Center for Medicare Advocacy

Advancing Access to Medicare and Healthcare

April 2015 – The Potential Impact of the “Doc Fix” & Other Issues

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LEGISLATIVE/BUDGET UPDATE

1.Medicare Physician Payment (SGR)

In an effort to address the perennial issue of payment for Medicare physicians — the fundamentally flawed reimbursement system known as the sustainable growth rate or SGR – the House of Representatives overwhelmingly passed a “doc fix” package on March 26, 2015 that would repeal and replace the SGR.  The Senate will take up the package as soon as April 13, 2015 when it returns from recess.  CMS has temporarily delayed implementation of the SGR – which would result in an approximate 21% cut in physician payment from Medicare – from April 1 until April 15.  

Impact of House Bill (H.R. 2) on Medicare Beneficiaries

The Center for Medicare Advocacy believes it is in the best interest of Medicare beneficiaries and their doctors to find a permanent solution to the broken physician payment formula called the “Sustainable Growth Rate” (SGR).  Unfortunately, the SGR replacement package from the House is not sufficiently balanced; it asks too much from beneficiaries – and nothing from the pharmaceutical or insurance industries – without providing enough for beneficiaries in return.

Unbalanced Offsets/“Pay-Fors”

The entire SGR package is estimated to cost roughly $214 billion over 10 years.  Of the portion of the package that will be offset, or paid for, roughly half (approximately $35 of the total $70 billion over 10 years) would come from Medicare beneficiaries through changes that will increase their out-of-pocket costs for health care (discussed below), including:

  • Adding deductibles to Medigap plans purchased in the future;
  • Further means-testing premiums for higher-income beneficiaries, and
  • Overall increases in Part B premiums.

At the same time, neither the pharmaceutical industry nor the insurance industry is being asked to pay for any of this package, although doing so would pay for a major portion of the SGR replacement.

“Structural Reform” of Medicare

Proponents of H.R. 2 have argued that the bill starts to make important “structural reforms” to the Medicare program that are needed to bring costs down.  We object to this line of thinking, and reject the myths upon which they are based.

In addition, we are opposed to the specific provisions of the SGR package that shift additional costs on to beneficiaries:

First, H.R. 2 would impose changes to Medigaps – Medicare supplemental insurance policies – that would limit coverage to costs above the Part B deductible by plans purchased by new Medicare beneficiaries beginning in 2020 (the Part B deductible is currently $147 a year; in 2020 Medicare Trustees project it to be $185 and in 2023, $217[1]). Doing so will diminish the financial security and protection against high, unexpected out-of-pocket expenses sought by purchasers of such plans who seek an alternative to Medicare Advantage and do not otherwise have supplemental coverage. Further, this change will encourage beneficiaries to join private Medicare Advantage plans – at greater costs to the Medicare program and taxpayers.

Second, H.R. 2 would impose further means-testing in Medicare by making higher-income individuals pay even greater shares of their Part B and D premiums than they already pay now.   Individuals with income of $85,000 or more (and couples with income above $170,000) already pay a greater share of their Part B and D premiums.  Beginning in 2018, H.R. 2 would lower the income thresholds for the top two income groups so that individuals with incomes starting at $133,500 would be paying an even greater share of their premiums.

Third, Part B premiums will increase as a result of the “doc fix.”  In 2015, the basic Part B monthly premium is $104.90.  As noted by the Congressional Budget Office (CBO), “[u]nder current law, CBO projects that the Part B premium will rise to $171 in 2025. By CBO’s estimate, enacting H.R. 2 would result in an increase of about $10—to $181—in the basic monthly Part B premium for 2025. By comparison, CBO estimates that the basic monthly premium would increase by about $7.50 in 2025 if Medicare’s payment rates for physicians’ services were frozen at current levels.”[2]

Extenders – What’s In and What’s Left Out

Whenever a temporary SGR fix has been negotiated in the past, beneficiary advocates have largely focused on a number of critical “extenders” – extensions of other temporary Medicare fixes – that have traditionally been part of a larger SGR bill.  These extenders include future funding for the Qualified Individual (QI) program that pays Part B premiums for certain low-income individuals, an exceptions process to Medicare’s annual caps on coverage of outpatient therapy services, and funding for outreach and education surrounding low-income programs.

H.R. 2 would make the Qualified Individual (QI) program permanent, which we strongly endorse.  In contrast, while there would be minimal increases for vital low-income outreach and assistance programs, which we also support, such programs would only be extended for two years instead permanently extended.

Given the significant cost-shifting on to Medicare beneficiaries as a means to keep physician payment stable, there are no provisions in H.R. 2 that would expand the eligibility and scope of the Medicare Savings Programs, including the QI program.  An increase in income eligibility for the QI program from 135% to 150% of the federal poverty level, for example, would have provided more assistance to low-income individuals.

Further, although the SGR replacement package that emerged from the Senate Finance Committee in 2013 would have repealed and replaced the annual Medicare payment caps for outpatient therapy, the current House SGR package keeps the caps in place. It merely extends the “exceptions” process by another two years and makes revisions to the manual review process.  The therapy caps are one of the biggest barriers to medically necessary care faced by individuals with chronic conditions, and since many providers are reluctant to use the exceptions process, individuals who could benefit from ongoing therapy go without.

Conclusion

While we welcome a discussion about expanding Medicare benefits and reducing beneficiaries’ cost-sharing burdens, we oppose redesigning or restructuring benefits for the purpose of achieving savings – particularly when it is done by shifting even higher health care costs to beneficiaries in order to pay for other segments of the health care sector that are asked to contribute nothing.  H.R. 2 asks too much from Medicare beneficiaries, without enough in return.

At the time of publication, the Senate has yet to address H.R. 2.  We hope that as the Senate does so, further balance and improvements can be made.

  • See the Center’s Analysis of the House-Passed SGR Legislation (March 24, 2015) at:

https://www.medicareadvocacy.org/analysis-of-sgr-legislation-from-the-center-for-medicare-advocacy/.

2.Dueling Budgets: Overview of House and Senate, Republican and Democratic Budgets and Medicare

House Budget

House Republicans adopted a 2016 budget in a 228-199 vote on March 25, 2015. The budget would increase defense spending close to $96 billion, well above President Obama’s $58 billion request. The budget would balance in nine years by cutting $5.5 trillion in spending over the next decade, most of which would come from programs that serve people of limited means.

The House Budget cuts Medicare by $316 billion, and moves to a “premium support” model to begin in 2024; combines Parts A and B deductibles; cuts Medicaid by $913 billion, not including repeal of the ACA’s Medicaid expansion, for a total cut of about $1.7 trillion; converts Medicaid into a block grant; rescinds the Administration’s ability to issue waivers for work requirements in the Temporary Assistance for Needy Families (TANF) program; converts SNAP to a State Flexibility Fund.

Budget Committee Democrats offered 27 different amendments, including such amendments as “Preventing the End of Medicare as We Know It,” with lead sponsor Rep. Lujan Grisham, blocking the “premium support” model. All of the Democratic amendments were rejected.

Senate Budget

Senate Republicans adopted a 2016 budget on March 27, 2015 in a 52-46 vote. The Senate Budget cuts Medicare by $566 billion. There is no “premium support” plan in the Senate version. There are also substantial cuts in Medicaid: approximately $400 billion, not including repeal of the ACA’s Medicaid expansion, for a total cut of about $1.2 trillion.

Several amendments backed by Democrats were approved, including an amendment that would permit legally-married same-sex couples to receive equal access to Social Security and Department of Veterans Affairs benefits, and an amendment that would encourage employers to offer up to seven paid sick days.

Next Steps

The next step in the budgetary process is for the two chambers to form a conference committee to streamline the two budgets into a combined budget. This will likely be difficult because, though the budgets are similar, key differences exist. If a joint conference agreement does pass both chambers, Republicans will be able to invoke a budget procedure known as reconciliation.

ADMINISTRATIVE/OTHER UPDATES

1.CMS Releases Final CY 2016 Call Letter

Every year, the Centers for Medicare and Medicaid Services (CMS) issues payment, performance and other rules that apply to Medicare Advantage (MA) and Part D plans that choose to participate in the Medicare program in the following calendar year. Commonly referred to as the “Call Letter,” this document is first released in draft form, subject to public comment, and is finalized a few months later, usually in April. The draft 2016 Call Letter was released on February 20, 2015, and the final 2016 letter was released on April 6, 2015.  

Similar to the draft Call Letter, the final document contains many provisions that we support, and others of concern (for links to our comments to the draft Call Letter, see below).

Medicare Advantage Payment Increase

For the third year in a row, CMS has reversed a proposal in the draft Call Letter to implement minor MA payment reductions, which, similar to previous years, was followed by an intensive lobbying campaign by the health insurance industry, supported by many members of Congress, in opposition to reductions.  Instead of an anticipated payment reduction of 0.95%, CMS announced an expected average MA revenue increase of 1.05% — or up to 3.25%, anticipating a continuing trend of some plans seeking higher risk-adjusted payment based upon how they report the health status of their enrollees.   We remain concerned that, contrary to the intent of the Affordable Care Act to achieve greater payment parity between MA plans and Traditional Medicare, MA plans continue to be overpaid in comparison to what Traditional Medicare spends on a given beneficiary.

Making the Exceptions and Appeals Processes More Accessible for Beneficiaries

We commend CMS for moving forward with efforts to improve the MA and Part D appeals process for Medicare beneficiaries, including improving Part D denial notices, clarifying plan sponsors’ obligations, expanding data collection regarding Part D appeals, and exploring a streamlined Part D appeals process that is initiated when a request for coverage of a prescription drug is denied at the pharmacy counter.  Among other things, the Final Call Letter announced a pilot program to help identify options for resolving certain point-of-sale claims rejections without an enrollee having to request a coverage determination from a plan. In addition, CMS is moving forward with improved data collection concerning Part D appeals data, with an implementation target of 2018. 

MA and Part D Plan Star Ratings

In the Draft Call Letter, CMS proposed to reduce the weights of certain plan quality measures in an attempt to account for differences in plans’ quality ratings due to enrollees’ dual eligibility for Medicare and Medicaid.   We expressed significant concerns about how decreasing the weight of measures that CMS has found to disproportionately impact dual eligible will in essence increase the quality Start Ratings for plans without actually improving care for dual eligibles in these areas.   We commend CMS for their decision not to move forward with this proposal in the Final Call Letter.  As noted by CMS, additional research is necessary before making such changes.  We strongly agree with CMS’ statement that “[w]e cannot risk the potential for masking disparities in care or jeopardizing the integrity of the Star Ratings Program by implementing changes that are not grounded in scientific evidence.”  

MA Plan Provider Directories  

On the one hand, we commend CMS for moving forward with their proposal to improve oversight of and consumer information about MA provider networks.  Specifically, CMS reminds plan sponsors that they are “expected to establish and maintain a proactive, structured process that enables them to assess, on a timely basis, the true availability of contracted providers which includes, as needed, an analysis to verify that the provider network is sufficient to provide adequate access to covered services for all enrollees.”  In addition, plans “must include in their online provider directories all active contracted providers, with specific notations to highlight those providers who are closed or not accepting new patients.”  On the other hand, we reiterate our disappointment that CMS has taken no further action to strengthen consumer protections surrounding MA plan mid-year provider network terminations.  The most effective way to protect consumers from being trapped in their plans after their own doctors are involuntarily terminated is to prohibit MA plans from terminating network providers mid-year without cause.  CMS has stated they will not impose such a requirement on plans, and has not proposed any additional consumer safeguards or relief. 

The Center, in collaboration with several other advocacy organizations, submitted comments to the draft Call Letter.   

ADVOCACY UPDATE: OBSERVATION STATUS

  1. Observation Status Bills Reintroduced in Both the House and the Senate

(H.R. 1571/S. 843)

For the last several years, the Center has been trying to address the problem of Observation Status in the hospital, which can affect both what Medicare beneficiaries pay for hospital stays, and their coverage of subsequent care in a nursing facility.  For the last several sessions of Congress, bills have been introduced to try to fix the problem for Medicare beneficiaries by counting all time spent in observation toward the three-day prior hospital stay requirement for skilled nursing facility care.

On March 23rd, alongside Center for Medicare Advocacy Executive Director Judith Stein, Congressman Joe Courtney (CT) announced the reintroduction of the Improve Access to Medicare Coverage Act of 2015.  As the Congressman stated, “My bill would fix this problem by counting all days spent in the hospital—whether admitted or on ‘observation’—toward the three-day requirement to qualify for Medicare coverage. This is a bipartisan effort that has been gaining momentum as more seniors and their families learn about this problem firsthand.” See Rep. Courtney’s press release at: http://courtney.house.gov/press-releases/alongside-patients-families-and-medical-professionals-courtney-announces-bill-to-restore-promise-of-medicare-coverage/.

The following day, Senators Brown, Collins, Nelson and Capito reintroduced the companion Senate bill.  See Sen. Brown’s press release at: http://www.brown.senate.gov/newsroom/press/release/brown-collins-nelson-capito-introduce-bill-to-end-arbitrary-medicare-policy-that-leaves-seniors-with-unfair-costs-after-receiving-necessary-care.

For more information about observation status, see: https://www.medicareadvocacy.org/medicare-info/observation-status/. 

LITIGATION UPDATE

  1. Recent Litigation Victories
  • Bagnall v. Sebelius (Observation Status) No. 3:11-cv-01703 (D. Conn., filed 11/3/2011). In November 2011, the Center for Medicare Advocacy and Justice in Aging filed a class action lawsuit on behalf of individuals who have been denied Medicare Part A coverage of hospital and nursing home stays because their care in the hospital was considered "outpatient observation" rather than an inpatient admission. When hospital patients are placed on observation status, they are labeled "outpatients," even though they are often on a regular hospital floor for many days, receiving the same care as inpatients.  Because patients must be hospitalized as inpatients for three consecutive days to receive Medicare Part A coverage of post-hospital nursing home care, people on observation status do not have nursing home coverage.  They must either privately pay the high cost of nursing care or forgo that skilled care.  The number of people placed on observation status has greatly increased in recent years.

As previously reported, on September 23, 2013, a federal judge in Connecticut granted the government’s motion to dismiss the lawsuit.  Plaintiffs appealed, but limited the appeal to the issue of the right to an effective notice and review procedure for beneficiaries placed on observation status. 

On January 22, 2015, a three-judge panel of the U.S. Court of Appeals for the Second Circuit decided that Medicare patients who are placed on “Observation Status” in hospitals may have an interest, protected by the Constitution, in challenging that classification.  The panel held that the district court erred when it dismissed the plaintiffs’ due process claims, and it sent the case back to that court for further proceedings.

Update: On April 6, 2015, a status conference was held with Judge Michael P. Shea of U.S. District Court in Hartford, CT. The parties are now working out a schedule for discovery and briefing of the issues as directed by the Second Circuit. The law firm of Wilson Sonsini Goodrich & Rosati, which has helped the Center in previous litigation, will be providing pro bono assistance, in particular with the discovery process.

On August 26, 2014, the Center filed a nationwide class action lawsuit in United States District Court in Connecticut: Lessler v. Burwell, No. 14-1230 (D.Conn.). The five named plaintiffs, from Connecticut, New York and Ohio, have all waited longer than the statutory 90-day limit for a decision on their Medicare appeals. The current average wait time is over five times the Congressionally-mandated time limit.  The complaint is available here: https://www.medicareadvocacy.org/wp-content/uploads/2014/08/00083998.pdf. 

On January 29, 2015, defendant’s motion to dismiss was denied

Update:  The parties have engaged in discovery and anticipate filing cross motions for summary judgment by June 1, 2015.  In the meantime, the court will hear oral argument on plaintiffs’ pending motion for class certification on April 22, 2015.

  1. Update on Other Litigation

•Jimmo v. Sebelius (Improvement Standard) No. 11-cv-17 (D.Vt. filed 1/18/11).  As reported during previous Alliance calls, the Settlement in Jimmo was approved on January 24, 2013 during a scheduled fairness hearing.  As previously discussed, CMS has issued revisions to its Medicare Benefit Policy Manual to ensure that Medicare coverage is available for skilled maintenance services in the home health, nursing home and outpatient settings.  CMS also implemented a nationwide education campaign for all who make Medicare determinations to ensure that beneficiaries with chronic conditions are not denied coverage for critical services because their underlying conditions will not improve. Pursuant to the Settlement, counsel for the parties are meeting twice a year to discuss problems with implementation and possible solutions, and are in regular contact between meetings.

  • For more information, see the Center’s website at: https://www.medicareadvocacy.org/medicare-info/improvement-standard/
     
  • Haro v. Johnson (Medicare Secondary Payer) No. 09-cv-134-TUC-DCB (D.Ariz.), filed March 10, 2009.  Appeal filed June 30, 2011 (No. 11-16606, 9th Cir.).  The issue in Haro was whether the Secretary's aggressive methods for attempting to collect payments under her Medicare Secondary Payer (MSP) program, directed at beneficiaries and their attorneys, violates the Medicare statute and the Due Process Clause.  Plaintiffs sought declaratory and injunctive relief prohibiting defendant's MSP recovery practices, including termination of Social Security benefits before there has been resolution of an administrative appeal of the MSP claim or waiver of recovery request, and requiring attorneys to withhold liability proceeds from their clients.

Update: On November 18, 2014, the court approved the parties’ stipulation of voluntary dismissal.  The stipulation was filed December 1, 2014, and the case was dismissed on January 28, 2015.  The government will be making revisions to the Medicare Secondary Payer Recovery letters it uses by May 17, 2015. It has already revised language on its website to clarify that “lien” is not the proper term for a Medicare recovery claim.

•Hull v. Sebelius, No. 14-801 (D.Conn.) (Lower level Medicare appeals) On June 4, 2014, the Center filed a complaint in United States District Court in Connecticut against Kathleen Sebelius, Secretary of Health and Human Services (at that time), on behalf of plaintiffs who have been denied a meaningful review of their Medicare claims at the first two levels of appeal. The case was brought as a class action on behalf of Connecticut Medicare beneficiaries seeking home health care coverage, and the four named plaintiffs represent the thousands of beneficiaries who cannot get a meaningful review of their cases. Instead, Medicare beneficiaries receive almost automatic denials of coverage, which is essentially “rubber stamped” at both the Redetermination and Reconsideration levels. The problem persists throughout the country.

Update:  On December 8, 2014, the court granted the government’s motion to dismiss on the grounds that the named plaintiffs lack standing.  A motion for reconsideration of the dismissal is fully briefed and currently pending.

On December 19, 2014, the Center for Medicare Advocacy and Vermont Legal Aid filed a class action lawsuit against Sylvia Mathews Burwell, the Secretary of Health and Human Services, to stop Medicare’s practice of repeatedly denying coverage for home health services for beneficiaries on the basis that they are allegedly not homebound, when Medicare has previously determined them to be homebound. (Ryan v. Burwell). The lawsuit was filed in the United States District Court in Burlington, Vermont on behalf of two Vermont residents, Marcy Ryan and John Herbert, as a regional class action lawsuit covering New England and New York.

Update: On March 25, 2015, the government filed a motion to dismiss on the grounds that plaintiffs lack standing, that the court lacks subject matter jurisdiction, and that plaintiffs have failed to state claim on which relief may be granted.  The plaintiffs will be filing their opposition soon.  The government will file its opposition to plaintiffs’ motion for class certification by April 20, 2015.

 

 

[1] 2014 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. 
[2] Congressional Budget Office, Letter to Speaker Boehner Re: Cost Estimate and Supplemental Analyses for H.R. 2, the Medicare Access and CHIP Reauthorization Act of 2015 (March 25, 2015). 

 

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