Latest News | Health Care Cuts

From CHA – 5/14/12

Gov. Brown’s May revision to the state budget for fiscal year (FY) 2012-13 includes $325 million in savings for the state General Fund that will have a direct impact on hospitals. The May revision estimates the budget deficit at $15.7 billion, up from $9.2 billion, due to a decrease in revenue, higher expenses, and decisions by courts and the federal government to block previous budget cuts from being implemented. Overall, the governor’s new budget plan proposes $4.1 billion in spending reductions, in addition to the $4.2 billion already put forward earlier this year. Budget solutions related to Health and Human Services include the following:

Hospital Fee Program – Increase payments made by private hospitals to the state for children’s health care coverage by $150 million in FY 2012-13 and $75 million in FY 2013-14. In addition, designated public hospitals would give up some of the fee-funded direct grants and managed care payments to generate $41.5 million in state General Fund savings for FY 2013-14.

Diagnosis-Related Group (DRG) Transition – Freeze base payments for FY 2012-13 with no increases to per-diem rates or non-contract cost increases. This is expected to save the General Fund $75 million in FY 2013-14. The transition to a DRG payment system would be delayed by six months to July 1, 2013.

Read more here…

Medicare Cuts Hurt Smaller Providers

From: Politico – 3/8/12

Article Excerpt:

For House-Senate negotiators, it was just the last piece in a political jigsaw puzzle. For Annette Iacono, vice president and general manager of a community lab in the Philadelphia suburbs, it “hit us in the solar plexus hard.”

At issue was a 2 percent cut in Medicare reimbursements for clinical lab services, a $2.4 billion, 10-year savings to forestall even more ruinous reductions in payments to physicians caring for the elderly. Helped by powerful allies, medical equipment suppliers and for-profit hospitals had protected their hides in the final “doc fix” talks — all part of the payroll tax drama last month. And the lab cut became the classic, dial up, dial down filler that lawmakers turn to without anyone able to explain the consequences in the real world outside.

Quest Diagnostics and LabCorp, the big national giants, can roll with the punches, but smaller independent labs — an integral part of serving Medicare patients in nursing homes — are in jeopardy, given their narrower profit margins. With cuts already made in health care reform, a $10 Medicare lab reimbursement in 2011 will drop to $9.31 by 2015, a 7 percent cut that is really almost double that when adjusted for inflation.

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From: The HILL’s Healthcare Blog – 1/26/12

Article Excerpt

The federal government could save billions of dollars a year by halting overpayments to privately run Medicare Advantage plans, House Democrats said Thursday.

Democrats released a new report, which they had requested from the Government Accountability Office, that concludes MA plans routinely classify their customers as being sicker than if they were on traditional Medicare, triggering higher reimbursement rates. 

The GAO found that MA plans were overpaid by $1.2 billion to $3.1 billion in 2010, with excess payments likely growing since then. The insurance industry however points out that the GAO report doesn’t say MA plans anything wrong but rather that they offer “diagnostic coding that is more comprehensive,” leaving open the possibility that they do a better job identifying conditions patients actually have.

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U.S. Supreme Court Issues Douglas v. Independent  Living Centers Decision

From: HLB Health Law E-alert – 2/22/12

Article Excerpt:

The U.S. Supreme Court today issued its decision in Douglas v. Independent Living Centers. The issue in this case is whether providers may sue state officials to challenge Medicaid rate cuts because the cuts result in rates that are so inadequate that they violate the requirement of federal law that rates be consistent with quality of care and sufficient to ensure that beneficiaries have equal access to services (the “equal access provision”). The Court, in a 5 to 4 decision, indicates that beneficiaries and providers likely may challenge these types of rate cuts in federal court.

Hooper, Lundy, and Bookman represents the California Hospital Association, the California Medical Association and other provider associations in Independent Living Centers and the plaintiffs in one of the consolidated cases, Douglas v. California Pharmacists Association. We are also handling many other Medicaid rate cases filed both before and after the Supreme Court heard arguments in Independent Living Centers.

The Court remanded the cases to the Ninth Circuit. The Court concluded that the circumstances had changed since the cases were presented to the Court because the federal Centers for Medicare and Medicaid Services (“CMS”) approved certain state rate cuts in October 2011 well after the Ninth Circuit’s decisions before the Court, and after the cases had been briefed and argued.

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The President’s budget was released this week.  We have included a list of all the proposed Medicare budget cuts for 2013:

1. Reduce Medicare Bad Debts – 3 year reduction from 70% to 25% -2013 (This reduction appears to be implemented in the “Doc Fix” legislation discussed above).
2. Align GME payments with patient care costs – IME adjustment reduced 10% – 2014
3. Reduce CAH payments from 101% of costs to 100% of reasonable costs -2013
4. Eliminate CAH designations for facilities <10 miles from nearest hospital – 2014
5. Revise Market Basket (e.g. Reduce) for SNF, HHA LTCH & IP Rehab Facilities – No date.
6. Equalize Payments for Certain Conditions in IRFs and SNFs – 2013.
7. Adjust IRF’s Compliance Threshold from 60% to 75% – 2013
8. Adjust (e.g. Reduce) SNF Payments to Reduce Hospital Readmissions – 2016
9. Align Medicare Drug Payment Policies w/ Medicaid Policies – 2013
10. Designate EHR Penalties for Non-Compliance to Deficit Reduction – 2020
11. Update (e.g. Reduce) Medicare Payments for appropriate use of Advanced Imaging – 2013.

Click here to review the details of these provisions in the President’s budget.

H.R. 3630 Conference Bill Health Offsets

From: H.R 3630 Conference Report – 2/13/12

The conference bill reveals the following Medicare cuts agreed to be made:

• Sec. 3201 – Reduction of Bad Debts treated as an allowable cost – Hospital/SNF allowable bad debts will  be reduced to 35% (currently 70%) amounts beginning in FFY 2013. (See Pages 92-93)
• Sec. 3201 – Reduction of Bad Debts treated as an allowable cost – CAH allowable bad debts will be reduced to 88% (currently 100%) in FFY 13, 76% in FFY 14 and 65% in subsequent FFYs. (See Pages 94-95)
• Sec. 3202 – Rebase Medicare Clinical Laboratory Payment Rates – Fee schedule will be reduced by 2% starting in FFY 2013 (See Page 96)
• Sec. 3203 – Rebasing State DSH Allotments for FY 2021 – Conference bill does not provide details of the specific impact (See Page 97).
• Sec. 3205 – Prevention and Public Health Fund – Made changes to the funds available from 2012 – 2022 (See Page 98-99).  $5 Billion diverted according to above article.

House and Senate at Impasse on Medicare Payments

From: NY Times – 2/6/12

Article Excerpt:

WASHINGTON — House and Senate negotiators are deadlocked over how to prevent a deep cut in Medicare payments to doctors who treat millions of Medicare beneficiaries, an impasse that could threaten broader legislation on a payroll tax cut.

Lawmakers in both parties said they wanted to give doctors a small increase, but could not agree on how to cover the cost. The issue, which is being negotiated as part of the talks over maintaining a reduction in payroll taxes for 160 million Americans, pits health care providers against one another — doctors versus hospitals — in a type of conflict that is most likely to become more common as the federal government tries to throttle back the growth of Medicare costs. The payroll legislation would also continue jobless benefits for many of the nation’s unemployed.

In the absence of agreement, doctors’ fees will be cut 27 percent next month, and many doctors say they could not continue treating Medicare patients under the lower payments.

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From: National Journal – 1/10/12

Article Excerpt: 

The federal government could save $148 billion over 10 years by increasing Medicare eligibility two years to age 67, the Congressional Budget Office reported on Tuesday. 

The projected savings are lower than CBO’s March estimate of $162 billion, but the earlier calculation did not include the premiums that seniors must pay into the program. A CBO official said that a senator requested the additional analysis of increasing the Medicare and Social Security eligibility ages.

Either way, the savings may not significantly cut the budget deficit but they could pay for a program such as the “doc fix”–a permanent solution to a temporary pay raise Congress must legislate for Medicare doctors every year.

CBO estimated the effects of increasing Medicare eligibility by two months every year beginning in 2014 for people who were born in 1949 until the Medicare eligibility age reached 67 in 2027 for people born in 1960.

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House Dems look to exempt Medicare from automatic spending cuts

From: The Hill Healthwatch Blog – 12/1/11

Article Excerpts:

While some Republicans are taking heat for seeking to mitigate $600 billion in sequestration cuts to the Defense Department, a handful of House Democrats this week put forward their own proposal to spare Medicare from spending cuts triggered by the August debt deal.

Rep. Edolphus Towns (D-N.Y.) introduced H.R. 3519, along with six other House Democrats, in a bid to exempt Medicare. Towns said Wednesday that hospitals would not be able to cope with reduced Medicare reimbursements required under the sequestration cuts required under the Budget Control Act.

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Hospitals, Insurers Would Bear Brunt of Automatic Cuts

From: The Hill’s Healthwatch Blog – 11/22/11

Article Excerpt:

Automatic Medicare cuts triggered by the congressional super-committee’s failure would hit hospitals harder than any other health industry, according to an analysis from Avalere Health.

The report puts hard numbers to across-the-board cuts that stakeholders have mostly viewed in broad, general terms. But Avalere chief executive Dan Mendelson cautioned that the figures also assume the automatic cuts will actually happen — an assumption he’s not ready to make.

The super-committee’s cuts, if it had agreed on a deal, likely would have started next year. But sequestration isn’t scheduled to begin until 2013.

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