Here is a summary of the Medicare, Medicaid, and other health care related provisions of H.R. 8, the American Taxpayer Relief Act of 2012, as passed by House and Senate as part of the fiscal cliff negotiations.  President Obama is expected to sign the law shortly.

The Congressional Budget Office (CBO) has issued a summary budget score of the bill, as well as detailed budget scoring estimating the cost or savings for each of the major Medicare, Medicaid, and other health related pieces.

The bill leaves unresolved large budget issues – setting the scene for more, much larger cuts to Medicare and Medicaid.  It delays the budget sequester by two months, including the 2 percent acroos-the-board cut in Medicare payments.  It also does not address the required increase in the national debt ceiling.  So get ready for a bumpy ride.

Some highlights on the American Taxpayer Relief Act of 2012 (ATRA):

  • In terms of payment cuts, Medicare Advantage health plans, hospitals, and dialysis centers are hit the hardest, with physicians, pharmacies, and other providers also seeing significant, targeted reductions.
  • Physicians avoid the unimaginable – the 26.5 percent cut required under the misguided Sustainable Growth Rate (SGR) formula – but 2013 will be another year without any Medicare rate increase.
  • The law sets up another huge, SGR generated physician rate cut in January 2014.  Congress punts again.  Why?  Because it’s easier for Congress to find $25 billion to delay the SGR cuts by a year than it is to find the $300 billion needed to repeal the formula.
  • State Medicaid programs will see a $4.2 billion cut in 2022 in federal funding for safety-net hospitals that serve a disproportionate low-income and uninsured population.
  • The bill also extends several special programs and add-on payments.
Medicare, Medicaid, and Other Health Program Budget Changes:

Medicare Physician Payment Update:  This provision freezes Medicare Part B physician rates for 2013.  It prevents for one year the 26.5 percent rate cut required under the Sustainable Growth Rate (SGR) formula in current law.

Work Geographic Adjustment:  Under current law, the Medicare Part B physician 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.  This provision extends the existing 1.0 floor on the physician work index through December 31, 2013.

Payment for Outpatient Therapy Services:  Current law places annual per beneficiary payment limits of $1,880 for all Medicare outpatient therapy services provided by non-hospital providers, but includes an exceptions process for cases in which the provision of additional therapy services is determined to be medically necessary.  This provision extends the exception process through December 31, 2013.  The provision also extends the cap to services received in hospital outpatient departments only through December 31, 2013.

Medicare Ambulance Add-On Payments:  Under current law, ground ambulance transports receive add-on to their base rate payments of 2% for urban providers, 3% for rural providers, and 22.6% for super-rural providers.  The air ambulance temporary payment policy maintains rural designation for application of rural air ambulance add-on for areas reclassified as urban by the Office of Management and Budget (OMB) in 2006.  This provision extends the add-on payment for ground including in super rural areas, through December 31, 2013, and the air ambulance add-on until June 30, 2013.

Extension of Medicare Inpatient Hospital Payment Adjustment for Low-Volume Hospitals:  Currently, qualifying low-volume hospitals receive add-on payments based on the number of Medicare discharges.  To qualify, the hospital must have less than 1,600 Medicare discharges and be 15 miles or greater from the nearest like hospital.  This provision extends the payment adjustment until December 31, 2013.

Extension of the Medicare Dependent Hospital (MDH) Program:  The Medicare Dependent Hospital (MDH) program provides higher Medicare payments to 212 small rural hospitals for which Medicare patients make up a significant percentage of inpatient days or discharges. The rationale is greater dependence on Medicare may make these hospitals more financially vulnerable to prospective payment, and the increased MDH payments are designed to reduce this risk. This provision extends the MDH program until October 1, 2013.

Extension for Specialized Medicare Advantage Plans for Special Needs Individuals:  Extends through 2015 the authority of Medicare Advantage Special Needs Plans (SNPs) to target marketing and enrollment to certain populations (i.e., dual eligibles, beneficiaries with certain chronic conditions, and Medicare beneficiaries needing institutional care).

Extension of Medicare Reasonable Cost Contracts:  This provision allows Medicare cost plans to continue to operate through 2014 in an area where at least two Medicare Advantage coordinated care plans operate.  Medicare cost plans are a type of HMO that work much the same way as Medicare Advantage plans.  In a Medicare cost plan, if a beneficiary goes to a non-network provider, the services are covered under traditional Medicare fee-for-service with standard Medicare Part A and Part B coinsurance and deductibles.

Performance Improvement:  Under the Medicare Improvement for Patients and Providers Act of 2008 (MIPPA), HHS entered into a five year contract with a consensus-based entity for certain activities relating to health care performance.  This provision continues this funding through 2013.  This provision also requires HHS to develop a strategy for providing data on performance improvement in a timely manner.

Extension of Funding for Outreach and Assistance for Low-Income Programs:  This provision extends the funding for one year for State Health Insurance Counseling Programs (SHIPs), Area Agencies on Aging (AAAs), Aging and Disability Resource Centers (ADRCs), and the National Center for Benefits Outreach and Enrollment.

Extension of the Qualifying Individual Program:  The Qualifying Individual (QI) program allows state Medicaid programs to pay the Medicare Part B premiums for low-income Medicare beneficiaries with incomes between 120 percent and 135 percent of poverty.  The QI program provides 100 percent federal funding to States for the payment of Medicare Part B premiums of Medicare beneficiaries who are not eligible for Medicaid but who have incomes between 120 percent and 135 percent of the federal poverty level.  Under current law, QI expires December 31, 2012.  This provision extends the QI program through December 31, 2013.

Extension of Transitional Medical Assistance:  Transitional Medical Assistance (TMA) allows low-income families to maintain their Medicaid coverage as they transition into employment and increase their earnings.  Under current law, TMA expires December 31, 2012.  This provision extends TMA until December 31, 2013.

Extension of Medicaid and CHIP Express Lane Option:  The CHIP Reauthorization Act of 2009 created a new option that allows state Medicaid and CHIP offices to rely on data from other state offices, like SNAP (formerly called Food Stamps) and school lunch programs, in making income eligibility determinations for children, called Express Lane Eligibility (ELE).  The authority to use ELE expires on September 30, 2013.  This provision would extend ELE authority through September 30, 2014.

Extension of Family-to-Family Health Information Centers:  This provision continues the Family to Family Health Information Centers (F2F HIC) to assist families of children and youth with special health care needs in making informed choices about health care in order to promote good treatment decisions, cost-effectiveness and improved health outcomes.  The centers are intended to help families navigate the health care system so that their children can get the benefits they need through Medicaid, CHIP, SSI, early intervention services, other government programs, and private insurance.  F2F HICs also train health care providers and policymakers and advocate for a family-centered “medical home” for every child. There is one F2F HIC in every state and the District of Columbia.

Extension of Special Diabetes Program for Type 1 Diabetes and for American Indians: Continues funding authorization for research for Type I diabetes and supports diabetes treatment and prevention initiatives for American Indians and Alaska Natives.  The Special Diabetes Program (SDP) expires at the end of 2013, but early reauthorization ensures continuation of the existing research projects.  This provision would extend the SDP through 2014.

Documentation and Coding (DCI) Adjustment:  This provision will phase in the recoupment of past overpayments to hospitals made as a result of the transition to Medicare Severity Diagnosis Related Groups (MS-DRGs).

Rebase Medicare End Stage Renal Disease (ESRD) Facility Payments:  This provision incorporates recommendations from the Government Accountability Office (GAO) by re-pricing Medicare bundled payment for ESRD services to take into account changes in behavior and utilization of biologics and drugs by outpatient dialysis centers.

Therapy Multiple Procedure Payment Reduction:  This provision further reduces Medicare payment for subsequent therapies when therapies are provided on the same day.

Medicare Payment for Certain Radiology Services:  This provision would equalize payments for stereotactic radiosurgery services provided under Medicare outpatient hospital payment systemStereotactic radiosurgery is a form of radiation therapy that focuses high-powered x-rays on a small area of the body. Other types of radiation treatment may affect nearby healthy tissue, but stereotactic radiosurgery better targets the abnormal area.

Medicare Payment Adjustment of Equipment Utilization Rate for Advance Imagining Services:  This policy would increase the utilization factor used in the setting of payment for imaging services in Medicare from 75% to 90%.

Competitive Prices for Diabetic Supplies:  This proposal would apply Medicare competitive bidding to diabetic test strips purchased at retail pharmacies.

Adjust Payment Adjustment for Non-Emergency Ambulance Transports For ESRD Beneficiaries:  This provision reduces the payment rates for ambulance services by 10% for individuals with ESRD obtaining non-emergency basic life support services involving transport, based on a recent Government Accountability Office report.

Increase Statute of Limitations for Recovering Overpayments:  This provision increases the federal statute of limitations to recover overpayments from three to five years, based on recommendations from the HHS Office of Inspector General (OIG).

Medicare Improvement Fund:  This provision eliminates funding for the Medicare Improvement Fund.

Rebase Medicaid Disproportionate Share Hospital (DSH) Payments to Extend the Changes from the Affordable Care Act (ACA) for an Additional Year:  This provision rebases federal allotments (caps) for Medicaid DSH payments to maintain the level of changes achieved in the ACA, and determines future allotments off of the rebased level using current law methodology.

Repeal of CLASS Program:  The provision repeals the Community Living Assistance Services and Supports (CLASS) program established by the Affordable Care Act.

Commission on Long Term Care:  The provision a new federal Commission on Long Term Care to develop a plan for the establishment, implementation, and financing of a high quality system that ensures the availability of long-term services and supports (LTSS) for individuals.

Medicare Advantage Coding Intensity Adjustment:  Under current law, Medicare Advantage plans receive risk-adjustment payments that are further adjustment to reflect differences in coding practices between Medicare fee-for-service (FFS) and Medicare Advantage.  This provision increases this coding intensity adjustment.

Consumer Operated and Oriented Plans (CO-OP) under ACA. This provision will rescind all unobligated CO-OP funds under section 1332(g) of the Affordable Care Act.   Under the ACA, the Centers for Medicare and Medicaid Services (CMS) has been providing federal grants and loans designed to fund the creation of these non-profit health plans.  This provision also creates a contingency fund of 10 percent of the current unobligated funds to be used to further assist currently approved co-ops that have already been created.  The provision does not take away any obligated CO-OP funds.