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A Summary of the Health-Related Provisions of the American Taxpayer Relief Act of 2012 (H.R. 8)

Posted on January 8, 2013 | No Comments

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By Michal McDowell

Introduction

Both the Senate and the House passed H.R.8 (89-8 and 257-167, respectively), the American Taxpayer Relief Act, on January 1, 2013. President Barack Obama signed the Act into law on January 3, 2013. The measure extends Bush-era income and other tax cuts for individuals and families making up to $400,000 and $450,000 respectively. For individuals and families above this income threshold, the bill increases taxes from 35% to 39.6%. H.R. 8 also postpones for 2 months the sequestration, replacing it with other spending cuts and revenue increases.

Notably, the fiscal cliff deal prevents the 27% cut in Medicare physician payment rates, which will cost government $25.2 billion over the next decade. Most of the 28 Medicare and other health-related provisions are “pay-fors” to finance this one-year sustainable growth rate (SGR) fix. Some of the more significant pay-fors include the $10.5 billion cut from Medicare payments to recover overpayments to hospitals, the $4.9 billion cut from end stage renal disease payments, and the rebasing of disproportionate share hospital payments, which will save $4.2 billion. According to the Congressional Budget Office (CBO), the estimated total budgetary effect of H.R. 8’s Title VI, which includes Medicare the other health extensions, is $1.7 billion.

Although they do not have significant cost impact, two politically notable provisions in the bill include the CLASS repeal and the significant defunding of health insurance co-operatives (CO-OPs). The CLASS program repeal, which already had its budget suspended in October 2011, was a strictly political move. The program was designed to be a public insurance program for Americans with permanent or temporary disabilities in need of long-term care support. CO-OPs are non-profit, patient-centered insurance issuers that must use profits to lower premiums, improve scope of benefits, or improve the quality of health care delivered to plan members.

See below for a detailed summary of the provisions under Title VI of H.R. 8.

Summary of Title VI

Medicare Extensions

  • Medicare Physician Payment Update
    • Fixes SGR by effectively delaying the scheduled slash in payment through December 31, 2013. Medicare physician payment rates were scheduled to be cut by approximately 27% at the end of 2012.[1]
    • Addresses health care quality improvement through the development of clinical data registries.[2]
  • Work Geographic Adjustment
    • The Medicare fee schedule is currently adjusted by geographic region to account for the price of physician work, practice expense, and medical malpractice insurance. The law extends the current “1.0” physician index through December 1, 2013.[3]
  • Payment for Outpatient Therapy Services
    • Extends the exemption to beneficiary payment caps for medically necessary, non-hospital outpatient therapy services through December 31, 2013 and applies the therapy cap to hospital outpatient departments.[4]
  • Ambulance Payments
    • Current law adds on payments of 2%, 3%, and 22.6% for urban, rural, and super-rural ground ambulance transports respectively. H.R. 8 extends the add-on payments through January 1, 2014, and also requires HHS to conduct a study regarding payments for ambulance services in both rural and super-rural areas.[5]
  • Medicare Inpatient Hospital Payment Adjustment for Low-Volume Hospitals
    • Extends the add-on payment adjustment for hospitals that have less that 1,600 Medicare discharges and are 15 miles or greater from the nearest hospital through December 1, 2013.[6]
  • Medicare-Dependent Hospital Program
    • The Medicare-Dependent Hospital Program provides funding for 200 hospitals that are located in rural areas, have 100 beds or fewer, are not the “sole community hospital,” and have at least 60% of inpatients days or discharges covered by Medicare. H.R. 8 extends this payment adjustment through October 1, 2013.[7]
  • Medicare Advantage Special Needs Plans (SNPs)
    • Extends through 2015 the availability of Medicare Advantage Plans for individuals with special needs.[8]
  • Medicare Reasonable Cost Contracts
    • Extends through 2014 the ability of Medicare cost plans to operate in areas where at least two Medicare Advantage programs operate.[9]
  • Performance Improvement
    • Continues funding through 2013 activities related to health care performance improvement, and requires HHS to develop a strategy to collect performance improvement data.[10]
  • Outreach and Assistance for Low-Income Programs
    • Extends funding for programs designed to raise awareness regarding benefits available to low-income individuals and families.[11]

Other Health Extensions[12]

  • Qualifying Individual (QI) Program
    • Extends the QI Program, which allows Medicaid to pay Medicare Part B premiums for low-income beneficiaries, through December 31, 2013.
  • Transitional Medial Assistance (TMA)
    • Extends the TMA program, which allows Medicaid beneficiaries to maintain Medicaid coverage as they transition into employment, through December 31, 2013.
  • Medicaid and CHIP Express Lane Option
    • Extends the Express Lane Eligibility option, which allows states to rely on data from other state offices in making income eligibility determinations, through September 30, 2014.
  • Family-to-Family Health Information Centers
    • Continues the Family-to-Family Health Information Centers grant, which provides funding to nonprofit service providers that care for special needs children and their families.
  • Special Diabetes Program
    • Extends the funding for the Special Diabetes Program and funds research on type I diabetes and supports prevention and treatment initiatives for American Indians and Alaska Natives.

Other Health Provisions (offsets)

  • Coding Adjustment for Implementation of MS-DRGs
    • Phases-in the recoupment of hospital overpayments due to the transition to Medicare Severity Diagnosis Related Groups (MS-DRGs).[13]
  • Medicare ESRD Bundled Payment System
    • Incorporates recommendations forwarded by the Government Accountability Office (GAO) in their December report on end stage renal disease (ESRD). H.R. 8 amends bundled payments to account for changes in the utilization of certain drugs and biological, and imposes a two year delay of implementation of oral-only ESRD-related drugs in the ESRD prospective payment system.[14]
  • Multiple Service Payment Policies for Therapy Services
    • Reduces payment for subsequent therapies furnished by physicians and other providers when they are provided in the same day.[15]
  • Radiology Services Furnished under Medicare OPPS
    • Equalizes payment for certain radiology services in Medicare hospital outpatient department.[16]
  • Advanced Imaging Services
    • Modifies the equipment utilization rate for advanced imaging services from 75% to 90%.[17]
  • Non-Emergency Ambulance Transports for ESRD Beneficiaries
    • Reduces payment for non-emergency ambulance transports for ESRD beneficiaries by 10 percent after October 1, 2013.[18]
  • Collection of Overpayments
    • Extends the statute of limitations for recovering overpayments from three to five years.[19]
  • Medicare Improvement Fund
    • H.R. 8 cuts the entire budget of the Medicare Improvement Fund.[20]
  • Rebasing of State DSH Allotments
    • Makes the disproportionate share hospital (DSH) payments for a state equal to the DSH allotment according to the percentage change in the consumer price index (CPI) for all urban consumers.[21]
  • CLASS Act and Replacement Commission on LTC[22]
    • H.R. 8 fully repeals the Community Living Assistance Services and Supports (CLASS) Act, replacing it with a commission on long-term care. The commission, made up of 15 appointed members, is tasked with establishing a plan for long-term care. If the majority of commission members vote in favor of a plan, the recommendation will be sent to Congress. CLASS was created under the March 2010 Patient Protection and Affordable Care Act (ACA).[23] The program allows workers to pay into a fund that would provide a daily $50 cash benefit for long-term care services. The program would collect contributions to the fund for five years before providing benefits. In October 2011, The U.S. Department of Health and Human Services (HHS) suspended implementation of CLASS, explaining that the program could not be voluntary, self-sustaining, and solvent for 75 years.
  • Consumer Operated and Oriented Plan Program (CO-OP)
    • Effectively halts all new CO-OP Program activity by rescinding 90% of remaining, unobligated Program funds and transfers the remaining 10% into a CO-OP Program contingency fund, which will cover loans and grants already awarded to current CO-OPs until such funds completely expended.[24]

Congressional Budget Office’s Estimated Budgetary Effects of Title VI

According to CBO’s estimate of the budgetary effects of H.R. 8, the fiscal cliff bill will add almost $4 trillion in debt from 2013-2022, largely due to less revenue coming into the Treasury and more outgoing refundable tax credits for low-income families.[25] Contradicting the CBO report, the White House’s Office of Management and Budget (OMB) released a statement arguing that the American Taxpayer Relief Act will reduce the deficit by $737 billion.[26] According to the White House, the higher tax payments from individuals who make over $400,000 and families who make over $450,000, paired with the potential interest savings, will reduce the debt. A crucial point made by Jeff Zients, the White House deputy director of management, is that CBO’s relevant point of comparison should not be current law, but rather current policy – namely, the sequestration policies in place December 31, 2012. Using this baseline as the reference point, OMB arrived at the $737 billion debt reduction figure.

Specific to the health care changes in Title VI of the bill, “Medicare and Other Health Extensions,” CBO projects that, in total, the provisions will decrease the budget authority by $540 million, but increase outlays by $1.7 billion over the next decade. Budget authority determines how much money Congress allows a federal agency to spend whereas outlays are how much money will actually flow out of the federal treasury in a given year. Budget authorities generally reflect Congressional budgetary decisions, whereas outlays determine the size of the surplus, or, in this case, deficit.



[1] H.R. 8, Title VI, Section 601, Part A, page 86.
[2] 7H.R. 8, Title VI, Section 601, Part B, page 86.
[3] H.R. 8, Title VI, Section 602, page 90.
[4] H.R. 8, Title VI, Section 603, pages 90-92.
[5] H.R. 8, Title VI, Section 604, pages 92-96.
[6] H.R. 8, Title VI, Section 605, page 96.
[7] H.R. 8, Title VI, Section 606, pages 96-97.
[8] H.R. 8, Title VI, Section 607, page 97.
[9] H.R. 8, Title VI, Section 608, pages 97-98.
[10] H.R. 8, Title VI, Section 609, pages 98-103.
[11] H.R. 8, Title VI, Section 610, pages 103-105.
[12] H.R. 8, Title VI, Subtitle B, pages 105-107.
[13] H.R. 8, Title VI, Subtitle C, Section 631, pages 107-110.
[14] H.R. 8, Title VI, Subtitle C, Section 632, pages 110-112.
[15] H.R. 8, Title VI, Subtitle C, Section 633, pages 112-113.
[16] H.R. 8, Title VI, Subtitle C, Section 634, pages 114-116.
[17] H.R. 8, Title VI, Subtitle C, Section 635, page 116.
[18] H.R. 8, Title VI, Subtitle C, Section 637, pages 118-119.
[19] H.R. 8, Title VI, Subtitle C, Section 638, page 119.
[20] H.R. 8, Title VI, Subtitle C, Section 640, page 120.
[21] H.R. 8, Title VI, Subtitle C, Section 641, pages 120-121.
[22] H.R. 8, Title VI, Subtitle C, Sections 642 & 643, pages 122-132.
[23] P.L 111-148, P.L. 111-152.
[24] H.R. 8, Title VI, Subtitle C, Section 644, pages 132-133.
[25] Congressional Budget Office, Estimate of the Budgetary Effects of H.R. 8, the American Taxpayer Relief Act of 2012, as passed by the Senate on January 1, 2013.
[26] http://www.whitehouse.gov/blog/2013/01/01/american-taxpayer-relief-act-reduces-deficits-737-billion.
H.R. 8, Title VI, Section 601, Part A, page 86.
H.R. 8, Title VI, Section 601, Part B, page 86.
H.R. 8, Title VI, Section 602, page 90.
H.R. 8, Title VI, Section 603, pages 90-92.
H.R. 8, Title VI, Section 604, pages 92-96.
H.R. 8, Title VI, Section 605, page 96.
H.R. 8, Title VI, Section 606, pages 96-97.
H.R. 8, Title VI, Section 607, page 97.
H.R. 8, Title VI, Section 608, pages 97-98.
H.R. 8, Title VI, Section 609, pages 98-103.
H.R. 8, Title VI, Section 610, pages 103-105.
H.R. 8, Title VI, Subtitle B, pages 105-107.
H.R. 8, Title VI, Subtitle C, Section 631, pages 107-110.
H.R. 8, Title VI, Subtitle C, Section 632, pages 110-112.
H.R. 8, Title VI, Subtitle C, Section 633, pages 112-113.
H.R. 8, Title VI, Subtitle C, Section 634, pages 114-116.
H.R. 8, Title VI, Subtitle C, Section 635, page 116.
H.R. 8, Title VI, Subtitle C, Section 637, pages 118-119.
H.R. 8, Title VI, Subtitle C, Section 638, page 119.
H.R. 8, Title VI, Subtitle C, Section 640, page 120.
H.R. 8, Title VI, Subtitle C, Section 641, pages 120-121.
H.R. 8, Title VI, Subtitle C, Sections 642 & 643, pages 122-132.
P.L 111-148, P.L. 111-152
H.R. 8, Title VI, Subtitle C, Section 644, pages 132-133.
Congressional Budget Office, Estimate of the Budgetary Effects of H.R. 8, the American Taxpayer Relief Act of 2012, as passed by the Senate on January 1, 2013.

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