The New Year’s Day agreement between Congress and the White House to avoid the so-called fiscal cliff was highlighted by higher taxes on the wealthiest Americans and postponing 2% spending cuts by two months to Medicare as required by sequestration.
The United State Senate voted 89-8 to approve the American Taxpayer Relief Act. The House of Representatives voted to approve 257 to 167 with most Republicans voting against the bill.
In the legislation, Congress buried five new provisions that will affect both individual orthopedic practices and the companies who supply them. These new provisions are:
1. Medicare Program Extensions
The bill extended several Medicare programs, such as the inpatient hospital payment adjustment for low-volume hospitals through December 31, 2013 and ambulance add-on payments for urban, rural and super-rural providers through June 30, 2013. It also extended the existing floor on the “physician work” index in the Medicare fee schedule. That schedule is adjusted geographically for physician work, practice expense and medical malpractice insurance to account for differences in the cost of resources for physician services.
Another measure extended the current payment exceptions process for outpatient therapy services. Under current law, there is an annual per-beneficiary payment limit of $1, 880 for all outpatient therapy services that are provided by non-hospital providers with exceptions for cases where additional therapy services are medically necessary. The bill extends this exceptions process through December 31, 2013.
One of the big issues facing Medicare is that physicians are walking away from the program. According to a recent American Medical Association (AMA) survey of more than 9, 000 doctors who care for Medicare patients, 1 in 5 physicians are restricting the number of Medicare patients in their practice and 1 in 3 primary care doctors—the providers on the front lines of keeping the cost of seniors’ care low—are restricting Medicare patients.
2. Bite Out of Obamacare
There are some small bites out of the Affordable Care Act (ACA) in the agreement:
The fiscal cliff legislation permanently repealed the CLASS Act (Community Living Assistance Services and Supports) which was intended to insure long-term care for beneficiaries. However, the Obama administration said about a year ago that it wouldn’t be actuarially sound, so they would not implement it.
There is a provision in agreement which puts a long-term care commission in place, presumably to come up with an actuarially sound alternative to the CLASS Act.
The deal would also take about $2.3 billion out of the law to set up co-ops, which was included in the law so that, particularly in rural areas, co-ops could be set up for health insurance. Congress said in this deal that any money that has not been sent to a co-op so far is not going to be sent out. That money is going to go toward deficit reduction.
In the past two years, the Department of Health and Human Services has awarded nearly $2 billion in loans to 24 proposed state co-ops. Those loans won’t be affected by the cut.
“We were blindsided by the elimination of funds, ” said John Morrison, president of the National Alliance of State Health Cooperatives. “The health insurance industry is getting its way here by torpedoing co-ops in the 26 remaining states. This is not about budgets; it is about those health insurance giants killing competition at the expense of millions of Americans who will pay higher premiums because of it.”
3. Device Tax Remains
The fiscal cliff legislation did not delay the 2.3% medical device tax which will now be levied on the sale of most medical devices in the U.S. and went into effect on January 1, 2013. Industry trade groups felt there was a good chance a bill would include a delay in the device tax.
Wells Fargo analyst Larry Biegelsen said that there are at least three opportunities in the next few months for the industry to seek relief.
- The first opportunity will occur at some point in the coming weeks when the U.S. Department of Treasury will run out of extraordinary measures which allow it to meet obligations even though the debt ceiling has been reached.
- The second opportunity will occur in two months when the delay in the across-the-board sequestration cuts ends.
- The third opportunity will occur on March 27 when the temporary funding measure for FY 2013 expires which means that Congress and the President must reach an agreement on the level of spending for non-entitlement programs for the remainder of the fiscal year (i.e., basic government services like the Pentagon and national parks) or trigger a government shutdown.
However, said Biegelsen, the fact that a delay was not included in the end of year fiscal cliff agreement is clearly a setback and demonstrates how determined the proponents of the medical device tax (and other taxes in the Affordable Care Act) are to keep those taxes on the books.
Medical device companies had already attributed previously announced lay-offs to the device tax. Investors cheered the avoidance of the fiscal cliff as shares of medical device makers rose with the broader market after the congressional action. The major orthopedic companies all rallied.
4. Qualified Clinical Date Registry
A new Registry! Another new provision buried in the legislation was a provision called, “Advancement of Clinical Data Registries To Improve the Quality of Health Care.”
This provision will explore ways for physicians to have an alternative way to participate in government-mandated quality reporting measures by participating in a qualified clinical date registry.
The legislation asks the Comptroller General of the U.S. to conduct a study on the potential of clinical data registries to improve the quality and efficiency of care in the Medicare program, including through payment system incentives.
The legislation specifically asks that the study analyze of the role of health information technology in facilitating clinical data registries. It also opens up the use of data from such registries among private health insurers as well as other entities the Comptroller General determines appropriate.
The legislation put a deadline on this report and it is November 15, 2013. The report will be submitted to Congress together with whatever recommendations the Comptroller General deems fit.
5. Specialty ACOs!
While not specifically noted in the legislation, Senior Health Care Advisor Ed Dougherty with Arnt Fox LLP, told us that Centers for Medicare and Medicaid Services (CMS) Principal Deputy Administrator Jonathan Blum recently told Inside Health Policy that the agency is considering allowing specialists to form ACOs (Accountable Care Organizations) as demonstrations, which would be a break from the health law’s strong disposition toward primary physician-run ACOs.
Blum said nephrologists and oncologists are among those who want to form ACOs.
Specialists are allowed to participate in ACOs, but the health law requires that ACOs in the Medicare Shared Savings Program be led by primary care physicians. Some specialists act as the primary care physician for many of their patients.
CMS assigns patients to ACOs based on evaluation and management codes, not based on conditions, so it’s not clear what role specialist ACOs would play. ACOs must have at least 5, 000 patients and it is unknown if specialist-led ACOs would be smaller or whether patients who do not see the specialist as a primary care physician would also be attributed to specialist ACOs.
The “Doc Fix”
The other big news for physicians was that the agreement included a temporary “doc fix” until January 1, 2014 that avoided a 26.5% cut in physician Medicare payments.
The 26.5% pay cut for physicians comes from a payment formula created by Congress in a 1997 deficit reduction law called the Sustainable Growth Rate (SGR). For the first few years, doctors received modest pay increases. But by 2002, the law required a 4.8% pay cut. Every year since, Congress has overridden the required cuts.
This year, Congress demanded that the $25 billion doc fix be paid for by a combination of cuts to the health care industry, mostly hitting hospitals that take Medicare patients.
Hospitals will pick up about half of the tab for the fix. And they aren’t happy about it.
For instance, Congress mandated a change in coding the purpose of which was to recoup past overpayments to hospitals because the shift to Medicare Severity Diagnosis Related Groups, or MS-DRGs, would save about $10.5 billion. A measure to re-price end-stage renal disease payments would save about $4.9 billion. The bill also calls for re-basing Medicaid Disproportionate Share Hospital (DSH) payments, which is estimated by the Congressional Budget Office to save about $4.2 billion.
Hospital association leaders say that under the Affordable Care Act (Obamacare), they put in a large share of the payment for the Act and that they shouldn’t have to continue to pay for other parts of the health care industry.
Another group upset with the doc fix is the pharmacists who will get nicked for about $600 million—that would apply a competitive-bidding program to diabetes test strips bought at retail pharmacies.
Political Munchausen Syndrome
Physicians are getting fed up with Congress who set up the problems of the SGR. Some tell us it’s like Munchausen Syndrome where Congress has to come in and play the role of savior every year. They want a permanent fix, which would cost about $200 billion.
John Tongue, M.D., president of the American Association of Orthopaedic Surgeons (AAOS), said while the Academy was pleased that the agreement kept the nation from “falling off the ‘fiscal cliff, ’ a permanent solution to both of these issues is vital to the health of our patients and our economy.”
He said short term patches continue to “breed uncertainty among patients and their physicians, hamper the medical community’s efforts to improve quality and lower healthcare costs, and further burden a strained U.S. economy.”
“It is true that our nation faces significant fiscal challenges and with healthcare costs currently accounting for over 17% of our GDP, we as physicians have a real duty to reduce inefficiencies in our healthcare system.
