Lawmakers at the end of 2012 negotiated a package of deficit-reduction measures to stop the nation from going over the “fiscal cliff,” a series of mandatory budget cuts and tax increases that were scheduled to take effect starting in January 2013. These measures included various cuts and/or alterations to Medicare.
The American Taxpayer Relief Act of 2012 averted a 27 percent pay cut slated to hit doctors on January 1, 2013 due to the sustainable growth rate. But the $30 billion price tag of that patch is offset in the bill by cuts in reimbursement to other Medicare providers over the next ten years. Hospitals will fare the worst, picking up nearly 50 percent of the tab.
Below is a detailed breakdown of the bill's Medicare provisions, and how they impact spending compared to the CBO's "current law" baseline:
COSTS
Doctors
- Medicare Physician Payment Update: This provision helped physicians avoid a 26.5 percent rate cut required under the Sustainable Growth Rate (SGR) formula. Cost: $25.2 billion
- Work Geographic Adjustment: This provision extends the existing Medicare Part B physician fee schedule, under the Social Security Act, through Dec. 31, 2013. Cost: $500 million
Hospitals
- Extension of Medicare Inpatient Hospital Payment Adjustment for Low-Volume Hospitals: This provision extends Medicare add-on payments to qualifying low-volume hospitals, those that discharges less than 1,600 beneficiaries a year, through Dec. 31, 2013. Cost: $30 million
- Extension of the Medicare-Dependent Hospital Program: This provision extends higher Medicare payments to small rural hospitals where Medicare beneficiaries make up a significant portion of its discharges. The provision is extended through Oct. 1, 2013. Cost: $10 million
Insurers/Medicare Advantage
- Extension for Specialized Medicare Advantage Plans for Special Needs Individuals: This provision extends the authority of the Medicare Advantage Plans for Special Needs Individuals (SNPs) to target marketing and enrollment to certain populations. It extended the provision, under the Social Security Act, from “2014” to “2015.” Cost: 30 million
- Extension of Medicare Reasonable Cost Contracts: This provision allows Medicare cost plans to continue through 2014. A Medicare cost plan is a type of HMO. According Medicare.gov, these plans may work the same way, and have some of the same rules, as Medicare Advantage. In a Medicare cost plan, if you go to a non-network provider, the services are covered under Original Medicare. You would pay the Medicare Part A and Part B coinsurance and deductibles. Cost: Between -$50 million and $50 million
All Providers
- Performance Improvement: This provision extends the requirement for the Secretary of Health and Human Services to develop a strategy to provide data for performance improvement in a timely manner to Medicare providers. Cost: Between $50 million and -$50 million
Other Providers
- Payment for Outpatient Therapy Services: This provision extends the process for receiving additional Medicare outpatient therapy services based on medical necessity through Dec. 31, 2013. Current law limits payments to $1,880 per beneficiary. Cost: $1 billion
- Ambulance Add-on Payment: This provision extends the Medicare add-on payment for ground ambulance transports through Dec. 31, 2013; and air ambulance transports add-on until June 30, 2013. Cost: $10 million
- Extension of Funding for Outreach and Assistance for Low-Income Programs: This provision extends funding, to include 2013, for the State Health Insurance Counseling Programs, Area Agencies on Aging, Aging and Disability Resource Centers, and the National Center for Benefits Outreach and Enrollment. Cost: Between $50 million and -$50 million
Beneficiaries
- Extension of the Qualifying Individual Program: This provision extends the Qualifying Individual Program through Dec. 31, 2013. The program allows Medicaid programs to pay the Part B premiums for low-income Medicare beneficiaries. Cost: $0.8 billion
CUTS
Hospitals
- IPPS Documentation and Coding Adjustments for Implementation of MS-DRGs: This provision phases in the recoupment of past overpayments to hospitals made as a result of the transition to Medicare Severity Diagnosis Related Groups (MS-DRGs). Savings: $10.5 billion.
- Certain Radiology Services Payments: This provision equalizes reimbursement for stereotactic radiosurgery services provided on under Medicare hospital outpatient payment system. Savings: $40 million
- Adjustment of Equipment Utilization Rate for Advanced Imaging Services: This provision would increase the utilization factor used in the setting of payment for imaging services in Medicare from 75 percent to 90 percent. Savings: $80 million
Insurers/Medicare Advantage
- Medicare Advantage Coding Intensity Adjustment: This provision increases the coding intensity adjustment to reflect differences in coding practices between Medicare fee-for-service and Medicare Advantage. Savings: $2.5 billion
Other Providers
- Revision to the Medicare End Stage Renal Disease (ESRD) Payment System: This provision integrates findings from the General Accountability Office by re-pricing costs for ESRD-related drugs under the bundled payment system. Savings: $4.9 billion.
- Therapy Multiple Procedure Payment Policies: This provision further reduces payment – from 25 percent to 50 percent – for subsequent therapies when therapies are provided on the same day. Savings: $1.8 billion.
- Medicare Payment for Diabetic Supplies: This proposal applies competitive bidding to diabetic test supplies and eliminates the overpayment for diabetic supplies. Savings: $60 million
- Medicare Payment Adjustment for Non-Emergency Ambulance Transports for ESRD Beneficiaries: This provision reduces the fee schedule for ambulance services for individuals with ESRD receiving non-emergency basic life support services on or after Oct. 1, 2013. It reduces payments by 10 percent. Savings: $40 million
- Elimination of Medicare Improvement Fund: This provision eliminates funding for the Medicare Improvement Fund which was established to make improvements under the original Medicare fee-for-service program in parts A and B for Medicare beneficiaries. Savings: $1.7 billion.
Related FAQs
What is Sequestration?
How Did We Arrive at Sequestration?
What Does Sequestration Mean to Medicare?
What Does Medicare Have to Do With the Federal Budget Deficit?
What Is Means Testing?
