The House and Senate have passed a new payroll tax cut bill that also stopped the Medicare payment cut to physicians, and it will now head to President Barack Obama's desk, where it is expected to be signed, according to a Politico report. But what does the bill mean for hospitals and healthcare?
The Middle Class Tax Relief and Job Creation Act of 2012 (pdf) will extend several provisions to Medicare policies:
• Sustainable growth rate: Physicians will not incur Medicare payment cuts of 27.4 percent, and their current Medicare rates will be frozen until Dec. 31, 2012, when the SGR will enact even higher cuts to physician payments to adjust for the economy. The SGR patch is the most expensive fix, as it will cost roughly $18 billion over 10 years. The Department of Health and Human Services and the Government Accountability Office must also issue reports to Congress this year to find a long-term solution to the SGR, according to the bill.
• Section 508 hospital payments: Under Medicare's Inpatient Prospective Payment System, hospital wage payments are adjusted by a wage index that is intended to reflect the cost of labor in that geographical area and are also compared with a national average. Hospitals will receive these wage index payments through March 31, 2012. After that point, the wage index program will be completely terminated. These payments were created in 2003 and were intended to last only three years. In total, this provision will cost $100 million over 10 years.
• Hospital outpatient hold harmless payments: Eligible rural hospitals and sole community hospitals with less than 100 beds will continue to receive outpatient hold harmless payments through Dec. 31, 2012. The hold harmless payment system provides a payment that is equal to 85 percent of the difference between the Outpatient Prospective Payment System and the hospital's costs. HHS must also file a report to Congress by July to determine which hospitals need these payments to maintain beneficiary access to outpatient services. This extension is projected to cost $100 million over 10 years.
• Physician work geographic adjustment: Payments to physicians who work in a Medicare geographic with a work value below the baseline will be extended. This will cost roughly $400 million over 10 years.
• Outpatient therapy caps: The exceptions process for outpatient therapy caps will be extended through Dec. 31, 2012. Additionally, spending caps that have been in effect since 2006 will be extended to the hospital outpatient department to "prevent a shift in the site of service to higher cost settings once enforcement of the current exceptions process begins."
• Payment for pathology services: Independent labs that have arrangements with eligible hospitals can bill Medicare directly, as opposed to billing the hospital, for certain surgical pathology services through June 30, 2012. This four-month extension, which will give hospitals, physicians and labs time to establish new payment arrangements, will cost roughly $50 million over 10 years.
• Ambulance add-on payments: Payments for the following ambulance services will be extended through Dec. 31, 2012: 2 percent for urban ground ambulance services, 3 percent for rural ground ambulance services and an increase to the base rate for ambulance trips that occur in "super rural" areas. In total, this will cost $100 million over 10 years.
Those and two other extenders will cost roughly $21 billion over the next decade, and Congress will be offsetting those costs through the following provisions:
• Reduction of bad debt payments: For hospitals and skilled nursing facilities, bad debt reimbursement rates from Medicare will be reduced from 70 percent to 65 percent beginning in fiscal year 2013. Other providers, such as federally qualified health centers and dialysis centers, will have their Medicare bad debt reimbursement rates reduced from 100 percent to 65 percent, but this will be phased over three years. This provision will cut healthcare spending the most — $6.9 billion over the next 10 years.
• Medicaid Disproportionate Share Hospital Payments: Starting in FY 2021, Medicaid DSH payments will be rebased, which will cut funds by $4.1 billion.
• Medicaid funding for Louisiana disaster fund: Starting in FY 2014, Louisiana will no longer receive the Medicaid federal disaster matching rate that was provided in the wake of Hurricane Katrina, cutting a total of $2.5 billion.
• Clinical lab payment rates: Payment rates for clinical lab services will be reduced by 2 percent starting in 2013, which will reduce spending by $2.7 billion.
• Prevention and Public Health Fund: The Prevention and Public Health Fund, part of the Patient Protection and Affordable Care Act, will be cut by $5 billion.
The Middle Class Tax Relief and Job Creation Act of 2012 can be viewed in its entirety here (pdf).
The Middle Class Tax Relief and Job Creation Act of 2012 (pdf) will extend several provisions to Medicare policies:
• Sustainable growth rate: Physicians will not incur Medicare payment cuts of 27.4 percent, and their current Medicare rates will be frozen until Dec. 31, 2012, when the SGR will enact even higher cuts to physician payments to adjust for the economy. The SGR patch is the most expensive fix, as it will cost roughly $18 billion over 10 years. The Department of Health and Human Services and the Government Accountability Office must also issue reports to Congress this year to find a long-term solution to the SGR, according to the bill.
• Section 508 hospital payments: Under Medicare's Inpatient Prospective Payment System, hospital wage payments are adjusted by a wage index that is intended to reflect the cost of labor in that geographical area and are also compared with a national average. Hospitals will receive these wage index payments through March 31, 2012. After that point, the wage index program will be completely terminated. These payments were created in 2003 and were intended to last only three years. In total, this provision will cost $100 million over 10 years.
• Hospital outpatient hold harmless payments: Eligible rural hospitals and sole community hospitals with less than 100 beds will continue to receive outpatient hold harmless payments through Dec. 31, 2012. The hold harmless payment system provides a payment that is equal to 85 percent of the difference between the Outpatient Prospective Payment System and the hospital's costs. HHS must also file a report to Congress by July to determine which hospitals need these payments to maintain beneficiary access to outpatient services. This extension is projected to cost $100 million over 10 years.
• Physician work geographic adjustment: Payments to physicians who work in a Medicare geographic with a work value below the baseline will be extended. This will cost roughly $400 million over 10 years.
• Outpatient therapy caps: The exceptions process for outpatient therapy caps will be extended through Dec. 31, 2012. Additionally, spending caps that have been in effect since 2006 will be extended to the hospital outpatient department to "prevent a shift in the site of service to higher cost settings once enforcement of the current exceptions process begins."
• Payment for pathology services: Independent labs that have arrangements with eligible hospitals can bill Medicare directly, as opposed to billing the hospital, for certain surgical pathology services through June 30, 2012. This four-month extension, which will give hospitals, physicians and labs time to establish new payment arrangements, will cost roughly $50 million over 10 years.
• Ambulance add-on payments: Payments for the following ambulance services will be extended through Dec. 31, 2012: 2 percent for urban ground ambulance services, 3 percent for rural ground ambulance services and an increase to the base rate for ambulance trips that occur in "super rural" areas. In total, this will cost $100 million over 10 years.
Those and two other extenders will cost roughly $21 billion over the next decade, and Congress will be offsetting those costs through the following provisions:
• Reduction of bad debt payments: For hospitals and skilled nursing facilities, bad debt reimbursement rates from Medicare will be reduced from 70 percent to 65 percent beginning in fiscal year 2013. Other providers, such as federally qualified health centers and dialysis centers, will have their Medicare bad debt reimbursement rates reduced from 100 percent to 65 percent, but this will be phased over three years. This provision will cut healthcare spending the most — $6.9 billion over the next 10 years.
• Medicaid Disproportionate Share Hospital Payments: Starting in FY 2021, Medicaid DSH payments will be rebased, which will cut funds by $4.1 billion.
• Medicaid funding for Louisiana disaster fund: Starting in FY 2014, Louisiana will no longer receive the Medicaid federal disaster matching rate that was provided in the wake of Hurricane Katrina, cutting a total of $2.5 billion.
• Clinical lab payment rates: Payment rates for clinical lab services will be reduced by 2 percent starting in 2013, which will reduce spending by $2.7 billion.
• Prevention and Public Health Fund: The Prevention and Public Health Fund, part of the Patient Protection and Affordable Care Act, will be cut by $5 billion.
The Middle Class Tax Relief and Job Creation Act of 2012 can be viewed in its entirety here (pdf).
Related Articles on the Sustainable Growth Rate:
Hospitals Face Nearly $11B in Cuts in New Payroll Tax, SGR Bill
Sen. Baucus: Permanent SGR Fix May Not Happen This Year
9 Biggest Issues Surrounding the Medicare Sustainable Growth Rate