New Medicare Law Reverses Medicare Physician Payment Cut, Provides New Provisions

In Brief: This article describes changes resulting from the enactment of the H.R. 6331, the Medicare Improvements for Patients and Providers Acts of 2008 (MIPPA). Despite a concentrated effort to pare down the bill, Congress eventually enacted a package that includes low-income program provisions, cuts to Medicare Advantage, and changes to the Part D benefit, among numerous other provisions.

A hard-fought battle over changes to the Medicare program ended in July when Congress voted to override President Bush’s veto and to enact H.R. 6331, the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). The president objected to the mechanism in the bill that would offset increased spending to reverse the physician pay cut, then the centerpiece of the legislation. But the bill also became a vehicle for a number of other changes to Medicare.

Physicians

Physician Fee Cuts: The bill replaces the impending 10.6% physician fee cut with a 0.5% update for the remainder of 2008, retroactive to July 1, 2008. For 2009, it replaces a 5% cut with a 1.1% update. Physicians, non-physician practitioners, and other providers of services paid under the Medicare Physician Fee Schedule were scheduled to begin to receive payment at the 0.5% update rates by the end of July. At the time of this writing, Medicare contractors were working to update their payment system with the new rates. To avoid a disruption to the payment of claims, the Centers for Medicare and Medicaid Services (CMS) announced that Medicare contractors will continue to process claims on a rolling basis (first in/first out) for payment at the new rate. After local contractors begin to pay claims at the new 0.5% rate, to the extent possible, the contractor will begin to automatically reprocess any claims paid at the lower rates.

Therapy Caps: The new law extends the exceptions process for Medicare outpatient therapy caps, by which a patient can receive medically necessary treatment beyond what is allowed under the cap. MIPPA extends the process through December 2009; it was set to expire in June 2008. For 2008, the limit on incurred expenses between speech and physical therapy, and for occupational therapy, is $1810. The law also created a separate cap for speech language pathology services, breaking those services out from the current combination with physical therapy. Beginning in 2009, speech language pathologists will bill Medicare directly for their services pursuant to the separate cap.

Imaging Provisions:

• By 2012, providers of the technical component of advanced diagnostic imaging services must be accredited, at which time CMS may refuse payment to unaccredited suppliers.

• By 2010, the Department of Health and Human Services (HHS) Secretary must designate accreditation organizations for suppliers of the diagnostic imaging technical component. CMS will also be conducting a voluntary two-year demonstration project to collect data to determine if advanced diagnostic services are provided appropriately to Medicare beneficiaries.

• By March 2014, the Government Accountability Office (GAO) must complete a study on accreditation requirements for advanced diagnostic imaging services; specifically, GAO will investigate how required accreditation affects the amount, type, and quality of imaging services provided to Medicare beneficiaries.

Electronic Prescribing: From 2009-2013, CMS will reward practitioners who e-prescribe regularly. By 2012, CMS will also reduce payments to those who fail to e-prescribe (the law also allows HHS to create a hardship exception for practitioners unable to e-prescribe).

Other Provisions: The new bill provides for new Part B coverage provisions, including the establishment of qualification requirements for cardiac and pulmonary rehabilitation programs conducted in physicians’ offices, out­patient hospital departments, or other outpatient settings in the Medicare program. In another provision, the Medicare Payment Advisory Commission is now required to study the possibility of establishing a network of providers to test new models of care coordination for chronically ill beneficiaries; the commission will submit a report by June 2009.

Facilities and programs

DMEPOS Competitive Bidding Program: The law terminated contracts that the government awarded to 325 suppliers earlier this year under the first bidding round in 10 metropolitan statistical areas (MSAs), including Dallas, Miami, Cleveland, and Orlando; it also made various revisions to bidding procedures. The program began in the aforementioned areas on July 1. It was delayed for 18 months and will begin again for first-round MSAs in 2009 and second-round MSAs in 2011. The original DME payment rates in effect prior to July 1 are to be reinstated retroactively. A 9.5% reduction in rates nationwide will begin in 2009 for items subject to bidding in round one. CMS stated that information on payment rates and claims processing “will be communicated to DME suppliers in the coming days” and that beneficiaries in the 10 competitive bidding areas will be notified of this change directly in a letter.

Qualifying Individual Program: Under the law, Congress extends the qualifying individual (QI) program until December 31, 2009; the program was set to expire as of June 30 this year. The law also appropriates a few hundred million dollars more to administer the program through next year. The QI program provides help with Part B premiums for beneficiaries ineligible for the Specified Low-Income Medicare Beneficiary Program, but whose incomes fall below 135% of the Federal Poverty Level. Starting in 2010, the bill allows Medicare Savings Program beneficiaries to have the same amount of assets that full subsidy low-income beneficiaries were allowed under the Part D drug program. The program is meant to help low-income beneficiaries who do not qualify for full Medicaid benefits.

Part D (Medicare Drug Benefit):

• Beginning in 2010, prescription drug plans (PDPs) are required to promptly pay pharmacies within 14 days for clean claims submitted electronically, and 30 days for clean claims submitted otherwise. If a PDP is late reimbursing a claim, it may be required to pay interest to the pharmacy.

• Starting in 2010, HHS will require that prescription drug plans cover all drugs within six drug classes/categories. Those groups will include drugs for which restricted access would have major or life-threatening consequences for patients with a disease or disorder treated by those drugs or for which patients have a significant clinical need because of unique chemical actions and pharmacological effects of the drugs.

• As of 2013, Medicare prescription drug plans are permitted to cover barbiturates used to treat epilepsy, cancer, or a chronic mental health disorder and to cover benzodiazepines.

Hospitals: The law makes a number of changes to Medicare’s hospital policy:

• Extending the rural hospital flexibility program into 2010

• Providing grants to increase access to mental health services for veterans and rural residents

• Providing a new base year for sole community hospitals

• Extending the Medicare Modernization Act’s wage index reclassifications for some hospitals through September 30, 2009

• Revoking the unique authority of the Joint Commission to deem hospitals in compliance with the Medicare Conditions of Participation without CMS review. They can reapply for authority after two years.

Medicare Advantage: Beginning in 2010, MIPPA will phase out an increase to Medicare Advantage (MA) payment rates for indirect medical education. The law allows for the continued payment to teaching facilities directly for indirect medical education, meant to defray higher patient care cost of teaching hospitals. MIPPA also requires Private Fee-For-Service (PFFS) plans to enter into contract agreements with providers in all areas where two or more network-based MA plans operate. This exception is removed in all individual market areas where two or more network-based MA plans operate. For employers, the law removes the PFFS exception to the MA access to care requirements in 2011.

Power Wheelchairs: Language prohibiting the first month purchase option for standard power wheelchairs and designating payment increases for the first year of the rental periods was not included in the final bill.

Oxygen: Starting in January 2009, the law repeals the transfer of ownership of oxygen equipment to beneficiaries after 36 continuous months of payment, thereby allowing oxygen suppliers to retain the title over the equipment. It also requires suppliers to provide oxygen equipment and CMS to make payments on the equipment for as long as the beneficiary has a medical need for it. In addition, the cut in reimbursement rates for oxygen therapy and related equipment was not included in the final bill.

Mental Health Parity: Over five years, the new law will eliminate the current differential in patient copayment rates for mental health services to equal the copayment rate for “physical” outpatient services. Medicare beneficiaries pay a higher percentage co-payment (50%) for mental health services than for other outpatient services (20%).

The MIPPA package was far more comprehensive than policymakers anticipated. Passage of this legislation clears the way for a comprehensive debate and reforms to begin on a broken Medicare physician payment system. For questions, please contact Suzanne Butler, JD, manager of legislative affairs, at legislativeupdate@aapmr.org.

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