Washington Watch

Carter L. Alleman, J.D.

CMS Doctor Pay Rule Timeline May Allow for Few Major Changes

A November deadline for creating a new Medicare payment system for doctors may leave federal officials little time to significantly change a draft proposal. The agency is required by law to finalize the rules by November if officials intend to implement them when the new payment year begins in January.

Centers for Medicare & Medicaid Services (CMS) unveiled the proposed rules in April. Andy Slavitt, the acting administrator for CMS, on Monday tweeted that more than 3,100 responses had been submitted before a Monday deadline. Many physicians appealed to the agency to shorten the reporting period for doctors who will be covered by the most common reimbursement approach, the new merit-based incentive payment system. Instead of looking at a full year of data from doctors, a six-month period could be used, she said.

The rule will carry out the mandate set in last year’s overhaul of physician pay (PL 114-10), known as the Medicare Access and CHIP Reauthorization Act (MACRA). A key concern with MACRA has been helping doctors in small practices adapt to the new reporting requirements. Groups representing doctors have sought to persuade CMS to reconsider the standards for qualifying for alternative payment models, which may prove more profitable in the long term for doctors.

CMS Releases 2014 PQRS Experience Report

The Centers for Medicare & Medicaid Services (CMS) on April 15 released the 2014 Physician Quality Reporting System (PQRS) Experience Report, which summarizes the experiences of group practices and individual providers that participated in the PQRS program. A total of 585,037 providers within 45,723 practices successfully participated in PQRS in 2014, earning $224 million in PQRS incentive payments. The total number of PQRS participants increased by 28 percent between 2013 and 2014. Claims reporting was the most popular way to participate in PQRS in 2014, while the PQRS Group Reporting Option also saw a dramatic increase with nearly 3,000 practices registered to participate in 2014 versus 677 in 2013. Based on 2014 reporting, more than half of all providers avoided the 2 percent penalty on their 2016 charges. Providers who were unsuccessful or nonparticipants in PQRS in 2014 receive a 2 percent penalty on their 2016 claims.

Senators Look for Overhaul of Medicare Appeals

Members of the Senate Committee on Finance, Chairman Orrin G. Hatch, R-Utah, Ranking Member Ron Wyden, D-Ore., and member Richard M. Burr, R-N.C., highlighted a bill (S 2368) that would establish a separate appeals process and keep lower-cost cases out of court, among other changes. The committee advanced that bill last June, but it has not been scheduled for floor consideration.

Their appropriations counterparts also are working to address the issue. The Senate Appropriations Committee on Thursday approved a $5 million increase to the $112.4 million budget for the Office of Medicare Hearings and Appeals, which handles the process, in a fiscal 2017, the United States Department of Labor, Department of Health and Human Services (HHS), and the Department of Education spending bill, although a tight budget cap makes it difficult to find extra funds.

The report and the Senate action highlight an issue that has long plagued providers, who have seen billions of reimbursement dollars tied up in the appeals process. Just 2.4 percent of claims come from beneficiaries, who can get priority review for their appeals. Providers, meanwhile, often wait months for a decision.

Medicare claims appeals at the third level, which are heard by administrative law judges after a case has gone through two prior reviews, skyrocketed by 936 percent between 2010 and 2014, the Government Accountability Office (GAO) found. Many of those appeals came from appeals of hospital and other inpatient stays, which went up by 2,000 percent. Hospitals groups often attribute the increases to the so-called two-midnight rule, which determines when a hospital stay is paid under inpatient or outpatient reimbursements. That had been an area of intense scrutiny for contractors who audit Medicare claims.

The GAO also found that appeals are not being finalized within the 90-day timeframe required by current law -- and emphasized that CMS won't be able to keep up with the skyrocketing rates. GAO also said HHS could do a better job establishing procedures for repetitious claims to ensure that near-duplicate appeals need not go through the process over and over again.

More recent HHS data shows that at the end of fiscal year 2015, some 884,000 third-level appeals were waiting to be adjudicated and another 14,874 were in limbo at the fourth level, the highest level of appeal. The agency can process about 75,000 third-level appeals and about 2,300 fourth level appeals in one year.

Missouri Regulator Moves to Block Aetna-Humana Deal

The Missouri Department of Insurance filed a preliminary motion opposing the merger, saying that the $37 billion proposed merger would "substantially lessen competition in the state" in the individual, small group, and Medicare Advantage markets.

Twenty states -- which do not include Missouri -- have the power to stymie the merger. In those states, officials must agree to allow local Humana subsidiaries to be taken over by Aetna in what is known as a "change of control approval." The Aetna-Humana deal has already been cleared by 15 of those 20 states.

Those states and others where Aetna and Humana are major market players, like Missouri, can undertake a separate process to investigate the competitive impacts of the merger on consumers. If a state uses that process to oppose the merger, it can consider preventing the companies from combining within the borders of the state. State attorney generals can also launch their own antitrust investigations or work with the Department of Justice.

MedPac Pushes for Competitive Medicare Drug Purchases

In an annual report to Congress, the Medicare Payment Advisory Commission (MedPAC) took a comprehensive look at how the nation’s single biggest purchaser of health care can manage its prescription drug costs.

MedPAC suggested steps for sharpening both the negotiations that insurers handle for the Part D program and Medicare’s approach to paying through the Part B program for drugs administered in doctors’ offices. The Part D guidance was within a set of formal recommendations, while MedPAC's suggestions for addressing the prices of Part B drugs are not yet as developed.

MedPAC suggested having Medicare remove two kinds of drugs, antidepressants and immunosupressants used by transplant patients, from the classes of medicines that are required to be broadly covered, which limits insurers' ability to drive bargains.

It also suggested making a Part D reinsurance program that shields insurance companies from steep losses less generous to insurers. Reinsurance provides funding to insurers when a customer of the Part D plans has pharmacy bills that top $7,517 a year, a threshold known as the catastrophic spending level. The reinsurance program accounted for about 38 percent of the $73.3 million Medicare spent for the Part D program in 2014, up from 17 percent of $46 billion in 2007, MedPAC said.

In the report, MedPAC did not specifically address a controversial Medicare proposal regarding the payment for Part B drugs administered in doctors’ offices. Drugmakers and Republicans in Congress are pushing for Medicare to withdraw the plan, first released in March. Medicare has not given a timeline for when it will release a revised final version of the plan.

The new report from MedPAC indicates a broader concern with the rising costs of drugs, beyond the relatively small initial step proposed in the Part B model. The proposal would switch some doctors away from the current reimbursement in which a premium of about 4.3 percent is added to the reported average sales price for medicine. They would instead get a premium of less than 1 percent with an added fee of $16.80 for administering drugs.                              

Among the approaches MedPAC suggested is combining certain similar drugs into a single billing code, thus creating price competition. Drugmakers complain that this approach would erode the high prices, and thus profits, that manufacturers say they need to fund their research. MedPAC noted there's not enough information for outside groups to assess how much money pharmaceutical companies require for these efforts, echoing a complaint that's been raised by critics of the industry.

Medicare's Hospital Fund Dire Report

Medicare’s hospital insurance trust fund will draw in enough revenue to cover its expenses only through 2028, the trustees said in their annual report released Wednesday. Last year, trustees projected that these hospital expenses could be covered through 2030.

The trustees urged Congress to address the looming shortfall, noting that new legislation would be needed to allow transfers from the Treasury’s general fund to address the shrinking hospital fund. The hospital trust fund is considered a bellwether for the challenges facing the United States as baby boomers age into their retirement years. The trustees on Wednesday also reported that Social Security’s retirement and disability trust fund reserves are projected to be exhausted in 2034, the same year projected in last year’s report.

Congress has not taken many actions in recent years to address the programs' long-term funding. Medicare's total expenses might reach $1.29 trillion in 2026, up from $ 683.2 billion this year, according to what the trustees term intermediate estimates. The mandatory spending involved in caring for senior citizens and the disabled are expected to crowd out other national priorities in future budget battles.

The report could signal another congressional battle over raising the premiums that some people pay for Medicare Part B services, such as routine visits to doctors. The standard monthly premium may rise from $121.80 this year to $149.00 next year. The trustees in their 2015 report had predicted the Part B premium would rise to $159.30 for 2016, but Congress acted through last year’s budget deal to lower it.

The projected 2017 hike would apply for only about 30 percent of people on Medicare, because the majority of beneficiaries would be protected by a “hold harmless” provision that keeps their premium increases in check. Under the provision, increases in Medicare Part B premiums can't exceed the dollar increase in Social Security benefits. The cost-of-living adjustment for Social Security next year could be 0.2 percent, meaning about 70 percent of people would see only small increases in their Medicare payment, the trustees said.

Among those potentially in line for a higher 2017 Medicare premiums are people enrolling in Part B for the first time, those that do not receive a Social Security benefit and people who qualify for both Medicare and the Medicaid program due their low incomes.

House Republicans Offer Details on Obamacare Replacement

House Republican leadership released a sweeping manifesto for overhauling the health care system, one that focuses on repealing the 2010 health care law but also hints at GOP priorities should Democrats win the election. The 37-page document contains a variety of proposals that have been floated before. Many, such as a tax credit for people purchasing health insurance in the individual market, aim to replace the features of the 2010 health care law designed to reduce the uninsured rate and improve access to coverage. But the document also includes proposed changes to Medicare, Medicaid, malpractice law and even medical research funding.

The plan would fully repeal the health care law's individual and employer coverage mandates and their associated penalties. It would keep popular provisions, such as its requirement that health plans keep young people on their parents' plans until the age of 26 and the ban on insurers kicking sick consumers off their plans. Unlike the tax credits offered under the health law, these would be a flat, monthly credit available regardless of income. Older Americans, whose health costs are usually higher, would get larger credits.

The proposal would forbid insurers from discriminating on the basis of pre-existing conditions, highlighting a requirement that insurers not increase costs for anyone who maintains continuous coverage under a health plan. They also propose $25 billion in funding to strengthen state-based high-risk pools for consumers otherwise priced out of the individual market, in which premiums would be capped.

Under the new Republican plan, insurers would get regulatory relief from many of the law's requirements related to essential health benefits, and they'd also get to charge older Americans up to five times more than younger Americans for their insurance. The health law sets that ratio at three.

The proposal relies on the expansion of tax-preferred Health Savings Accounts, which are usually coupled with high-
deductible health plans. It would expand regulations that let insurers sell products across state lines, and it would also allow small businesses to band together to offer association health plans. The proposal also takes aim at employer-sponsored health insurance by capping the health insurance tax exclusion for employers for the most generous health care plans. The move would rein in what some Republicans view as a problematic tax break for employers while discouraging high-end coverage.

The blueprint also outlines $25 billion in funding for states looking at innovative ways to reduce insurance premiums. And it includes several restrictions on using taxpayer funding for abortions that go beyond those in the 2010 law.
The outline would overhaul the Medicare program for the elderly and disabled by setting up a voucher program under which the federal government would pay a portion of the health insurance premium as a defined contribution. Beneficiaries would be liable for the remainder of the cost. Republican budgets and other proposals in recent years have described similar ideas. Other provisions take aim at uncompensated care and look to achieve performance parity between private Medicare Advantage plans and traditional fee-for-service Medicare. It would also give insurers more flexibility in benefit design under Medicare Advantage.

IPAB Lives on in Annual Medicare Report

Medicare trustees on Wednesday again gave prominence to the Independent Payment Advisory Board (IPAB), a panel created under the 2010 health care law that's never had members appointed and that's been repeatedly targeted for termination by congressional Republicans, with the backing of some Democrats.

The law mandates that IPAB or the Department of Health and Human Services (HHS) put forward a package of spending cuts if growth in Medicare spending reaches a trigger point. The trustees on Wednesday reiterated an estimate that the IPAB trigger on spending would be reached for the first time in 2017, which would require that a package of cost-cutting proposals move forward in 2018.

Lawmakers have a history of easing the terms of cost controls such as the IPAB. It did this with the so-called sustainable growth rate, created by a 1997 budget law. Moving to repeal the IPAB provision could trigger a debate about finding alternative savings in the budget to offset the loss of those estimated to result from the trigger provision. The 2010 law calls for making IPAB’s proposals take effect automatically unless Congress acts to stop them. Paying the cost for medical care for the aging baby boomers is seen as one of the largest challenges to the federal budget. Medicare's annual outlays may jump to $1.29 trillion in fiscal 2026 from $695 billion in fiscal 2016, according to the Congressional Budget Office.