Tuesday, December 7, 2010

“Doc Fix” Update

In order to prevent the 23 percent reduction in Medicare reimbursement levels scheduled to take effect on January 1, Sens. Reid, McConnell, Baucus, and Grassley have reached agreement on a one-year extension of the “doc fix.”  The legislation is being hotlined tonight, in the hope that it can pass by unanimous consent to allow for House consideration of the measure.

The legislation provides a zero percent update in physician reimbursement levels for calendar year 2011, and stipulates that the payment increase shall be disregarded for purposes of calculating SGR rates for periods after December 31, 2011.  The bill also includes several one-year extensions of expiring Medicare provisions (which are usually extended with the SGR), as well as some technical changes that were agreed to on a bipartisan basis.

The bill is paid for by increasing recapture payment thresholds for health insurance subsidies created under the health care law.  Current law provides that subsidy eligibility will be determined on the basis of prior year financial information (e.g., tax returns, etc.).  The bill would increase on a sliding-scale basis the $400 ($250 for individuals) amount that families will have to repay the federal government if they are found to have received a higher subsidy than their actual income warranted (because, for instance, a family member received a raise that wasn’t reflected on the prior year tax return).

A more complete summary follows below.  If your boss has concerns with this legislation, please contact the cloakroom.


Medicare Physician Payment:  Provides for a 0 percent update in reimbursement levels for 2011.  Provides that the 0 percent update for 2011 shall not be considered when calculating the Sustainable Growth Rate (SGR) reimbursement levels in 2012 and future years.  Spends $14.9 billion over five and ten years.

Medicare “Extenders:”  Extends for one year a series of Medicare and health-related provisions, all of which would expire at the end of the calendar year unless otherwise noted:

  • Section 508 hospital reclassifications (expired on September 30, 2010) at a cost of $300 million over ten years;
  • Geographic floor for work, costing $500 million over ten years;
  • Therapy caps exception process, costing $900 million;
  • Technical component of certain physician pathology services, costing $100 million;
  • Reimbursement raises for ambulance services, costing $100 million;
  • Mental health reimbursements (5% increase), costing $100 million;
  • Outpatient hold harmless provision, costing $200 million;
  • Reasonable cost payments for clinical diagnostic laboratory tests in rural areas (expires on July 1, 2011 under current law); no significant score;
  • Qualifying Individual (QI) program, assistance to low-income seniors in paying Medicare premiums, costing $600 million;
  • Transitional Medical Assistance, which provides Medicaid benefits for low-income families transitioning from welfare to work, costing $1 billion; and
  • Two year extension of special diabetes programs that fund research into Type 1 diabetes and prevention and treatment of diabetes through Indian Health Service facilities, costing $600 million.

Other Provisions:  Repeals the health law’s delay of the revised skilled nursing facility prospective payment system.  Includes other clarifying amendments with respect to drafting errors in the health care law.  Includes language regarding affiliated hospitals and provisions in the health care law surrounding distribution of medical residency positions, as well as a technical correction maintaining childrens hospitals’ ability to participate in the 340B discount program with respect to orphan drugs.  Includes clarifying provisions regarding eligibility for Medicaid health IT funding provided in the “stimulus.”

Funding for Claims Re-processing:  Provides $200 million in mandatory appropriations to CMS to re-process claims for calendar year 2010, as a result of the changes in Medicare payment policy enacted mid-year.

Medicare Improvement Fund:  Utilizes $275 million in funding from the Medicare Improvement Fund, which was created in 2008 “to make improvements under the original Medicare fee-for-service program.”

Health Insurance Subsidy Recapture:  The bill increases the repayment levels for insurance subsidies provided under the Patient Protection and Affordable Care Act (PPACA).  Under the health law, new health insurance subsidies are based on an individual’s (or family’s) most recent tax return – so that subsidy levels beginning in January 2014 will be based on reported income for 2012.  However, a family’s circumstances can change significantly during this time lag for a variety of reasons – a change in job, significant raise, divorce, birth, or death, to name just a few.

PPACA established a reconciliation process intended to recapture any subsidy over-payments – but the law capped the amount of such repayments at $250 for individuals and $400 for families for all families with incomes under 400 percent of the federal poverty level (FPL, $88,200 for a family of four); above 400% FPL, no limits currently apply.  The bill would raise these limits on a sliding scale basis to:

Income between 100-200% FPL:  $300 for an individual, $600 per family

Income between 200-250% FPL:  $500 for an individual, $1,000 per family

Income between 250-300% FPL:  $750 for an individual, $1,500 per family

Income between 300-350% FPL:  $1,000 for an individual, $2,000 per family

Income between 350-400% FPL:  $1,250 for an individual, $2,500 per family

Income between 400-450% FPL:  $1,500 for an individual, $3,000 per family*

Income between 450-500% FPL:  $1,750 for an individual, $3,500 per family*

(*While subsidies are only available to individuals and families with incomes below 400% FPL, the above recapture penalties would apply to individuals who received subsidies, yet were not eligible for ANY subsidies based on their income.  As noted above, currently individuals with incomes above 400% FPL would have to pay back ALL of the insurance subsidy amounts they received in error.)

CBO and the Joint Committee on Taxation score this provision as saving $19 billion over ten years; the provision would also reduce coverage estimates for the new insurance subsidies by an estimated 200,000 individuals.

Many may argue that this provision does NOT represent a tax increase, on the grounds that individuals will be repaying a subsidy they received in error. (In addition, most of the subsidies provided under PPACA are refundable in nature, and some would argue that limiting refundable subsidies reduces government spending, rather than increasing taxes.)


UPDATE: CBO tables for the bill match the descriptions included above.  Note that per CBO, the asterisk on the second page of the score indicates a net deficit reduction of less than $50 million.  (Also FYI, the shell vehicle for the “doc fix” is H.R. 4994; I neglected to mention that earlier.)