Notes from the Cliff: The Deal and Its Impact on Medicare

This week, the U.S. House of Representatives voted to approve legislation passed by the Senate to address  the "fiscal cliff"- the concurrent expiration of tax cuts and the beginning of automatic spending cuts (the Sequester) set to take place on January 1st. The deal, also known as the American Taxpayer Relief Act  (the Relief Act)[1], contains provisions affecting Medicare; delays mandated automatic spending cuts for two months; and extends tax breaks to individual Americans making less than $400,000 per year ($450,000/couple). Additionally, the deal does not resolve debt ceiling concerns.

While the deal itself does not contain significant changes or cuts to traditional Medicare, serious and fundamental threats to the Medicare program are expected to arise in the coming months as Congress grapples with broad budgetary issues. As a result, programs like Medicare, Medicaid, and Social Security are poised to take center stage in discussions about Sequestration, the debt ceiling, and decreasing the national debt.

Important Medicare-Related Provisions of the Deal[2]

• Sustainable Growth Rate (SGR) – Physician Payment

  The Sustainable Growth Rate (also known as the "doc fix")[3]  is a formula created in 1997 to control the rate of Medicare cost growth by setting targets for expenditures on physician services. Despite being law, Congress has not followed the SGR formula and has voted each year to override the SGR formula in order to avoid steep cuts in provider reimbursements. The longer reform or replacement of SGR is pushed back, the more expensive it becomes to resolve. The Relief Act once again pushes back the application of SGR for another year. Another round of discussions over SGR is expected as part of efforts to replace the formula.

• Outpatient Therapy Caps

  Current Medicare law places a yearly dollar amount cap on all outpatient physical and speech therapy services (The cap was $1,880 in 2012 and will be $1,900 in 2013).[4] Beneficiaries and their providers, however, have been able to file for an exception when the provision of additional therapy services is determined to be medically necessary. This exceptions process was set to expire on December 31, 2012.  The Relief Act extends the exceptions process to December 31, 2013.

• Medicare Private Health Plans

  The authority of Medicare Advantage Special Needs Plans (SNPs) to restrict enrollment to specified groups of beneficiaries (for example, dual eligible individuals) was extended until January 1, 2015.

  The authority for Medicare Cost Plans, a type of Health Maintenance Organization (HMO) through which  Medicare beneficiaries may choose to receive their benefits, was extended until January 1, 2014. These plans are only authorized to operate in certain regions of the country.

• Outreach to Enroll Medicare Beneficiaries in Low-Income Programs

  Funding to improve enrollment in programs for low-income Medicare beneficiaries was reauthorized for another year.[5] This funding is allocated to State Health Insurance Programs (SHIPs), Area Agencies on Aging (AAA), Aging and Disability Resource Center (ARDCs), and the National Center for Benefits Outreach and Enrollment. The money is intended to help eligible individuals enroll in Medicare Savings Programs, the Part D Low Income Subsidy, and other programs.

• The Qualified Individual (QI) Medicare Savings Program

  The QI program provides a block grant to Medicaid programs to pay Medicare Part B premiums for Medicare beneficiaries with incomes between 120% and 135% of poverty. QI was set to expire December 31, 2012. The Relief Act extends QI through December 31, 2013.

• Commission on Long Term Care

  The Relief Act established a fifteen member commission to develop a plan for implementing and financing a comprehensive, coordinated and high quality system that ensures the availability of long term services and supports (LTSS). Efforts in the Affordable Care Act to enact such a system, known as the CLASS Act, were repealed in the Relief Act.

  Commission members will be appointed this month by House and Senate leaders as well as the White House.  The Commission will be tasked with producing a comprehensive and detailed report with recommendations for legislative or administrative action within 6 months.  If approved by a majority of the Commission members, this report will be introduced as a Senate bill.

• Other Provider Payment Provisions

  The Relief Act also included a number of provisions adjusting how Medicare providers are paid. Many affect how certain Medicare hospitals are paid. There are also provisions affecting Medicare payment of radiology services, ESRD treatment, diabetic supplies and ambulance transportation, among others.  For more information, see the full text of the Relief Act at http://thomas.loc.gov/cgi-bin/bdquery/z?d112:HR00008:@@@R.

Conclusion

The Medicare provisions in the Relief Act are not as harmful to the program as many of the dangerous proposals offered to Congress over the past few months.  However, drastic cuts are still on the table as policy-makers seek to address the looming sequestration and debt ceiling with savings from health care programs. For real health savings that address the underlying problem of health care costs system wide, policy-makers and advocates should begin with solutions that improve the health and well being of Medicare beneficiaries while preserving the Medicare program for those who depend on it now and in the future.

For more information, contact attorney Andrea Callow (ACallow@medicareadvocacy.org) in the Center for Medicare Advocacy's Washington, DC office at (202) 293-5760.