Health Provisions in House UI/Payroll Tax Bill

As you may have heard, the House introduced a new two-month payroll tax/UI extension this afternoon.  Text is available here, and a CBO score is online here.

The health provisions of the House-introduced bill are UNCHANGED from the measure the Senate cleared last Saturday.  Namely, the legislation provides a zero percent update in physician reimbursement levels for January and February 2012, and stipulates that the payment increase shall be disregarded for purposes of calculating SGR rates for future periods.  Those provisions cost $3.6 billion.  The bill also includes several two month extensions of expiring Medicare provisions (listed in full below), costing a total of $510 million.  The entire bill is paid for through non-health savings, namely an increase in guarantee fees for Fannie Mae and Freddie Mac mortgages.

Numerous reports indicate the House will consideration the measure during its session tomorrow.  Timeline for Senate consideration remains unclear; however, under the order of December 17, the Senate is scheduled to convene tomorrow at 9:30 AM and on Tuesday December 27 at noon.

 

Medicare Physician Payment:  Provides for a 0 percent update in reimbursement levels for January and February 2012.  Provides that the payment update shall not be considered when calculating the Sustainable Growth Rate (SGR) reimbursement levels in future periods.

Medicare “Extenders:”  Extends for two months 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;
  • Geographic floor for work;
  • Therapy caps exception process;
  • Technical component of certain physician pathology services;
  • Reimbursement raises for ambulance services;
  • Mental health reimbursements (5% increase);
  • Outpatient hold harmless provision;
  • Minimum payment for bone mass measurement;
  • Qualifying Individual (QI) program, assistance to low-income seniors in paying Medicare premiums; and
  • Transitional Medical Assistance, which provides Medicaid benefits for low-income families transitioning from welfare to work.

Health Provisions of Reid-McConnell Payroll/UI Substitute

Sens. Reid and McConnell have introduced a substitute amendment for H.R. 3630, the House passed payroll tax bill.  Among other things, the substitute includes a two-month extension of Medicare payment provisions, which would prevent a 27 percent reduction in physician payments scheduled to take effect on January 1.  Per the unanimous consent request entered into yesterday evening, the vote on this payroll tax agreement will take place at 9 AM TODAY, subject to a 60-vote affirmative threshold.

The legislation provides a zero percent update in physician reimbursement levels for January and February 2012, and stipulates that the payment increase shall be disregarded for purposes of calculating SGR rates for future periods.  The bill also includes several two month extensions of expiring Medicare provisions (which are usually extended with the SGR).  The entire bill is paid for through non-health savings, namely an increase in guarantee fees for Fannie Mae and Freddie Mac mortgages.

A summary follows below.  Per CBO, the two month doc fix costs $3.6 billion over ten years, the other Medicare extenders cost $510 million, and this $4.1 billion in spending is offset by non-health provisions elsewhere in the bill, making the product fully paid for…

 

Medicare Physician Payment:  Provides for a 0 percent update in reimbursement levels for January and February 2012.  Provides that the payment update shall not be considered when calculating the Sustainable Growth Rate (SGR) reimbursement levels in future periods.

Medicare “Extenders:”  Extends for two months 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;
  • Geographic floor for work;
  • Therapy caps exception process;
  • Technical component of certain physician pathology services;
  • Reimbursement raises for ambulance services;
  • Mental health reimbursements (5% increase);
  • Outpatient hold harmless provision;
  • Minimum payment for bone mass measurement;
  • Qualifying Individual (QI) program, assistance to low-income seniors in paying Medicare premiums; and
  • Transitional Medical Assistance, which provides Medicaid benefits for low-income families transitioning from welfare to work.

Health Provisions in House Payroll Tax Bill

As you know, the House introduced their payroll tax bill earlier today; text can be found here.  With regard to health care provisions, the bill provides for a two year Medicare physician payment update of 1 percent, costing just under $39 billion.  This spending is more than offset by spending reductions – including several included in the President’s deficit proposal, such as additional Medicare means-testing – meaning that the health care provisions collectively reduce the deficit by $32.9 billion.

A summary of the bill follows below; the full CBO score is online here.

 

Medicare Physician Payment:  Provides for a 1 percent update in reimbursement levels for 2012 and 2013.  Provides that these updates shall not be considered when calculating the Sustainable Growth Rate (SGR) reimbursement levels in 2014 and future years.  Costs $35 billion over five years and $38.9 billion over ten years.

Mandates three studies related to physician payments – an HHS study (due January 1, 2013) regarding bundled or episodic-based payments, a GAO report (due January 1, 2013) of private payer initiatives to promote quality and efficiency, and a MedPAC report (due March 1, 2013) on aligning payment incentives between Medicare and private payers.  Commits the committees of jurisdiction to spend the balance of the 112th Congress reviewing options, with an eye toward replacing the SGR mechanism.

Medicare “Extenders:”  Extends for one year increases in ground and rural ambulance reimbursement rates scheduled to expire at year’s end.  Requires an updated GAO report and MedPAC study on ambulance reimbursement levels.  Costs $100 million over five and ten years.

Extends for two years the Medicare therapy caps exception process scheduled to expire at year’s end.  Inserts a new requirement that claims processed under the exception process include an appropriate modifier indicating the claims are medically necessary as justified by medical records documentation.  Beginning in July 2012, subjects claims over $3,700 to a manual medical review process; the $3,700 threshold for review shall apply separately to physical therapy services (including speech-language pathology services) and occupational services.  Requires a report from MedPAC on the therapy benefit, data from HHS on the therapy payment system, and a study from GAO on the manual review process implementation.  Costs $700 million over five years, but saves $1.7 billion over ten.

Extends for one year the Medicare geographic floor for work scheduled to expire at year’s end.  Requires a MedPAC report by June 1, 2012 on work geographic adjustments.  Costs $500 million over five and ten years.

Extends for one year the Qualifying Individual program, which provides assistance to low-income seniors in paying Medicare premiums.  Costs $700 million over five and ten years.

Extends for one year Transitional Medical Assistance (TMA), which provides Medicaid benefits for low-income families transitioning from welfare to work.  Beginning in 2012, provides a process for terminating TMA benefits if a family’s income over a three-month period exceeds 185 percent of the federal poverty level ($41,347 for a family of four in 2011).  Costs $1.2 billion over five and ten years.

Physician-Owned Hospitals:  Modifies requirements on physician-owned hospitals included in last year’s health care law (PPACA, P.L. 111-148).  Permits hospitals under construction as of the date of enactment of PPACA to retain physician ownership; under current law, only those facilities that actually had a Medicare provider agreement in place as of the date of PPACA’s enactment may retain physician ownership.  Removes several restrictions currently in effect that limit the number of physician-owned facilities that may expand.  Costs $100 million over five years, and $300 million over ten; background information on CBO’s scoring practices with respect to physician-owned hospitals can be found here.

Health Insurance Subsidy Recapture:  Modifies the repayment levels for insurance subsidies provided under 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, $89,400 for a family of four); above 400% FPL, no limits applied.  Both the “doc fix” that passed in December 2010 (P.L. 111-309), and the 1099 repeal bill enacted earlier this year (P.L. 112-9), modified these levels; the House proposal would modify those levels still further.  The below spreadsheet shows the maximum repayment amounts (for individuals and families) under the original law, the current law (as modified), and the proposed changes:

Percentage of Poverty PPACA as Enacted December 2010 “Doc Fix”           (P.L. 111-309) Current Law (P.L. 112-9) House Proposal
Under 100% FPL $250/$400 $300/$600 $300/$600 $300/$600
100-150% FPL $250/$400 $300/$600 $300/$600 $400/$800
150-200% FPL $250/$400 $300/$600 $300/$600 $500/$1,000
200-250% FPL $250/$400 $500/$1,000 $750/$1,500 $750/$1,500
250-300% FPL $250/$400 $750/$1,500 $750/$1,500 $1,100/$2,200
300-350% FPL $250/$400 $1,000/$2,000 $1,250/$2,500 $1,250/$2,500
350-400% FPL $250/$400 $1,250/$2,500 $1,250/$2,500 $1,600/$3,200
400-450% FPL* Full subsidy $1,500/$3,000 Full subsidy Full subsidy
450-500% FPL* Full subsidy $1,750/$3,500 Full subsidy Full subsidy
Above 500% FPL* Full subsidy Full subsidy Full subsidy Full subsidy

(*While subsidies are only available to individuals and families with incomes below 400% FPL, the recapture penalties would apply to individuals who received subsidies, yet were not eligible for ANY subsidies based on their income.)

Saves $2.8 billion over five years, and $13.6 billion over ten (including both outlay and revenue effects).

Democrat claims notwithstanding, many may argue that the subsidy recapture 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.  While some Democrats in the House have previously expressed concern about the higher repayment requirements, it is worth noting that last December’s increase in subsidy repayments passed the Senate by voice vote, and passed the House by the overwhelming margin of 409-2, with 243 House Democrats supporting what they later criticized as a “tax increase.”

Prevention “Slush Fund:”  Caps spending for the Prevention and Public Health Fund created in the health care law at $640 million annually, beginning in 2013.  Under current law, the Fund is granted $2 billion in mandatory appropriations for Fiscal Year 2015 and every year thereafter.  Some Members have previously expressed concern that this fund would be used to fund projects like jungle gyms and bike paths, questionable priorities for the use of federal taxpayer dollars in a time of trillion-dollar deficits.  Saves $2.5 billion over five years, and $8 billion over ten.

Hospital Outpatient Evaluation and Management:  Provides that, beginning in 2012, hospital facility fees for outpatient department evaluation and management services shall be paid at the facility practice rate associated with the physician fee schedule.  Saves $2.7 billion over five years, and $6.8 billion over ten.

Medicare Bad Debt:  Reduces bad debt payments to providers – for unpaid cost-sharing owed by beneficiaries – from 45 percent down to 25 percent over three years, beginning in 2013.  Applies changes to skilled nursing facilities and all other providers receiving payments for bad debt.  Differing versions of this proposal have previously been included in the President’s September deficit submission, and the Fiscal Commission’s final reportSaves $3 billion over five years, and $10.6 billion over ten.

Rebase Medicaid Disproportionate Share Hospital Payments:  In 2021, reallocates Medicaid DSH payments to hospitals treating low-income patients, based on states’ actual 2020 allotments (as amended and reduced by the health care law).  No budgetary impact in the first five years, but saves $4.1 billion over ten.

Additional Means Testing:  Increases means tested premiums under Parts B and D by 15%, beginning in 2017.  Freezes the income thresholds at which means testing applies until 25 percent of beneficiaries are subject to such premiums.  This proposal was previously included in the President’s September deficit submissionNo budgetary impact in the first five years, but saves $31 billion over ten.

“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.)

Legislative Update: Extenders and 1099

As you may have seen, Sen. Baucus introduced his latest version of tax extenders legislation yesterday.  A summary of health related provisions follows below; however, all these provisions have been included in prior versions of the extenders package.  The Medicare SGR “doc fix” and extension of Medicaid “stimulus” funding were removed, both provisions having been signed into law earlier this year.  The remainders consist of several Medicare-related provisions, as well as a variety of tweaks of and changes to the health care law.  It also includes a $400 million provision (Section 510) adjusting Medicare fee schedule localities in California, which some may view as a legislative earmark.

While Sen. Baucus sought unanimous consent to pass the legislation yesterday, Republicans objected, due to both a lack of time to review the bill and lack of opportunity to offer amendments.  Following that exchange, Sen. Baucus told CongressDaily he expected consideration to take place during a lame duck session.  As a friendly reminder, the Medicare “doc fix” (which is not included in the current extenders package) expires at the end of November; physicians in Medicare face a 23 percent pay cut on December 1, followed by an additional 6.5 percent reduction on January 1.

Separately, Politico reports this morning that the Democrat leadership in the other body is preparing for another vote on a stand-alone 1099 measure, potentially next week.  Apparently the bill will fully repeal the 1099 reporting requirement included in Section 9006 of the health care law – something which Bill Nelson’s amendment, voted on in the Senate this week, did not do.  However, unlike Republican efforts in both the House and Senate to repeal the 1099 reporting requirement, the latest Democrat initiative would paid for by raising other taxes on business.  The article quotes one Democrat staffer as saying this latest 1099 repeal effort is designed “to put Republicans into a corner” by including a new tax on carried interest as a pay-for.

 

340B Program:  Adds inpatient drugs to the 340B outpatient discount program, and maintains childrens hospitals’ ability to participate in the 340B discount program with respect to orphan drugs.

Health Law Clarifications:  Repeals the health law’s delay of the revised skilled nursing facility prospective payment system, as well as the law’s extension of reasonable cost payments for certain laboratory services.  Repeals section 6502 of the law, which requires states to exclude certain providers from Medicaid and SCHIP.  Includes other clarifying amendments with respect to drafting errors in the health care law.

Other Provisions:  Extends for an additional year (through September 30, 2011) the Section 508 hospital reclassification program, at a cost of $300 million over five and ten years.  Provides $175 million in mandatory appropriations to CMS to implement the act’s provisions.  Includes clarifying provisions regarding eligibility for Medicaid health IT funding provided in the “stimulus.”  Provides $400 million to California to adjust Medicare fee schedule localities, and includes clarifying language preventing Medicare providers from un-bundling reimbursement requests.  Includes language regarding affiliated hospitals and language in the health care law surrounding distribution of medical residency positions.

Legislative Update on Extenders and 1099

As you may have seen, Sen. Baucus introduced his latest version of tax extenders legislation yesterday.  A summary of health related provisions follows below; however, all these provisions have been included in prior versions of the extenders package.  The Medicare SGR “doc fix” and extension of Medicaid “stimulus” funding were removed, both provisions having been signed into law earlier this year.  The remainders consist of several Medicare-related provisions, as well as a variety of tweaks of and changes to the health care law.  It also includes a $400 million provision (Section 510) adjusting Medicare fee schedule localities in California, which some may view as a legislative earmark.

While Sen. Baucus sought unanimous consent to pass the legislation yesterday, Republicans objected, due to both a lack of time to review the bill and lack of opportunity to offer amendments.  Following that exchange, Sen. Baucus told CongressDaily he expected consideration to take place during a lame duck session.  As a friendly reminder, the Medicare “doc fix” (which is not included in the current extenders package) expires at the end of November; physicians in Medicare face a 23 percent pay cut on December 1, followed by an additional 6.5 percent reduction on January 1.

Separately, Politico reports this morning that the Democrat leadership in the other body is preparing for another vote on a stand-alone 1099 measure, potentially next week.  Apparently the bill will fully repeal the 1099 reporting requirement included in Section 9006 of the health care law – something which Bill Nelson’s amendment, voted on in the Senate this week, did not do.  However, unlike Republican efforts in both the House and Senate to repeal the 1099 reporting requirement, the latest Democrat initiative would paid for by raising other taxes on business.  The article quotes one Democrat staffer as saying this latest 1099 repeal effort is designed “to put Republicans into a corner” by including a new tax on carried interest as a pay-for.

 

340B Program:  Adds inpatient drugs to the 340B outpatient discount program, and maintains childrens hospitals’ ability to participate in the 340B discount program with respect to orphan drugs.

Health Law Clarifications:  Repeals the health law’s delay of the revised skilled nursing facility prospective payment system, as well as the law’s extension of reasonable cost payments for certain laboratory services.  Repeals section 6502 of the law, which requires states to exclude certain providers from Medicaid and SCHIP.  Includes other clarifying amendments with respect to drafting errors in the health care law.

Other Provisions:  Extends for an additional year (through September 30, 2011) the Section 508 hospital reclassification program, at a cost of $300 million over five and ten years.  Provides $175 million in mandatory appropriations to CMS to implement the act’s provisions.  Includes clarifying provisions regarding eligibility for Medicaid health IT funding provided in the “stimulus.”  Provides $400 million to California to adjust Medicare fee schedule localities, and includes clarifying language preventing Medicare providers from un-bundling reimbursement requests.  Includes language regarding affiliated hospitals and language in the health care law surrounding distribution of medical residency positions.

Who Put the PhRMA Earmark in the FMAP Bill…?

The education and Medicaid legislation the Senate will be voting on this morning includes a provision that changes Medicaid reimbursement of certain drugs.  The provision had previously been included in “extenders” legislation that the Senate voted on back in June.  However, the language being voted on this morning contains an additional word that was not included in the previous version – “generally:”

Effective as if included in the enactment of Public Law 111-148, section 1927(k)(1)(B)(i)(IV) of the Social Security Act (42 U.S.C. 1396r-8(k)(1)(B)(i)(IV)), as amended by section 2503(a)(2)(B) of Public Law 111-148 and section 1101(c)(2) of Public Law 111-152, is amended by adding at the end the following: ‘‘, unless the drug is an inhalation, infusion, or injectable drug that is not GENERALLY dispensed through a retail community pharmacy; and’’.

That one word gives the Centers for Medicare and Medicaid Services (CMS) flexibility in determining what drugs are generally not dispensed through a retail pharmacy – and that discretion given to CMS means that certain pharmaceutical companies will not have to provide reimbursement rebates to Medicaid.  The Congressional Budget Office found that this one-word change would result in nearly $100 million less in rebates being collected from the pharmaceutical industry (see the $2.1 billion in savings for Section 526 of Senate amendment 4386 offered in June when compared to $2.0 billion in savings for Section 202 of Senate amendment 4575, which we’ll be voting on this morning).  So it’s worth asking:

  • Which drugs, and which companies, will benefit from this $100 million change?
  • Who decided to give the pharmaceutical industry this $100 million earmark, and how did it end up in the legislation?
  • Is this yet another one of Democrats’ infamous backroom deals?  When will the majority finally open legislative agenda to full scrutiny, amendments, and public transparency?

Extenders Update and Revised Health Care Summary

Last night, Sen. Baucus introduced a new substitute; language is attached, along with a redline comparison to “Baucus 2.0,” the substitute introduced last week on which the Senate failed to invoke cloture by a 56-40 vote.  The new substitute DOES include the “doc fix” provisions passed separately by the Senate last Friday as H.R. 3962 – i.e., the six month SGR extension and its pay-fors (IRS-CMS data match and three-day payment rule among them).

The updated substitute extends the Medicaid FMAP assistance provided in the “stimulus,” while reducing the federal match levels.  As a reminder, the “stimulus” provided two categories of enhanced federal funding: an across-the-board increase of 6.2% for all states, along with more targeted assistance focused on states with higher unemployment levels; in both cases the “stimulus” assistance expires on December 31, 2010.  The Baucus substitute would extend the targeted unemployment assistance for a full six months (i.e. through June 30, 2011), while reducing the across-the-board increases – the increase provided to all states for January-March 2011 would be 3.2%, and the increase for April-June 2011 would be 1.2%.  A detailed score is not yet available, but the majority claims this provision will cost $16 billion (down from $24 billion in the earlier versions).

Also of note, the substitute adds a new Section 526, to make inhalation, infusion, and injectable drugs not dispensed through retail community pharmacies subject to the average manufacturer price regime.  Again, a detailed score is not yet available, but the majority claims this provision will save $2.1 billion.

The latest text removes the emergency designation from the Medicaid FMAP increase, as well as the statutory PAYGO exemption from the “doc fix” provisions.  The health subtitle would still add $17.5 billion to the deficit over ten years.

After Sen. Baucus introduced his substitute, Sen. Reid filled the amendment tree and filed cloture on the measure.  As a reminder, barring a unanimous consent agreement, a vote on cloture would occur on Friday, with a vote on passage 30 hours thereafter.

 

Medicare Physician Payment:  Provides a 2.2% increase in reimbursement levels for June-November of 2010.  The legislation also guarantees a further funding “cliff” this December, whereby Medicare payments would be cut by at least 21% absent further Congressional action.  Spends $6.5 billion over five and ten years.

Medicaid Funding:  Includes a six-month extension (through June 30, 2011) of increased federal Medicaid funding provided in the “stimulus.”  Phases down the across-the-board increase in the federal Medicaid match, from the 6.2 percent in the “stimulus” through the end of calendar year 2010 to 3.2 percent in the first calendar quarter of 2011, and 1.2 percent in the second calendar quarter of 2011.  The bill clarifies that states with Section 1115 waivers covering childless adults in effect as of December 31, 2009 qualify for meeting the “stimulus” bill’s maintenance of effort requirements.  The bill also includes a new provision requiring that to obtain the additional six months of federal funding, state chief executive officers must certify “that the state will request and use such additional funds” – language which some may view as a politically motivated stunt.  Spends $16.1 billion over five and ten years.

COBRA Subsidies:  Extends for six months eligibility for COBRA subsidies for individuals laid off through November 30, 2010.  The bill does not extend the length of the subsidy program beyond the current-law 15 months.  The bill designates this spending as emergency appropriations for PAYGO purposes, although it will still add to the deficit.  Raises the deficit by $6.9 billion over five and ten years.

IRS Data Match:  Includes provisions allowing the IRS and CMS to co-ordinate data matching efforts with regard to delinquent tax debts owed by Medicare providers, and to take such information into account when releasing reimbursement payments and accepting new providers.  These provisions were originally included in Section 1303 of the substitute amendment for the reconciliation bill (H.R. 4872), but were stripped out at the House Rules Committee due to Byrd rule concerns.  Saves $175 million over five years and $425 million over ten, according to JCT.

Hospital Payments:  Prohibits Medicare from reopening or adjusting claims made by hospitals during the three days preceding a patient’s inpatient admission.  Saves $4.2 billion over five and ten years.

340B Program:  Adds inpatient drugs to the 340B outpatient discount program, and maintains childrens hospitals’ ability to participate in the 340B discount program with respect to orphan drugs.

Health Law Clarifications:  Repeals the health law’s delay of the revised skilled nursing facility prospective payment system, as well as the law’s extension of reasonable cost payments for certain laboratory services.  Repeals section 6502 of the law, which requires states to exclude certain providers from Medicaid and SCHIP.  Includes other clarifying amendments with respect to drafting errors in the health care law.

“Sweetheart Deal:”  Provides $400 million to California to adjust Medicare fee schedule localities – funds that according to the text of the bill are available only to the state of California.  Some may view this provision as providing a “sweetheart deal” to one specific state.  Costs $400 million over five and ten years.

Average Manufacturer Price:  Makes inhalation, infusion, and injectable drugs not dispensed through retail community pharmacies subject to the average manufacturer price regime.  Saves $800 million over five years and $2.1 billion over ten.

Other Provisions:  Extends for an additional year (through September 30, 2011) the Section 508 hospital reclassification program, at a cost of $300 million over five and ten years.  Provides $175 million in mandatory appropriations to CMS to implement the act’s provisions.  Includes clarifying provisions regarding eligibility for Medicaid health IT funding provided in the “stimulus,” and language preventing Medicare providers from un-bundling reimbursement requests.  Includes language regarding affiliated hospitals and provisions in the health care law surrounding distribution of medical residency positions.

 

UPDATE: New CBO tables were just released; the summary of health provisions with scores has been updated accordingly.  Overall, the bill still increases the deficit by $33.3 billion, and the health subtitle increases the deficit by $17.5 billion.

Six Month, Fully Offset “Doc Fix” Clears Senate

A few moments ago, the Senate passed by unanimous consent a six month doc fix extension.  The legislation would provide a six month doc fix extension, fully paid for through 1) pension provisions included in the Thune substitute amendment Republicans voted for yesterday, 2) language clarifying the three-day payment window (a pay-for included in the Baucus substitute), and 3) a CMS-IRS data match included in both the Thune and Baucus extender packages.  To be clear, the bill ONLY addresses the SGR – it does NOT include unemployment compensation, Medicaid FMAP funding, COBRA insurance subsidies, or any of the other Medicare/health provisions (e.g. Section 508 hospital extension, etc.) included in the Baucus substitute.

A summary follows below.  As a reminder, because the House adjourned last night for the weekend, that body must consider the legislation early next week before the payment changes take effect.  With regard to the broader extenders package, Sen. Reid did not indicate when or how the majority intends to proceed on that measure.

 

Medicare Physician Payment:  Provides a 2.2% increase in reimbursement levels for June-November of 2010.  Stipulates that the payment increase shall be disregarded for purposes of calculating SGR rates for periods after November 30, 2010.  Spends $6.4 billion over five and ten years.

Hospital Payments:  Prohibits Medicare from reopening or adjusting claims made by hospitals during the three days preceding a patient’s inpatient admission.

Pension Relief:  Offers the same relief from pension funding obligations for companies as contained in the Republican fully paid for alternative. This relief raises $2.1 in revenue, because it will result in fewer tax-preferred contributions to pension plans and therefore more taxable income for the firms, and generates $675 million in outlay savings due to lower than expected payments by the Pension Benefit Guarantee Corporation (PBGC).  Saves $2.8 billion over ten years.

IRS Data Match:  Includes provisions allowing the IRS and CMS to co-ordinate data matching efforts with regard to delinquent tax debts owed by Medicare providers, and to take such information into account when releasing reimbursement payments and accepting new providers.  These provisions were originally included in Section 1303 of the substitute amendment for the reconciliation bill (H.R. 4872), but were stripped out at the House Rules Committee due to Byrd rule concerns.  Saves $175 million over five years and $425 million over ten, according to JCT.

Casey/Brown (OH) Amendment (#4371) on COBRA Subsidies

Senators Casey and Brown (OH) have offered an amendment (#4371) regarding COBRA health insurance subsidies.  A vote is possible later today.  This amendment may be subject to a Budget Act point of order for exceeding aggregate spending caps.
Summary
  • The amendment would extend eligibility for federal subsidies of COBRA continuation coverage first included in the “stimulus” (P.L. 111-5).  The amendment would allow individuals currently eligible for subsidies – those suffering a loss of employment prior to May 31, 2010, when the subsidies lapsed – to continue receiving a maximum of 15 months of subsidized coverage.  Individuals laid off after June 1, 2010 would receive only six months of subsidies.
  • The amendment includes elimination of the advanced refundability of the Earned Income Tax Credit (EITC) as a pay-for.
Considerations
  • The Democrat argument that this amendment is paid for is factually dubious on several levels.
  • Although a CBO formal score for the Casey/Brown amendment is not yet available, a six month extension of COBRA subsidies initially included in Section 511 of the House version of H.R. 4213 was scored as costing $6.8 billion.  When included in the President’s Fiscal Year 2011 budget, the Joint Committee on Taxation scored elimination of the advance EITC as saving only $1.2 billion over ten years.
  • While scaling back the subsidy length for newly eligible individuals (i.e. those laid off after June 1, 2010) may reduce the apparent cost of the amendment, many may view this as a budgetary gimmick.  Section 1010 of the Department of Defense Appropriations Act (P.L. 111-118) extended the subsidies from the nine months originally included in the “stimulus” to 15 months.  Given that Democrats have already extended the length of COBRA subsidies once this year, some may question whether the majority will try to lengthen the subsidy duration again at the first possible opportunity.
  • The amendment sponsors are citing an interim report on the COBRA subsidy recently released by the Treasury Department as evidence that the subsidy extension will cost less than the CBO projects.  The Treasury report stated that the program has cost $2.1 billion to date, and served just under 2.2 million households.  However, at the time of the “stimulus” JCT estimated that the subsidy would benefit 7 million individuals.  Even after accounting for an average American household size of 2.59 persons, the 2.2 million households cited in the Treasury report mean that about 5.6 million individuals received some benefit from the subsidies—or nearly 20% fewer than the 7 million projected.  Some may view the smaller cost—because fewer individuals than expected participated in the program in the first place—as evidence that the program is ineffective and should be discontinued, NOT extended.
  • Democrats themselves have raised concerns about the repeated extensions of COBRA subsidies, with little oversight or evaluation by Congress as to the program’s merits—one reason why a six-month COBRA extension was not included in the House-passed extender package.  Rep. Stephanie Herseth Sandlin (D-SD) told CongressDaily last month: “COBRA, that’s never had a hearing. That’s never had a congressional hearing, yet some in our Caucus think that automatically should be extended ad infinitum…There are constituents in our districts who are working and don’t get any help paying for their health insurance and yet we’re going to subsidize COBRA for people who may lose their jobs next month. … So we think some of these provisions warrant far more scrutiny than they’ve received to date.”