The President’s Proposed FY 2016 Budget: The Impact on Medicare

On Monday, February 2^nd, President Obama unveiled his Fiscal Year 2016 Budget.[1]  For an overview of the budget’s Medicare-related provisions, including both projected costs and savings to the Medicare program, see the Kaiser Family Foundation’s summary.[2] With respect to Medicare, this year’s proposed budget is very similar to last year’s, both good and bad, with some notable exceptions.  While not a comprehensive analysis of all of the Medicare-related provisions, the Center for Medicare Advocacy offers the following comments based on the budget’s potential impact on Medicare beneficiaries, including their access to services and out-of-pocket expenses.   

Proposals We Support

• Prescription drug rebates – The President's drug rebate proposal would restore the law to what it was before Part D by allowing Medicare to benefit from the same rebates that Medicaid receives for brand name and generic drugs provided to beneficiaries who receive the Part D Low-Income Subsidy (LIS).   Drug manufacturers would pay the difference between rebate levels already provided to Medicare Part D programs.  Implementing drug rebates would save the Medicare program $116 billion over ten years.
• Other drug savings – Common-sense provisions aimed at obtaining fair drug prices include prohibiting “pay for delay” arrangements between brand and generic drug manufacturers, which slow the entry of more affordable generics into the marketplace, and shortening the length of exclusivity for biologics from 12 years to 7 years.  A new proposal would allow the Secretary of Health and Human Services to negotiate prices with drug manufacturers for biologics and high-cost prescription drugs eligible for placement on the Part D specialty tier. (While we support broader negotiation authority, this would be an important first step.)
• Closing the Part D Donut Hole more quickly – The President's budget would close the Donut Hole in 2017 – 3 years sooner than under current law – by accelerating manufacturer drug rebates and increasing brand-name drug discounts in the Donut Hole.
• Eliminating 190 day cap on inpatient psychiatric hospital care – As noted in the President’s budget, this limit on services “is one of the last obstacles to behavioral health parity in the Medicare benefit.”[3] A new provision in the President’s budget would remove this obstacle.
• Improving payment accuracy for Medicare Advantage plans – As noted by the Center for Public Integrity, the President’s budget includes a provision aimed at saving “billions of tax dollars [that] are misspent every year because some Medicare health plans exaggerate how sick their patients are, a practice known as ‘upcoding.’”[4]  
• Making permanent the Medicare primary care incentive payment – In an effort to boost access to primary care providers, the Affordable Care Act implemented a temporary 10% primary care incentive payment program; the proposed budget would make this program permanent.

Proposals of Concern

The FY 2016 Budget includes a number of Medicare legislative proposals that would reduce net Medicare spending by $423 billion over 10 years.  Unfortunately, of this amount, approximately $83 billion would be saved by implementing “structural savings” that would shift additional costs directly to Medicare beneficiaries.[5]  The Center continues to oppose these proposals.

• Implementing a Co-Payment for Home-Health Care.  Starting in 2019, this proposal would create a home health co-payment of $100 per 60-day home health episode, applicable for episodes with five or more visits not preceded by a hospital or other inpatient post-acute care stay.  
• Increasing the Part B Deductible for New Beneficiaries. The President's plan would increase the Part B deductible ($147 in 2015) for new beneficiaries by $25 dollars in 2019, 2021 and 2023 (for a total $75 increase).
• Expanding Means-Testing of Medicare Part B and D Premiums.  Certain Medicare beneficiaries already pay higher Part B and D premiums based upon their income.  Starting in 2019, this proposal would increase the amount of premiums paid by higher income individuals and also freeze the income level for higher payments at $85,000, not adjusting for inflation, cost of living, or any other such factors, until 25% of beneficiaries were paying the higher premiums. According to the Kaiser Family Foundation’s analysis of this provision in last year’s budget, if this proposal was implemented today, Medicare beneficiaries with incomes at or above $45,600 for individuals and $91,300 for couples would be paying higher premiums this year.[6] 
• Increasing the Cost of Certain Medigap Policies.  This proposal would add a surcharge on Part B premiums for new beneficiaries who purchase Medigap policies with low cost-sharing starting in 2019.  This surcharge would be equivalent to about 15% of the average Medigap premium (or roughly 30% of the Part B premium).
• Encouraging the Use of Generic Drugs by Low-Income Beneficiaries.   Starting in 2017, this proposal would force the increased use of generic drugs by Part D Low-Income Subsidy (LIS) enrollees by doubling copayments for brand drugs from their current law level, while lowering specified copayments for generic drugs.  While we generally support promoting the use of generic drugs, we do not support doing so by correspondingly increasing the cost-sharing for brand name drugs paid by low-income individuals.
• Part D “lock-in” proposal – In an effort to prevent prescription drug abuse, the budget includes a proposal to allow the Secretary of HHS to establish a program in Part D that “would require that high-risk Medicare beneficiaries only utilize certain prescribers and/or pharmacies to obtain controlled substance prescriptions”.[7]  While the proposal notes that the program would be “required to ensure that beneficiaries retain reasonable access to services of adequate quality” we are concerned that, among other things, such a program might be overly restrictive on beneficiaries without adequate focus on potential provider-side solutions.
• Limited extension of the Qualified Individual (QI) program; other SGR “extenders” not addressed – the QI program helps pay for Part B premiums for those who are eligible.  This program has been repeatedly authorized on a temporary basis, along with a group of other “extenders” that have typically accompanied short-term fixes for the Medicare physician payment formula, the sustainable growth rate (SGR, or “doc fix”).  While the President’s budget would permanently repeal and replace the SGR, it would only extend QI through CY 2016, rather than make the program permanent.  QI, left on its own for reauthorization, would face longer odds for renewal.  In addition, the President’s budget does not appear to either repeal or extend the exceptions process for Medicare outpatient therapy caps.  Continuation of this process has typically been included as an SGR “extender” and the therapy caps were actually repealed in the Senate-passed version of last year’s attempt to permanently replace the SGR.[8]
• Various payment reforms – While we support paying providers accurately for high-quality services, we are concerned about how access to care might be negatively impacted by several proposals, including restructuring payment for post-acute care (PAC) services using a bundled payment approach beginning in 2020.  In addition, one proposal of great concern would adjust the standard for classifying a facility as an inpatient rehabilitation facility (IRF).[9]
• Reforming the Medicare Appeals Process – the Center has considerable experience representing beneficiaries in the Medicare administrative appeals process.  Over the last few years, we have witnessed a diminishing success rate concerning beneficiary appeals at the lower levels of review, and significant delays in obtaining administrative law judge (ALJ) hearings,[10] where beneficiaries are usually given the fairest review of their claim.  Given this experience, we are greatly alarmed at new proposals in the President’s budget that would further restrict access to meaningful review of individuals’ claims.  These proposals include:
  • Establishing a refundable filing fee for providers, suppliers, and State Medicaid agencies, including those acting as a representative of a beneficiary, at each level of Medicare appeal;
  • Increasing the amount in controversy (AIC) for ALJ hearings (the 3rd, and most useful, stage in the appeals process) to equal the amount required for judicial review in federal court (the 5^th and final stage in the appeals process).  The ALJ AIC would increase almost ten-fold (from  $150 to $1,460 in 2015);
  • Allow attorney adjudicators (presumably with less experience and training than ALJs) to hear appealed claims below the higher AIC threshold;
  • Remand appeals to the redetermination level with the introduction of new evidence.  As noted above, beneficiaries, who often have problems obtaining timely documents and other support for their appeals, experience an almost non-existent success rate at these lower levels (a denial rate of about 98%).

Conclusion

While we support a number of provisions of the President’s proposed budget that would improve the program’s finances without harming beneficiaries and expand access to care, we remain concerned about other provisions that would shift additional costs onto beneficiaries and hinder access to both care and meaningful review of claim denials.