By Rebecca Adams, CQ HealthBeat Associate Editor

December 2, 2010 -- Hospitals would receive a 1 percent net increase in inpatient and outpatient payment rates in fiscal 2012 under a draft recommendation issued by the influential Medicare Payment Advisory Commission (MedPAC).

The draft language could change before the commission votes in January on final recommendations to send to Congress. After the final recommendations are released, Congress would then have to clear legislation approving the changes. Lawmakers have a mixed record of accepting MedPAC's suggestions.

Officials for the American Hospital Association (AHA) expressed concern about the impact of the proposal, particularly on outpatient departments whose costs to treat Medicare patients significantly outpace the funding they get from the program.

"We disagree with the update," said Joanna Kim, AHA senior associate director for policy. In remarks to commissioners, Kim urged the panel to reconsider both the inpatient and outpatient rates. She emphasized that hospital outpatient centers need a full update reflecting increases in costs, which commission staff estimated would be about 2.6 percent.

Commission staff estimated that hospital margins were negative in 2009, meaning that payments from Medicare were less than treatment costs. Payments were 5.2 percent less than costs in 2009, an improvement from 7.1 percent in 2008 and 6.0 percent in 2007. Just for inpatient care, the margins were –2.4 percent while the outpatient margins were –10.8 percent.

Before Kim gave the hospital industry's objections, commissioners appeared supportive of the draft recommendation, although several expressed concerns about the factors used to arrive at the recommendation.

MedPAC Chairman Glenn Hackbarth came up with the proposal after studying hospitals' estimated margins. He said he believed it was important to give hospitals a modest rate increase and decided on the 1 percent number. He said he then looked for factors to support the decision, factoring in such issues as payment changes tied to coding problems, productivity and the overall hospital margins.

Commissioners spent a good deal of time discussing details of those components.

Hospitals were overpaid in 2008 and 2009 because of coding changes. The Centers for Medicare and Medicaid Services is in the process of recapturing some of those overpayments. CMS officials also are supposed to reduce future payments at some point to prevent further overpayments. But the agency has not yet taken this step and is not under a deadline to make that change, so Hackbarth is proposing a coding adjustment amounting to a 1.6 percent decrease in payments in order to encourage CMS to act as soon as possible.

Hackbarth combined that 1.6 percent decrease with other adjustments to arrive at the 1 percent figure.

Kim said that her group does not believe hospitals were overpaid as much as CMS officials believe. She said that it is important to get accurate estimates because "every small percent" change in coding payments "is very important." A 0.1 percent change is worth $100 million to hospitals, which means that the MedPAC draft recommendation would represent a $1.6 billion loss.

However, Hackbarth took into account that hospitals would lose money under that proposal. He recommended compensating for that by helping hospitals with another factor. Under current law, hospitals are expected to get a –1.4 percent productivity update; Hackbarth recommended changing that to zero. That change, accompanied by the reductions aimed at preventing coding overpayments, allowed Hackbarth to support an overall 1 percent increase while still pushing CMS to avoid additional overpayments.

Commissioners Scott Armstrong, president and CEO of the Seattle-based Group Health Cooperative, and Peter Butler, executive vice president and chief operating officer of Rush University Medical Center in Chicago, raised concerns about the continued trend of hospitals receiving lower payments than costs. Armstrong, saying he wondered about the sustainability of the ongoing negative margins, asked whether commissioners should have some target margin that they believe is adequate.

But Hackbarth said that the 17-member commission should not recommend an increase in rates just to push up hospitals' margins. On the contrary, he said that hospitals become more efficient when under financial stress. He also noted that since the backlash against managed care plans, insurers' payments to hospitals "in many markets have been pretty generous for the past 10 years or so." That allows hospitals to make up for lower Medicare payments.

Hackbarth said that Medicare and preferably all payers, including insurers, should put more financial pressure on hospitals. "When institutes face pressure, they're able to reduce their costs," Hackbarth said.

That's partly because many hospitals are nonprofits, and "if you provide more money, most of it's going to be spent" pursuing the hospital's mission, Hackbarth said. "You're just going to be chasing your tail and never deal with escalating costs as a problem."

By Jane Norman, CQ HealthBeat Associate Editor

December 2, 2010 -- Even as members of the Medicare Payment Advisory Commission (MedPAC) debated recommending a 1 percent increase in doctor payments for 2012, they stressed their frustration at Congress' series of five short-term adjustments to scheduled reimbursement cuts.

Several commissioners also questioned a survey by MedPAC staff that said that nationally, just a small percentage of beneficiaries find it difficult to see a doctor.

Their comments reflected growing unhappiness in the physician community about the scheduled large reductions in Medicare payment rates that Congress again postponed earlier this week. "This is the most disruptive thing that I see in the medical community, and I think most of us feel that way," said Ronald D. Castellanos, a physician with Southwest Florida Urologic Associates in Fort Myers, Fla.

Commission Chairman Glenn Hackbarth said that language in the commission's annual report to Congress should express the panel's dismay "as clearly and prominently as possible." Hackbarth said the repeated extensions and the disruptions they produce are "a real problem and a growing problem for the program."

The recommendation for a 1 percent payment increase could change before the commission votes on final recommendations to Congress in January, though members said they were comfortable with that level.

Congress is not obligated to follow the recommendations of MedPAC, an independent advisory body. But at a minimum they serve as a reference point for debate.

President Obama on Nov. 30 signed a law (PL 111-286) that would postpone for one month a scheduled 23 percent cut in physician payment rates that was scheduled to take effect Dec. 1. It will cost $1 billion over 10 years but would be offset by savings from within the physician payment system.

Senate Finance Chairman Max Baucus, D-Mont., and Sen. Charles E. Grassley of Iowa, the top Republican on the panel, have said they are working on an agreement to pay for a one-year postponement of the cuts. Republicans have objected to bills that fail to find other savings to cover the costs of the payments, although under budgetary pay-as-you-go rules Medicare reimbursements do not have to be offset.

A survey conducted by MedPAC staff this fall of 8,000 people and discussed at the meeting indicated that Medicare beneficiaries are not having much trouble finding doctors, which is similar to survey findings in the past.

The survey said that Medicare enrollees are less likely than privately insured people ages 50 to 64 to report unwanted delays in getting appointments with doctors. It also said that 75 percent of the Medicare beneficiaries contacted said they "never" had delays in getting routine care appointments, and 83 percent said they never had delays in getting an illness or injury appointment.

Medicare beneficiaries also were less likely than people with private insurance to report problems finding a new physician, according to the survey. Seven percent of those surveyed were looking for a new primary care provider. Among that 7 percent, 79 percent reported no problem and 12 percent reported a "big problem" finding a new doctor. MedPAC staff members said those with problems amount to about 1 percent of all beneficiaries, though it's still a concern.

However, the survey also noted that minorities experience more problems with access to care than whites. Among those seeking a routine care appointment, 76 percent of white beneficiaries said they never had a problem, while the figure was 74 percent for minorities. Among those seeking a new specialist, 5 percent of white Medicare beneficiaries found a big problem while 9 percent of those in minority groups said the same.

In response to questions from the panel, staff members said the survey did not capture physicians who say they accept new Medicare patients but have a shrinking number of appointment slots available for them.

Hackbarth noted there is a "disconnect" between the survey results and what members of Congress are hearing from constituents complaining about fewer doctors available who accept Medicare patients. He said he wasn't sure of the answer but speculated that the situation may vary from market to market. In Oregon, where he lives, Hackbarth said there are many retirees moving in and the physician supply has not kept pace.

He also pointed out that with 48 million Medicare beneficiaries, even a small percentage of people with problems finding care can generate a number of complaints.

The staff report also found that the volume of physician services per beneficiary continues to grow, based on an analysis of claims, and that most quality indicators in care were stable or improved between 2007 and 2009. In addition, Medicare payments continued to be about 80 percent of private payer rates, the same as in the previous year, and 99 percent of all charges were paid in full.

Commission members also received a draft recommendation to possibly increase reimbursements for ambulatory surgical centers by 0.6 percent, though there was also discussion of not voting on that a recommendation because little new information is available on the centers.

By Rebecca Adams, CQ HealthBeat Associate Editor

November 29, 2010 -- It's been a long time—more than 20 years, actually—since lawmakers have considered repealing a major piece of health care legislation. And in that case, they really didn't have any choice. The 1988 measure provided new Medicare prescription drug coverage and protections from catastrophically high medical bills, but it required about 40 percent of seniors to pay higher income taxes to finance it. Public opinion was clear: In Chicago, House Ways and Means Committee Chairman Dan Rostenkowski had to run from a pack of screaming seniors who blocked his car and shook their canes at him in protest. Startled lawmakers cleared a repeal 16 months after it became law. Only 66 House members dared to vote against it. Not one senator did.

This time around, opponents of the new health care law must wish they could generate that kind of public outrage. Polls show that the public is pretty evenly divided about the law. And opposition to it is not based on experience—many of the law's provisions don't kick in until next year or later.

Moreover, the new law is far more complex than the 1988 measure. It remakes every aspect of the health care system at the federal, state and local level through an interlocking and interdependent web of provisions. As a result, efforts to unwind the measure are as fragmented as the health care system itself, with challenges rising in Congress, the states and the courts. The question is whether any of them will pull a thread that unravels the fabric of the law.

Congressional Republicans do not expect to be able to overturn the law in its entirety. They could succeed in moving a repeal bill through the House, but even if it survived the Senate, President Obama would be waiting with his veto pen to kill it.

Republicans know that. But they are under pressure to fulfill campaign pledges to gut the law and are committed to keeping the issue in front of voters until the 2012 elections. They see the symbolic votes, hearings and investigations ahead as useful campaign ammunition.

More substantive action might take place in the states, where governors and state lawmakers who have to implement major portions of the law will have wide latitude to interpret it. State legislatures are charged with passing legislation authorizing major changes, such as the new "exchange" marketplaces that the law requires in every state by 2014. State officials may not want to implement the law according to the vision of the Democrats in Washington who wrote it. They are already pressing the Obama administration to waive key elements of the law.

The most unpredictable challenges are in the courts. Attorneys general in two separate cases have challenged the constitutionality of the law, meaning its final fate may rest with the Supreme Court.

The goal of congressional Republicans is to convince voters that Democrats are thwarting the public's will as expressed in polls and in the midterm election "shellacking." And that's where the hearings and votes come in, as each one will underscore Democrats' continued support of the law.

"We may not be able to bring about straight repeal in the next two years, and we may not win every vote against targeted provisions, even though we should have bipartisan support for some," said Senate Minority Leader Mitch McConnell of Kentucky. "But we can compel administration officials to attempt to defend this indefensible health spending bill and other costly, government-driven measures."

Democrats mostly are clinging to the hope that once voters learn more about what is actually in the law, perceptions will change. They note that some parts of the law are popular, including tax credits for small businesses and insurance rules that require plans to cover dependents up to age 26 and prevent insurers from dropping patients' coverage once they get sick.

Obama cited support for those types of provisions in a post- election news conference Nov. 3. "I don't think that you'd have a strong vote for people saying, you know, 'Those are provisions I want to eliminate,''' Obama said, adding that he still feels confident that enacting the law was "the right thing to do."

After Republicans demonstrate that they don't have the votes to get a full repeal through to Obama, they can be expected to line up targeted attacks against specific provisions in the law. One of the first opportunities will come during the debate on the fiscal 2012 budget resolution, because it tends to frame the issues for the coming year and because health care and budget issues are so intertwined.

This could present a problem for the GOP. The Congressional Budget Office (CBO) has estimated that many of the provisions in the health care law would save money, so undoing them would be seen as adding to the deficit. Some provisions could be repealed without offsets—for instance, Medicaid expansions and subsidies to help people who earn up to 400 percent of the federal poverty limit to buy insurance starting in 2014—but for many others, the Republicans would have to pay for the changes or face charges of hypocrisy on the deficit.

"They're going to have to deal with the rhetoric that the first thing you do as Republicans is repeal the health care law that some people support and, more importantly, you're adding to the deficit," said G. William Hoagland, a longtime Republican Senate Budget aide and now vice president for public policy for Cigna Corp. "So how do they pay for the repeal? I don't know the answer. They're in a box here, it seems to me. Just flat-out repeal would be scored as a cost, and I'm not sure how they get out of that box."

A Question of Money

Some GOP health care proposals that could replace the law would save some money, but not enough. For instance, medical malpractice changes could save about $54 billion over a decade, according to the CBO. Eliminating or limiting the subsidies for insurance and curbing the law's expansion of Medicaid would save hundreds of billions of dollars. But those savings would be consumed by ripping out provisions such as tax changes, payment growth reductions to providers, and penalties for employers who don't offer coverage or individuals who don't buy it.

Republicans also might press the CBO to revisit its estimates, especially since the term of the current CBO director, Douglas Elmendorf, runs out in January. Elmendorf may be reappointed. If he's not, the Senate Budget Committee, which is controlled by Democrats, would take the lead in recommending a replacement. But either way, Republicans hope CBO will give previous estimates a second look.

Another option for Republicans is to attach provisions blocking implementation of the law to "must-pass" legislation. Congressional rules bar lawmakers from making substantive authorization changes to appropriations bills, but riders that prevent agencies from working on a policy for one year might make it through. Critics also could try to kill regulations stemming from the law by using a tool known as the Congressional Review Act.

All of those attempts would be opposed by Obama. It is possible, however, that Congress could adjust tangential elements of the law by tucking changes into a broader must-pass bill. Obama has already signaled a willingness to reconsider a requirement that businesses file reports, known as 1099 forms, documenting any vendor receiving more than $600 in a year.

Some moderates who voted for the law but were never enthusiastic supporters are up for re-election in 2012, including Democrats Ben Nelson of Nebraska, Kent Conrad of North Dakota, Jon Tester of Montana and independent Joseph I. Lieberman of Connecticut. They might be convinced to target specific provisions. After all, even the Democrats who wrote the legislation never intended it to become the law of the land as it did. After unexpectedly losing a Senate race in Massachusetts and therefore the 60th seat needed to defeat a GOP filibuster, Democrats rushed to pass legislation without going through a conference with the House. The law is a cobbled-together mesh of the Senate version of the bill and a secondary bill aimed at cleaning up some of the biggest problems in the original.

A Tight Weave

A potential vulnerability of the law is the fact that it does not contain the severability clause often included in legislation to ensure that if a court strikes down one aspect of the law, the rest stands. As a result, some attorneys say successful challenges to the constitutionality of certain provisions could bring down the full law. On some occasions, however, the Supreme Court has acted on its own to sever a law by specifying which portions stand and which don't.

Attorneys general are seeking to overturn provisions that require most people in the United States to buy health insurance and force states to expand Medicaid, the federal-state partnership to provide health coverage to low-income Americans.

Democrats wrote the legislation with close attention to previous court rulings on the Commerce Clause of the Constitution, attaching an extensive "findings" section aimed at defending the law from constitutional challenges.

Regardless of what the courts ultimately decide about severability, the law's components are tightly interwoven. Lobbyists for hospitals, physicians and drug companies supported it because they believed that the requirements for individuals to buy insurance and employers to offer it to their workers would increase the number of paying customers for medical services. If the individual mandate is removed, then the groups' support would weaken significantly, if not disappear.

Future Congresses could put in other options to add more people to the insurance rolls, by limiting the amount of time that people would have to enroll , for example, or increasing their costs if they go without coverage. But those types of revisions would probably not happen before the 2012 presidential election.

The most important impact of the debate next year may be that it will frame the upcoming election and shape future legislation.

"Even if 'repeal and replace' legislation only passes the House this year, the provisions included within that legislation will likely form the cornerstone of what will be considered by both the House and Senate in 2013," said Patrick Morrisey, a former congressional aide and co-chairman of King and Spalding's life science, FDA and health care practice. "Congress loves to recycle legislation that has passed during a previous session."

While Congress continues the rhetorical fight, governors and state officials will be making decisions that could actually make a difference in the way that the law is carried out.

"The fireworks may be in Washington, but the real story will be told in the states where the heavy lifting really will occur," said Drew Altman, president and CEO of the Kaiser Family Foundation, a nonpartisan health policy organization.

At least 29 governors will be Republicans starting in January, up from 24 this year. (Votes are still being counted in Minnesota.) Half of the states will have a unified Republican legislature controlling both chambers, an increase from 14.
Action in the States

State officials are charged with designing the new health insurance exchange markets that will open in 2014. They will oversee insurance premium rates in their areas and a required federal expansion of Medicaid. Already, state officials are either operating or allowing the federal government to run a temporary insurance pool for people who have been uninsured in the state for at least six months.

But a major debate looms over the structure of the new insurance marketplaces. Two states serve as models for the exchanges—and each has a distinctly different mission. In Massachusetts, the state government provides subsidies similar to the ones the federal government would give to low- and middle-income Americans under the new health care law. State officials closely regulate the type of insurance that is offered. In Utah, the exchange is little more than a website that shows consumers the options available to them.

Governors have the choice of refusing to create exchanges, but few have shown interest in that option—doing so would allow the federal government to come in and create new systems. Even governors who fiercely opposed the law say they do not want to hand over major decisions about insurance in their states to federal officials. But they might create Utah-like systems that do not have the type of regulatory oversight that the Obama administration prefers.

"Models may emerge that don't look exactly like what was envisioned when the law was passed because GOP governors say they don't want to implement Obamacare," said Kaiser's Altman. "It may still be health reform but slightly different."

Some GOP officials, most vocally in Texas, are threatening to take the draconian and politically risky step of walking away from Medicaid entirely rather than expand the program to cover all adults and children up to 133 percent of the federal poverty limit. Currently, individuals must qualify for Medicaid not only on the basis of their incomes but also on whether they fit into a category of people covered by the program, such as children, parents of children and people with disabilities. Governors are frustrated that the federal government will cover the costs only of those who are gaining coverage under the new law, without considering that more people might realize that they are eligible for Medicaid as a result of outreach campaigns and start signing up for benefits. They are further concerned that Washington will cover all of the costs for the expansion group only for a limited time, with states having to pick up about 10 percent of the costs by 2020.

Even governors who support the law might ask the Department of Health and Human Services for waivers to let them avoid some of its requirements. One of the law's defenders, Maine Insurance Superintendent Mila Kaufman, has already asked HHS to exempt her state from rules that will go into effect Jan. 1 that require insurance companies to spend a certain portion of their premium dollars on medical care. That "medical loss ratio" rule is among the many provisions that have been targeted by opponents of the law.

What follows is a look at that and 13 other provisions, chosen by the editors and reporters on CQ's health team, that could be targeted for repeal or revision in the coming year, as well as the outlook for each of them.

By Jane Norman, CQ HealthBeat Associate Editor

December 1, 2010 -- Members of the House Judiciary Committee grilled officials from the Federal Trade Commission and Department of Justice about why they haven't done more to break up health insurer market concentration.

Lawmakers also said they're worried about what seems to be more aggressive enforcement of possible anti-trust violations committed by doctors than by hospitals and insurers and about how the regulations will be written on the accountable care organizations (ACOs) authorized by the health care law.

The ACOs, designed to produce more teamwork among health care providers, will offer higher Medicare payments when the ACOs meet cost control and quality performance targets.

But lawmakers voiced concerns about whether they might hinder competition and give great power to the dominant players in the partnerships, whether they are hospitals or large physician practices.

Rep. Charlie Gonzalez, D-Texas, repeatedly asked Richard A. Feinstein, director of the bureau of competition at the FTC, and Sharis A. Pozen, chief of staff at the antitrust division at Justice, to give a "yes or no" answer as to whether the nation now has a competitive health insurance industry.

"I think it really varies, candidly, market by market," said Feinstein. Pozen said that there are some areas with vigorous competition and some without.

"The answer for all of us has to be 'no,'" countered Gonzalez, citing 2007 figures that show two insurers make up anywhere from 48 percent to 98 percent of the market share depending on the state.

In testimony prepared for the committee, Arthur Lerner, a former antitrust lawyer with the FTC who was representing America's Health Insurance Plans, a trade group, said that regulators—whether at the federal or state level—do not shy away from closely scrutinizing mergers in the health insurance market.

The Justice Department, Lerner said, has an "active merger enforcement program, focused on identifying those mergers that, on the evidence, it believes should be challenged. It seeks the remedies it believes will protect consumers."

A representative of the American Hospital Association, however, said in her testimony that health care providers have faced much closer scrutiny of their attempts to form close associations or merge than have insurers.

Hospitals have been subjected to "intense scrutiny by the federal antitrust agencies,'' Melinda Hatton, AHA's general counsel and senior vice president, said in her testimony. "Conversely, insurers, which wield enormous—largely unchecked—market power in most markets, have not faced nearly as much public antitrust scrutiny and oversight.''

Gonzalez told the regulators that when it comes to antitrust enforcement he believes "doctors are at a tremendous disadvantage. "My own observation is they are just not as organized as the insurance industry or the hospitals." Yet they're being asked to take part in the ACOs without the lobbyists or lawyers that larger organizations may have to represent them, he said.

Feinstein and Pozen said that the rules on ACOs are being formulated in conjunction with the Centers for Medicare and Medicaid Services, and there will be clear guidance issued. "From the standpoint of the individual physician, if what they are hoping to accomplish is something that is likely to lead to more efficient delivery of care and higher quality, something that is going to serve the interests of consumers, we are not going to get in their way," said Feinstein.

Pozen said the desire is to help ACOs go forward and feel comfortable with innovation.

But Committee Chairman John Conyers Jr., D-Mich., urged again that the officials answer the "yes or no" question. "They're all concentrated, aren't they?" he asked, referring to markets.

Pozen declined to say yes or no. "We're doing what we can to not allow more of it and make sure insurers that are dominant are not using that dominance in an anti-competitive way," said Pozen.

She pointed to a lawsuit filed in October against Blue Cross Blue Shield of Michigan alleging the insurance company has used its clout to push anti-competitive provisions in agreements with hospitals.

Rep. Howard Coble, R-N.C., said that "physicians clearly want and need clear guidance" as the ACO model is implemented and need faster responses from the government when questions about anti-competititve practices arise.
"The guiding principle of antitrust law is it's supposed to promote consumer welfare through competition," Coble said. "However I feel patients often get lost in these discussions about health care."

Conyers said doctors are "hassled" or threatened with prosecution if they unite, but insurers are treated differently. "Doctors, whenever they get together, are worried about the laws and whether they crossed the line or not," he said. As for insurers, they set rates and "you're either in or you're out," said Conyers.

But Feinstein and Pozen said their agencies are committed to a health care market that works for consumers. It is "simply wrong" that collaboration is discouraged, said Feinstein.

By Rebecca Adams, CQ HealthBeat Associate Editor

December 3, 2010 -- Health industry lobbyists representing hospitals to physical therapists have descended on Capitol Hill to remind lawmakers that for many providers, New Year's Eve may not be a time to celebrate. That's when a wide range of targeted payment provisions that benefit health care companies expire.

In the past few weeks, the campaigns have intensified as the end of session and the expiration of many provisions approach. The American Hospital Association, joined by 13 other trade associations, is asking congressional leaders to prioritize the passage of nine different reimbursements. A coalition of groups representing long-term care facilities and occupational, physical and other therapists is running ads pushing for two changes that could affect patients and provider profits. The National Rural Health Association sent e-mail to every member of Congress pleading for action and, coordinating with the Senate Rural Health Caucus and House Rural Health Coalition, flew in top officials to make its case in person.

Compared with the battle being waged by the American Medical Association for a yearlong payment change to stave off a 25 percent Medicare physician payment cut at a cost of about $15 billion in 2011, the myriad provisions that lobbyists want tucked into must-pass legislation in the next four to six weeks is not a big deal. Of the nearly two dozen requests lawmakers are discussing, at least six can be drafted in a way that won't count as a cost by Congressional Budget Office standards. But the potential package's $4.5 billion or so price tag doesn't minimize their importance to the companies that are waiting for more federal funds to come their way.

"Sure, the amount of money involved is not at the level of some of the other things like the physician fix," said Tom Nickels, senior vice president for federal relations at the American Hospital Association. "But for the facilities that are impacted, it's significant."

Competing Interests

The lobbying push comes as lawmakers are trying to figure out ways to pay for legislation that would prevent payment cuts to doctors, who for nearly a decade have been fending off a series of reductions that kick in under a statutory formula. This week, Congress cleared a bill that holds off scheduled cuts for one more month.

Advocates are hoping that their wish lists will be included in any new "doc fix" legislation, a continuing budget resolution or any tax cut measure that moves this month.

The doc fix bill would be a natural vehicle, but it may not actually move to President Obama's desk until later this month or perhaps even January, which makes some groups nervous because the provisions that apply to them are expiring.

The Centers for Medicare and Medicaid Services (CMS) can hold off on paying claims for a week or two to give lawmakers some time to take care of these payments retroactively. But that's not much of a cushion given a new Congress with a crowded agenda.

Providers are worried that even if Congress eventually restores the higher payments, they may have the hassle of waiting for payments or accepting lower ones that will later have to be adjusted. In fact, Congress went through this exercise earlier this year: Some provisions had expired in January and Congress did not renew them until the health care overhaul passed in March. One of the changes likely to be added to the list of newly expiring provisions is a request to give CMS funding for reprocessing claims made during that January to March gap—at a cost of about $175 million.

There's also always a risk that Congress will not change some of the provisions the industry wants.

With both the physician payment schedule adjustment and the other requested Medicare policy extensions, Congress has fallen into a routine of regularly passing short-term patches to continue policies that are expiring—largely to avoid paying the bill all at once. Executives at companies have come to expect congressional drama over expiring provisions to be followed by relief when the quasi-permanent policies are ultimately extended, often as part of the final legislation of the year. Then the cycle is repeated when the next expiration date approaches.

But now, as the cost of the physician payment fix grows increasingly higher with every delay, and worries about Medicare's fiscal unsustainability mount, companies that have seen Congress renew their preferred policies every year for a decade are now worrying that their payments will be targeted to help pay for another "doc fix" round or other cost-cutting measures that become a priority for the 112th Congress.

Executives are now starting to fear that at some point, as fiscal conservatives take charge in the House, Congress might not only fail to restore their higher payments but may look to their companies for deeper cuts. That's because every provision that hands more money to one interest group must be paid for by cutting another.

Therapy Cap at Issue

The cap on therapy services is one example. Since 1979, federal policy has imposed a limit on the amount of money Medicare will spend on occupational, speech or physical therapy for seniors. The cap on expenses for physical therapy and speech language pathology services together was $1,860 for 2010. For occupational therapy services, a separate limit of $1,860 applied.

But for more than a decade, companies that are affected by the cap have almost always successfully beaten back the limits—initially by delaying them through a series of moratoria. Since 2006, they've persuaded Congress to approve a process that will exempt seniors from the cap. Industry executives say the vast majority of patients hit the cap within a month or two of getting the services. But exceptions are routinely granted to patients whose doctors say the senior still needs therapy. The authority for the exemption process runs out Dec. 31.

If the exceptions process disappears, the limits will suddenly become real.

Additionally, in the most recent one-month physician fix, payments for those services were sliced by 20 percent as a way to fund the higher physician payments. To be sure, that cut was not as severe as what the Centers for Medicare and Medicaid services wanted to do. In June, CMS proposed halving payments for therapy and had only recently backed down with a plan to cut them by 25 percent.

Still, lobbyists for long-term care facilities such as those run by RehabCare, Kindred Healthcare, Inc., Sun Health, Genesis HealthCare and Golden Living are not satisfied. They worry that the cut is a harbinger of deeper reductions in the future. Trade associations for therapists—the American Occupational Therapy Association (AOTA), the American Physical Therapy Association (APTA), and the American Speech-Language-Hearing Association—have joined forces with trade groups representing long-term care and nursing facilities, such as the American Health Care Association, to fight further cuts and press for the continuation of the exceptions process.

Holly Feraci, vice president of government affairs with MSLGroup, which represents a post-acute care provider, said the fear is that therapy payment cuts will continue. "We want to make sure that doesn't happen," she said.

Feraci has one message for Capitol Hill: "Everyone's focused on docs now, but don't forget about therapy."

The groups also want a new payment policy to go in place. Under current law, implementation of a new version of a reimbursement schedule for therapy at skilled nursing facilities has been delayed until Oct. 1, 2011. Both Medicare officials and the skilled nursing facility industry want to move ahead with it now because the new policy will take care of some problems that have been identified.

"If the delay is not removed, it creates a lot of havoc for providers as well as CMS," said David Hebert, senior vice president of policy and government relations of the American Health Care Association, which represents nursing homes and assisted living facilities.

But whether they will get these changes depends on identifying an offset for the therapy caps process and finding a legislative vehicle that lawmakers will open up to the Medicare changes.

Feraci said it is only fair that Congress act to protect patients who will hit the cap and the providers who want seniors to keep receiving their services.

"If the docs get a one-year extension then so, too, should the therapy caps exceptions process," she said. "I am just saying that now that the AMA has used therapy dollars for their short-term fix, that in their efforts to get a longer-term fix, they also [should] ask that Congress extend the exceptions process."

Lobbyists for physicians aren't necessarily quick to embrace that idea.

"Everything you add on is something you have to find money for," said one lobbyist representing physicians who asked not to be named because he is not authorized to speak officially. "There are not a lot of easy pay-fors left. The other thing you're up against is the clock in this environment . . . If you start making things more complicated, friction is the enemy of the goal line."

More on the Table

Other payment fixes under consideration include:

• Addition of an inpatient component to the 340B drug discount program. Under current law, drug manufacturers are required to provide certain hospitals and other facilities that treat low-income and uninsured patients (including certain public hospitals, critical access hospitals, children's hospitals, and cancer hospitals) with discounts that mirror the Medicaid rebate price for the same drug. The bill would extend these discounts for certain 340B-eligible entities to inpatient drugs for use by patients who are uninsured or who do not have prescription drug coverage. A provision would make a technical correction to ensure the continued inclusion of orphan drugs in the definition of covered outpatient drugs for children's hospitals under the 340B drug discount program. Earlier this year, the provision was estimated to cost $35 million over 10 years.
• Extension of Section 508 reclassifications. Hospital geographic reclassifications that gave some hospitals extra money under section 508 of the Medicare Modernization Act expired Sept. 30. The bill would extend these reclassifications through fiscal 2011. The provision was estimated to cost $300 million over 10 years.
• Funding for claims reprocessing. Extensions of Medicare payment policies for calendar year 2010 were enacted into law on March 23, 2010, as part of the health care overhaul law (PL 111-148, PL 111-152). That required CMS to reprocess Medicare claims back to Jan. 1. The bill would provide funding for CMS to reprocess these claims. This provision costs $175 million over 10 years.
• Clarification of the effective date of Part B special enrollment period for disabled TRICARE beneficiaries. Under current law, disabled Medicare beneficiaries who are also eligible for TRICARE military health care are eligible for a 12-month special enrollment period for Medicare Part B, which pays for outpatient services. That is to ensure that they properly enroll in Medicare Part B and retain their TRICARE eligibility. The provision would clarify the effective date of the enrollment period to make sure that beneficiaries can use it. This provision was estimated to cost $3 million over 10 years.
• Adjustment to California Medicare payment localities. Under current law, the boundaries of payment localities in the state of California are determined using data that is almost 20 years old. This provision, which is more controversial than others because it affects just one state, was estimated to cost $400 million over 10 years. It would update the method used to determine the localities used for Medicare's physician geographic adjustment factor in California, utilizing an approach that is based on Metropolitan Statistical Areas.
• Extension of payment for the technical component of certain physician pathology services. This extends a provision that allows independent laboratories to bill Medicare directly for certain clinical laboratory services.
• Extension of ambulance add-on payments. This extends bonus payments made by Medicare for ground and air ambulance services in rural and other areas.
• Extension of payment rules for long-term care hospital services and of the moratorium on the establishment of certain hospitals and facilities. Extends Sections 114 (c) and (d) of the Medicare, Medicaid and SCHIP Extension Act of 2007.
• Extension of physician fee schedule mental health add-on. This increases the payment rate for psychiatric services delivered by physicians, clinical psychologists and clinical social workers by 5 percent.
• Extension of existing outpatient hold-harmless provision. This would allow Sole Community Hospitals with more than 100 beds to also be eligible to receive this adjustment.

By John Reichard, CQ HealthBeat Editor

November 29, 2010 -- Centers for Medicare and Medicaid Services (CMS) officials outlined their near-term plans for provisions of the health law dealing with accountable care organizations (ACOs), new forms of payment and health care delivery innovation, and "dual eligibles" — the 9 million Americans eligible both for Medicare and Medicaid.

The officials spoke in an "open-door forum," a series in which industry officials and members of the general public exchange views via teleconference on various issues relating to Medicare and Medicaid.

Deputy CMS Administrator Jon Blum said that his agency wants to encourage solo practitioners and small group practices to take part in accountable care organizations, in which teams of doctors and other providers join together to contract with Medicare to provide more efficient, higher-quality care. A recent "request for information" by CMS aims to get input on how best to encourage such participation before the agency issues a proposed rulemaking on ACOs in late December or in early 2011, Blum said.

Richard Gilfillan, acting director of the Center for Medicare and Medicaid Innovation, told the teleconference that his office is developing an operating plan for testing new payment systems and new forms of health care delivery to improve health, create higher-quality care and lower costs. He encouraged health care industry officials to offer advice on what should go into the plan and said a website would be developed to spur the communication of ideas.

Melanie Bella, head of the Federal Coordinated Health Care Office, addressed issues relating to the improvement of care for those eligible for Medicare and Medicaid, a particularly frail population with multiple chronic illnesses. She said her office is developing a list of the ways in which the two programs conflict with each other and create barriers to care. She said the list will be released to the public in the near future and will enumerate possible legislative or regulatory fixes and assign them priorities. She said the public will be able to share ideas about the list.