This Week in Washington – March 27, 2015

House Approves SGR Repeal

On Thursday, March 26, the House overwhelmingly approved the bipartisan Medicare Access and CHIP Reauthorization Act of 2015 (H.R. 2) to repeal the Medicare physician payment formula. The bill passed with a vote of 392-37, with the support of 212 Republicans and 180 Democrats. The legislation now shifts to the Senate, where the bill has growing support for passage given the White House officially endorsed the House SGR bill on Wednesday.

Since the Senate was busy voting on a budget resolution until 3 AM on Friday morning, Majority Leader Mitch McConnell (R-KY) decided not to take up the House-passed measure before the Easter recess. That means the bill will not get a vote until the week of April 13 at the earliest. Without legislation passed, physicians would see a 21 percent cut in their payments on April 1, but CMS has indicated that electronic claims aren’t paid until at least 14 calendar days after they’re received. This would provide the Senate a small cushion to pass legislation before physicians feel the cut.

In broad terms, the SGR deal would eliminate the current Medicare formula for paying physicians, known as the Sustainable Growth Rate. The deal would implement a new payment policy that is designed to reward quality instead of volume. The bill would provide fee increases of 0.5 percent in each of the next four years. Payment rates would then hold flat for six years. After that, physicians would see annual 0.25 percent payment increases.

To pay for the deal, the bill would establish two changes to entitlement programs. It would require additional means testing for high-income seniors’ Medicare premiums and eliminate first-dollar coverage in future Medigap policies. On Wednesday, the Congressional Budget Office (“CBO”) estimated that H.R. 2 would add $141 billion to the deficit over the next decade. CBO also said that savings from the entitlement reforms would increase in the second decade.

Cuts to providers also help off-set the cost of the deal. Post-acute care providers, including skilled nursing facilities and long-term care hospitals, will see market basket rates increase by no more than one percent in 2018 under the deal. The House deal delays DSH cuts by another year, pushing them back to fiscal year 2018, but it also authorizes DSH cuts to continue for an additional year through 2025.

House SGR Deal Extends Two-Midnights Enforcement Delay

The House-passed SGR replacement bill included an extension of the partial enforcement delay of Medicare’s two-midnight hospital admission policy. Under the current two-midnight policy, adopted in 2013, a beneficiary isn’t defined as an “inpatient” unless the doctor believes the beneficiary will be hospitalized for at least two midnights. Under this policy, shorter stays are considered outpatient and reimbursed at a lower rate.

As part of the last SGR patch, Congress included a measure to restrict CMS from using Recovery Audit Contractors to audit short hospital stays through March 2015. H.R. 2 would extend the enforcement delay through the end of September 2015. The provision allows CMS to continue the use of the Medicare Administrative Contractor (“MAC”) “probe and educate” program to assess provider understanding and compliance with the two-midnight rule on a prepayment basis through September 30.

House Anti-Fraud Measure Included in House Passed SGR Bill

The House package to permanently replace the SGR includes the House Ways and Means Committee’s Medicare anti-fraud bill. The Committee had passed the anti-fraud legislation in February, and H.R. 2 includes provisions from the measure that would set up a MAC outreach and education program, extend MAC contracts to 10 years, broaden the scope of who can sign off on durable medical equipment face-to-face requirements and require home health agencies to carry surety bonds worth at least $50,000.

Bills Introduced This Week

Rep. Kristi Noem (R-SD) introduced the Protecting Access to Rural Therapy Services (“PARTS”) Act. The bill (H.R. 1611) is intended to provide patients living in rural areas with greater access to therapeutic hospital outpatient services in local health care facilities. The legislation would require CMS to allow general supervision (rather than direct supervision) for low-risk services. Sens. Jerry Moran (R-KS) and John Thune (R-SD) introduced the PARTS Act (S. 257) in the Senate in January.

Rep. Joe Courtney (R-CT) introduced a bill (H.R. 1571) to amend Title XVII of the Social Security Act to count a period of receipt of outpatient observation services in a hospital toward satisfying the three-day inpatient hospital stay requirement for coverage of skilled nursing facility services under Medicare. The legislation would allow all time beneficiaries spent in the hospital, whether they were formally admitted or under observation status, to be counted toward the hospital stay requirements necessary to receive Medicare coverage for skilled nursing care. A companion bill (S. 843) was also introduced in the Senate by Sen. Sherrod Brown (D-OH).

Sen. Susan Collins (R-ME) introduced a bill (S. 839) to amend Title XVIII of the Social Security Act to extend the rural add-on payment in the Medicare home health benefit. The legislation would provide additional payments for Medicare home health services in rural areas.

Sen. Thomas Carper (D-DE) introduced a bill (S. 861) that would enact stronger penalties and prevention strategies to curb waste, fraud and abuse in the Medicare and Medicaid programs.