Comparison of the Coverage, Medicare, and Medicaid Provisions U.S. House and Senate Federal Health Reform Legislation December 2009

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1 U.S. Patient Protection and Affordable Care Act H.R Status: Passed on December 24 by a vote of All Republicans voted against passages. U.S. of Representatives Affordable Health Care for America Act H.R Status: Passed on November 7 by a vote of Thirtynine Democrats voted against passage. All Republicans, except one, voted against passage. 1

2 Coverage Expansion HANYS Position: HANYS urges Congress to increase the level of coverage to at least 97% of all Americans, as per the agreement the national hospital associations reached with the White and Finance Committee Chairman Max Baucus (D-MT). Both Bills: Would increase insurance coverage for American citizens by increasing federal support for Medicaid eligibility and by offering subsidies to moderate income Americans to buy insurance either through private plans, a new government-run public insurance plan ( only), or new non-profit health insurance co-operatives (co-ops) in newly established state-based () or federal or state-based () health insurance exchanges. Individual and employer mandates would also be established. Sections: 1323, 1334, 1401, and 2001 The bill would provide insurance coverage to 94% of all Americans; up to 31 million individuals would newly access coverage. Twenty-three million individuals would remain uncovered in Expansion of Federal Support for Medicaid Eligibility: Would raise the threshold for mandatory Medicaid coverage to 133% of federal poverty level (FPL). A federal matching rate of 100% would be provided to states for the cost of the expansion through The federal matching rate for 2017 and beyond would vary by state based on current levels of Medicaid coverage and would range from about 80% to a maximum of 95%. Subsidies for Health Insurance Coverage: Premium assistance in the form of refundable tax credits would be provided on a sliding scale to individuals and families. The credits would start at 2.0% of income for those at 100% of FPL and phase out at 9.8% of income for those at 400% of FPL. A cap on annual out-ofpocket costs is provided to individuals and families that fall into these 2 Sections: 310, 323, 324, 341, 342, 343, 344, and 1701 The bill would provide insurance coverage to 96% of all Americans; up to 36 million individuals would newly access coverage. Eighteen million individuals would remain uncovered in Expansion of Federal Support for Medicaid Eligibility: Would raise the threshold for mandatory Medicaid coverage to 150% of FPL. A federal matching rate of 100% would be provided to states for the cost of the expansion in 2013 and The federal matching rate for 2015 and beyond would be 91%. Subsidies for Health Insurance Coverage: Premium credits would be provided on a sliding scale to individuals and families. Premium limits as a percentage of income would start at 1.5% of income for those at or below 133% of FPL and phase out at 12% of income for those at 400% of FPL. A cap on annual out-of-pocket costs is provided to individuals and families that fall into these income

3 income categories. Establishment of Government-regulated Private, National Health Insurance Plans and Non-profit Health Insurance Co-operatives: Would require the Office of Personnel Management (OPM), the agency that oversees the Federal Employee Health Benefit Plan, to oversee a new system of national health insurance plans offered by private insurers, available via state exchanges. OPM would be required to offer at least two multi-state qualified health plans (MSQHP) through the exchanges, one of which must be non-profit. Also, federal funding for start-up loans and grants would be provided to qualified organizations to assist in the establishment of nonprofit, member-run health insurance co-ops that would offer health insurance through the health insurance exchange. categories. Establishment of a Government-run Public Insurance Plan and Non-profit Health Insurance Co-operatives: Would require the Secretary of Health and Human Services (HHS) to develop a new, government-operated public health insurance option to compete with private health insurance plans. Also, federal funding for start-up loans and grants would be provided to qualified organizations to assist in the establishment of nonprofit, member-run health insurance co-ops that would offer health insurance through the health insurance exchange. Payment Rates to Providers Under the Public Plan and By Co-ops: Health care providers would negotiate payment rates with plans that offer coverage through the state-based exchanges or directly with the co-op. Payment Rates to Providers under the Public Plan and By Co-ops: Health care providers would either negotiate payment rates with the HHS Secretary (for public plan) or directly with the co-op. Under the public plan, the law would require that rates negotiated with the Secretary are not lower than aggregate average Medicare rates; and not higher than aggregate average rates of private health insurance plans offering insurance through the exchange. The Secretary would have the authority to adjust payment rates under the public option to promote better quality and more efficient care. Any payment changes considered by the Secretary must seek to reduce cost for enrollees, improve health outcomes, reduce health disparities, address geographic variation in the provision of medical services, prevent or manage chronic illnesses, or promote integrated patientcentered care. 3

4 Medicare Update Factor Reductions HANYS Position: The Medicare marketbasket reductions to New York hospitals, nursing homes, and home health agencies are of a magnitude that would prevent the successful implementation of health reform. HANYS urges Congress to reduce and impose time limits on the proposed marketbasket reductions. Both Bills: The update factor for all Medicare Part A and B providers who are subject to a marketbasket or Consumer Price Index (CPI) update would be reduced to reflect estimated gains in productivity. A measure of productivity gains for the general economy would be used (currently 1.3%) to reduce the update for inpatient and outpatient hospitals, inpatient psychiatric facilities, inpatient rehabilitation facilities, long-term care hospitals, nursing homes, home health, and hospice care providers. Further update reductions beyond the productivity adjustment would also be applied. Section: 3401 Savings: U.S. $147 billion over ten years New York $8.2 billion Productivity Offsets: Beginning in 2012, productivity adjustments would be applied to: Hospital inpatient and outpatient; Inpatient psychiatric facilities; Inpatient rehabilitation facilities; Long-term care hospitals; and Skilled nursing facilities. Hospice productivity reductions would begin in Home health agency productivity reductions would begin in Sections: 1101, 1102, 1103, 1131, 1153, and 1155 Savings: U.S. $173.3 billion over ten years New York $10.7 billion Productivity Offsets: Beginning in 2010, productivity adjustments would be applied to: Hospital inpatient and outpatient; Long-term care hospitals; and Hospice providers Beginning in 2011, productivity adjustments would be applied to: Skilled nursing facilities; Inpatient rehabilitation facilities; Inpatient psychiatric facilities; and Home health agencies 4

5 Additional Update Factor Reductions for Inpatient and Outpatient Hospitals, Inpatient Rehabilitation Facilities, and Inpatient Psychiatric Facilities: Would reduce the annual update factors for these providers by 0.25 percentage points in 2010 and Updates would be reduced, in addition to the productivity offset described above, by an additional 0.10 percentage points in 2012 and 2013 and an additional 0.20 percentage points annually from 2014 through Additional Update Factor Reductions for Long-Term Care Hospitals: Would reduce the annual update factors for long-term care hospitals by 0.25 percentage points in The annual update would be reduced by 0.50 percentage points in The annual update would be reduced, in addition to the productivity offset described above, by an additional 0.10 percentage points in 2012 and 2013, and an additional 0.20 percentage points annually from 2014 through Additional Update Factor Reductions for Home Health Agencies: Would reduce the annual update factors for home health agencies by 1.0 percentage point in 2011, 2012, and Additional Update Factor Reductions for Hospice Providers: Would reduce the annual update factors for hospice providers, in addition to the productivity offset described above, by an additional 0.30 percentage points from 2013 through Restoration of Additional Update Factor Reductions Based on Projections of Coverage Expansion: The additional update factor reductions applicable to inpatient and outpatient hospitals, inpatient rehabilitation facilities, inpatient psychiatric facilities, long-term care hospitals and hospice providers 5 Additional Update Factor Reductions for Inpatient and Outpatient Hospitals, Inpatient Rehabilitation Facilities, and Inpatient Psychiatric Facilities: No comparable provision. Additional Update Factor Reductions for Long-Term Care Hospitals: No comparable provision. Additional Update Factor Reductions for Home Health Agencies: No comparable provision. Additional Update Factor Reductions for Hospice Providers: No comparable provision. Restoration of Additional Update Factor Reductions Based on Projections of Coverage Expansion: No comparable provision.

6 from 2014 through 2019 could be restored if the previous year s insured population is more than five percentage points below projections. Comparison of the Coverage, Medicare, and Medicaid Provisions Elimination of the 2010 Update Factor for Home Health Agencies, Inpatient Rehabilitation Facilities, and Skilled Nursing Facilities: No comparable provision. Protection of Update Factors from Going Below Zero: Elimination of the 2010 Update Factor for Home Health Agencies, Inpatient Rehabilitation Facilities, and Skilled Nursing Facilities: Would eliminate the 2010 annual update factor for home health agencies, and would eliminate the update for inpatient rehabilitation facilities and skilled nursing facilities in the second, third, and fourth quarters of Protection of Update Factors from Going Below Zero: Would protect the update factors for each care setting from going below zero. 6

7 Medicare and Medicaid Disproportionate Share Hospital (DSH) Payment Reductions HANYS Position: HANYS urges Congress to preserve DSH payments in a manner consistent with the continuing responsibility of hospitals to serve all uninsured and under-insured patients, and that recognizes losses associated with Medicaid payment shortfalls. HANYS urges Congress to adopt the bill provisions, as the bill preserves far more DSH payments than the bill. Both Bills: Would reduce Medicare and Medicaid DSH payments to adjust for the impact of the health care reform measures that reduce the number of uninsured individuals. U.S. Sections: 2551 and 3133 Savings: U.S. $43 billion over ten years New York $5.5 billion Medicaid DSH Reductions: Would reduce Medicaid DSH payments by $18.5 billion over ten years. Reductions could begin in Reductions to a state s DSH allotment would be triggered once the number of uninsured is reduced in a state by 45%. The level Medicaid DSH cuts would vary by state based on the amount of Medicaid DSH funding distributed to states and how much of its DSH allotment each state has spent over the past several years (based on average spending for FY as of the beginning of October 1, 2008): U.S of Representatives Sections: 1112 and 1704 Savings: U.S. $20.3 billion over ten years New York $2.6 billion Medicaid DSH Reductions: Would reduce Medicaid DSH payments by $10.0 billion over ten years. $1.5 billion in 2017; $2.5 billion in 2018; and $6.0 billion in Reductions would begin in Reductions to a state s DSH allotment would be based on states rates of uninsured and use of DSH funding, which would be measured by uncompensated care and hospital Medicaid volume. 17.5% reduction low DSH states that have spent more than 99.9% of their allotment. 7

8 25% reduction low DSH states that have spent less than 99.9% of their allotment. 35% reduction DSH states that have spent more than 99.9% of their allotment. 50% reduction DSH states that have spent less than 99.9% of their allotment. New York State has not yet provided an official analysis of how this provision would impact the state s DSH program. A state s DSH allotment could not fall below 50% of the total allotment in 2012, adjusted for inflation. Comparison of the Coverage, Medicare, and Medicaid Provisions Medicare DSH Reductions: Would reduce Medicare DSH payments by $24.4 billion over ten years. Reductions would begin in federal fiscal year Would base Medicare DSH payments on: 25% of DSH payments that would otherwise be made will continue to be paid as empirically justified ; and 75% of DSH payments would be subject to reductions to reflect reductions in the uninsured population. Generally, for every percentage point reduction in the uninsured rate (in each period evaluated), the percent of DSH funding available for the period would be proportionally reduced. However, the calculation of the reduction in the uninsured population has been modified to artificially increase the reduction of uninsured by an additional 1.5 Medicare DSH Reductions: Would reduce Medicare DSH payments by $10.3 billion over ten years. Reductions could begin in federal fiscal year 2017 if there is a reduction in the uninsured rate that exceeds eight percentage points from 2010 to Would require CMS would report to Congress by January 1, 2016 on the level of Medicare DSH payments that should be made based on the empirical justification for Medicare DSH attributable to hospital characteristics, including bed size. 8

9 percentage points, therefore increasing the level of Medicare DSH cuts when a reduction in the uninsured rate is observed. Comparison of the Coverage, Medicare, and Medicaid Provisions A portion of DSH funding would be maintained for hospitals with high levels of uncompensated care. Up to 50% of the savings achieved by reducing DSH to the empirical level would be redistributed based on individual hospital levels of uncompensated care, excluding bad debt. 9

10 Medicare Readmissions Payment Policy HANYS Position: HANYS opposes the readmissions provisions of both bills as each adheres to an aggressive policy of reducing payments for all Medicare cases for hospitals with readmissions rates deemed to be higher than expected. The policy in each bill fails to consider that many readmissions are unavoidable. Both Bills: Acute care hospitals (and Critical Access Hospitals in the bill) with higher than expected risk-adjusted readmission rates during a 30-day performance evaluation window would receive reduced Medicare payments for every discharge. Payments would be reduced by the lower of a hospitalspecific readmissions adjustment factor or a pre-determined floor (see below). In the first year, the payment policy would be applied to readmissions related to three conditions: heart failure, heart attack, and pneumonia. In the third year, the payment policy would be expanded to include chronic obstructive pulmonary disease (COPD), coronary artery bypass graft (CABG), percutaneous transluminal coronary angioplasty (PTCA), and other vascular procedures. The Secretary could expand the policy to additional conditions in future years, including all-cause readmissions. Sections: 3025 and 3026 Savings: U.S. $7.1 billion over ten years New York $800 million Begins: Federal fiscal year (FFY) 2013 Maximum Payment Reduction for Individual Facility: 1.0% in FFY 2013, increasing to 3.0% in FFY 2015 and thereafter. Methodology Change to Reflect National Data Comparisons: Section: 1151 Savings: U.S. $9.3 billion over ten years New York $1.1 billion Begins: FFY 2012 Maximum Payment Reduction for Individual Facility: 1.0% in FFY 2012, increasing to 5.0% in FFY 2015 and thereafter. Methodology Change to Reflect National Data Comparisons: Beginning in FFY 2014, the HHS Secretary would be authorized to modify the adjustment methodology based on hospitals readmissions performance compared to a national ranking of hospitals. 10

11 Public Reporting of Hospital-Specific Readmissions Rates: Would require the HHS Secretary to publicly post (on Hospital Compare Web site) all-payer readmission rates for identified conditions. This would require hospitals to submit all-payer claims-level data to CMS, either independently or through their state data agency. This provision would apply to cancer, children s, rehabilitation, long-term care, and psychiatric inpatient facilities as well. Assistance for High Readmission Hospitals: The Secretary would be required to make a quality improvement program available to hospitals with high severity-adjusted readmission rates. Beginning in FFY 2011, the bill would also provide $500 million over three years to fund a Community Care Transitions Program for hospitals with high readmission rates and partnership organizations to implement care transitions using evidence-based interventions for targeted high-risk beneficiaries. Post-Acute Care Providers: Would require reporting of all-patient claims data for posting of readmission rates on the Hospital Compare site (see above). Physicians: 11 Public Reporting of Hospital-Specific Readmissions Rates: Assistance for High Readmitting Hospitals: The Secretary would be required to provide financial assistance to hospitals with a DSH patient percentage of at least 30%, to help them address specific patient noncompliance issues that may be causing high readmission rates, especially provision of transitional care services. Post-Acute Care Providers: Would require payment for discharges from a post-acute care provider that are readmitted to an acute care hospital or Critical Access Hospital (CAH) within 30 days of the initial post-acute discharge to be reduced by 0.4% in 2012, 0.7% in 2013, and 1.0% in Would require the Secretary to implement a Medicare readmissions payment policy for post-acute providers similar to the Medicare acute care hospital readmissions payment policy in Physicians: The Secretary would be required to conduct a study and issue a report within one year after enactment on how a Medicare readmissions payment policy could apply to physicians.

12 Establishment of a Medicare Value-Based Purchasing (VBP) Program HANYS Position: The Secretary, under the VBP provision, has tremendous discretion on the design and implementation of a VBP program. HANYS believes that the Secretary should be required to develop the VBP methodology in consultation with the hospital field. HANYS urges that the pool funding the VBP program be limited to 1.0% of Medicare inpatient payments. Sections: 3001, 3006, and 3007 Budget Neutral Inpatient Hospitals: Would begin in FFY Inpatient Hospitals: The VBP program would be funded by Medicare inpatient payment reductions beginning with a 1.0% reduction in FFY 2013 and increased by 0.25% each year until the reduction reaches 2.0% for FFY 2017 and subsequent years. The program would be budget-neutral, with each year s funding pool fully distributed to hospitals in that same year. The VBP program would apply to all subsection (d) inpatient hospitals all hospitals under the Inpatient Prospective Payment System (PPS) excluding psychiatric, rehabilitation, children s, cancer, and longterm care hospitals and would establish demonstration projects to test VBP models for critical access and small hospitals. The Secretary would select measures, determine the scoring methodology, and determine the payment methodology. Hospitals that meet or exceed a performance standard set by the Secretary would be eligible to earn back the money initially withheld. No earlier than FFY 12

13 2014, the Secretary would be required to include efficiency measures (including adjusted Medicare spending per beneficiary) as part of the VBP program ( s approach to address geographic variation in spending). The use of readmissions measures would be prohibited. Comparison of the Coverage, Medicare, and Medicaid Provisions Post-Acute Care Providers: Would direct the Secretary to submit plans to Congress for VBP programs for home health providers and skilled nursing facilities by October 1, Post-Acute Care Providers: Would direct the Secretary, by January 1, 2016, to establish pilot to test the implementation of value-based purchasing programs for inpatient rehabilitation hospitals inpatient psychiatric hospitals, long-term care hospitals, cancer hospitals, and hospice providers. The duration and scope of these pilot programs could be expanded by the Secretary at any point after January 1, Physicians: Would establish a value-based payment modifier that allows for differential payments to physicians based upon quality and cost indicators. Physicians: 13

14 Medicare and Medicaid Health Care-Acquired Conditions (HAC) Payment Policies HANYS Position: Payments to hospitals under the Medicare program are currently reduced for certain cases in which an infection is determined to be health care-acquired. HANYS opposes further reductions in the Medicare payments for HACs proposed in the bill. Both Bills: Would extend the existing Medicare HAC policy to Medicaid. Medicare currently reduces payments to hospitals for cases in which one of a select number of secondary diagnoses identified under the Medicare program was not present on admission and, therefore, considered to be health careacquired. The would create a further penalty for hospitals with high HAC rates. Sections: 2702 and 3008 Savings: U.S. $1.5 billion over ten years Medicare HAC Payment Policy: Would begin in FFY Section: 1751 Savings: U.S. under $50 million over ten years Medicare HAC Payment Policy: Hospitals in the worst 25th percentile of risk-adjusted HAC rates would be subject to a 1.0% payment penalty under Medicare. The reduction would be applied in addition to current CMS payment adjustments for HACs. Would require the Secretary to publicly report on measures for HACs that are currently utilized by CMS. The Secretary would be required to study and report to Congress by January 1, 2012, on expanding the HAC policy to inpatient rehabilitation facilities, long-term care hospitals, hospital outpatient departments, and other hospitals excluded from the Inpatient PPS. Medicaid HAC Payment Policy: Would begin on July 1, Would require state Medicaid programs to adopt policies ensuring that higher Medicaid payments are not made for cases with conditions 14 Medicaid HAC Payment Policy: Would begin on January 1, Similar to, but would also require state Medicaid programs to adopt policies for non-payment for any health care-acquired condition

15 covered by the Medicare HAC policy. The Secretary could exclude conditions identified under the Medicare program determined to be inapplicable to populations under the Medicaid program. determined to be a non-covered service under the Medicare program. States could include additional health care-acquired conditions for nonpayment in their Medicaid programs. 15

16 Expansion of Medicare Pay-for-Reporting and Quality Reporting Programs Sections: 3004 and 3005 Savings: U.S. $200 million over ten years Pay-for-Reporting: Would implement pay-for-reporting programs for long-term care hospitals, inpatient rehabilitation facilities, inpatient psychiatric facilities, and hospice providers in Providers that do not report would be subject to a two percentage point reduction in their annual marketbasket update. Quality Reporting: Requires reporting of quality and efficiency measures for cancer hospitals in Pay-for-Reporting: Quality Reporting: 16

17 Addressing Geographic Variation in Health Spending HANYS Position: HANYS supports the rigorous and thorough analysis of causes and characteristics of geographic variation in health spending. HANYS believes any such study must take into consideration legitimate causes for variation, such as the costs associated with purchasing all of the goods and services needed to provide care in a given market. Analysis must examine how the utilization of services is driven not by hospitals, skilled nursing facilities, home health agencies, and hospices, but by physicians and other patient care providers who make decisions regarding which services and how many procedures/tests are needed to provide appropriate, quality care. Only then can informed proposals be developed to address any variation determined to be inappropriate. The findings and recommendations of such rigorous analysis should inform the development of reimbursement to providers not control it. Any proposals to address variation in spending that do not allow Congress and providers to have a significant voice in their character are likely to yield unintended and unforeseen consequences that could weaken the health care delivery system. Section: 3001 Budget Neutral Use of Efficiency Measures in VBP: Would require the Secretary to include efficiency measures in an inpatient hospital VBP program by FFY Measures of Medicare spending per beneficiary adjusted for age, sex, race, severity of illness, and other factors that the Secretary determines to be appropriate must be included. IOM Study and Development of a Value Index : Sections: 1159 and 1160 Budget Neutral Use of Efficiency Measures in VBP: IOM Study and Development of a Value Index : Would direct the Institute of Medicine (IOM) to analyze the geographic variation in per capita health care spending among Medicare, Medicaid, privately insured, and uninsured populations and recommend Medicare payment changes to the Secretary by April 15, Would require IOM to consider in its study the extent to which geographic variation can be attributed to differences in input prices, practice patterns/utilization, patient access to health services, socio-

18 economic factors, health care outcomes, and provider organizational models. IOM, based on its study, would be required to consider the development and adoption of a value index based on measures of quality and cost to adjust provider payment levels on a regional or provider-level basis. The Secretary would present Congress with a plan for implementation of the IOM recommendations by Congress could not modify the proposal in any way; and it would automatically take effect unless Congress passes a joint resolution to reject it. The President would have the authority to veto congressional disapproval. Establishment of a Wage Index Floor for Hospitals and Physicians in Select Frontier States: Would establish and apply a hospital wage index floor of 1.0 for inpatient hospital services (for discharges on or after October 1, 2010) and outpatient services (for discharges on or after January 1, 2011) in "frontier" states (defined as MT, ND, NV, SD, and WY). A floor of 1.0 would also apply to the practice expense for physician services provided on or after January 1, 2011 in these frontier states. Establishment of a Wage Index Floor for Hospitals and Physicians in Select Frontier States: 18

19 Medicare Hospital Wage Index Reform HANYS Position: HANYS supports allowing hospitals in areas with low wage indexes the opportunity to receive higher wage index adjustments, while holding all other hospitals harmless through the permanent infusion of funding into the Medicare wage index system. Section: 3137 Budget Neutral Would require the Secretary to report to Congress by December 31, 2011 with recommendations for comprehensive reform of the Medicare wage index system. The plan would be required to take into account the 2001 MedPAC wage index report, including the proposed use of Bureau of Labor Statistics data and the recommended redefinition of wage areas. In addition, see geographic variation section summary above. Sections: 1157 and 1158 Increase: U.S. up to $8 billion over ten years Would direct IOM to report, within one year of enactment on the validity and effects of the Medicare wage index for hospitals and the geographic practice cost index (GPCI) for physicians, and make recommendations. The Secretary could propose policies to adjust these factors and increase Medicare payment levels by up to $4 billion per year for two years prior to Beginning in 2014, the new money/hold-harmless provision would expire, and the changes to the wage index and GPCI beyond 2014 would be redistributive. 19

20 Medicare GME Provisions HANYS Position: Increased Medicare support for training medical residents is critical, as the physician shortage in New York and throughout the nation continues to worsen. HANYS supports the redistribution of currently unused medical residency slots along with increasing the number of overall Medicare-supported residency slots. Preference for residency slot reallocations or increases should be given to institutions currently training physicians in excess of their Medicare GME cap. HANYS supports the modernization of GME training language to allow Medicare support for the training of residents in non-hospital settings. Both Bills: GME payments to hospitals would be protected, maintaining current levels of funding for Indirect Medical Education and Direct Medical Education in perpetuity. In addition, GME training slots for primary care would be increased through a re-distribution of unused slots. The bills would also allow hospitals to be paid for resident training in non-hospital settings if the hospital incurs the costs of the stipends and fringe benefits for the resident. This would eliminate current requirements for compensating supervising physicians in non-hospital settings. Further, hospitals would be allowed to count time spent by a resident in non-patient care activities such as didactic conferences and seminars. Sections: 5503, 5504, and 5506 Increase: U.S. $1.2 billion over ten years Redistribution of Unused Resident Slots: Redistributes 65% of the currently unused training slots. Rural hospitals with less than 250 beds and hospitals that participated in voluntary reduction programs are exempt from reductions. Hospitals could apply to receive up to 75 additional residency positions. In return, the hospital would be required to use at least 75% of the increase for primary care or general surgery residency and to maintain its quantity of primary care residents. Priority would be given to hospitals located in states with low residentto-population ratios; hospitals in one of the top ten states for the ratio of the total population living in a Health Professional Shortage Area 20 Sections: 1501, 1502, 1503, 1504, and 1744 Increase: U.S. $1.5 billion over ten years Redistribution of Unused Resident Slots: Redistributes 90% of the currently unused training slots. Hospitals could apply to receive a maximum of 20 additional residency slots. All additional slots would be used for primary care residents. Priority would be given to hospitals currently training physicians above their Medicare GME cap, hospitals with three-year primary care residency programs, hospitals that emphasize training in non-hospital settings or in health professional shortage areas, and hospitals in states

21 (HPSA); and hospitals located in rural areas. Preservation of Resident Slots from Closed Hospitals: Resident slots from closed hospitals would be redistributed using a process to be determined by the Secretary. Priority would be given to other hospitals within the same Core-based Statistical Area (CBSA), followed by hospitals within the same state. This would include hospitals that have closed up to two years prior to enactment. with low resident-to-population ratios. Preservation of Resident Slots From Closed Hospitals: Same as, but would not include other hospitals within the same CBSA in the priority redistribution. 21

22 Independent Payment Advisory Board (IPAB) HANYS Position: HANYS opposes the creation of a new federal entity with the authority to set Medicare payment levels. It is imperative that Congress maintain its role in determining overall funding for health services and in framing conditions for reform. Section: 3403 Savings: U.S. $28.2 billion over ten years. Establishment of IPAB: Would establish an IPAB to submit proposals to Congress beginning in 2015 that would reduce Medicare spending by targeted amounts (0.5 percentage point reduction in 2015 increasing to a 1.5 percentage point reduction in 2018) if it is determined that there is excess cost growth in the Medicare program. Establishment of IPAB: Congress could modify or pass an alternative to the proposals, but would be required to maintain the targeted level of Medicare savings for the year. The Board s original proposal would be implemented if Congress does not consider the Board s proposal. Exemption from Board Proposals: Providers such as hospitals and hospices that are scheduled to receive a reduction to their marketbasket update in excess of a productivity-based reduction would be exempt from any proposed reductions from the Board through Exemption from Board Proposals: 22

23 New Requirements Applicable to Tax-Exempt Status HANYS Position: HANYS believes states like New York that already have in place robust reporting requirements including implementation of strategies to meet community needs based on the findings of periodic health needs assessments and the adoption of financial assistance, billing and debt collection policies, should be permitted to maintain their existing programs. Section: 9002 Would not establish thresholds hospitals must meet to attain or maintain tax-exempt status. Would establish the following additional criteria for hospitals to maintain their Section 501(c)(3) tax-exempt status: implementation of strategies to meet community needs-based on the findings of periodic health needs assessments; adoption of a financial assistance policy with criteria to qualify, basis for payment and defined collection policies; limitation of charges for those who qualify for financial assistance to no more than the amounts generally billed to those with insurance, and prohibits the use of gross charges; and requirement that 501(c)(3) hospitals not engage in extraordinary collection actions. In addition to meeting all four reporting requirements to maintain taxexempt status, a $50,000 excise tax would apply if a hospital fails to meet the community health plan requirements. Would require the Internal Revenue Service to review information about a hospital s community benefit activities at least once every three years. 23

24 Would require the Secretary to report to Congress on the levels of charity care, bad debt, unreimbursed costs of non means-tested government programs, and the cost of community benefit activities incurred by tax-exempt, taxable, and government hospitals. 24

25 340B Drug Discount Program Expansion HANYS Position: HANYS supports the expansion of the 340B drug discount program to inpatient drugs and the extension of the program to all special status rural hospitals, children s hospitals, and cancer hospitals. Both Bills: Would extend access to the 340B drug discount program to certain special status rural hospitals, children s hospitals, and cancer hospitals. Section: 7101 Extension of 340B Program: Beginning January 1, 2010, would extend access to 340B program to certain children s and cancer hospitals, CAHs, Sole Community Hospitals (SCHs), and Rural Referral Centers (RRCs). SCHs and RRC must have a DSH adjustment percentage equal to or greater than 8 percent. The program is not extended to Medicare Dependent Hospitals. Expansion of 340B Program: Would expand the 340B drug discount program to include inpatient drugs and would require that hospitals issue credits to the state Medicaid program for covered inpatient drugs provided to Medicaid recipients. Sections: 2501, 2502, and 2503 Extension of 340B Program: Similar to, but would be effective upon enactment, not require SCHs and RRCs to meet a DSH adjustment percentage threshold, and would extend the program to Medicare Dependent Hospitals. Expansion of 340B Program: 25

26 Medical Liability Reform HANYS Position: HANYS encourages Congress to take a more aggressive stance to address the burdens associated with the current medical liability system. We urge the adoption of a medical indemnity fund, which would provide an alternative financing mechanism for specific, high-cost cases involving neurological impairment, and a mechanism to reduce the cost of insurance for physicians. In addition, administrative compensation systems, medical courts, and the promotion of a sorry works program to encourage physicians to be candid with patients without fear of reprisals, should be actively pursued. Finally, we urge Congress to consider the establishment of caps on non-economic (pain and suffering) damages. Section: of the Manager s Amendment and section 6801 Would authorize the Secretary to award $50 million in demonstration grants to states over a period of five years, beginning fiscal year 2011, for the development, implementation, and evaluation of alternatives to the existing civil litigation system. Each State desiring a grant is required to develop an alternative to current tort litigation that allows for the resolution of disputes over injuries allegedly caused by health care providers or health care organizations, and promotes a reduction of health care errors by encouraging the collection and analysis of patient safety data related to disputes resolved by organizations that engage in efforts to improve patient safety and the quality of health care. Section: 2531 Would authorize the Secretary to make incentive payments to states that adopt an effective alternative medical liability law. State alternatives to medical malpractice litigation must consist of certificates of merit, early offers, or both, and may not limit attorneys fees or impose caps on damages. Any incentive payments received by states must be used to improve health care in the state. The proposal would also express a sense of the encouraging states to develop and test alternatives to the existing civil litigation system and encourage Congress to consider establishing state demonstration projects to test alternatives to the current civil litigation system as a means to reduce providers medical liability insurance burdens. 26

27 Medicare Rural Provisions Sections: 3122, 3123, 3124, 3125, 3126, 3127, 3129, and 3131 Increase: U.S. $200 million over ten years Extension of Outpatient Hold-Harmless Payments: Would extend outpatient hold-harmless payments for one year, through December 31, Medicare Dependent Hospitals (MDHs): Would extend the MDH classification, which is set to expire on September 30, 2011, for one additional year, through September 30, Clinical Diagnostic Laboratory Services: Would reinstate reasonable cost payment for clinical diagnostic laboratory services to rural hospitals with less than 50 beds from July 1, 2010 through June 30, Medicare Payment Adjustment for Low-Volume Hospitals: Would modify the current low-volume Medicare payment adjustment for FFYs 2011 and The size of a low-volume hospital would be increased from 1,500 to 1,600 discharges per year and the Secretary would be required to determine the low-volume add-on amount using a linear sliding scale ranging from 25% for low-volume hospitals with Medicare discharges below a certain threshold, to no adjustment for hospitals with more than 1,600 Medicare discharges. Rural Community Hospital Demonstration Program: Would extend for five additional years, through December 31, 2014, the rural community hospital demonstration project and increase the number 27 Section: 1192 Increase: U.S $200 million over ten years Extension of Outpatient Hold-Harmless Payments: Same as but would extend the payments for two years, through December 31, MDHs: Clinical Diagnostic Laboratory Services: Medicare Payment Adjustment for Low-Volume Hospitals: Rural Community Hospital Demonstration Program:

28 of participating hospitals from 15 to 30. In addition, this provision would expand the eligible sites to rural areas in all states. Comparison of the Coverage, Medicare, and Medicaid Provisions Expansion of Community Health Integration Models in Rural Areas: Would remove the limit on the number of eligible counties that may participate in the demonstration project on community health integration models in certain rural counties within qualifying states. MedPAC Review of Medicare Payments for Rural Areas: Would require MedPAC to review payment adequacy for rural health care providers serving the Medicare program and report to Congress by January 1, Medicare Rural Hospital Flexibility Program: Would extend the FLEX program for an additional two years through Allows Small Rural Hospital Improvement grant program funding to support small rural hospitals participation in the delivery system reform programs outlined in this legislation (such as VBP, bundling, and accountable care organizations). Expansion of Community Health Integration Models in Rural Areas: MedPAC Review of Medicare Payments for Rural Areas: Medicare Rural Hospital Flexibility Program: 28

29 Other Hospital and Health System Provisions Sections: 3137, 3141, 3138, and 6411 Increase: U.S. $200 million over ten years Updating Outpatient Payments for PPS-Exempt Cancer Hospitals: Would require CMS to conduct a study to determine if the outpatient costs incurred by PPS-exempt cancer hospitals exceed the costs of other hospitals reimbursed under outpatient PPS. If appropriate, CMS would provide an adjustment for services starting January 1, Extension of Section 508 Legislative Medicare Wage Index Reclassifications: Would extend for one year, through FFY 2010, special Section 508 Medicare hospital wage index reclassifications. Would require CMS to recalculate the FFY 2010 wage indexes for those hospitals that reclassify under Section 508 to include their data in the reclassified wage index values. If the resulting reclassified wage index value is higher than the value currently published, the Secretary must retroactively adjust payments for those hospitals. The recalculation must be done by April 1, 2010 and the retroactive adjustment must be made prior to December 1, Sections: 1145 and 1193 Increase: U.S. $500 million over ten years Updating Outpatient Payments for PPS-Exempt Cancer Hospitals: Same as. Extension of Special Section 508 Legislative Medicare Wage Index Reclassifications: Same as but would extend the reclassifications for two years, through FFY Restoration of Medicare Hospital Wage Index Reclassification Thresholds: Would direct the Secretary to restore for FFY 2011 the FFY 2008 Medicare hospital wage index reclassification thresholds used to compare hospitals average hourly wages (AHWs), for the purpose of determining wage index reclassifications (the AHW comparison 29 Restoration of Medicare Hospital Wage Index Reclassification Thresholds:

30 criterion was made stricter over the past two years). Application of Budget Neutrality for the Medicare Hospital Wage Index: Would require that the application of budget neutrality associated with the effect of the Medicare wage index rural floor and imputed rural floor be applied on a national, rather than state-specific, basis through a uniform, national adjustment to the area wage index. (The current methodology that applies the wage index floor budget neutrality adjustment at the state level was adopted by CMS in FFY 2009.) Expansion of the Recovery Audit Contractor (RAC) Program: The RAC program, which currently audits Medicare Part A and Part B claims, would be expanded no later than December 31, 2010, to include audits of the Medicaid program and Medicare Parts C and D. Application of Budget Neutrality for the Medicare Hospital Wage Index: Expansion of the RAC Program: 30

31 State Fiscal Relief HANYS Position: HANYS supports an extension to the temporary increase in the Federal Medical Assistance Percentage (FMAP) provided under the American Recovery and Reinvestment Act (ARRA) of 2009 to help states cover the increased cost associated with Medicaid expansion under both bills. Section: 1749 Increase: U.S. $23.5 billion over six months New York $3.4 billion Would extend for six months, the temporary increase to the Federal Medical Assistance Percentage provided in the ARRA. 31

32 Establishment of Delivery System Reform Pilot Programs and Demonstration Projects Both Bills: Would require the HHS Secretary to conduct programs to test alternative structures and payment methodologies for bundled services. The bundles could include hospital, post-acute care, and physicians services. Provider participation would be voluntary. Additional funding would also be provided to CMS to develop innovative provider reimbursement methodologies. Sections: 2704, 2705, 2706, 2707, 3021, 3022, and 3023 Savings: U.S. $4.9 billion over ten years Medicare Payment Bundling Pilot: Participation would be voluntary. Would direct the HHS Secretary to implement a national pilot program for bundling payments in CMS would select eight conditions to be included in the pilot program. The bundled service would include care delivered three days prior to hospital admission, and would extend through 30 days following discharge; and would cover: acute care inpatient services including readmissions; outpatient hospital services including emergency room; physician care, including services in and out of the hospital; and post-acute care, including home health services, skilled nursing facility, inpatient rehabilitation, and long-term care hospital services. An entity comprised of providers including a hospital, a physician group, a skilled nursing facility, and a home health agency, could submit an application to join the pilot program. The Secretary is Sections: 1152, 1301, 1730A, and 1907 Savings: U.S. $2.7 billion over ten years Medicare Payment Bundling Pilot: Participation would be voluntary. Would require the Secretary to expand, by January 1, 2011, the current Acute Care Episode (ACE) bundled payment demonstration project to include post-acute care services and additional sites, geographic areas, and conditions. The current demonstration is testing bundled payments for a limited number of procedures and includes only hospital and physician care. The Secretary could choose to apply the ACE bundled payments to: hospitals and physicians; hospitals and post-acute care providers; hospitals, physicians, and post acute care providers; or combinations of post-acute providers. If it is determined that the ACE demonstration has improved quality and reduced costs, the Secretary would have the authority to implement the mechanisms and reforms tested under the pilot program, on a voluntary 32

33 required to consult with representatives of small rural hospitals and Critical Access Hospitals regarding their participation in the pilot program. basis, to as large a geographic scale as practical and economical. The Secretary would develop the bundled payment rates and could test payments based on bids submitted by the entities. Annual payments under the pilot to a single entity could not exceed what would otherwise be paid for the same services under the current Medicare program(s). The pilot program would last five years, and could be extended for providers participating at the end of the five-year period if the Secretary determines the extension would result in improving (or not reducing) the quality of patient care and reducing spending. In 2016, CMS would report on the results of the pilot program and make recommendations to Congress for its expansion. Secretary Plan for Bundling: Accountable Care Organizations (ACOs): Participation would be voluntary. Would establish a program, beginning in 2012, to allow groups of providers to be recognized as ACOs and share in the cost savings they achieve for the Medicare program. 33 Secretary Plan for Bundling: Would require the Secretary to develop a plan for bundling payments for post-acute services (defined as skilled nursing facilities, inpatient rehabilitation facilities, long-term care hospitals, hospital-based outpatient rehabilitation facilities, and home health agencies) no later than three years after the date of enactment. The plan must consider how and whether to include acute care hospitals and physicians in the bundle, the scope of the included services, and the payment methodology. It must also determine the quality measures that would be appropriate for reporting by hospitals and post-acute providers. ACOs: Participation would be voluntary. Would establish a pilot program, beginning in 2012, that would allow physician practices to qualify as ACOs and share in the cost savings

34 Hospitals could take the lead in formation of an ACO and ACOs could include: group practice arrangements; networks of individual physician practices; partnerships or joint-venture arrangements between hospitals and practitioners; and hospitals employing practitioners. To qualify, the organization must act as the primary care provider for at least 5,000 Medicare fee-for-service beneficiaries. ACO providers would agree to participate for at least three years. Hospitals and other providers of the ACO could share in the Medicare cost savings they achieve if the ACO meets quality performance standards established by the Secretary and average per capita Medicare expenditures are below a benchmark based on the claim history and characteristics of the patients assigned to the ACO. CMS Center for Medicare and Medicaid Innovation (CMI): Would establish by 2011, the Center for Medicare and Medicaid Innovation (CMI) to test innovative payment and service delivery models to improve the coordination, quality, and efficiency of health care services provided to Medicare and Medicaid beneficiaries. Gives preference to models for which there is evidence that the model addresses a defined population for which there are deficits in care leading to poor clinical outcomes or potentially avoidable expenditures. they achieve for the Medicare program. Hospitals cannot take the lead in forming an ACO. Hospitals and other providers must be affiliated with the physician group to participate in the ACO. The ACO could share in the Medicare cost savings if it meets quality performance standards and if Medicare expenditures for beneficiaries in the ACO are less than a target spending level or a target rate of growth. In addition, the Secretary is given authority to develop other ACO payment models, including partial capitation. The pilot program could cover a multi-year period of between three and five years. The Secretary may extend the duration of the agreement for successful ACOs and could issue regulations to permanently implement one or more ACO models if such models would result in estimated Medicare expenditures below estimated Medicare spending in the absence of such expansion. CMS CMI: Generally the same as the, but would set funding levels at $350 million for FFY 2010, $440 million for FFY 2011, $550 million for FFY 2012, and, for each subsequent year, the prior year amount adjusted for overall Medicare expenditure growth. The Secretary may, through rulemaking, expand (including implementation on a nationwide basis) the duration and the scope of a model that is being tested or a demonstration project to the extent determined appropriate by the Secretary, if the Secretary determines that such expansion is expected to reduce spending under the Medicare 34