropriately directed at strengthening the program’s future
financial standing. Industry representatives are debating the extent to which the Medicare
program can be viewed as a funding source without compromising beneficiaries’ access to quality
care. Proponents of health insurance reform argue that the Medicare program and care provided to
beneficiaries would be strengthened by certain of the payment reforms included in the bill and not
harmed by the payment reductions. How (and whether) these different discussions will be
resolved remains an open question.
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Appendix. Selected Medicare Provisions
in Division B of H.R. 3200
This appendix contains the majority of provisions in H.R. 3200 affecting the Medicare program
with a brief current law, simplified provision description and, where possible, the associated CBO
score. The section number and title of Medicare provisions that have been omitted from the
appendix will be included in footnotes to the immediately preceding provision. Those provisions
in H.R. 3200 that were included in the bill as passed by the Energy and Commerce Committee are
explicitly noted as such.
Sec. 1101. Skilled Nursing Facility Payment Update. Skilled nursing facilities (SNFs) are paid
through a prospective payment system (PPS) which is composed of a daily (“per-diem”) urban or
rural base payment amount that is then adjusted for case mix and area wages. Each year, the SNF
payment rate is increased by an update factor that is determined, in part, by the projected increase
in the SNF market basket (MB) index. Without changes to current law, the SNF MB update for
FY 2010 is 2.2%. The provision would eliminate the MB update for FY 2010. For each
subsequent fiscal year, the rate would be increased by the skilled nursing facility MB percentage
change for the fiscal year involved. This provision would not apply to payments for days before
January 1, 2010. The CBO score (with interaction with Section 1103) is -$0.8 billion for FY2010-
FY2014 and -$26.0 billion for FY2010-FY2019.
Sec. 1102. Inpatient Rehabilitation Facility Payment Update. Starting January 1, 2002,
Medicare payments to inpatient rehabilitation facilities (IRFs) are made under a discharge-based
prospective payment system where one payment covers capital and operating costs. Typically, the
per discharge payment amount is increased each fiscal year by an update factor based on the
increase in the applicable market basket index. However, in FY2008 and FY2009, the update
factor has been set at zero percent, starting for discharges as of April 1, 2008. The provision
would extend the zero percent update factor until September 30, 2010 (the end of FY2010) but
would not apply to payment units occurring before January 1, 2010. The CBO score (with
interaction with Section 1103) is -$1.4 billion for FY2010-FY2014 and -$5.3 billion for FY2010-
FY2019.
Sec. 1103. Incorporating Productivity Improvements into Market Basket Updates That Do
Not Already Incorporate Such Improvements. Currently, most providers in fee-for-service (or
traditional) Medicare, including acute care hospitals, SNFs, long term care hospitals (LTCHs),
IRFs, inpatient psychiatric facilities (IPFs), and hospice care receive predetermined payment
amounts established under different, unique prospective payment systems. Each year, the base
payment amounts in the different Medicare payment systems are increased by an update factor to
reflect the increase in the unit costs associated with providing health care services. Generally,
Medicare’s annual updates are linked to projected changes in specific market basket (MB) indices
which are designed to measure the change in the price of goods and services purchased by the
provider. Annual updates to the Medicare physician fee schedule are determined by a separate
method that includes the sustainable growth rate (SGR) formula, which already incorporates
adjustments for gains in physician productivity.
The update factors for certain providers would include a productivity adjustment which would
equal the percentage change in 10-year moving average of annual economy-wide private nonfarm
business multi-factor productivity. The adjustment would be included for IPPS hospitals, SNFs,
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IRFs. and hospice care for fiscal years beginning in 2010. To the extent that the base rate for
LTCHs would be subject to an annual update, the update factor would be subject to a productivity
adjustment starting for rate year 2010. To the extent that the base rate for IPFs would be subject to
an annual update, the update factor would be subject to a productivity adjustment starting for rate
year 2011.
The component of the IPPS update that is reduced when the acute care hospital does not submit
quality data would not be reduced below zero. Similarly, the component of the IPPS update that is
reduced for the acute care hospital is not a meaningful electronic health record (EHR) user would
not be reduced below zero. The update reduction for those IPPS hospitals that are not meaningful
EHR users would apply only with respect to the fiscal year involved and would not include the
productivity adjustment; the Secretary would not be able to take into account the reduction in
computing the applicable MB increase in subsequent years. The CBO score (with interaction with
Sections 1101 and 1102) is -$23.2 billion for FY2010-FY2014 and -$101.6 billion for FY2010-
FY2019.
Sec. 1111. Payments to Skilled Nursing Facilities. SNFs are paid through a PPS which is
composed of a daily (“per-diem”) urban or rural base payment amount that is then adjusted for
case mix and area wages. The base payment is adjusted for treatment type and care needs of the
beneficiary based on 53 payment-adjusted resource utilization groups (RUGs). In January 2006,
CMS implemented a refined SNF PPS (using FY 2001 claims data), including a parity adjustment
to ensure that estimated total payments under the 53-group RUG model would maintain parity to
the formerly used 44-group RUG model in a budget neutral manner. CMS also applied an
adjustment to account for the variability in the use of nontherapy ancillary (NTA) services (e.g.,
prescription drugs, medical equipment and supplies, IV therapy). After noting that actual
utilization patterns differed from CMS projections, CMS used actual CY 2006 claims data to
update its calibrations and its parity adjustment so as to re-establish budget neutrality and its NTA
adjustment component.
In the final rule published on Friday, July 31, 2009, CMS describes its proposal to recalibrate the
case mix indexes to better account for the resources uses in the care of the medically complex.
According to CMS, the total impact of this recalibration for FY 2010, accounting for a MB
increase of 2.2 percentage points, would be a decrease in Medicare payments to SNFs of 1.1% (or
$360 million) below FY 2009 payments. Some individual providers could experience larger
decreases in payments than others due to case-mix utilization. The proposed PPS and
Consolidated Billing SNF payment regulation for FY 2010, describes how the Secretary would
recalibrate the case-mix indexes (CMIs) for 2010 to more accurately match the service needs of
beneficiaries.
The provision would require the Secretary to adjust the case mix indexes for FY2010, using
FY2006 claims data, by the appropriate recalibration factor, as proposed in the SNF proposed rule
issued by the Secretary on May 12, 2009. It would also require the Secretary to increase payments
for non-therapy ancillary services by 10% and decrease payments for the therapy case mix
component of such rates by 5.5%. Such payment changes would be required to apply for days on
or after January 1, 2010, and until the Secretary implements an alternative case mix classification
system for the SNF PPS.
The Secretary would also be required to ensure the accuracy of payments for NTA services
furnished during a fiscal year beginning with FY 2011, within certain specifications. Beginning
with October 1, 2010, The Secretary would be required to provide for an addition or adjustment
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to the outlier payment amounts and to reduce estimated payments that would otherwise be made
under the PPS with respect to a FY by 2 percent. The total amount of additional payments or
payment adjustments for these outliers with respect to a FY could not exceed 2 percent of total
payments projected or estimated based on the SNF PPS. The CBO Score is -$2.5 billion for FY
2010-FY2014 and -$6 billion for FY2010-FY2019.
Sec. 1112. Medicare DSH Report and Payment Adjustments in Response to Coverage
Expansions. Since 1986, an increasing number of acute care hospitals have received additional
Medicare payments because they serve a disproportionate share of low-income patients. The
policy justification for Medicare’s disproportionate share hospital (DSH) spending has changed
over time. Originally, the DSH adjustment was intended to compensate hospitals for their higher
Medicare costs associated with their providing services to a large proportion of low-income
patients. Now, the adjustment is considered as a way to protect access to care.
The provision would require the Secretary to submit no later than July 1, 2016 a Medicare DSH
report including recommendations on the appropriate targeting of DSH funds that would be
consistent with its original intent and consider any reduction in the number of uninsured
individuals as well as hospitals’ remaining uncompensated care costs. If H.R. 3200 decreases the
national rate of uninsurance among the under 65-population by 8 or more percentage points from
2012 to 2014, the Medicare DSH adjustment would be reduced starting in FY2017. Additional
payments (not to exceed 50% of the aggregate DSH reduction) would be made based on the
estimated amount of uncompensated care, excluding bad debt, provided by a hospital; hospitals
with higher levels of uncompensated care would receive higher uncompensated care payments.
The CBO score is $0.0 for FY2010-FY2014 and -10.2 billion for FY2010-FY2019.
Sec. 1121. Sustainable Growth Rate Reform. Each year since 2003, Congress has passed laws
that have overridden the reductions in Medicare physician payments that would have been
required under existing law (the sustainable growth rate, or SGR, system). These reductions were
a consequence of actual Medicare Part B expenditures exceeding projected targets. Most recently,
Section 101 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA , P.L. 110-
173) increased the update to the conversion factor for Medicare physician payment by 0.5%
compared with 2007 rates for the first six months of 2008 and the Medicare Improvements for
Patients and Providers Act of 2008 (MIPPA, P.L. 110-275) extended the 0.5% increase through
the end of 2008 and set the update to the conversion factor to 1.1% for 2009. Without further
legislation, the update formula will require a reduction in physician fees beginning January 1,
2010 estimated at 21% by the CBO and by additional amounts annually for at least several years
thereafter.
This bill would (1) reset the baseline for calculating future expenditure targets ─ meaning that
past overages would not be required to be recouped, and (2) create a new method for calculating
future updates. Instead of grouping all physician expenditures together in the calculation of the
annual update to the fee schedule under the SGR system, the bill would establish separate target
growth rates for (a) evaluation and management services and (b) for all other services.
Each category would have a separate target growth rate. The target growth rate for a year,
beginning with 2010, would be computed and applied separately for each service category as
defined above and would be computed using the same method for computing the target growth
rate except that the update to the conversion factor for evaluation and management services as
well as Medicare covered preventive services would be allowed to increase by the percentage
growth rate of GDP per capita plus 2 percentage points, while the increase for all other
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physicians’ services would be allowed to grow at the percentage rate of increase in GDP per
capita plus 1 percentage point. CBO scores this provision as requiring an additional $73.7 billion
in outlays over the next five years (2010-2014) and $228.5 billion over the next ten (2010-2019).
Sec. 1122. Misvalued Codes Under the Physician Fee Schedule. The Medicare physician fee
schedule is based on assigning relative weights to each of the approximately 7,500 physician
service codes used to bill Medicare. The relative value for a service compares the relative work
involved in performing one service with the work involved in providing other physicians’
services. The scale used to compare the value of one service with another is known as a resource-
based relative value scale (RBRVS).
CMS, which is responsible for maintaining and updating the fee schedule, continually modifies
and refines the methodology for estimating relative value units (RVUs). CMS relies on advice and
recommendations from the American Medical Association/Specialty Society Relative Value Scale
Update Committee (RUC) in its assessments. In general, as currently implemented, increases in
RVUs for a service or number of services lowers the resultant fees for other physician services.
One consequence has been that the payments for evaluation and management codes, whose RVUs
typically are not increased over time, have fallen relative to other codes whose RVUs have
increased and as a consequence of new technologies that have been introduced into coverage with
relatively high RVUs. CMS is required to review the RVUs no less than every five years.
Under this proposal, the Secretary would periodically identify and make appropriate adjustments
to the relative values for the services identified as being potentially misvalued. The Secretary
would examine the following, as appropriate: (1) codes (and families of codes as appropriate) for
which there has been the fastest growth; (2) codes (and families of codes as appropriate) that have
experienced substantial changes in practice expenses; (3) codes for new technologies or services
within an appropriate period (such as three years) after the relative values are initially established
for such codes; (4) multiple codes that are frequently billed in conjunction with furnishing a
single service; (5) codes with low relative values, particularly those that are often billed multiple
times for a single treatment; (6) codes that have not been subject to review since the
implementation of the RBRVS (the so-called ‘Harvard-valued codes’); and (7) such other codes
determined to be appropriate by the Secretary. According to CBO, this provision would increase
outlays by approximately $100 million over the next five years (2010-2014) and $200 million
over the next ten (2010-2019).
Sec. 1123. Payments for Efficient Areas. In certain circumstances, physicians receive an
additional payment in addition to the Medicare fee schedule amount to encourage targeted
activities. These bonuses, typically a percentage increase above the Medicare fee schedule
amounts, can be awarded for a number of activities including reporting on quality measures,
participating in electronic prescribing, or practicing in underserved areas.
The bill would create a new incentive payment for physicians; providers delivering services in
counties or equivalent areas in the United States that fall in the lowest 5% based on per capita
spending for Medicare part A and part B services would receive an additional 5% payment for the
Medicare Part B services. The Secretary would standardize per capita spending to eliminate the
effect of geographic adjustments in payment rates. CBO estimates that an additional $500 million
in outlays would be required by this provision, with all the spending occurring from 2011 to 2013.
Sec. 1124. Modifications to the Physician Quality Reporting Initiative (PQRI). The Tax
Relief and Health Care Act of 2006 (TRHCA, P.L. 109-432) required the establishment of a
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physician quality reporting system (the Physician Quality Reporting Initiative, PQRI) that would
include an incentive payment to eligible professionals who satisfactorily report data on quality
measures. MIPPA made this program permanent and extended the bonuses through 2010; the
incentive payment was increased from 1.5% of total allowable charges under the physician fee
schedule in 2007 and 2008 to 2% in 2009 and 2010.
The bill would modify the PQRI to include a feedback program for physicians, integrate PQRI
and electronic health record (EHR) reporting, and extend the years of bonus payments. Not later
than January 1, 2011, the Secretary would develop and implement a mechanism to provide timely
feedback to eligible professionals on the performance of the eligible professional with respect to
satisfactorily submitting data on quality measures under the PQRI program.
The bill would integrate physician quality reporting under the PQRI and EHR reporting relating
to the meaningful use of EHR. The integration would consist of the following (1) the
development of measures that would both demonstrate meaningful use of an electronic health
record for purposes of EHR reporting and provide information on the clinical quality of the care
furnished to an individual; (2) the collection of health data to identify deficiencies in the quality
and coordination of care for Medicare beneficiaries; and (3) other activities as specified by the
Secretary. The Secretary would develop such a plan no later than January 1, 2012. Incentive
payments under the PQRI program would be extended through 2012; for each of the years 2009
through 2012, the bonus would be 2% of Part B payments. According to the CBO, this provision
would require an additional $600 million in 2012 and $1 billion in 2013.
Sec. 1125. Adjustment to Medicare Payment Localities. The Medicare fee schedule pays
providers differently according to the geographic location, known as a Medicare physician
payment locality, in which the provider practices. By construction, the costs of providing
physician services were relatively consistent within each payment locality at the time when they
were defined; sub-regions of a state were designated as separate payment localities only if the
data showed a marked difference between the costs in that area compared with the rest of the
state. Economic conditions have affected parts of the country differently in the years since the
payment localities were created. If localities were to be created based on data from recent years
using the original methodology, the resulting number and composition of the payment localities
might not be the same as the ones that currently exist.
The bill would alter the payment localities in the state of California used as the basis for the
geographic adjustment of Medicare physician payments. Under the proposal, payments to
California physicians would transition from a system based on the current localities to one based
on Metropolitan Statistical Areas (MSAs) for services furnished on or after January 1, 2011. The
provision includes a hold harmless condition that would require that no geographic adjustments
be reduced during the first 5 years of the transition from the former county-based payment
localities to the MSA-based fee schedule areas. The new fee schedule areas would be subject to
periodic review and adjustments. CBO estimates that these changes would require an additional
$200 million over the next five years (2010-2014) and $300 over the next ten (2010-2019).
Sec. 1126. Resource-Based Feedback Program For Physicians In Medicare. Both MedPAC
and GAO have suggested that CMS provide information to physicians on their resource use with
the expectation that physicians who are outliers would alter their practice patterns as a result.
Providing this information to physicians would enable them to assess their practice styles,
evaluate whether they tend to use more resources than their peers or what evidence-based
research (if available) recommends, and to revise practice styles as appropriate.
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Section 131(c) of MIPPA established such a physician feedback program, which CMS
implemented by January 1, 2009. CMS initially called this effort the Physician Resource Use
Feedback Program, but has renamed this initiative the “Physician Resource Use Measurement
and Reporting Program.” MIPPA also requires the GAO to conduct a study of the Physician
Feedback Program as described above, including the implementation of the Program, and to
submit a report to Congress by March 1, 2011 containing the results of the study, together with
recommendations for such legislation and administrative action as the Comptroller General
determines appropriate.
The proposal would modify the existing physician feedback program. The feedback reports
would include measures of the utilization of services under the Medicare program based on
claims data and would include quality data under the existing physician quality reporting
initiative (PQRI) as well as other information determined to be appropriate. These reports would
be provided confidentially to physicians and other practitioners (those who furnish services for
which payment is made under Medicare and for which such payment would be made if furnished
by a physician).
The feedback reports would include information allowing the comparison of a physician’s
resource use pattern to the use patterns of peers. These reports could include resource use data on
a per capita basis, a per episode basis, or both. The reports would include information regarding
nationwide groups of similarly situated physicians (taking into consideration specialty, practice
setting, and such other criteria as the Secretary finds appropriate) and comparing the pattern of
services of each physician in the group to the group average pattern of services
During 2011, the Secretary would evaluate the efficacy of the feedback methods with regard to
changing practice patterns to improve quality and decrease costs. Taking into account the cost of
each method, the Secretary would expand the program by developing a plan to disseminate
feedback reports in a significant manner in the regions and cities of the country with the highest
utilization of services under Medicare. The Secretary would establish a process by which a
physician could opt not to receive feedback reports under this program. This provision was not
included in the draft of the legislation that CBO scored in its July 17, 2009 letter to the Congress.
Sec. 1131. Incorporating Productivity Improvements into Market Basket Updates That Do
Not Already Incorporate Such Improvements. Payments for certain durable medical equipment
(DME) in specific areas may be established by competitive bidding, but generally, Medicare pays
for certain medical services and supplies using different prospective payment systems or fee
schedules. Each year, the Medicare program, often directed by Congress, addresses the issue of
whether or how much to increase payments. Under this provision, starting in CY2010, Medicare’s
annual updates for hospital outpatient department services, ambulance services, ambulatory
surgical center services, clinical laboratory services would be subject to the productivity
adjustment established earlier in the legislation The productivity adjustment would apply to DME
payments starting June 2013. The CBO score is -$8.4 billion for FY2010-FY2014 and -$40.1
billion for FY2010-FY2019.
Sec. 1141. Rental and Purchase of Power-driven Wheelchairs. Medicare pays for new or
replacement power-driven wheelchairs in one of two ways: either Medicare will pay the supplier
a monthly rental amount during the beneficiary’s period of medical need (not to exceed 13
continuous months), or, payment is made on a lump-sum basis at the time the supplier furnishes
the chair. Power wheelchairs are classified into 3 broad groups based on their reported
performance in categories such as speed, range of travel and the height of the vertical obstruction
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they can climb. This provision would restrict the ‘lump-sum’ payment provision for new and
replacement power-driven wheelchairs to those recognized by the Secretary as classified within
group 3 or higher. The provision would be effective for chairs furnished on or after January 1,
2010, but would not apply to areas where the payments for Medicare DMEPOS are based on the
competitive bids of suppliers and bids had been submitted before October 1, 2010. The CBO
score is -$0.6 billion for FY2010-FY2014 and -$0.8 billion for FY2010-FY2019.
Sec. 1141A. Election to Take Ownership, or to Decline Ownership, of a Certain Item of
Complex Durable Medical Equipment After the 13-Month Capped Rental Period Ends.
[Committee on Energy and Commerce Amendment] Pressure reducing support surfaces are used
for the care or prevention of pressure ulcers or bedsores and are a covered Medicare Part B DME
benefit. For beneficiaries that fulfill coverage criteria for a pressure reducing support surface,
Medicare will pay the supplier a monthly rental amount during the beneficiary’s period of
medical need (though payments are not to exceed 13 continuous months). On the first day after
the 13th continuous month of rental payments, the supplier of the item is required to transfer title
to the item to the beneficiary. After the supplier transfers title to the beneficiary, Medicare pays
for maintenance and servicing for parts and labor not otherwise covered under a manufacturer’s
warranty if the Secretary determines that payments are reasonable and necessary. Payment
amounts for such maintenance and services are determined by the Secretary. Support surfaces
come in different categories. A group 3 support surface is a complete bed system known as air-
fluidized beds. It simulates the movement of fluid by circulating filtered air through silicone-
coated ceramic beads.
This provision would eliminate the automatic transfer of title of group 3 support surfaces to
beneficiaries after 13 months of continuous use. Effective upon enactment, this provision would
require DME suppliers, during the 10th continuous month of rental, to offer the beneficiary the
option to accept or reject the transfer of title to a group 3 support surface after the 13th month of
rental. The beneficiary would be deemed to reject the title, unless it was accepted within one
month of the offer. If the individual accepted the title, it would be transferred on the first day that
begins after the 13th month of continuous rental; reasonable and necessary maintenance and
servicing not otherwise covered by a manufacturer’s warranty would be covered by Medicare, as
under current law. If the beneficiary did not accept the title, payments for maintenance and
servicing would be as follows: no maintenance and serving payment during the first 6 months
following the 13 continuous months of rental payments; during the first month of each succeeding
6 month period, a maintenance and servicing payment could be made, (for parts and labor not
covered by the supplier’s or manufacturer’s warranty as determined by the Secretary, to be
appropriate for group 3 support surfaces) and in an amount equal to the lower of (a) a reasonable
and necessary maintenance and servicing fee or fees established by the Secretary, or (b) 10% of
the total purchase price, as specified.
If on the effective date of this legislation, the individual’s rental period has exceeded 10
continuous months, but has not reached the first day after the 13th month of continuous rental, the
supplier would be required to offer the beneficiary the option to reject or accept title to the group
three support surface. The supplier would be required to do so within 1 month of the effective
date. The beneficiary has one month to accept or reject the title. The beneficiary is deemed to
reject the title unless it is accepts the title. Maintenance and servicing of the equipment would be
as described above. This provision was not included in the draft of the legislation that CBO
scored in its July 17, 2009 letter to the Congress.
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Sec. 1142. Extension of Payment Rule for Brachytherapy. As required by MMA, Medicare’s
outpatient prospective payment system make separate payments for specified brachytherapy
sources. As mandated by TRHCA, this separate payment will be made using hospitals’ charges
adjusted to their costs until January 1, 2008. MMSEA extended cost reimbursement for
brachytherapy services until July 1, 2008. MMSEA also specified that therapeutic
radiopharmaceuticals will be paid using this methodology for services provided on or after
January 1, 2008, and before July 1, 2008. MIPPA extended cost reimbursement for brachytherapy
and therapeutic radiopharmaceuticals until January 1, 2010. The provision would extend cost
reimbursement for brachytherapy and therapeutic radiopharmaceuticals until January 1, 2012. The
CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY2019.
Sec. 1143. Home Infusion Therapy Report to Congress. Infusion therapy involves the
administration of medication through a needle or a catheter. If a physician determines that it is
medically appropriate for a particular patient, some infusion therapies may be provided in a
patient’s home. Infusion drugs administered in a patient’s home are covered under the Medicare
Part D drug benefit. Medicare Part D does not, however, cover supplies, equipment or
professional services associated with home infusion therapy. The provision would require
MedPAC to analyze the scope of infusion therapy services provided under specified programs,
the benefits and costs of providing coverage under Medicare, and analysis of how payment for
such services could be structured. MedPAC is to submit a report to Congress not later than 12
months after the date of enactment. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0
billion for FY2010-FY2019.
Sec. 1144. Require Ambulatory Surgical Centers (ASCs) to Submit Cost Data and Other
Data. Ambulatory surgery centers (ASCs) must meet certain health, safety, and other specified
standards in order to participate in Medicare. ASCs have never been required to submit cost
reports. In March 2009, MedPAC recommended that Congress require ASCs to submit cost data
and quality data that would allow for an effective evaluation of the adequacy of Medicare’s
payment rates. The provision would require ASCs to submit information on their facility costs as
a condition for agreeing to participate in Medicare beginning 18 months after the date the
Secretary develops the cost reporting form. No later than 3 years from enactment, an ASC cost
reporting form would be developed taking into account the hospital cost reporting requirements.
The ASC cost reports would be periodically audited. The requirements would apply to
agreements applicable to cost reporting periods. Starting 2012, ASCs would be required to report
quality data, including data on health care associated infections. The CBO score is $0.0 billion for
FY2010-FY2014 and $0.0 billion for FY2010-FY2019.
Sec. 1145. Treatment of Certain Cancer Hospitals. Eleven cancer hospitals are exempt from
the IPPS used to pay inpatient hospital services provided by acute care hospitals. Historically,
they have been paid on a reasonable cost basis, subject to certain payment limitations and
incentives. These hospitals are also held harmless under the outpatient prospective payment
system (OPPS) and will not receive less from Medicare under this payment system than under the
prior outpatient payment system. Under OPPS, Medicare pays for outpatient services using
ambulatory payment classification (APC) groups. The Secretary would be required to determine
if the costs incurred by cancer hospitals with respect to APCs exceed those costs incurred by other
hospitals reimbursed under OPPS. If so, cancer hospitals would receive APC payments with an
appropriate adjustment for outpatient services furnished starting January 1, 2011. The CBO score
is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY2019.
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Sec. 1146. Medicare Improvement Fund. Section 188 of MIPPA established the Medicare
Improvement Fund (MIF), available to the Secretary to make improvements under the original
fee-for-service program under Parts A and B for Medicare beneficiaries. The American Recovery
and Reinvestment Act of 2009 (ARRA) modified the availability so that $22.29 billion are to be
available to the Secretary for this purpose for services furnished during FY2014. For fiscal year
2020 and in each subsequent fiscal year, the amount in the fund would be the Secretary’s
estimate, as of July 1 of the fiscal year, of the aggregate savings in Medicare expenditures due to
payment reductions resulting from restrictions imposed on various Medicare providers as an
incentive for the adoption and meaningful use of certified EHR technology. The proposal in this
bill would modify the amount of monies in the fund so that $8 billion would be available for the
period beginning with fiscal year 2011 and ending with fiscal year 2019. CBO scores this
provision as saving $16.7 billion in 2014 and $5.6 billion in 2015, when interacted with Section
1158, which requires the Secretary to use funds from the MIF to address geographic inequities.
Sec. 1147. Payment for Imaging Services. Under the Medicare fee schedule, some services have
separate payments for the technical component and the professional component. Medicare pays
for each of these components separately when the technical component is furnished by one
provider and the professional component by another. When both components are furnished by one
provider, Medicare makes a single global payment that is equal to the sum of the payment for
each of the components. Imaging procedures generally have two parts: the actual taking of the
image (the technical component), and the interpretation of the image (the professional
component).
CMS’s method for calculating the Medicare fee schedule reimbursement rate for advanced
imaging services assumes that imaging machines are operated 25 hours per week, or 50% of the
time that practices are open for business. Setting the equipment use factor at a lower —rather than
at a higher—rate has led to higher payment for these services. Citing evidence showing that the
utilization rate is 90%, rather than the 50% previously assumed, MedPAC is urging CMS to use
the higher utilization rate in the calculation of fee schedule payments for advanced imaging
services.
The bill proposes to increase the utilization rate for calculating the payment for advanced
diagnostic imaging equipment from 50% to 75%; this would result in a decrease in the payment.
In addition, for single session imaging involving continuous body parts, the proposal would
reduce the technical component fees for additional imaging services to 50% to reflect efficiency.
These modifications would apply to services furnished on or after January 1, 2011. CBO
estimates that this provision would save an estimated $1.3 billion over the next five years (2010-
2014) and $4.3 billion over the next ten (2010-2019).
Sec. 1148. Durable Medical Equipment Program Improvements. This provision modified
requirements for surety bonds, oxygen equipment and accreditation. The CBO score for Section
1148 is $0.0 billion for FY2010-FY2014 and -$0.1 billion for FY2010-FY2019.
Surety Bond: The Secretary can not issue or renew a Medicare provider number for payment of
Medicare durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) claims
unless the supplier provides the Secretary with a surety bond of not less than $50,000. The final
regulation exempts certain individuals from the requirement, including certain physicians and
non-physician practitioners, physical and occupational therapists, state-licensed orthotic and
prosthetic personnel, and government-owned suppliers. This provision would waive the surety
bond requirement for a pharmacy that (1) supplies durable medical equipment, prosthetics,
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orthotics, and supplies, (2) has been issued a provider number for at least 5 years, and (3) has not
received an adverse action.
Oxygen Equipment: Medicare makes rental payments for oxygen equipment. The monthly
payments are made for the period of medical need, not to 36-months. The statute requires
suppliers to continue furnishing the equipment during any period of medical need for the
remainder of the reasonable useful lifetime of the equipment, which is defined by the Secretary as
5 years (or 60 months). This provision would modify the time period during which the supplier
would be required to furnish medically necessary oxygen and oxygen equipment. As of the 27th
month of the 36 month rental period, the supplier furnishing the equipment would be required to
continue furnishing the equipment (either directly or through arrangements with other suppliers)
during any subsequent period of medical need for the remainder of the reasonable useful lifetime
of the equipment regardless of the location of the individual, unless another supplier accepted the
responsibility to furnish equipment during the remainder of the period. This provision would
apply to equipment furnished to individuals for whom the 27th month of a continuous period of
use occurred on or after July 1, 2010. This provision would also allow a beneficiary to begin a
new 36 month rental period if the supplier who had been furnishing oxygen and oxygen
equipment to the beneficiary was declared bankrupt and its assets were liquidated and at the time
of the declaration and liquidation more than 24 months of rental payments had been made.
Accreditation: MMA required the Secretary to establish and implement quality and accreditation
requirements for Medicare suppliers of DMEPOS. MIPPA exempted a group of health care
professionals from having to become accredited unless the Secretary determined the standards
were designed specifically to be applied to those professionals. The Secretary was given authority
to other professionals from the accreditation. This provision would exempt pharmacies enrolled
as Medicare DMEPOS suppliers from the accreditation requirement for the purposes of supplying
diabetic testing supplies, canes, and crutches. Any supplier that had submitted an application for
accreditation before August 1, 2009 would be deemed as meeting applicable standards and
accreditation requirements under the subparagraph until the independent accreditation
organization took action on the suppliers application.
Section 1149. MedPAC Study and Report on Bone Mass Measurement. The Medicare
Payment Advisory Commission would conduct a study regarding bone mass measurement,
including computed tomography, duel-energy x-ray absorptriometry, and vertebral fracture
assessment. The study would focus on the following: (1) an assessment of the adequacy of
Medicare payment rates for such services, taking into account costs of acquiring the necessary
equipment, professional work time, and practice expense costs; (2) the impact of Medicare
payment changes since 2006 on beneficiary access to bone mass measurement benefits in general
and in rural and minority communities specifically; (3) a review of the clinically appropriate and
recommended use among Medicare beneficiaries and how usage rates among such beneficiaries
compares to such recommendations; and (4) in conjunction with the findings under (3),
recommendations, if necessary, regarding methods for reaching appropriate use of bone mass
measurement studies among Medicare beneficiaries. Not later than 9 months after enactment, the
Commission would submit a report to the Congress containing a description of the results of the
aforementioned study and the conclusions and recommendations, if any, regarding each of the
issues described above. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for
FY2010-FY2019.
Sec. 1149A. Exclusion of Customary Prompt Pay Discounts Extended to Wholesalers from
Manufacturer’s Average Sales Price for Payments for Drugs and Biologicals Under
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Medicare Part B. [Committee on Energy and Commerce Amendment] Medicare Part B pays for
a small number of drugs in limited circumstances including drugs administered to patients in
physician offices and outpatient departments. MMA established a Part B drug reimbursement
methodology based on the Average Sales Price (ASP) of drugs; since January 2005, Medicare has
paid for most physician administered drugs based on 106% of the volume-weighted ASP for each
drug code. MMA defines ASP as the average manufacturer’s sales of a drug to all purchasers in
the United States in a given quarter. The ASP is net of any price concessions provided by the
manufacturer to the purchaser (e.g. the wholesaler, group purchasing organization or provider)
such as prompt pay discounts, volume discounts, and rebates other than those obtained through
the Medicaid drug rebate program. Some physician groups are concerned that the prompt pay
discounts provided to wholesalers or group purchasing organizations are not passed on to
physicians, but are still included in the determination of the ASP, thereby lowering Medicare
payment to physicians for the cost of the drugs. This provision would exclude customary prompt
pay discounts extended to wholesalers from the calculation of ASP in cases where the discounts
do not exceed 2% of the wholesale acquisition cost22 for drugs and biologicals that are sold on or
after January 1, 20011 and before January 1, 2016. This provision was not included in the draft of
the legislation that CBO scored in its July 17, 2009 letter to the Congress.
Sec. 1149B. Timely Access to Post-Mastectomy Items. [Committee on Energy and Commerce
Amendment] A breast prosthesis is covered by Medicare Part B for a patient who has had a
mastectomy. An external breast prosthesis garment, with mastectomy form is covered for use in
the postoperative period prior to a permanent breast prosthesis or as an alternative to a
mastectomy bra and breast prosthesis. The breast prosthesis and garment are not covered by
Medicare prior to the mastectomy or breast cancer surgery as there is no medical need for the
items.
Upon enactment, the provision would specify that payment for post-mastectomy external breast
prosthesis garments would be made regardless of whether the items are supplied to the
beneficiary prior to or after the mastectomy procedure or other breast cancer surgical procedure.
The Secretary would be required to develop policies to ensure appropriate beneficiary access and
utilization safeguards. This provision was not included in the draft of the legislation that CBO
scored in its July 17, 2009 letter to the Congress.
Sec. 1149C. Moratorium on Medicare Reductions in Payment Rates for Certain
Interventional Pain Management Procedures Covered Under the ASC Fee Schedule.
[Committee on Energy and Commerce Amendment] CMS implemented a new payment system
for ASCs starting on January 1, 2008. The new payment system which will be phased in over a 4-
year period uses the ambulatory payment classification groups that are the basis for Medicare’s
OPPS used to pay for hospital outpatient department services. Under the new payment system,
Medicare’s payments for certain services will increase and those for other services will decrease.
This provision would establish that Medicare payments for interventional pain management
services provided in ASCs starting January 1, 2010 and before January 1, 2012 would not be less
than the payment rate in effect as of January 1, 2007 under the prior payment system. The
interventional pain services included under this provision would be epidural injections, facet joint
22 The term `wholesale acquisition cost' means, with respect to a drug or biological, the manufacturer's list price for the
drug or biological to wholesalers or direct purchasers in the United States, not including prompt pay or other discounts,
rebates or reductions in price, for the most recent month for which the information is available, as reported in wholesale
price guides or other publications of drug or biological pricing data.
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injections, and sacroiliac joint injections. This provision was not included in the draft of the
legislation that CBO scored in its July 17, 2009 letter to the Congress.
Sec. 1149D. Medicare Coverage Of Services Of Qualified Respiratory Therapists Performed
Under The General Supervision Of A Physician. [Committee on Energy and Commerce
Amendment] Under current law, respiratory therapists can not be reimbursed independently under
the Medicare fee schedule, as they are not included in the definition of physicians and other
providers. Thus, services provided by respiratory therapists outside of hospital settings are
generally covered as services “incident to a physician’s professional service.” Under this
provision, the physician must directly supervise the service (meaning the physician must be
physically present) when the physician is not the one providing the service.
The provision would amend the definition of “medical and other health services” and add a new
subparagraph addressing respiratory therapy and respiratory therapists. For purposes of the
Medicare program, respiratory therapy services would include those services that are performed
by a respiratory therapist under the general (not direct) supervision of a physician for the
diagnosis and treatment of respiratory illnesses (and would be physicians’ services if furnished by
a physician). These services would be reimbursed under the Medicare fee schedule, but only if no
facility or other provider charges are paid with respect to the furnishing of such services. The
term ‘respiratory therapist’ would mean an individual who (1) is credentialed by a national
credentialing board recognized by the Secretary, (2) is licensed to practice respiratory therapy in
the State in which the respiratory therapy services are performed, or in the case of an individual in
a State which does not provide for such licensure, is legally authorized to perform respiratory
therapy services (in the State in which the individual performed such services) under State law or
the State regulatory mechanism provided by State law, (3) is a registered respiratory therapist; and
(4) holds a bachelor’s degree.
Payment for these respiratory services furnished by a respiratory therapist would be the amount
equal to 80 percent of the lesser of the actual charge for the services or 85 percent of the Medicare
fee schedule amount provided for the same services if furnished by a physician. This change
applies to services furnished on or after January 1, 2010. This provision was not included in the
draft of the legislation that CBO scored in its July 17, 2009 letter to the Congress.
Sec. 1151. Reducing Potentially Preventable Hospital Readmissions. Medicare pays for most
acute care hospital stays using a prospectively determined payment for each discharge. Payment
also depends on the relative resource use associated with a patient classification group, referred to
as the Medicare Severity diagnosis related groups (MS-DRGs), to which the patient is assigned.
Medicare’s IPPS includes adjustments that reflect certain characteristics of the hospital, such as
the wage index of the area where the hospital is located or where it has been reassigned, its
teaching hospital status and DSH status. Hospitals in Maryland are not paid using IPPS; rather
they receive Medicare payments based on a state-specific Medicare reimbursement system.
Critical Access Hospitals (CAHs) are limited-service facilities that are located more than 35 miles
from another hospital (15 miles in certain circumstances) or designated by the state as a necessary
provider of health care; offer 24-hour emergency care; have no more than 25 acute care inpatient
beds; and have a 96-hour average length of stay. Medicare pays CAHs on the basis of 101% of
the reasonable costs of the facility for inpatient and outpatient services. Certain aspects of the
CAH payment system are not subject to administrative or judicial review.
According to MedPAC’s analysis of 2005 Medicare data, 6.2% of hospitalizations of Medicare
beneficiaries resulted in readmission within 7 days and 17.6% of hospitalizations resulted in
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readmission within 30 days. The 17.6% of hospital readmission accounts for $15 billion in
Medicare spending. These readmission rates reflect the total number of readmissions, including
those that may not have been related to the initial diagnosis and may not have been preventable.
MedPAC, CMS, and others have expressed concern that providers do not have financial
incentives to reduce potentially preventable readmissions. In addition, MedPAC, in its June 2008
report, recommended that Medicare’s payments to hospitals with relatively high readmission rates
for select conditions be reduced.
Penalties for Hospitals IPPS hospitals and acute care hospitals in Maryland would receive
reduced payments for potentially preventable hospital readmissions occurring on or after October
1, 2011. Reduced hospital payments for readmissions would be calculated by multiplying the base
operating DRG payment amount by an adjustment amount. The base operating DRG payment
amount is the base amount that would have been paid under IPPS reduced by payments
associated with indirect medical education and DSH payments. In the case of hospitals in
Maryland, the base amount would be the payment amount under their state system.
The adjustment factor for a hospital in a fiscal year would be the greater of (1) a floor adjustment
factor equal to a reduced percentage of the discharge payment or (2) the excess readmissions ratio
for the applicable fiscal year. The floor adjustment factor would be 0.99 of the discharge
payments in FY2012, 0.98 of the discharge in FY 2013, 0.97 in FY 2014; or 0.95 in subsequent
fiscal years. The excess readmissions ratio would equal 1 minus the ratio of the aggregate
payments for excess readmissions for the hospital divided by the aggregate payments for all
discharges. (Each component of this formula is specified in the provision.) Beginning with
discharges for FY2014, the Secretary would be able to provide additional incentives for hospitals
to reduce their potentially preventable readmission rates (by ranking hospitals by readmission
ratios from lower to higher readmissions and establishing a benchmark that is lower than the 50th
percentile).
An applicable condition would be defined as a condition or procedure that represents high volume
(above a minimum threshold) or high expenditures for Medicare or meets other specified criteria
that also satisfies certain measures of readmissions (that have been endorsed by a consensus-
based entity). Readmissions would be defined as an admission to the hospital of an individual
who had been discharged from either the same or another applicable hospital within a specified
time period from the date of discharge.
Starting in FY2012, the Secretary would select 3 applicable conditions that have been endorsed
by the consensus based entity as of the date of enactment. Beginning with FY2013, the Secretary
would be required to expand the list of applicable conditions to include 4 conditions identified by
the MedPAC in its June 2007 Report to Congress. The Secretary would also be able to extend it to
other conditions including an appropriate all-condition measure of readmissions. In expanding the
list of conditions, the Secretary would be required to seek the endorsement by a consensus-based
entity, but would be able to apply such conditions with such endorsement.
Hospital activities would be monitored to determine if the hospitals took the steps to avoid
patients at risk for readmissions. Such activities could be sanctioned, after appropriate notice and
opportunity for the hospital to redress these actions.
Starting in FY2011, targeted hospitals that received $10 million or more in DSH payments in
their most recently settled cost report could receive increased payments for transitional care
activities, such as care coordination services; hiring translators and interpreters; increasing
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discharge planning services among other actions. The payment increase would be subject to
aggregate and hospital-specific caps. In the aggregate, payment increases would not exceed 5% of
the estimated savings attributed to the hospital readmission policy in a fiscal year. A specific
hospital would not receive more than the estimated difference attributed to the excess
readmissions policy. The Secretary would make these additional payments on a lump sum basis, a
periodic basis, a claim by claim basis or in any other form deemed appropriate. Not later than 3
years after funds are first made available, GAO would be required to submit a report on the use of
such funds.
No administrative or judicial review could be conducted of the determination of the base
operating DRG amounts; the methodology for determining the excess readmission adjustment
factor and its various components (excess readmissions ratio, aggregate payments for excess
readmissions and aggregate payments for all discharges, applicable conditions, and applicable
periods); measures of readmissions; the determination of a targeted hospital for additional
payments, the increase in payments, the aggregate cap, the hospital-specific limit, and the form of
the additional payment.
Application to Critical Access Hospitals (CAHs). Starting for cost reporting periods beginning in
FY2012, CAHs would receive reduced payments for preventable hospital readmissions. The
adjustment factor for acute care hospitals would be applied. The methodology for determining the
adjustment factor, including the determination of aggregate payments for actual and expected
readmissions, applicable periods, applicable conditions and measures of readmission would not
be subject to administrative or judicial review.
Application to Post Acute Care Providers. The proposal would also reduce Medicare payments
on claims from post-acute care providers (SNFs, IRFs, HHA, and LTCHs) for patients readmitted
to an applicable hospital or a CAH within 30 days of an initial discharge from a hospital or a
CAH. Payments to post-acute providers would be reduced by 0.996 for the fiscal year or rate year
2012; 0.993 for the fiscal or rate year 2013; and 0.99 for fiscal or rate year 2014. This policy
would apply to the discharges or services starting October 1, 2011 or July 1, 2012 depending
upon the providers Medicare rate setting schedule.
The Secretary would be required to develop appropriate measures of readmissions rates for post
acute care providers and to submit such measures for endorsement through a consensus-based
entity. The Secretary would be required to adopt, expand and apply such measures, in the same
manner as for applicable hospitals established earlier in the legislation. To the extent such
measures would be adopted, the Secretary would adopt similar payment policies for post acute
providers on or after October 1, 2013 that have been established for applicable hospitals and
CAHs earlier in this proposed legislation. Post acute providers would also be subject to the
monitoring and penalties established for applicable hospitals and CAHs earlier in this proposed
legislation.
Physicians. The Secretary would be required to conduct a study to determine how this
readmissions policy could be applied to physicians and issue a public report no later than 1 year
after enactment. Such approaches would be required to be considered: (1) creating a code (or
codes) and budget neutral payment amount(s) under the fee schedule for services furnished by an
appropriate physicians who sees an individual within the first week after discharge from a
hospital or CAH.; (2) developing measures of readmissions rates for individuals treated by
physicians; (3) applying a payment reduction for physicians who treat the patient during the
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initial admissions that results in a readmission; and (4) methods for attributing payments or
payment reductions to the appropriate physician or physicians.
Funding. In addition to funds otherwise available, $25 million for each fiscal year beginning with
2010 would be appropriated to the CMS Program Management Account; the amounts
appropriated for a fiscal year would be available until expended. The CBO score is -$3.8 billion
for FY2010-FY2014 and -$19.1 billion for FY2010-FY2019.
Sec. 1152. Post Acute Care Services Payment Reform Plan and Bundling Pilot Program.
Medicare pays for most post-acute care (PAC) services, including skilled nursing facilities (SNF),
long-term care hospitals (LTCH), inpatient rehabilitation facilities (IRF), and home health, under
prospective payment systems (PPS) established for each type of provider. Payments across PAC
settings may differ considerably even though the clinical characteristics of the patient and the
services delivered may be very similar. The Deficit Reduction Act of 2005 (P.L. 109-171)
required the Centers for Medicare and Medicaid Services (CMS) to develop a Post Acute Care
Payment Reform Demonstration (PAC demonstration) to standardize patient assessment
information from PAC settings and to use these data to guide payment policy in the Medicare
program. This demonstration began in 2008 and a report is expected to be submitted to Congress
by the Secretary in 2011. CMS has also established a 3-year Acute Care Episode (ACE)
Demonstration to test the effects of using a bundled payment for hospital and physician services
for a set of 9 orthopedic and 28 cardiovascular conditions. There are 5 participants in the ACE
demonstration which began early in 2009.
The provision would require the Secretary to develop a detailed plan for bundling payments for
Medicare’s PAC services (SNFs, IRFs, LTCHs, hospital based outpatient rehabilitation facilities,
and home health agencies services) provided after discharge from a hospital and as determined
appropriate by the Secretary. This provision would also require the Secretary, by no later than
January 1, 2011 to convert the acute care episode demonstration into a pilot program and expand
it to include post acute services and such other services the Secretary determines to be
appropriate, Under this pilot program, the Secretary could apply bundled payments to: (i)
hospitals and physicians; (ii) hospitals and post-acute-care providers; (iii) hospitals, physicians,
and post-acute care providers; or (iv) combinations of post-acute providers. Bundled payments
would be applied in manner as to include collaborative care networks and continuing care
hospitals, as defined by the legislation. The Secretary would also be required to provide a study of
and development of a plan, that could be implemented by the Secretary in a demonstration, to test
additional ways to increase bundling of payments for physicians in connection with an episode of
care. The CBO score is $0.0 for FY 2010-FY2014 and $0.0 for FY2010-FY2019.
Sec. 1153. Home Health Payment Update for 2010. HHAs are paid under a PPS in which
payments are based on 60-day episodes of care for beneficiaries, subject to several adjustments,
with unlimited episodes of care in a year. The payment covers skilled nursing, therapy, medical
social services, aide visits, medical supplies, and others. Durable medical equipment is not
included in the home health PPS. The base payment amount, or national standardized 60-day
episode rate, is increased annually by an update factor that is determined, in part, by the projected
increase in the home health market basket (MB) index. This index measures changes in the costs
of goods and services purchased by HHAs. For CY 2010, the HH MB is expected to be 2.2%.
Starting in 2007, HHAs were required to submit to the Secretary health care quality data. A HHA
that does not submit the required quality data now receives an update of the MB minus two
percentage points. This reduction only applies to the fiscal year in question. The provision would
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eliminate the MB update for home health payments for 2010. Home health agencies would still be
subject to the requirement to submit required quality data in subsequent years. The CBO score is -
$2.8 billion for FY 2010-FY2014 and -$7.7 billion for FY2010-FY2019.
Sec. 1154. Payment Adjustments for Home Health Care. HHAs are paid under a PPS. Payment
is based on 60-day episodes of care for beneficiaries, subject to several adjustments, with
unlimited episodes of care in a year. In calendar year (CY) 2008, CMS made refinements to the
PPS that resulted in payment reductions established in 42 CFR §484.220 as described in the
Federal Register issued on August 29, 2007 (72 FR 49879). This regulation established changes
to the HHA case-mix index to account for the relative resource utilization of different patients.
These changes modified the coding or classification of different units of service that do not reflect
real changes in case-mix. As a result, the national prospective 60-day episode payment rate was
adjusted downward by 2.75% for CY2008; by 2.75% for each calendar year 2009 and 2010, and
by 2.71% for CY2011.
The provision would accelerate the case-mix adjustments described in 42 CFR § 484.220 by
implementing both the planned CY2011 adjustment of 2.71% and the planned CY2010 of 2.75%
at the same time in CY2010, for a total CY2010 downward adjustment of 5.46%. These
adjustment amounts would not be limited if more recent data were to indicate that a greater
adjustment would be appropriate. Starting in 2011, PPS amounts would be adjusted by a uniform
percentage determined appropriate by the Secretary and based on analysis of certain factors. After
2011, such amounts would be required to be equal to the amount paid for the previous year
updated by the HH MB. If the Secretary is not able to compute the changed prospective payment
amounts for 2011 on a timely basis, then the Secretary would be required to pay 95% of what the
prospective payment amount would have been had this provision not applied and to compare,
before July 1, 2011, amounts paid to amounts that would have been paid had the Secretary been
able to compute the adjustment on a timely basis. For 2012, the Secretary would be required to
decrease or increase the prospective payment amount (or at the Secretary’s discretion, over a
period of several years beginning with 2012), by the amount (if any) by which the amount applied
is greater or less, respectively, than the amount that should have been applied. The CBO score is -
$9.6 billion for FY 2010-FY2014 and -$34.2 billion for FY2010-FY2019.
Sec. 1155. Incorporating Productivity Improvements Into Market Basket Update For Home
Health Services. Home health agencies (HHAs) are paid under a prospective payment system
(PPS). The base payment amount, or national standardized 60-day episode rate, is increased
annually by an update factor that is determined, in part, by the projected increase in the home
health MB index. This index measures changes in the costs of goods and services purchased by
HHAs. HHAs are required to submit to the Secretary health care quality data. A HHA that does
not submit the required quality data will receive an update of the MB minus two percentage
points. The provision would make annual updates by the HH MB, beginning with 2010, subject to
a productivity adjustment as long as the annual update would not be less than zero. The
productivity adjustment would equal the 10-year moving average of changes in annual economy-
wide private non-farm business multi-factor productivity. The CBO score is -$2.1 billion for FY
2010-FY2014 and -$14.9 billion for FY2010-FY2019.
Sec. 1156. Limitation on Medicare Exception to the Prohibition on Certain Physician
Referrals for Hospitals. Physicians are generally prohibited from referring Medicare patients for
certain services to facilities in which they (or their immediate family members) have financial
interests. However, among other exceptions, physicians are not prohibited from referring patients
to whole hospitals in which they have ownership or investment interests. Providers that furnish
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substantially all of its designated health services to individuals residing in rural areas are exempt
as well.
Entities receiving Medicare payment for covered items and services are required to provide the
information on the entities’ ownership, investment, and compensation arrangements. This
information includes the covered items and services provided by the entity, and the names and
unique physician identification numbers of all physicians (or those whose immediate relatives)
who have an ownership or investment interest, or certain compensation arrangements.
Under this provision, only hospitals that met certain requirements would be exempt from the
prohibition on self-referral. Hospitals (including rural providers) that have physician ownership
and a provider agreement in operation on January 1, 2009 and that met other specified reporting
and public disclosure requirements would be exempt from this self-referral ban. The percentage
of the total ownership or investment held in the hospital (or in an entity whose assets include the
hospital) by physician owners or investors in the aggregate would not be able to exceed such
percentage as of the date of enactment. With certain exceptions, the number of operating rooms,
procedure rooms, or beds of the hospital would not be able to increase after the enactment date.
The hospital could not have converted from an ambulatory surgical center to a hospital after
enactment.
Information provided by hospitals would be published and periodically updated on the Internet
website of the Centers for Medicare and Medicaid Services (CMS). Any person who fails to meet
required reporting and disclosure requirements would be subject to a civil monetary penalty of
not more than $10,000 for each day for which reporting is required to have been made or for each
case in which disclosure is required to have been made.
Exempt hospitals would ensure bona fide ownership and investment by meeting certain
requirements. Generally, any ownership or investment interest offered to a physician could not be
offered on more favorable terms than those offered to a person who is not in a position to refer
patients or otherwise generate hospital business. Other restrictions would apply. To ensure patient
safety, those exempt hospitals that do not offer emergency services would have to have the
capacity to provide assessment and initial treatment for medical emergencies as well as the ability
refer and transfer the patient with the medical emergency to an appropriate hospitals. Hospitals
that do not have any physician available on the premises 24 hours per day, 7 days a week must
disclose such a fact to the patient before admitting the patient and receive a signed
acknowledgement from the patient. The Secretary would retain the ability to terminate a
hospital’s provider agreement if the hospital is not in compliance with Medicare’s conditions of
participation.
With certain exceptions, exempt hospitals would not be permitted to increase the number of
operating rooms, procedure rooms or beds after the date of enactment. A process would be
established to allow certain hospitals to expand. This capacity increase would be limited to
facilities on the main campus of the hospital and could not exceed 200% of the number of
operating rooms, procedure rooms and beds at the time of enactment. Any such increase would
only be permitted in facilities on the main campus of the hospital. The Secretary would be
required to promulgate regulations establishing the appeal process no later than the first day of
the month beginning 18 months after the date of enactment, The appeal process would be
implemented one month after the date of regulations are promulgated. The final decision
regarding an expansion request will be posted on the CMS website of no later than 120 days after
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a complete application is received. There shall be no administrative or judicial review of this
process.
The Secretary would be required to establish policies and procedures to ensure compliance with
these requirements. The enforcement efforts would be able to include unannounced site reviews
of hospitals. Starting in FY2010, $5 million would be appropriated in each fiscal year to carry out
this section. Appropriated funds would be available until expended. The CBO score is -$0.3
billion for FY2010-FY2014 and -$1.0 billion for FY2010-FY2019.
Sec. 1157. Institute of Medicine Study of Geographic Adjustment Factors Under Medicare.
Generally, Medicare’s payment systems include adjustment factors to account for the geographic
differences in the costs of providing health care services. For example, Medicare’s physician fee
schedule (which with modifications is used to reimburse other health care practitioners) uses the
geographic practice cost index (GPCI) for this purpose; Medicare’s IPPS uses a hospital wage
index to adjust payments for acute care hospitals. With modifications, the IPPS wage index is
used to calculate payments for inpatient rehabilitation hospitals, inpatient psychiatric hospitals,
long term care hospitals, skilled nursing facilities, and home health agencies.
Under this provision, the Secretary would enter into a contract with the Institutes of Medicine of
the National Academy of Sciences (IOM) to conduct an empirical study with appropriate
recommendations on the accuracy of the geographic adjustment factors established for
Medicare’s physician fee schedule and for Medicare’s IPPS The study would also examine the
effect of the adjustment factors on the level and distribution of the health workforce within the
United States as well as the effect of the adjustment factors on population health, quality of care,
and the ability of providers to furnish efficient, high value care. The IOM report would be
submitted to the Secretary and to Congress no later than one year from enactment. Necessary
funds would be authorized to be appropriated to carry out this study. The CBO score is $0.0
billion for FY2010-FY2014 and $0.0 billion for FY2010-FY2019.
Sec. 1158. Revision of Medicare Payment Systems to Address Geographic Inequities.
Generally, Medicare’s payment systems include adjustment factors to account for the geographic
differences in the costs of providing health care services. In the previous section, IOM was
required to conduct a study of the GPC used to adjust Medicare’s physician fee schedule and the
hospital wage index used in Medicare’s IPPS. With modifications, Medicare’s physician fee
schedule and the hospital wage index are used to reimburse other practitioners and providers.
Generally, the CMS promulgates changes to Medicare’s physician fee schedule and IPPS through
an annual rulemaking process where proposed changes and a notice of a public comment period
are published in Federal Register with the final rule establishing the payment polices and
responding to the public comments issued subsequently in the Federal Register. Medicare’s IPPS
and physician payments are on different payment years and therefore rulemaking schedules.
Generally the new IPPS payment rates are effective October 1st of each year and new physician
fee schedule is effective as of January 1st of each year.
Under this provision, the Secretary would be required to take into account the IOM
recommendations and include appropriate proposals to revise the respective geographic
adjustments in the physician fee schedule and IPPS proposed rules. The proposals would be
included in the next applicable rulemaking cycle after submission of the IOM report to the
Secretary. The Secretary would be able to change the geographic adjustments accordingly, but
could not reduce an adjustment below that which applied in the payment system in the prior
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payment year. These adjustments for services furnished before January 1, 2014 could not exceed
the amounts in the Medicare Improvement Fund as amended in this legislation. No more than half
of that $8 billion would be available in any one payment year. The CBO score is $8.0 billion for
FY2010-FY2014 and $8.0 billion for FY2010-FY2019.
Sec. 1161. Phase-in of Payment Based on Fee-for-Service Costs. Medicare Advantage (MA) is
an alternative way for Medicare beneficiaries to receive covered benefits. Under MA, private
health plans are paid a per-person amount to provide all Medicare-covered benefits (except
hospice) to beneficiaries who enroll in their plan. Payments to MA plans are determined by
comparing plan bids to a benchmark. Each bid represents the plan's estimated revenue
requirement for providing required Medicare services to an average Medicare beneficiary. The
benchmark is the maximum amount Medicare will pay a plan. If the plan bid is below the
benchmark, the plan payment is the bid plus 75% of the difference between the bid and the
benchmark. If the bid is above the benchmark, the plan payment is equal to the benchmark and
each plan enrollee must pay a premium equal to the difference between the bid and the
benchmark. MA benchmarks are based, in part, on historical Medicare private plan payment rates.
BBA 97 increased payments to private plans above rates of per capita FFS costs in some areas.
Subsequent legislation also increased payment rates to private plans. The historical payment rates
were used as the basis for the benchmark amounts. As a result, current MA benchmarks exceed
per capita FFS costs in some areas. This provision would phase-in MA benchmarks equal to per
capita FFS spending in each county starting in 2011. Starting 2013, MA benchmarks would be
equal to per capita FFS spending in each county. Benchmarks could not be less than per capita
FFS spending. The provision would not apply to Programs of All-Inclusive Care for the Elderly
(PACE). The CBO score is -$48.1 billion for FY2010-FY2014 and -$156.3 billion for FY2010-
FY2019.
Sec. 1162. Quality Bonus Payments. Though all MA organizations are required to have a quality
improvement program by January 1, 2010, payments to MA plans are not contingent on the
quality of care provided to plan enrollees. (A description of how plans are paid is included under
Section 1161 above.) Under this provision, starting in 2011, MA plans could receive an increase
in their benchmark if they were a qualifying plan in a qualifying county. The benchmark increases
would equal 2.6% in 2011, 5.3% in 2012 and 8.0% in subsequent years. A qualifying plan would
have had a quality ranking (based on the quality ranking system established by CMS in 2007) of
4 stars or higher during a specified previous year. A qualifying county would be one, for a year,
(a) that was within the lowest quarter of counties with respect to per capita spending in original
Medicare, and (b) within which, 50 percent of individuals were enrolled in MA and of the
residents enrolled, at least 50 percent were enrolled in a plan with a quality ranking of 4 stars or
higher. A plan could lose its quality bonus payment for non-compliance with MA rules. The CBO
score is $2.9 billion for FY2010-FY2014 and $9.6 billion for FY2010-FY2019.
Sec. 1163. Extension of Secretarial Coding Intensity Adjustment Authority. Medicare
payments to MA plans are risk-adjusted to account for the variation in the cost of providing care.
DRA required the Secretary to adjust for patterns of diagnosis coding differences between MA
plans and providers under parts A and B of Medicare for plan payments in 2008, 2009, and 2010,
to the extent that the Secretary identified such differences. The Secretary did not make
adjustments in 2008 and 2009, due to ongoing analyses, but is to adjust rates in 2010. The
provision would extend the requirement that MA plan payments be adjusted for differences in
coding patterns beyond 2010. The provision would require the Secretary to conduct analyses of
coding differences periodically and incorporate the findings on a timely basis. The CBO score is -
$2.9 billion for FY2010-FY2014 and -$15.5 billion for FY2010-FY2019.
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Sec. 1164. Simplification of Annual Beneficiary Election Periods. Medicare beneficiaries may
enroll in or change their enrollment in MA from November 15 to December 31 each year (the
annual, coordinated election period). Changes go into effect January 1st of the next year. During
the first three months of the year, beneficiaries can enroll in an MA plan, and individuals enrolled
in an MA plan can either switch to a different MA plan or return to original Medicare. This period
is known as the continuous open enrollment and disenrollment period. The provision would move
the annual, coordinated election period to 15 days earlier in the year -- November 1st to December
15th, rather than from November 15th to December 30th. The provision would eliminate the
continuous open enrollment and disenrollment period (during the first three months of the year.)
The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY2019.
Sec. 1165. Extension of Reasonable Cost Contracts. Reasonable cost plans are MA plans that
are reimbursed by Medicare for the actual cost of providing services to enrollees. Cost plans were
created in the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA, P.L. 97-248). BBA 97
included a provision to phase-out the reasonable cost contracts, however, the phase-out has been
delayed over the years through congressional action. These plans are allowed to operate
indefinitely, unless two other plans of the same type (i.e., either 2 local or 2 regional plans)
offered by different organizations operate for the entire year in the cost contract’s service area.
After January 1, 2010, the Secretary may not extend or renew a reasonable cost contract for a
service area if (1) during the entire previous year there were either two or more MA regional
plans or two or more MA local plans in the service area offered by different MA organizations;
and (2) these regional or local plans meet minimum enrollment requirements. This provision
would extend for two years—from January 1, 2010, to January 1, 2012—the length of time
reasonable cost plans could continue operating regardless of any other MA plans serving the area.
The provision would modify the minimum enrollment requirement used as one of the criteria the
Secretary considers when determining whether to renew or extend a reasonable cost plan. The
enrollment criteria would apply to the portion of the MA regional or local plan’s service area for
the year that it was within the service area of the reasonable cost contract (and not the total
service area of the MA regional or local plan). The CBO score is $0.0 billion for FY2010-FY2014
and $0.0 billion for FY2010-FY2019.
Sec. 1166. Limitation of Waiver Authority for Employer Group Plans. The Secretary has the
authority to waive or modify requirements that hinder the design of, the offering of, or the
enrollment in employer or union sponsored MA plans. Such plans can be offered either under
contracts between the union or employer group and a MA organization, or directly by the
employer or union group. For employers or unions that sponsor an MA plan directly (and not
through a contract with a private MA organization), the Secretary would only have authority to
waive or modify MA requirements for the plan if 90% of eligible individuals enrolled in the plan
live in a county in which the MA organization offers an MA local plan. This provision would
apply to plan years on or after January 1, 2011, and would not apply to plans in effect as of
December 31, 2010. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for
FY2010-FY2019.
Sec. 1167. Improving Risk Adjustment for MA Payments. In general, Medicare payments to
MA plans are risk adjusted to account for the variation in the cost of providing care. Risk
adjustment is designed to compensate plans for the increased cost of treating older and sicker
beneficiaries, and thus discourage plans from preferential enrollment of healthier individuals. The
Medicare risk adjustment models take into account the variation in expected medical expenditures
associated with demographic characteristics (age, sex, current Medicaid eligibility, original
Medicare eligibility due to a disability), as well as medical diagnoses, and differences in coding
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practices between MA and providers under Medicare Part A and B. The provision would require
the Secretary to evaluate and report on the adequacy of MA risk adjustments at predicting costs
for beneficiaries with chronic or co-morbid conditions, beneficiaries dually-eligible for Medicare
and Medicaid, and non-Medicaid eligible low-income beneficiaries. The report would also
address the need and feasibility of including further gradations of diseases or conditions and
multiple years of beneficiary data. Taking this report into account, not later than January 1, 2012,
the Secretary would be required to implement necessary improvements to the MA risk adjustment
system. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY2019.
Sec. 1168. Elimination of the MA Regional Plan Stabilization Fund. MMA created the MA
Regional Program and established the MA Regional Plan Stabilization Fund to encourage plans to
enter into and/or remain in the MA Regional Program. The fund was originally set at $10 billion
with additional money added to the fund from savings in the bidding process. Funds were to be
available from 2007 through the end of 2013. Subsequent legislation decreased the amount of
funds available and delayed their availability. Most recently, MIPPA reduced the initial funding of
the program to one dollar. Money from the regional plan bidding process continues to flow into
the Fund, but availability is delayed until 2014. The provision would eliminate the Fund and
transfer amounts in the Fund to the Part B Trust Fund. The CBO score is -$0.2 billion for
FY2010-FY2014 and -$0.2 billion for FY2010-FY2019.
Sec. 1169. Study Regarding the Effects of Calculating Medicare Advantage Payment Rates
on a Regional Average of Medicare Fee for Service Rates. [Committee on Energy and
Commerce Amendment] The provision would require the CMS to conduct a study to determine
the potential effects of calculating MA rates on a more aggregated geographic basis, rather than
using county boundaries. The study would consider whether the alternatives would result in (a)
improvements in quality of care, (b) greater equity among providers, and (c) more predictable
benchmark amounts. CMS would be required to consult with certain experts and stakeholders.
CMS would be required to submit a report to Congress, including recommendations, no later than
one year after the date of enactment. This provision was not included in the draft of the legislation
that CBO scored in its July 17, 2009 letter to the Congress.
Sec. 1171. Limitation on Cost-Sharing for Individual Health Services. Each MA plan must
provide all required Part A and B Medicare benefits (other than hospice) to individuals entitled to
Medicare Part A and enrolled in Part B. Beginning January 2011, MA plans would be prohibited
from offering benefits with cost sharing requirements that are greater than the cost sharing
requirements imposed under the traditional Medicare program. This provision would also prohibit
plans from imposing cost-sharing for dual-eligible individuals or qualified Medicare beneficiaries
that exceeds the cost-sharing amounts permitted under the Medicare and Medicaid statutes. The
CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY2019.
Sec. 1172. Continuous Open Enrollment for Enrollees in Plans with Enrollment Suspension.
Special Election Periods (SEPs) allow beneficiaries the option to discontinue or change their
enrollment in a MA plan outside of the annual coordinated election period. The circumstances in
which an enrollee can exercise this option include (1) an MA plan terminates its participation in
the MA program or in a specific area, (2) an individual’s place of residence changes, (3) the MA
plan violates a provision of its contract or misrepresents the plan’s provisions in marketing the
plan, or (4) other exceptional conditions as provided by the Secretary. This provision would
expand the categories of beneficiaries eligible to participate in a SEP to include beneficiaries
enrolled in private plans that have been suspended for not meeting the terms of their contract. The
CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY2019.
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Sec. 1173. Information for Beneficiaries on MA Plan Administrative Costs. This provision
would require the publication of administrative cost information, including the medical loss ratio
(MLR), for MA plans. The Secretary would be required to develop and implement standardized
elements and definitions for reporting the data necessary to calculate a MLR. Plans that fail to
meet a minimum MLR would be subject to sanctions. Beginning in 2014, if the Secretary
determines that a MA plan failed to have a MLR of at least 0.85, the Secretary would be required
to mandate that the MA plan provide enrollees with a rebate of their Part C premiums (or Part B
or D, if applicable) by the amount necessary to meet the 0.85 requirement. The Secretary would
also be required to restrict enrollment in the MA plan for 3 consecutive years and terminate the
plan’s contract if the plan failed to meet the MLR requirements for 5 consecutive years. The CBO
score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY2019.
Sec. 1174. Strengthening Audit Authority. The Secretary is required to provide for the annual
auditing of the financial records of at least 1/3 of MA plans. Beginning January 2011, each
contract with a MA plan would be required to include a provision that the Secretary have the
authority to take necessary action, including the pursuit of financial recoveries, to address
deficiencies identified during an annual audit. The provision would apply to Part D Prescription
Drug Plans (PDPs) in the same manner as certain other MA contract provisions apply to PDP
plans. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY2019.
Sec. 1175. Authority to Deny Plan Bids. By the first Monday in June, each local MA plan must
submit to the Secretary an aggregate monthly bid amount (which includes separate bids for
required services, any offered supplemental benefits, and any offered drug benefits) for each MA
plan it intends to offer in the upcoming calendar year. The Secretary has the authority to evaluate
and negotiate the plan’s bid amounts and its proposed benefit packages. Beginning January 2011,
the Secretary would not be required to accept any or every bid submitted by a MA or PDP plan.
The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY2019.
Sec. 1176. Limitation on Enrollment Outside Open Enrollment Period of Individuals into
Chronic Care Specialized MA Plans for Special Need Individuals. MMA established a new
type of Medicare Advantage (MA) coordinated care plan focused on individuals with special
needs. Special needs plans (SNPs) are allowed to target enrollment to one or more types of
special needs individuals including 1) institutionalized; 2) dually eligible; and/or 3) individuals
with severe or disabling chronic conditions. Subsequent legislation has extended the effective
date of SNPs (which was set to expire December 31, 2008). MMSEA authorized the SNP
program through December 31, 2009, but also established a limited moratorium on the creation of
SNPs after January 1, 2008 (existing plans could continue to enroll qualified individuals). More
recently, MIPPA, among other changes, authorized the SNP program and extended the
moratorium on designation of new SNPs until January 1, 2011.
The number of SNPs has increased dramatically since 2004, the first year of operation. In 2004,
CMS approved 11 SNPs, but by January 2008, CMS had approved 787 SNPs, including 442 dual-
eligible SNPs, 256 chronic care SNPs, and 89 institutional SNPs. In September 2008, there were
1.2 million beneficiaries in SNPs. Medicare beneficiaries may enroll in or change their
enrollment in Medicare Advantage from November 15th to December 31st each year. Changes go
into effect January 1st of the next year. This provision would require that beginning on January 1,
2011, SNPs serving beneficiaries with severe or disabling conditions could only enroll eligible
individuals during an annual, coordinated open enrollment period or at the time of diagnosis of
the disease or condition that would qualify an individual for a chronic care SNP. The CBO score
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for Sections 1176 and 1177 is +$0.2 billion for FY2010-FY2014 and $0.1 billion for FY2010-
FY2019.
Sec. 1177. Extension of Authority of Special Needs Plans to Restrict Enrollment. Prior to
January 1, 2011, SNPs may restrict enrollment to those who are in one or more classes of special
needs individuals. Starting January 1, 2010, new SNP enrollment must be limited exclusively to
individuals that meet the criteria for which the SNP is designated: dual eligible, chronic care, and
institutional care. Further, MIPPA required that dual eligible SNPs contract with state Medicaid
agencies to provide medical assistance services (Medicaid), which may include long-term care
services. If SNPs do not have contracts with Medicaid agencies by January 1, 2010, then they can
continue to operate, but are prohibited from expanding their service areas. However, state
Medicaid agencies are not required to enter into contracts with SNPs.
This provision would extend the time period, from January 1, 2011 to January 1, 2013, during
which SNPs may restrict current enrollment to individuals who meet the definition of the
respective SNP. In addition, selected SNPs that had contracts with states that had a state program
to operate an integrated Medicaid-Medicare program that was approved by CMS as of January 1,
2004, would be allowed to restrict enrollment to beneficiaries who meet the definition of special
needs individuals through January 1, 2016.
The Secretary would be required to provide an analysis of the SNPs that were approved by CMS
as of January 1, 2004. The analysis of these grandfathered SNPs would include the impact of such
plans on cost, quality of care, patient satisfaction, and other subjects as specified by the Secretary.
By December 31, 2011, the Secretary would be required to submit a report to Congress including
recommendations on how the appropriate treatment of these plans. The CBO score for Sections
1176 and 1177 is +$0.2 billion for FY2010-FY2014 and $0.1 billion for FY2010-FY2019.
Sec. 1181. Elimination of Coverage Gap. Medicare law sets out a defined standard benefit
structure under the Part D prescription drug benefit that includes a gap in coverage (the doughnut
hole) during which enrollees, who are not eligible for the low-income subsidy, are responsible for
paying 100% of the cost of their drugs. Prior to the implementation of the Medicare Part D
outpatient prescription drug benefit in 2006, Medicaid was the primary payer for drugs for dual-
eligible beneficiaries. Drug manufacturers who wish to have their drugs available for Medicaid
enrollees must provide state Medicaid programs with rebates on drugs paid on behalf of Medicaid
beneficiaries. This provision would gradually phase out the coverage gap until it is completely
eliminated in 2022. Drug manufacturers would be required to provide the Secretary rebates for
drugs dispensed to full-benefit dual eligible Part D plan enrollees, and the funds would be used to
pay for all or part of the elimination of the coverage gap. The CBO score (with interaction with
Section 1182) is –$22.1 billion for FY 2010-FY2014 and -$29.7 billion for FY2010-FY 2019. In a
separate analysis,23 CBO also estimates that beneficiary premiums would increase faster than
they would under current law; however, on average, the reduction in beneficiary cost sharing
would outweigh the increase in premiums.
23 Letter to the Honorable Dave Camp, Ranking Member, Committee on Ways and Means, from Douglas W.
Elmendorf, Director, Congressional Budget Office, August 28, 2009, http://www.cbo.gov/ftpdocs/105xx/doc10543/08-
28-MedicarePartD.pdf.
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Sec. 1182. Discounts for Certain Part D Drugs in Original Coverage Gap. This provision
incorporates a voluntary PhRMA agreement to provide discounts of 50% for brand-name drugs
used by Part D enrollees in the Part D coverage gap. Manufacturers of prescription drugs would
enter into agreements with Medicare Part D drug plan sponsors to provide discounts on drugs
provided to plan enrollees in the coverage gap period. The amount of the discount, in addition to
the amount actually paid by the enrollee, would count toward costs incurred by the plan enrollee.
Plan enrollees receiving the low income subsidy would not be eligible for the discount. This
provision would be applicable to drugs dispensed after December 31, 2010. The CBO score (with
interaction with Section 1182) is –$22.1 billion for FY 2010-FY2014 and -$29.7 billion for
FY2010-FY 2019.
Sec. 1183. Repeal of Provision Relating To Submission Of Claims By Pharmacies Located In
Or Contracting With Long-Term Care Facilities. Section 172 of MIPPA provided for a new set
of requirements for contracts between Part D drug plan sponsors and pharmacies located in or
contracting with long-term care facilities for plan years beginning on or after January 1, 2010.
Each contract entered into with a PDP sponsor or MA-PD plan is required to provide that a
pharmacy located in or having a contract with a long-term care facility would have between 30
and 90 days to submit claims for reimbursement. H.R. 3200 would repeal Section 172 of MIPPA
and eliminate these deadlines for long-term care pharmacists to file Part D claims to allow more
time for coordination with state Medicaid programs. The CBO score is $0.0 billion for FY2010-
FY2014 and $0.0 billion for FY2010-FY2019.
Sec. 1184. Including Costs Incurred By AIDS Drug Assistance Programs And Indian Health
Service In Providing Prescription Drugs Toward The Annual Out Of Pocket Threshold
Under Part D. Under a standard Medicare Part D plan design, beneficiaries must incur a certain
level of out-of-pocket costs ($4,350 in 2009) before catastrophic protection begins. These include
costs that are incurred for the deductible, cost-sharing, or benefits not paid because they fall in the
coverage gap. Costs are counted as incurred, and thus treated as true out-of-pocket (TrOOP) costs
only if they are paid by the individual (or by another family member on behalf of the individual),
paid on behalf of a low-income individual under the subsidy provisions, or paid under a State
Pharmaceutical Assistance Program. Additional payments that do not count toward TrOOP
include Part D premiums and coverage by other insurance, including group health plans, workers'
compensation, Part D plans' supplemental or enhanced benefits, or other third parties. This
provision would allow costs paid by the Indian Health Service or under an AIDS Drug Assistance
Program to count toward the out-of-pocket threshold for costs incurred on or after January 1,
2011. The CBO score is +$0.3 billion for FY 2010-FY2014 and+$0.8 billion for FY2010-FY
2019.
Sec. 1185. Permitting Mid-Year Changes In Enrollment For Formulary Changes That
Adversely Impact An Enrollee. Part D plans are permitted to operate formularies—lists of drugs
that a plan chooses to cover and the terms under which they are covered. By law, Part D plans
may not change the therapeutic categories and classes in a formulary other than at the beginning
of each plan year except as the Secretary may permit to take into account new therapeutic uses
and newly approved covered part D drugs. If a plan removes a covered part D drug from a
formulary or makes any change in the preferred or tiered cost-sharing status of a drug, appropriate
notice must be provided to the Secretary, affected enrollees, physicians, pharmacies, and
pharmacists. This provision would establish a special enrollment period that would enable Part D
enrollees to change plans outside of the open enrollment period if their plan makes changes to its
formulary that increases cost-sharing or otherwise reduces coverage. The provision would apply
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to contract years beginning on or after January 1, 2011. The CBO score is $0.0 billion for
FY2010-FY2014 and $0.0 billion for FY2010-FY2019.
Sec. 1186. Negotiation of Lower Covered Part D Drug Prices on Behalf of Medicare
Beneficiaries. [Energy and Commerce Amendment] Part D plan sponsors (or the pharmacy
benefit managers they have contracted with) negotiate prices with drug manufacturers,
wholesalers, and pharmacies and are required to provide enrollees with access to these negotiated
prices for covered Part D drugs. The law specifically states that the Secretary may not interfere
with the negotiations between drug manufacturers and pharmacies and PDP sponsors. Further, the
Secretary may not require a particular formulary or institute a price structure for the
reimbursement of covered Part D drugs. This is known as the “non-interference provision” (SSA
§ 1860D-11(i)). Section 1186 would strike SSA § 1860D-11(i), and in its place, add language that
would require the Secretary to negotiate prescription drug prices (including discounts, rebates and
other price concessions) that may be charged to PDP sponsors and MA organizations, but would
still allow prescription drug plans to obtain discounts or price reductions below those negotiated
by the Secretary. The provision would also maintain the prohibition against the establishment of a
formulary by the Secretary; however, there would no longer be an explicit prohibition of the
institution of a price structure. The provision would take effect on the date of enactment and
would first apply to negotiations and prices for plan years beginning on January 1, 2011. This
provision was not included in the draft of the legislation that CBO scored in its July 17, 2009
letter to Congress. However, CBO scored similar legislation in the 110th (H.R. 4) and concluded
that it would have a negligible effect on federal spending.24
Sec. 1187 State Certification Prior to Waiver of Licensure Requirements Under Medicare
Prescription Drug Program. [Energy and Commerce Amendment] Medicare Part D
participants must obtain coverage through a Part D sponsor—a private insurer or other entity that
has contracted with Medicare to provide prescription drug benefits. According to Section 1860D-
12 of the SSA, a sponsor of a prescription drug plan is required to be organized and licensed
under state law as a risk-bearing entity eligible to offer health insurance or health benefits
coverage in each state it offers a prescription drug plan. Under certain circumstances, a sponsor
may apply to CMS for a waiver of this requirement. The National Association of Insurance
Commissioners (NAIC) has noted instances in which PDP sponsors have been granted waivers
from state licensure requirements but did not have fully completed applications for licensure
pending at the time the waiver had been granted.
The provision would amend Section 1860D-12 of the SSA to require that CMS may only grant a
waiver of licensure for a particular state if it has received a certification from the State Insurance
Commissioner that the prescription drug plan has a substantially complete application pending in
that state. Additionally, the waiver could be revoked if the State Insurance Commissioner submits
a certification to CMS that the sponsor committed fraud with respect to the waiver, did not make
a good faith effort to satisfy state licensing requirements, or was determined by the state to be
ineligible for licensure. The requirements would be effective for plan years beginning January 1,
2010. This provision was not included in the draft of the legislation that CBO scored in its July
17, 2009 letter to the Congress.
24 Letter to the Honorable John D. Dingell, from Donald B. Marron, Acting Director, Congressional Budget Office,
January 10, 2007, http://www.cbo.gov/ftpdocs/77xx/doc7722/hr4.pdf .
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Sec. 1191. Telehealth Expansion and Enhancements. Medicare covers certain services
including professional consultations, office and other outpatient visits, individual psychotherapy,
pharmacological management, psychiatric diagnostic interview examinations, neurobehavioral
status exams, and end stage renal disease related services delivered via an eligible
telecommunications system. An interactive telecommunications system is required as a condition
of payment. The originating site (the location of the beneficiary receiving the telehealth service)
can be a physician or practitioner’s office, a critical access hospital, a rural health clinic, a
federally qualified health center, a hospital-based renal dialysis center, a skilled nursing facility, a
community mental health center or a hospital. The originating site must be in a rural health
professional shortage area or in a county that is not in a metropolitan statistical area or at an entity
that participates in a specified federal telemedicine demonstration project.
Under this provision, a renal dialysis facility would be included as a covered originating site for
telehealth services effective for services starting January 1, 2011. The Secretary would appoint a
Telehealth Advisory Committee to make policy recommendations regarding telehealth services
including the appropriate addition or deletion of covered services and procedure codes for
authorized payments. In making determinations with respect to covered services, the Secretary
would be required to take into account the recommendations of the Committee. If the Secretary
does not implement a recommendation, the Secretary would publish a statement providing the
reason for such decision in the Federal Register. The CBO score is $0.0 billion for FY2010-
FY2014 and $0.0 billion for FY2010-FY2019.
Sec. 1192. Extension of Outpatient Hold Harmless Provision. Small rural hospitals (with no
more than 100 beds) that are not sole community hospitals (SCHs) can receive additional
Medicare payments if their outpatient payments under the prospective payment system are less
than under the prior reimbursement system. For calendar year (CY) 2006, these hospitals received
95% of the difference between payments under the prospective payment system and those that
would have been made under the prior reimbursement system. The hospitals received 90% of the
difference in CY2007 and 85% of the difference in CY2008. The payment is set at 85% for
CY2009. Sole community hospitals with not more than 100 beds receive 85% of the payment
difference for covered HOPD services furnished on or after January 1, 2009, and before January
1, 2010. Under this provision, small rural hospitals and sole community hospitals with not more
than 100 beds would receive 85% of the payment difference for covered HOPD services
furnished until January 1, 2012. The CBO score is +$0.4 billion for FY2010-FY2014 and +$0.4
billion for FY2010-FY2019.
Sec. 1193. Extension of Section 508 Hospital Reclassifications. Section 508 of MMA provided
$900 million for a one-time, 3-year geographic reclassification of certain hospitals that were
otherwise unable to qualify for administrative reclassification to areas with higher wage index
values. These reclassifications were extended from March 31, 2006 to September 30, 2007 by the
Tax Relief and Health Care Act of 2006 (P.L. 109-432). MMSEA extended the reclassifications to
September 30, 2008. MIPPA extended the reclassifications until September 30, 2009. These
extensions are exempt from any budget neutrality requirements. Under this provision, Section 508
reclassifications would be extended until September 30, 2011. The CBO score is +$0.5 billion for
FY2010-FY2014 and +$0.5 billion for FY2010-FY2019.
Sec. 1194. Extension of Geographic Floor for Work. The Medicare fee schedule is adjusted
geographically for three factors to reflect differences in the cost of resources needed to produce
physician services: physician work, practice expense, and medical malpractice insurance. The
geographic adjustments are indices that reflect how each area compares to the national average in
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a “market basket” of goods. A geographic practice cost index (GPCI) with a value of 1.00
represents an average across all areas. A series of bills set a temporary floor value of 1.00 on the
physician work index beginning January 2004; most recently, Section 134 of the MIPPA extended
the application of this floor when calculating Medicare physician reimbursement through
December, 2009. The other geographic indices (for practice expense and medical malpractice)
were not modified by these Acts. The proposal would extend the 1.00 floor for the geographic
index for physician work for an additional 3 years through December, 2012. CBO estimates that
this provision would increase outlays by $1.3 billion with all the outlays occurring in the next
three years (2010-2012).
Sec. 1195. Extension of Payment for Technical Component of Certain Physician Pathology
Services. Legislation enacted in 1997 specified that independent labs that had agreements with
hospitals on July 22, 1999 to bill directly for the technical component of pathology services could
continue to do so in 2001 and 2002. The provision has been periodically extended, most recently
through December 31, 2009 by MIPPA. This provision would extend this payment through 2011.
CBO estimates that this would increase outlays by roughly $100 million in each of the next two
years (2010 and 2011).
Sec. 1196. Extension of Ambulance Add-Ons. Ground ambulance services are paid on the basis
of a phased in national fee schedule. In 2010 and subsequently, the payments in all areas will be
based on the national fee schedule amount. The fee schedule payment for an ambulance service
equals a base rate for the level of service plus payment for mileage. Geographic adjustments are
made to a portion of the base rate. For the period July 2004 to December 2009, mileage payments
are increased for ground ambulance services originating in rural low population density areas. For
the period July 1, 2004 until December 31, 2008, there is a 25% bonus on the mileage rate for
trips of 51 miles and more. Payments for ground transports originating in rural areas or rural
census tracts are increased by 3% for the period of October 1, 2008 through December 31, 2009.
MIPPA specifies that any area designated as rural for the purposes of making payments for air
ambulance services on December 31, 2006, will be treated as rural for the purpose of making air
ambulance payments during the period July 1, 2008 until December 31, 2009.
The provision would maintain the 3% higher payments for ground transports originating in rural
areas or rural census tracts until December 31, 2012. The MIPPA provision maintaining the
designation of certain areas as rural for the purposes of Medicare’s payments for air ambulance
services would be maintained until December 31, 2011. The CBO score is +$0.1 billion for
FY2010-FY2014 and +$0.1 billion for FY2010-FY2019.
Sec. 1197. Ensuring Proportional Representation of Interests in Rural Areas on MedPAC.
[Energy and Commerce Amendment] BBA 97 established MedPAC to advise Congress on issues
impacting the Medicare program. The Commission is composed of 17 members appointed for
three-year terms by GAO. A mix of health care providers, health researchers, insurance
organization officials, employers, representatives from prescription drug benefit programs, and
consumers, among others are represented on MedPAC. This provision would establish that the
proportion of MedPAC commissioners who would represent the interests of health care providers
and beneficiaries located in rural areas would be no less than the proportion of total number of
Medicare beneficiaries who live in rural areas. This provision would apply to appointments to
MedPAC made after enactment. This provision was not included in the draft of the legislation that
CBO scored in its July 17, 2009 letter to the Congress.
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Sec. 1201. Improving Assets Tests for Medicare Savings Program and Low-income Subsidy
Program. Federal assistance is provided to certain low-income persons to help them meet
Medicare Part D premium and cost-sharing charges. To qualify for the Part D low-income
subsidy, Medicare beneficiaries must have resources no greater than the income and resource
limits established by MMA. In general, beneficiaries may qualify for a subsidy if they have an
annual income below 150% of the FPL and if their resources do not exceed a certain limit (in
2009, $12,510 for individuals or $25,010 if married). Under this provision, the asset test used to
determine eligibility for the low income subsidy and Medicare Savings programs would be
increased. In 2012, the level would be $17,000 for an individual and $34,000 for a couple and
would be indexed annually by the CPI. The CBO score (the combined score for Sections 1201-
1207) is +$3.3 billion for FY2010-2014 and +$11.9 billion for FY2010-2019.
Sec. 1202. Elimination of Part D Cost-sharing for Certain Non-institutionalized Full-benefit
Dual Eligible Individuals. Cost-sharing subsides for LIS enrollees are linked to the standard Part
D prescription drug coverage. Full-subsidy eligibles have no deductible, minimal cost sharing
during the initial coverage period and coverage gap, and no cost-sharing over the catastrophic
threshold. Full-benefit dual eligibles who are residents of medical institutions or nursing facilities
have no cost-sharing. This provision would eliminate cost sharing for people receiving care under
a home and community based waiver who would otherwise require institutional care in a facility
for the mentally retarded for drugs dispensed on or after January 1, 2011. The CBO score (the
combined score for Sections 1201-1207) is +$3.3 billion for FY2010-2014 and +$11.9 billion for
FY2010-2019.
Sec. 1203. Eliminating Barriers to Enrollment. Under the Medicare Part D low-income subsidy
program, dual eligibles, those receiving assistance through Medicare Savings Programs, and
recipients of SSI are deemed subsidy-eligible individuals for up to one year; other persons, or
their personal representatives, have to apply for assistance either at state Medicaid offices or
Social Security offices. Applicants are required to provide information from financial institutions
as requested to support information in the application, and to certify as to the accuracy of the
information provided. Under this provision, individuals applying for the low-income subsidy
under the prescription drug program would be permitted to qualify on the basis of self-
certification of income and resources beginning January 1, 2010. The CBO score (the combined
score for Sections 1201-1207) is +$3.3 billion for FY2010-2014 and +$11.9 billion for FY2010-
2019.
Sec. 1204. Enhanced Oversight Relating to Reimbursements for Retroactive Low Income
Subsidy Enrollment. Individuals who qualify for Medicaid, a Medicare Savings Program, or SSI
are automatically deemed eligible for the low-income subsidy, while other individuals with
limited income and resources may apply for the low-income subsidy and have their eligibility
determined by either the SSA or their state Medicaid agency. As eligibility is effective the month
the application was submitted, LIS status is often applied retroactively. If a beneficiary is already
enrolled in a Part D plan, the Part D sponsor must take steps to ensure that the beneficiary has
been reimbursed for any premiums or cost-sharing the member had paid that should have been
covered by the subsidy. This provision would enhance oversight to make sure that low-income
beneficiaries who are owed retroactive reimbursement payments from their drug plans receive
them. The reimbursement would be made automatically by the Part D sponsor upon appropriate
notice that the beneficiary is eligible for assistance and no further information would need to be
submitted to the plan by the beneficiary. The CBO score (the combined score for Sections 1201-
1207) is +$3.3 billion for FY2010-2014 and +$11.9 billion for FY2010-2019.
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Sec. 1205. Intelligent Assignment in Enrollment. Generally, there is a two-step process for low-
income persons to gain Part D coverage. First, a determination must be made that they qualify for
the assistance; second, they must enroll, or be enrolled, in a specific Part D plan. Full-benefit
dual-eligible individuals who have not elected a Part D plan are auto-enrolled into one by CMS
using a random assignment process. Because of the random nature of the process, some dual
eligibles may be enrolled in plans that may not best meet their needs; for example, necessary
drugs may not be covered by the new plan. Under this provision, for contract years beginning
with 2012, the Secretary would be given the option to use an “intelligent assignment” process as
an alternative to the random assignment process which would take into account the quality, cost,
and formularies of plans. The CBO score (the combined score for Sections 1201-1207) is +$3.3
billion for FY2010-2014 and +$11.9 billion for FY2010-2019.
Sec. 1206. Special Enrollment Period and Automatic Enrollment Process for Certain
Subsidy Eligible Individuals. In general, a Medicare beneficiary who does not enroll in Part D
during his or her initial enrollment period may enroll only during the annual open enrollment
period, which occurs from November 15 to December 31 each year. Beneficiaries already
enrolled in a Part D plan may change their plans during the annual open enrollment period. There
are a few additional, limited occasions when an individual may enroll in or disenroll from a Part
D plan or switch from one Part D plan to another, called special enrollment periods. The
provision would establish a new special enrollment period for persons deemed to be low-income
subsidy eligible individuals for subsidy determination made for months beginning with January
2011. HHS would be given the authority to enroll subsidy-eligible beneficiaries into plans using a
process that accounts for the quality, cost and/or formulary of plans, while also giving
beneficiaries the option of choosing another plan. The CBO score (the combined score for
Sections 1201-1207) is +$3.3 billion for FY2010-2014 and +$11.9 billion for FY2010-2019.
Sec. 1207. Application of MA Premiums Prior to Rebate in Calculation of Low Income
Subsidy Benchmark. The federal government pays up to 100% of the Part D premiums for LIS
beneficiaries who are enrolled in “benchmark” plans. A Part D plan qualifies as a benchmark plan
if it offers basic Part D coverage with premiums equal to or lower than the regional low-income
premium subsidy amount. MA plans offering prescription drug coverage submit a separate bid for
the Part D portion. Payment for the portion of the premium attributable to basic prescription drug
benefits is calculated in the same way as that for stand-alone PDPs, however the MA plan may
choose to apply some of its Part C rebate payments to lower the Part D premium. MedPAC has
noted that the number of plans that qualify as low-income benchmark plans has been decreasing
in recent years, resulting in fewer options for LIS enrollees. For the 2009 plan year,
approximately 2.3 million LIS enrollees were affected by the decrease in the number of
qualifying plans and needed to enroll, or be enrolled, in new plans. This provision would exclude
the Medicare Advantage rebate amounts from the MA-PDP premium bids when calculating the
low-income regional benchmark for subsidy determinations made for months beginning with
January 2011. The CBO score (the combined score for Sections 1201-1207) is +$3.3 billion for
FY2010-2014 and +$11.9 billion for FY2010-2019.25
Sec. 1231. Extension Of Therapy Caps Exceptions Process. Current law places two annual per
beneficiary payment limits for all outpatient therapy services provided by non-hospital providers.
For 2009, the annual limit on the allowed amount for outpatient physical therapy and speech-
25 Sections 1221, 1222, 1223, and 1224 in Subtitle B: Reducing Health Disparities are discussed in CRS Report
R40745, Public Health, Workforce, Quality, and Other Provisions in H.R. 3200, coordinated by C. Stephen Redhead.
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language pathology combined is $1,840, and there is a separate limit for occupational therapy of
$1,840. The Secretary was required to implement an exceptions process for 2006, 2007, and the
first half of 2008 for cases in which the provision of additional therapy services was determined
to be medically necessary. Section 141 of MIPPA extended the exceptions process for therapy
caps through December 31, 2009. The provision would extend the exceptions process for therapy
caps for 2 years, through December 31, 2011. CBO estimates that this provision would increase
outlays by $1.8 billion.
Sec. 1232. Extended Months of Coverage of Immunosuppressive Drugs for Kidney
Transplant Patients and Other Renal Dialysis Provisions. Medicare coverage for beneficiaries
with end-stage renal disease (ESRD) generally begins in the fourth month of dialysis treatments
or the month of a kidney transplant. After receiving a kidney transplant, individuals are prescribed
immunosuppressive drugs to reduce the risk of their immune system rejecting the new organ. If a
beneficiary already had Medicare because of age or disability before the onset of end-stage renal
disease, or if an individual became eligible for Medicare because of age or disability after
receiving a transplant paid for by Medicare, Medicare will continue to pay for
immunosuppressive drugs with no time limit. However, if a beneficiary qualifies for Medicare
only because of kidney failure, Medicare, together with coverage of the immunosuppressive
drugs, ends 36 months after the month of the successful transplant.
This provision would eliminate the current 36-month limitation on Medicare coverage of
immunosuppressive drugs for kidney transplant patients who would otherwise lose this coverage
on or after January 1, 2012. It would also make technical changes to the Medicare ESRD bundled
payment system. The CBO score is +$0.1 billion for FY 2010-2014 and +$0.4 billion for FY
2010-2019.26
Sec. 1234. Part B Special Enrollment Period and Waiver of Limited Enrollment Penalty for
Tricare Beneficiaries. Starting in 2001, military retirees and their eligible dependents become
eligible for Tricare for Life at the same time they become eligible for Medicare. Tricare for Life
essentially functions as a Medicare supplement and provides coverage for authorized services not
covered by Medicare. Enrollment in Medicare Part B is required for access to Tricare for Life.
Prior to the legislation creating Tricare for Life, many retirees had not enrolled in Part B,
believing that they would always have access to military medical facilities. With the
establishment of Tricare for Life and the concomitant need to enroll in Medicare Part B, there was
concern over the potential imposition of significant penalties for late enrollment in Part B.
Subsequent legislation–Section 625 of MMA–waived the Part B enrollment penalty for eligible
retirees who enrolled in Part B prior to December 31, 2004. This provision would create a special
12-month enrollment period in which military retirees (or their eligible dependents) who have not
yet enrolled in Medicare Part B can enroll in Part B, thus becoming eligible for Tricare for Life,
without incurring a late enrollment penalty. This provision would also require the Secretary of
HHS to establish a method for providing rebates for late enrollment penalties that were charged to
certain disabled and end-stage renal disease (ESRD) beneficiaries who enrolled during or after
January 2005 and before the month of enactment of this Act. The CBO score is $0.0 billion for
FY2010-FY2014 and $0.0 billion for FY2010-FY2019.
26 Section 1233. Advance Care Planning Consultation is discussed in CRS Report R40741, End-of-Life Care Provisions
in H.R. 3200, by Kirsten J. Colello.
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Sec. 1235. Exception for Use of More Recent Tax Year in Case of Gains From Sale of
Primary Residence in Computing Part B Income-Related Premium. Medicare beneficiaries
have out-of-pocket cost-sharing requirements that differ according to the services they receive.
Physician and outpatient services provided under Part B are financed through a combination of
beneficiary premiums, deductibles, and federal general revenues. In general, Part B beneficiary
premiums equal 25% of estimated program costs for the aged, with federal general revenues
accounting for the remaining 75%. Beginning in 2007, higher-income enrollees pay a higher
percentage of Part B costs. The provision would exclude income from the gains attributable to the
sale of a primary residence from the beneficiary’s modified adjusted gross income in determining
the Part B income-related premium. This modification would apply to premiums and payments
for years beginning with 2011. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0
billion for FY2010-FY2019.
Sec. 1236. Demonstration Program on Use of Patient Decisions Aids. Current law does not
explicitly address patient decision aids, which are information tools to help patients understand
health care options, and make informed choices that take into account their lifestyle, preferences,
and beliefs. This provision would require the Secretary to conduct a Medicare demonstration
program to determine if using patient decision aids would improve beneficiaries’ understanding
of their medical treatment options. The program would enroll not more than 30 eligible providers,
with preference given to providers that have documented experience, and the necessary
information technology infrastructure and training, in using patient decision aids. Eligible
providers would be required to provide follow-up counseling visits after beneficiaries have
viewed decision aids, to address questions about subsequent medical care and the beneficiary’s
preferences. The Secretary would have to provide for the development of a code(s) and
reimbursement for the follow-up counseling. Eligible providers would be responsible for the costs
of selecting, purchasing, and delivering patient decision aids, and reporting data on quality and
outcome measures. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for
FY2010-FY2019.
Sec. 1301. Accountable Care Organization Pilot Program. No current provision. In April 2005,
CMS initiated the Physician Group Practice demonstration, which offers 10 large practices the
opportunity to earn performance payments for improving the quality and cost-efficiency of health
care delivered to Medicare fee-for-service beneficiaries.
This provision would add a new section 1866D to the Social Security Act (SSA) to establish the
accountable care organization pilot program to test different payment incentive models. Specific
payment incentive models to be tested include: the performance target model, the partial
capitation model, and other payment models. A qualifying accountable care organization
(qualifying ACO) would be a group of physicians or other physician organizational models which
is organized, at least in part, for the purpose of providing physician services and meet other
specified standards. A qualifying ACO could include a hospital or any other provider or supplier
(furnishing Medicare covered services) that is affiliated with the ACO under an arrangement
structured so that the provider or supplier participates in the pilot program and shares in any
incentive payments. The pilot program would begin no later than January 1, 2012. An agreement
with a qualifying ACO under this pilot would cover a multi-year period of between 3 and 5 years.
The Secretary would evaluate the payment incentive model for each qualifying ACO to assess the
pilot’s impact on beneficiaries, providers of services, suppliers and the program. The evaluation
would be publicly available within 60 days of the date of completion of such report. The OIG
would be responsible for monitoring of the operation of ACOs under the pilot program with
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regard to violations of the Stark self referral prohibition (Section 1877 of the SSA). No later than
2 years after the date the first pilot agreement is established, and every 2 years thereafter for 6
years, the Secretary would report to Congress on the use of authorities under the pilot program
and its impact on expenditures, access, and quality. The Secretary would be able issue regulations
to implement on a permanent basis 1 or more models of the pilot program that are beneficial to
Medicare. However, to do so, the Chief Actuary of the CMS would be required to certify that the
expansion of the program’s components would result in estimated spending that would be less
than what spending would otherwise be estimated to be in the absence of such expansion.
The program management account of CMS would be appropriated $25 million for FY2010
through FY2014 and $20 million in FY2015 for the purposes of administering and carrying out
the pilot program, but not for payments for Medicare covered items and services or for incentive
payments. The CBO score is -$0.2 billion for FY2010-FY2014 and -$2.0 billion for FY2010-
FY2019.
Sec. 1302. Medical Home Pilot Program. TRHCA, as modified by MIPPA, requires the
Secretary to establish a 3-year demonstration in up to 8 states with urban, rural and underserved
areas, to redesign the health care delivery system to provide targeted, accessible, continuous, and
coordinated family-centered care to high need Medicare populations with chronic or prolonged
illnesses requiring regular medical monitoring, advising or treatment.
This provision would add a new section 1866E to the SSA to establish the medical home pilot
program for the purpose of evaluating the Medicare payments to qualified patient-centered
medical homes for furnishing medical home services to high need beneficiaries in urban, rural,
and underserved areas. New subsection 1866E(a) would require the Secretary to establish pilot
programs to evaluate two medical home models: (1) the independent patient-centered medical
home model; and (2) the community-based medical home model. Nothing in this provision would
prevent a nurse practitioner or physician assistant from leading a patient centered medical home
so long as all of the pilot program requirements are met and the nurse practitioner or physician
assistant is acting consistently with State law.
The independent patient-centered medical home pilot program would begin within 6 months of
enactment. The Secretary would be required to pay independent patient-centered medical homes a
monthly fee, paid prospectively, for each targeted high need beneficiary who consents to receive
services. This pilot program would have to be designed to include the participation of physicians
in practices with fewer than 10 full-time equivalent physicians, as well as physicians in larger
practices, particularly in underserved and rural areas, as well as federally qualified community
health centers, and rural health centers. A physician in a group practice that participates in the
Accountable Care Organization pilot program established in section 1866D of the SSA would not
be eligible to participate in this pilot program, unless this program is ultimately made permanent.
The Secretary would be required to make payments for medical home services provided by a
community based medical home (CBMH) to a high need beneficiary. A CBMH would employ
community health workers, including nurses or other non-physician practitioners, lay health
workers, or other appropriate persons who assist the primary or principal care physician or nurse
practitioner in chronic care management activities.
The Secretary would be required to start the CBMH pilot program within 2 years of enactment.
Demonstration sites under the pilot program would operate for up to 5 years after the initial
implementation phase. The Secretary would be required to establish a methodology for payment
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for medical home services furnished under the CBMH model, to include two separate prospective
monthly payments for each high need beneficiary: one to a community-based or State-based
organization, and one to the primary or principal care practice.
The Secretary would be required, within 60 days of completion of the pilot program, to submit a
report to Congress on the evaluation. Subject to the evaluation, the Secretary would be authorized
to issue regulations to implement one or more models on a permanent basis, to the extent that
such models are beneficial to Medicare, but only if the Chief Actuary of CMS were to first certify
that the expansion would not result in higher estimated Medicare spending.
$6 million for each of fiscal years 2010 through 2014 would be transferred from the Federal
Supplementary Medical Insurance Trust Fund (Part B Trust Fund) to the CMS Program
Management Account to carry out this section. $200 million for each of fiscal years 2010 through
2014 for payments for independent patient-centered medical home services, and $125 million for
each of fiscal years 2012 through 2016 for CBMH services would be available for CMS from the
Part B Trust Fund. In addition to funds otherwise available, $2.5 million for each of fiscal years
2010 through 2012 would be available to CMS from the Part B Trust Fund for initial
implementation costs. Any amounts made available under this subsection for a fiscal year would
be available until expended. The authority for the Medicare Medical Home Demonstration project
would be repealed. The $100 million established by the TRHCA for the existing Medicare
Medical Home Demonstration would be made available to the independent patient-centered
medical home pilot program. The CBO score is $1.5 billion for FY2010-FY2014 and $1.8 billion
for FY2010-FY2019.
Sec. 1303. Independence at Home Pilot Program. [Energy and Commerce Amendment] The
Secretary would be required to conduct a Medicare pilot program, beginning no later than
January 1, 2012, to test a payment incentive and service delivery model that uses physician and
nurse practitioner directed home-based primary care teams designed to reduce expenditures and
improve health outcomes in the provision of items and services to certain high-cost, chronically
ill Medicare beneficiaries. The Secretary would enter into agreements with qualifying
Independence at Home Medical Practices (practice) which are legal entities comprised of an
individual physician or nurse practitioner or group of physicians and nurse practitioners. The
Secretary would design the pilot program to include the participation of physician and nurse
practitioner practices with fewer than 10 full-time equivalent physicians, as well as physicians in
larger practices, particularly in underserved rural areas. A home-based primary care team could be
led by a nurse practitioner or physician assistant, if it complies with the requirements of this
provision and acts consistently with State law.
Practices would be expected to spend at least 5% less than a target spending level or a target rate
of growth. A practice could receive 80% of savings in excess of 5% if Medicare expenditures for
applicable beneficiaries are at least 5% greater than would result from normal variation in
expenditures Medicare services covered by Parts A and B (and Part D to the extent the Secretary
decides to include such costs). Practices could receive interim payments for geriatric assessments
and monthly care coordination services. However, those payments, or a fraction of them, may be
recouped by the Secretary in the event that the practice does not achieve the required savings. To
participate, a practice would be required to demonstrate to the Secretary that it is able to assume
financial risk for the 5% savings requirement. The Secretary must limit payments for shared
savings to each practice so that aggregate expenditures for applicable beneficiaries, including
shared savings payments, would not exceed the amount that would have been expended if the
pilot program had not been implemented.
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Agreements with practices under the program could cover a 3-year period. The Secretary would
also be required to submit to Congress a report on the pilot’s best practices no more than 2 years
after the date the first agreement is entered into and every second year thereafter during the pilot
program. Subject to the evaluation, the Secretary may enter into additional agreements with
practices to further test and refine models. If determined to be beneficial by the Secretary and
certified by the Chief Actuary of the CMS as resulting in lower estimated Medicare spending, the
Secretary may issue regulations to permanently implement the Independence at Home Practice
Model. The provision would appropriate to the CMS Program Management Account $5 million
for each of fiscal years 2010 through 2014 to administer the pilot program. This provision was not
included in the draft of the legislation that CBO scored in its July 17, 2009 letter to the Congress.
Sec. 1304. Payment Incentive for Selected Primary Care Services. Section 1833(m) of the
Social Security Act provides bonus payments (10% of what would otherwise be paid under the
fee schedule) for physicians who furnish medical care services in geographic areas that are
designated by the Health Resources and Services Administration (HRSA) as primary medical care
health professional shortage areas (HPSAs) under section 332 (a)(1)(A) of the Public Health
Service (PHS) Act. In addition, for claims with dates of service on or after July 1, 2004,
psychiatrists furnishing services in mental health HPSAs are also eligible to receive bonus
payments.
The provision would establish payment incentives for primary care services furnished on or after
January 1, 2011 by a primary care practitioner. The amount of the payment incentive would be
5% (or 10% if the practitioner provides the services predominately in an area that is designated as
a primary care health professional shortage area) and would be paid from the Part B Trust Fund.
The primary care services incentive payments would not be taken into account in determining the
additional payments for physicians in health professions shortage areas or in physician scarcity
areas. CBO estimates that this provision would require an additional $2.5 billion over the next
five years (2010-2014) and $6.4 billion over the next ten (2010-2019).
Sec. 1305. Increased Reimbursement Rate for Certified Nurse-Midwives. In general,
Medicare pays 80% of the reasonable charges (the lesser of the actual charge for the services or
the amount determined by the fee schedule) for provider services covered under Medicare Part B.
However, Medicare payments for services performed by certified nurse–midwives to Medicare
beneficiaries are currently limited to no more than 65% of the fee schedule amount for the same
service performed by a physician. The proposal would remove the 65% restriction for Medicare
payments to certified nurse-midwives. The modification would apply to services furnished on or
after January 1, 2011. According to the CBO, this provision would require about $100 million in
additional outlays over the 5-year as well as the 10-year window.27
Sec. 1308. Excluding Clinical Social Worker Services From Coverage Under the Medicare
Skilled Nursing Facility Prospective Payment System and Consolidated Payment. The
majority of services provided to beneficiaries in a Medicare covered SNF stay are included in the
bundled prospective payment made to the SNF. Certain services have been specifically excluded
from SNF consolidated billing. In these instances, Medicare will pay the entity providing the
service directly. Currently, the items and services provided by a clinical social worker are
27 Sections 1306 and 1307 concerning coverage and waiver of cost sharing for certain preventive services are discussed
in CRS Report R,40745 Public Health, Workforce, and Quality Provisions in the House Health Reform Legislation
(H.R. 3200).
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included in the SNF consolidated billing. The provision would exclude items and services
provided by clinical social workers to Medicare beneficiaries in a SNF from SNF consolidated
billing and would establish a separate Medicare payment on or after July 1, 2011. The CBO score
is $0.0 billion for FY 2010-FY2014 and $0.0 billion for FY2010-FY2019.
Sec. 1309. Coverage of Marriage and Family Therapist Services and Mental Health
Counselor Services. Section 1861(s)(2) of the SSA defines “medical and other health services”
as including medical supplies, hospital services, diagnostic services, outpatient physical therapy
services, rural health clinic services, home dialysis services and supplies, antigens and physician
assistant and nurse practitioner services. Marriage and family therapists and mental health
counselors are not included under current law.
The provision would add two subcategories of medical and health services: marriage and family
therapists, and mental health counselors. Required qualifications for a marriage and family
therapist, and mental health counselor would be established. Medicare would pay 80% of the
lesser of the actual charge for services or 75% of the amount that would be paid for a
psychologist’s services. The Secretary would be required to consider confidentiality issues while
developing criteria to allow direct payment of the therapist and medical information sharing with
the patient’s primary care physician or nurse practitioner. Services provided by marriage and
family therapists and mental health counselors would be excluded from consolidated billing by
SNFs; marriage and family therapists and mental health counselors would be providers in rural
health clinics and federally qualified health centers. Marriage and family therapists and mental
health counselors would be one of the practitioner categories who can file claims for services
provided. The CBO score is $0.2 billion for FY2010-FY2014 and $0.5 billion for FY2010-
FY2019.
Sec. 1310. Extension of Physician Fee Schedule Mental Health Add-on. By law, every five
years CMS examines Medicare billing codes under the physician fee schedule to determine
whether they are overvalued or undervalued. Subsequent to the most recent evaluation, Medicare
increased the rates for the codes used by physicians to bill for “evaluation and management”
(E/M) services (face-to-face visits with patients), effective January 1, 2007. To maintain budget
neutrality, rates for certain other codes, including some used to bill for psychotherapy services,
were reduced. MIPPA increased Medicare payments under the fee-schedule for psychotherapy
services by 5% beginning on July 1, 2008 and ending on December 31, 2009. The provision
would extend the increase payments for psychotherapy services for an additional two years
(ending December 31, 2011). The CBO score is $0.1 billion for FY2010-FY2014 and $0.1 billion
for FY2010-FY2019.28
Sec. 1601. Increased Funding and Flexibility to Fight Fraud and Abuse. The Health Care
Fraud and Abuse Control (HCFAC) account funds activities to fight health care fraud. The
HCFAC program along with the Medicare Integrity Program (MIP) were both established by the
Health Insurance Portability and Accountability Act of 1996 (HIPAA, P.L. 104-191) which sought
to increase and stabilize federal funding for health care anti-fraud activities. Specifically, HCFAC
funds are directed to the enforcement and prosecution of health care fraud whereas MIP funding
supports the program integrity activities undertaken by CMS contractors. This provision would
28 Sections 1311 and 1312 concerning access to vaccines and certified diabetes educators; section 1401 establishing
comparative effectiveness research; most of the sections concerning quality in Title IV, and all of the sections in Title
V concerning graduate medical education are discussed in CRS Report R40745, Public Health, Workforce, Quality,
and Other Provisions in H.R. 3200, coordinated by C. Stephen Redhead.
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increase funding for HCFAC and MIP by $100 million annually beginning with FY2011. Total
mandatory and discretionary funding for health care fraud activities in FY2009 amounted to $1.4
billion.29 Non-scorable savings attributed to the increased HCFAC spending is $0.4 billion from
FY2010-FY2014 and $1.3 billion from FY2010-FY2019.30
Sec. 1611. Enhanced Penalties for False Statements on Provider or Supplier Enrollment
Applications. In Medicare, providers and suppliers are required to submit an application to enroll
in the Medicare program in order to receive payment. To participate in Medicaid, providers and
suppliers are required to sign written agreements with their State Medicaid Agency. Beginning
January 2010, this provision would provide that a person who knowingly makes or causes to be
made any false statement, omission, or misrepresentation on an application, agreement, bid, or
contract to participate in a federal health program be subject to a civil monetary penalty (CMP) of
$50,000. Entities such as Medicaid managed care organizations, Medicare Advantage (MA)
organizations, and Part D Prescription Drug Plans (PDPs) would also be subject to this provision.
The aggregate CBO score for Sections 1611 through 1653 is $-0.4 billion for FY2010-FY2014
and -1.3 billion for FY2010-FY2019.
Sec. 1612. Enhanced Penalties for Submission of False Statements Material to a False
Claim. The CMP authority in the SSA requires the imposition of CMPs on any person, including
an organization, agency, or other entity, who engages in various types of improper conduct with
respect to federal health care programs, including presenting false or fraudulent claims to a
federal agency. Beginning January 2010, persons who knowingly make, use, or cause to be made
or used any false statement or record material to a false claim would be subject to a CMP of
$50,000 for each violation. The aggregate CBO score for Sections 1611 through 1653 is $-0.4
billion for FY2010-FY2014 and -1.3 billion for FY2010-FY2019.
Sec. 1613. Enhanced Penalties for Delaying Investigations. Beginning January 2010, this
provision would provide that persons who fail to grant timely access, upon reasonable request, to
the Office of the Inspector General (OIG) for the purpose of audits, investigations, evaluations be
subject to CMPs of $15,000 per day. The provision would also modify the contractual
requirements for MA plans to allow the Secretary to conduct timely audits and inspections of MA
plans. The aggregate CBO score for Sections 1611 through 1653 is $-0.4 billion for FY2010-
FY2014 and -1.3 billion for FY2010-FY2019.
Sec. 1614. Enhanced Hospice Program Safeguards. Medicare statute mandates the
establishment of health and safety standards that providers must meet in order to participate in the
Medicare and Medicaid programs (i.e. hospitals, hospices, nursing homes, and home health
agencies). These standards are often referred to as Conditions of Participation (CoPs). Generally,
state agencies, under contract with CMS, survey providers to determine compliance with CoPs.
This provision would require the Secretary to develop and implement intermediate sanctions for
hospices that fail to meet federal health and safety standards. The sanctions may include CMPs of
up to $10,000 for each day of non-compliance, payment suspension or denial, the appointment of
temporary managers, correction plans, and staff training. If after a period of sanctions, the
deficiencies have not been corrected, the Secretary would be required to terminate the providers’
29 For additional information on HCFAC and MIP programs see CRS Report RL34217, Medicare Program Integrity:
Activities to Protect Medicare from Payment Errors, Fraud, and Abuse, by Holly Stockdale.
30 Scorekeeping rules establish that decreases in mandatory spending will not be scored as a result of an increase in
direct spending for administration or program management activities. See Budget Option 115 in CBO’s Budget
Options: Volume I: Health Care, December 2008 pp. 209-210.
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participation in federal health programs. The aggregate CBO score for Sections 1611 through
1653 is $-0.4 billion for FY2010-FY2014 and -1.3 billion for FY2010-FY2019.
Sec. 1615. Enhanced Penalties for Individuals Excluded from Program Participation.
Beginning January 2010, this provision would provide that a person who orders or prescribes an
item or service, including home health care, lab tests, prescription drugs, durable medical
equipment (DME), ambulance services, or physical or occupational therapy when they have been
excluded from participation in a federal health care program, and the person knows or should
know that a claim for such item or service will be presented to such a program, is subject to a
CMP of $50,000 for each order or prescription.31 The aggregate CBO score for Sections 1611
through 1653 is $-0.4 billion for FY2010-FY2014 and -1.3 billion for FY2010-FY2019.
Sec. 1616. Enhanced Penalties for Provision of False Information by Medicare Advantage
and Part D Plans. The Secretary has the authority to impose intermediate sanctions and CMPs
ranging from $25,000 to $100,000 on MA plans that violate the terms of their contract. Among
the types of violations are failing to provide medically necessary care, imposing excess
beneficiary premiums, expelling or refusing to re-enroll beneficiaries, or misrepresenting or
falsifying information. Beginning January 2010, this provision would add an additional penalty
for MA and Part D plans to include an assessment of up to three times the amount claimed by the
plan based on the misrepresentation or falsified information. The aggregate CBO score for
Sections 1611 through 1653 is $-0.4 billion for FY2010-FY2014 and -1.3 billion for FY2010-
FY2019.
Sec. 1617. Enhanced Penalties for Medicare Advantage and Part D Marketing Violations.
The Secretary has the authority to impose intermediate sanctions and CMPs ranging from
$25,000 to $100,000 on MA plans that violate the terms of their contract. This provision would
increase the number of violations that would be subject to the imposition of sanctions and CMPs
by the Secretary. Beginning January 2010, employees, agents, or participating providers of MA
plans that: 1) enroll beneficiaries in a MA or Part D plan without their consent, 2) transfer an
individual from one plan to another for the purpose of earning a commission, 3) or fail to comply
with CMS marketing requirements could be subject to sanctions imposed by the Secretary. The
aggregate CBO score for Sections 1611 through 1653 is $-0.4 billion for FY2010-FY2014 and -
1.3 billion for FY2010-FY2019.
Sec. 1618. Enhanced Penalties for Obstruction of Program Audits. The OIG has permissive
authority (i.e. discretion) to exclude an entity or individual from a federal health program for a
conviction related to the obstruction of a health care fraud investigation. Beginning January 2010,
this provision would expand the OIG’s permissive exclusion authority to include a conviction
related to the obstruction of an audit related to health care fraud. The aggregate CBO score for
Sections 1611 through 1653 is $-0.4 billion for FY2010-FY2014 and -1.3 billion for FY2010-
FY2019.
Sec. 1619. Exclusion of Certain Individuals and Entities from Participation in Medicare and
State Health Care Programs. Medicare statute provides that the Secretary (and through
delegation, OIG) has the authority to exclude individuals and entities from participation in federal
31 The OIG has the authority to exclude individuals from participation in federal health care programs for a variety of
offenses. Under exclusion, no payment may be made by a federal health care program for any items or services ordered
or prescribed by an excluded individual.
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health care programs under a variety of circumstances. This provision would clarify the effect of
an exclusion of an individual or entity on payment made under a federal health care program.
Subject to exceptions, payment cannot be made from any federal health care program with
respect to an item or service furnished (1) by an excluded individual or entity, or (2) at the
medical direction, or on the prescription of an authorized individual (e.g., a physician) when the
person submitting a claim for the item or service knew or had reason to know of an individual’s
exclusion. The aggregate CBO score for Sections 1611 through 1653 is $-0.4 billion for FY2010-
FY2014 and -1.3 billion for FY2010-FY2019.
Sec. 1631. Enhanced CMS Program Protection Authority. Beginning January 2011, this
provision would authorize the Secretary to subject Medicare, Medicaid, and CHIP providers and
suppliers to enhanced screening, oversight, or a moratorium on enrollment in instances where
there is a significant risk of fraud. Determinations of what constitutes a significant risk of fraud
would be made by the Secretary. The Secretary would be required to establish procedures for
screening and enhanced oversight (i.e. site visits, enhanced claims review). In instances of serious
ongoing fraud, the Secretary would have the authority to impose a moratorium on enrolling
providers within a certain category of providers or specific geographic area. The aggregate CBO
score for Sections 1611 through 1653 is $-0.4 billion for FY2010-FY2014 and -1.3 billion for
FY2010-FY2019.
Sec. 1632. Enhanced Medicare, Medicaid, and CHIP Program Disclosure Requirements
Relating to Previous Affiliations. In order to receive payment from Medicare, providers must
enroll in the Medicare program. CMS regulations mandate that Medicare enrollment applications
contain information to uniquely identify the provider (i.e. proof of business name, social security
number, or Tax ID number) and include documentation necessary to verify licensure. State
Medicaid agencies determine whether a provider or supplier is eligible to participate in the
Medicaid program by providing for written agreements with providers and suppliers. Beginning
January 2011, this provision would require that providers or suppliers enrolling or re-enrolling in
Medicare, Medicaid, or CHIP be required to disclose information on their affiliations with certain
providers or suppliers. The Secretary would have the authority to deny enrollment in instances
when an affiliation poses a risk of fraud. The aggregate CBO score for Sections 1611 through
1653 is $-0.4 billion for FY2010-FY2014 and -1.3 billion for FY2010-FY2019.
Sec. 1633. Required Inclusion of Payment Modifier for Certain Evaluation and
Management Services. Evaluation and management services include certain primary care
services, hospital inpatient medical services, preventive medicine visits, and others. This
provision would require the Secretary to establish a payment modifier for evaluation and
management services that result in the ordering of additional services (i.e. lab tests, prescription
drugs, DME, or other services) determined by the Secretary to be at high risk of fraud. The
aggregate CBO score for Sections 1611 through 1653 is $-0.4 billion for FY2010-FY2014 and -
1.3 billion for FY2010-FY2019.
Sec. 1634. Evaluations and Reports Required Under Medicare Integrity Program. The MIP
program requires the Secretary to enter into contracts with private entities to conduct a variety of
program integrity activities for the Medicare program including auditing providers, reviewing
claims for medical necessity, and identifying and investigating alleged fraud. Beginning in 2011,
this provision would require MIP contractors to submit annual reports to the Secretary on their
activities. The aggregate CBO score for Sections 1611 through 1653 is $-0.4 billion for FY2010-
FY2014 and -1.3 billion for FY2010-FY2019.
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Sec. 1635. Require Providers and Suppliers to Adopt Programs to Reduce Waste, Fraud,
and Abuse. This provision would require Medicare providers and suppliers to establish
compliance programs to reduce fraud. The Secretary, in consultation with the OIG, would be
required to establish the core components for these programs. Providers and suppliers that do not
meet requirements for establishing these programs would be subject to certain sanctions,
including a CMP of up to $50,000 or disenrollment. The Secretary would be authorized to
conduct a pilot program for certain high-risk providers prior to implementing these compliance
requirements across all providers. The aggregate CBO score for Sections 1611 through 1653 is $-
0.4 billion for FY2010-FY2014 and -1.3 billion for FY2010-FY2019.
Sec. 1636. Maximum Period for Submission of Medicare Claims Reduced to Not More Than
12 Months. Medicare statute requires that payments be made only to Medicare eligible providers
and only if a written request for payment is filed within three calendar years after the year in
which the services were provided. The Secretary is authorized to reduce this period to no less
than one year if necessary. Beginning January 2011, the provision would reduce the time period
for filing a written request for payment from three calendar years to one calendar year. The
aggregate CBO score for Sections 1611 through 1653 is $-0.4 billion for FY2010-FY2014 and -
1.3 billion for FY2010-FY2019.
Sec. 1637. Physicians Who Order DME or Home Health Services Required to be Medicare
Enrolled Physicians or Eligible Professionals. In order to receive payment from Medicare,
physicians are required to certify that specified services (i.e. inpatient psychiatric services, post-
hospital extended care services, and home health services) meet certain conditions. For example,
physicians must certify that home health care services are necessary because the patient is
confined to his/her home and needs skilled nursing care. In the case of DME, payment may only
be made if the physician has communicated to the supplier a written order for the item. Beginning
January 2010, this provision would require that physicians who order DME or home health
services be a Medicare eligible professional or enrolled in the Medicare program. The aggregate
CBO score for Sections 1611 through 1653 is $-0.4 billion for FY2010-FY2014 and -1.3 billion
for FY2010-FY2019.
Sec. 1638. Requirement for Physicians to Provide Documentation on Referrals to Programs
at High Risk of Waste and Abuse. Beginning January 2010, the Secretary would have the
authority to disenroll, for no more than one year, a Medicare enrolled physician or supplier that
fails to maintain and provide access to written orders or requests for payment for DME, home
health services, or referrals for other items and services to the Secretary. The provision would also
extend the OIG’s permissive exclusion authority to include individuals or entities that order, refer,
or certify the need for health care services that fail to provide adequate documentation to the
Secretary. The aggregate CBO score for Sections 1611 through 1653 is $-0.4 billion for FY2010-
FY2014 and -1.3 billion for FY2010-FY2019.
Sec. 1639. Face to Face Encounter with Patient Required Before Physicians May Certify
Eligibility for Home Health Services or DME under Medicare. In order to receive payment
from Medicare, physicians are required to certify that specified services (i.e. inpatient psychiatric
services, post-hospital extended care services, and home health services) meet certain conditions.
For example, physicians must certify that home health care services are necessary because the
patient is confined to his/her home and needs skilled nursing care. In the case of DME, payment
may only be made if the physician has communicated to the supplier a written order for the item.
Beginning January 2010, this provision would require that physicians have a face-to-face
encounter (including through telehealth) with the individual prior to issuing a certification or re-
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certification. The provision would also apply to physicians making home health certifications in
Medicare, Medicaid, and CHIP. The aggregate CBO score for Sections 1611 through 1653 is $-
0.4 billion for FY2010-FY2014 and -1.3 billion for FY2010-FY2019.
Sec. 1640. Extension of Testimonial Subpoena Authority to Program Exclusion
Investigations. The Secretary has the authority to exclude individuals and entities from
participation in federal health care programs under a variety of circumstances. Beginning January
2010, this provision would apply the Secretary’s testimonial subpoena authority to program
exclusion investigations. Thus, the Secretary would be able to issue subpoenas and require the
attendance and testimony of witnesses and the production of any other evidence relating to
matters under investigation or in question by the Secretary. The aggregate CBO score for Sections
1611 through 1653 is $-0.4 billion for FY2010-FY2014 and -1.3 billion for FY2010-FY2019.
Sec. 1641. Required Repayments of Medicare and Medicaid Overpayments. This provision
would require Medicare and Medicaid providers and suppliers, including Medicaid managed care
plans, MA plans, and Part D plans, that know of an overpayment to report and return the
overpayment within 60 days. The aggregate CBO score for Sections 1611 through 1653 is $-0.4
billion for FY2010-FY2014 and -1.3 billion for FY2010-FY2019.
Sec. 1642. Expanded Application of Hardship Waivers for OIG Exclusions to Beneficiaries
of any Federal Health Care Program. The Secretary has the authority to exclude individuals
and entities from participation in federal health care programs under a variety of circumstances.
Exclusions from federal health programs are mandatory in some circumstances, and permissive in
others. Generally, in the case of a mandatory exclusion, the minimum period of exclusion cannot
be less than five years. However, if a federal health care program administrator determines that
the exclusion would impose a hardship, the Secretary may, after consultation with the OIG, waive
the exclusion under certain circumstances. This provision would clarify that the “hardship
waiver” for exclusions applies to beneficiaries enrolled in a federal health care program. The
aggregate CBO score for Sections 1611 through 1653 is $-0.4 billion for FY2010-FY2014 and -
1.3 billion for FY2010-FY2019.
Sec. 1643. Access to Certain Information on Renal Dialysis Facilities. This provision would
require End State Renal Disease Facilities to provide the Secretary with access to information
relating to any ownership or compensation arrangement between the facility and the medical
director of such facility or between the facility and any physician for the purposes of an audit or
evaluation. The aggregate CBO score for Sections 1611 through 1653 is $-0.4 billion for FY2010-
FY2014 and -1.3 billion for FY2010-FY2019.
Sec. 1644. Billing Agents, Clearinghouses, or Other Alternate Payees Required to Register
Under Medicare. CMS has implemented regulations requiring Medicare providers and suppliers
to submit an application to enroll in the Medicare program in order to receive billing privileges.
The enrollment application requires that providers and suppliers include the names, addresses,
and tax ID numbers for billing agencies on their applications. Beginning January 2012, this
provision would require billing agencies, clearinghouses, or other payees that submit claims on
behalf of a health care provider to register with the Secretary. The aggregate CBO score for
Sections 1611 through 1653 is $-0.4 billion for FY2010-FY2014 and -1.3 billion for FY2010-
FY2019.
Sec. 1645. Conforming CMPs to False Claims Act (FCA) Amendments. The federal False
Claims Act (FCA), codified at 31 U.S.C. §§ 3729-3733, provides for the imposition of CMPs and
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damages for the knowing submission of false claims to the United States government. The
recently enacted Fraud Enforcement and Recovery Act of 2009 (FERA, P.L. 111-21), made
several amendments to the FCA, which essentially expanded the types of conduct that could lead
to FCA liability. The CMP authority in the SSA requires the imposition of CMPs on any person,
including an organization, agency, or other entity, who engages in various types of improper
conduct with respect to federal health care programs. Similar to the FERA amendments to the
FCA, this provision would amend the CMP statute by expanding the types of conduct that could
lead to CMPs. For example, the provision would remove the requirement that a claim be
presented to a government officer, employee, agent, or agency in order to be liable for CMPs. In
addition, the bill would create a new section 1128A(a)(12), which would impose CMPs on a
person who conspires to commit a violation of the CMP statute. The aggregate CBO score for
Sections 1611 through 1653 is $-0.4 billion for FY2010-FY2014 and -1.3 billion for FY2010-
FY2019.
Sec. 1651. Access to Information Necessary to Identify Waste and Abuse. This provision
would establish that the Attorney General have unrestricted access to all Medicare and Medicaid
claims and payment databases. Access for the Attorney General would be facilitated by the OIG
and in consultation with CMS or the owner of any such database. Access would be required to be
carried out for the purposes of law enforcement activity and in a manner consistent with any
applicable disclosure, privacy, and security laws, including HIPAA. The aggregate CBO score for
Sections 1611 through 1653 is $-0.4 billion for FY2010-FY2014 and -1.3 billion for FY2010-
FY2019.
Sec. 1652. Elimination of Duplication Between the Healthcare Integrity and Protection
Databank and the National Practitioner Databank. Medicare statute requires the Secretary to
develop and maintain a national health care fraud and abuse data collection program, the Health
Care Integrity and Protection Data Bank (HIPDB), for the reporting of adverse actions taken
against health care providers or suppliers. The Health Care Quality Improvement Act of 19.86
established the National Practitioner Data Bank (NPDB). The NPDB collects and releases data on
the professional competence of physicians, dentists, and certain healthcare practitioners. This
provision would require the Secretary to transfer information from the HIPDB to the NPDB. The
transition would be funded from the fees collected to access the database and from the annual
HCFAC appropriation. The aggregate CBO score for Sections 1611 through 1653 is $-0.4 billion
for FY2010-FY2014 and -1.3 billion for FY2010-FY2019.
Sec. 1653. Compliance with HIPAA Privacy and Security Standards. The Privacy Act of 1974
generally prohibits disclosures of records contained in a system of records maintained by a
federal agency without the written request or consent of the individual to whom the record
pertains. HIPAA Privacy and Security Rules establish national standards for the privacy and
security of protected health information. This provision would clarify that the privacy and
security regulations promulgated under the HIPAA and the Privacy Act of 1974 apply to all fraud,
waste, and abuse provisions in this bill.32 The aggregate CBO score for Sections 1611 through
1653 is $-0.4 billion for FY2010-FY2014 and -1.3 billion for FY2010-FY2019.
Sec. 1801. Disclosures to Facilitate Identification of Individuals Likely to Be Ineligible for
the Low-Income Assistance Under the Medicare Prescription Drug Program to Assist Social
32 Title VII with provisions amending the Medicaid and CHIP programs are discussed in a forthcoming CRS report.
Sections 1801 and 1802 in Title VII Revenue Related Provisions will not be not included in that report.
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Security Administration’s Outreach to Eligible Individuals. Under Medicare Part D,
beneficiaries with incomes and assets below certain levels may be eligible for low-income
subsidy benefits. Section 1144 of the SSA requires the Commissioner of Social Security to
conduct outreach efforts to inform potential LIS beneficiaries about the additional premium and
cost-sharing subsidies. The Social Security Administration, from its own records, and other
available non-tax records is able to determine a potential pool of LIS beneficiaries, but such pool
may be over-inclusive and include persons ineligible for the LIS benefits. It is believed that the
IRS possesses additional income information, and, through imputation, some asset information,
that could narrow the pool of potentially eligible LIS beneficiaries thereby reducing outreach
costs. Under this provision IRS would be authorized to disclose to the Social Security
Administration certain taxpayer return information to assist in identifying individuals likely to be
eligible for the low-income subsidy and help focus outreach efforts. This provision was not scored
by CBO.
Sec. 1901. Repeal of the Trigger Provision. The Hospital Insurance (HI) and Supplementary
Medical Insurance (SMI) trust funds are overseen by a board of trustees that reports annually to
Congress on Medicare expenditures and revenues. As part of their analysis, as required MMA, the
trustees must determine whether or not general revenue financing will exceed 45% of total
Medicare outlays within the next seven years. MMA requires that if an excess general revenue
funding determination is made for two successive years, the President must submit a legislative
proposal to respond to the warning and Congress is required to consider the proposals on an
expedited basis. On January 6, 2009, the House approved a rules package (H.Res. 5) that nullifies
the trigger provision in the House for the 111th Congress. This provision would repeal the 45%
trigger. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY2019.
Sec. 1902. Repeal of Comparative Cost Adjustment Program. The requirement for a six-year
program that will begin in 2010 to examine comparative cost adjustment (CCA) in designated
CCA areas would be repealed. Specifically this program requires that payments to local MA plans
in CCA areas would, in part, be based on competitive bids (similar to payments for regional MA
plans), and Part B premiums for individuals enrolled in traditional Medicare may be adjusted,
either up of down. This program would be phased-in and there is also a 5% annual limit on the
adjustment, so that the amount of the adjustment to the beneficiary's premium for a year can not
exceed 5% of the amount of the monthly Part B premium, in non-CCA areas. The CBO score is -
$0.1 billion for FY2010-FY2014 and -$0.1 billion for FY2010-FY2019.
Sec. 1903. Extension of Gainsharing Demonstration. Section 5007 of DRA authorizes a
gainsharing demonstration to evaluate arrangements between hospitals and physicians designed to
improve the quality and the efficiency of care provided to beneficiaries. In the absence of this
DRA authority, gainsharing arrangements are restricted by the Civil Monetary Penalty law. CMS
is operating two projects, each consisting of one hospital in New York and West Virginia.
Although authorized to begin on January 1, 2007, the project began on October 1, 2008 and will
end as mandated on December 31, 2009. The Secretary was required to submit a report on quality
improvement and achieved savings as a result of the demonstration no later than December 1,
2008. The final report on these issues was due on May 1, 2010. The project was appropriated $6
million in FY2006 to be available for expenditure through FY2010. The provision would extend
the gainsharing demonstration until September 30, 2011. The due date of the quality improvement
and achieved savings report would be extended from December 1, 2008, to March 31, 2011. The
final report would be due March 31, 2013, instead of May 1, 2010. An additional $1.6 million
would be appropriated in FY2010. All appropriations would be available for expenditure through
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FY2014. The CBO score is $0.0 billion for FY2010-FY2014 and -$0.0 billion for FY2010-
FY2019.
Author Contact Information
Sibyl Tilson, Coordinator
Paulette C. Morgan
Specialist in Health Care Financing
Specialist in Health Care Financing
stilson@crs.loc.gov, 7-7368
pcmorgan@crs.loc.gov, 7-7317
Cliff Binder
Jennifer Staman
Analyst in Health Care Financing
Legislative Attorney
cbinder@crs.loc.gov, 7-7965
jstaman@crs.loc.gov, 7-2610
Patricia A. Davis
Holly Stockdale
Specialist in Health Care Financing
Analyst in Health Care Financing
pdavis@crs.loc.gov, 7-7362
hstockdale@crs.loc.gov, 7-9553
Jim Hahn
Julie Stone
Analyst in Health Care Financing
Specialist in Health Care Financing
jhahn@crs.loc.gov, 7-4914
jstone@crs.loc.gov, 7-1386
Edward C. Liu
Legislative Attorney
eliu@crs.loc.gov, 7-9166
Congressional Research Service
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