Congress has not acted to address 21.3% Medicare Physician Fee cut on June 1 -- CMS announces they will hold claims

CMS announces they will temporarily hold claims starting June 1st in case Congress fails to act.

Currently, neither the House of Representatives and the Senate have approved legislation to stop the pending 21.3 percent cut to physician Medicare payments, which will take effect unless final legislation is signed into law by June 1. Despite a proposal earlier this week calling for modest updates through the end of 2014, legislators ultimately scaled back many areas of the bill, including the Medicare physician payment provision, to reduce the overall cost of the bill. However, House members continued to object to the revised cost of the bill, making it unclear when the House would hold a vote.

It is not clear that Congress will be able to pass even another short temporary fix before June 1. To address this possibility, earlier today the Centers for Medicare & Medicaid Services (CMS) released the following statement:

The Continuing Extension Act of 2010, enacted on April 15, 2010, extended the zero percent (0%) update to the 2010 Medicare Physician Fee Schedule (MPFS) through May 31, 2010. The Centers for Medicare & Medicaid Services (CMS) believes Congress is working to avert the negative update scheduled to take effect June 1, 2010. To avoid disruption in the delivery of health care services to beneficiaries and payment of claims for physicians, non-physician practitioners, and other providers of services paid under the MPFS, CMS has instructed its contractors to hold claims containing services paid under the MPFS (including anesthesia services) for the first 10 business days of June. This hold will only affect MPFS claims with dates of service June 1, 2010, and later.

This hold should have minimum impact on provider cash flow because, under the current law, clean electronic claims are not paid any sooner than 14 calendar days (29 for paper claims) after the date of receipt. Be on the alert for more information about the 2010 Medicare Physician Fee Schedule Update.

Will the Physician "Doc Fix" issue get addressed before June 1st Deadline?

Potential progress this week on the Medicare Physician Reimbursement "Doc Fix" issue which would create a 21% cut for physicians unless the temporary fix that expires on June 1st is addressed. The issue is being included in a Tax Extenders Bill that includes a wide range of provisions.

Yesterday, House Ways and Means Committee Chairman Sander Levin (D-MI) and Senate Finance Committee Chair Max Baucus (D-MT) circulated a $220 billion tax extenders bill (H.R. 4213) that includes a Medicare physician payment adjustment, an extension of unemployment benefits and COBRA subsidies, an a number of other health care provisions. Details are limited but the proposal includes a plan to block scheduled cuts in Medicare reimbursement for physician services through 2013. According to the bill summary and reports from policy insiders, the proposal would provide a 1.3% rate increase starting June 1 for the remainder of 2010, and an additional 1% increase in 2011. There would be no reductions in 2012 and 2013, and there would be an allowance for payment increases for primary care and preventive care services.

As an offset to the cost of the physician pay "fix" - currently being assessed by the Congressional Budget Office (CBO) - the proposal would change Medicare's "72-hour" rule, disallowing hospitals from submitting separate claims for inpatient and outpatient care provided within 3 days of a hospital admission, a proposal the hospital industry is lobbying against heavily, as it represents further cuts to hospitals on top of the hit the industry will take under the new reform law.

The proposal also includes an expansion of the 340B drug discount program to inpatient drugs for use by patients who do not have prescription drug coverage. However, the language related to expansion of 340B to include inpatients appears to provide new clarity and restrictions regarding the use of 340B drug discounts to only eligible patients within eligible entities. This is a critical issue since current 340B drug discount programs in the outpatient setting appear to be used for all patients by eligible facilities. The details of this provision will be critical to watch should this legislation move forward.

House Democrats have been working since last year toward at least a 5-year solution to the ongoing cuts created by the SGR, but the Senate consistently raised cost concerns and does not support a longer term fix that is not paid for. Physician advocates, while desperate for some form of relief from the imposing 21% cut, continue to push for a permanent fix to the perennial payment problem created by the SGR. About the current proposal, physicians fear that the current problems will only be exacerbated in 2014 when payment rates would revert to the current formula.

In other relief provisions, the bill would extend by 6 months increased federal payments for Medicaid programs (initiated in the American Recovery and Reinvestment Act of 2009, ARRA). Additionally, the bill would also extend, through the end of the year, the 65% COBRA subsidy, also effectuated by the ARRA.

The tax extenders bill is scheduled to be taken up by both chambers next week with some urgency as the current delay in cuts expires May 31st.

Health Reform Creates new Challenges for Physician Issues with Medicare Policy

The healthcare reform law included a little-publicized provision calling for the permanent dissolution of the Practicing Physicians Advisory Council (PPAC), a CMS physician advisory panel. And, although they have not yet publicly announced the advisory panel's discontinuation, HHS informed PPAC members of the Council's fate last month, indicating the June meeting will not take place.Providers are concerned that their venues for advancing concerns and providing input to Medicare regulations and policy are limited with the demise of the PPAC.
The Medicare Payment Advisory Commission (MedPAC) and the new Independent Payment Advisory Board (IPAB) established by the new reform law have physician members, but both Commissions are primarily focused on cost cutting and are not substitutes for the PPAC.Conjecture about the dissolution attributes the Council's end to the powerful Ways and Means Committee Chair Peter Stark (D-CA), who has very publicly and repeatedly focused on patient concerns over those of providers with increasing vigor over the last several years. Regardless of the motivation and source for dissolving the Council, physicians are concerned that practicing physicians have lost a platform to access regulators and vet their concerns.

Medicare "Doc Fix" -- Groundhog Day Continues

The temporary fix to avert the 21% cut to Medicare physician payments expires on June 1 -- once again creating a dramatic threat to physician reimbursement.

The long-debated issue of fixing the flawed sustainable growth rate (SGR) payment update formula has now gotten more complex since the Congressional Budget Office (CBO) released an updated estimate on merely freezing the current Medicare payment levels. According to the updated CBO, a long-term payment freeze would cost $276 billion over 10 years, a figure that is more than 30% more than its estimate to adopt a similar measure last fall. The scoring increase is attributable to the improved economic outlook and an increase in the estimate in the volume of Medicare physician services over the next decade. This issue does not make any sense to the average American -- how can it cost $276 billion to keep physician reimbursement flat?

So now physicians (for the third time this year) are facing the 21% "cliff" if Congress does not again act to avert the cuts. Twice so far this year, Congress has extended the 2009 Medicare payment rates as it continues to debate a longer-term fix to the problematic update formula.

Democrats are working to pass a measure that would avert the cuts for up to 5 years, estimated to cost $89 billion. Members of the both the Senate and the House support such a fix but, so far, have not been able to agree on the "pay for" for such a fix which has created the issue.

This issue remains critical to the viability of many physician practices, and there are growing reports of practice and clinic closures due, in part, to this protracted debate along with persisting inadequacies in Part B drug reimbursement.

We need to get this SGR issue fixed -- hopefully for more than a short term fix so we can move onto other issues critical to patient access and reimbursement. We continue to work to urge Congress to exclude prompt pay terms from ASP in order to have accurate and consistent reimbursement of life saving treatments in the physician office and hospital outpatient setting as an urgent next step.

Medicare Part D: New confusion on how the 50% brand discount will work

This past week CMS released a memo to Part D plan sponsors with draft guidance on how the 50-percent discount provided by drug manufacturers for Part D beneficiaries in the coverage gap will be operationalized. The guidance includes a few surprises, and departs somewhat from how the program was envisioned by congressional members who were part of the "$80 billion deal" negotiated with PhRMA last summer. From a patient access perspective --- many seniors already have very high expectations regarding the "closing of the donut hole" but the reality is this will take some time given the cost.

Some of the highlights from the draft guidance include the following:

• A Part D drug will only be covered under Part D if the manufacturer has a signed agreement with CMS to provide the discount on coverage gap claims for all of its applicable drugs and remains compliant with the terms of that agreement
• The Part D sponsor must provide the discounts for applicable drugs in the coverage gap at the point-of-sale (POS) (such as the retail pharmacy or specialty pharmacy).
• CMS will coordinate the collection of discount payments from manufacturers and payment to Part D sponsors that provided the discount to beneficiaries
• A CMS contractor will invoice each manufacturer quarterly on the behalf of Part D sponsors
  Manufacturers will be required to pay the invoiced amounts to Part D sponsors directly; manufacturers must pay the entire invoiced amount within 15 days (including any amount in dispute)
• Given the timing of the discount agreements and plan bids, CMS must allow coverage in 2011 of Part D drugs irrespective of manufacturer discount agreements
• In a departure from what was outlined in the new health reform law, CMS will not be using a third-party administrator to oversee the discount program due to HIPAA concerns.

Perhaps a bigger surprise, being described as a "process glitch", is the fact that the agency does not plan to require all branded manufacturers to offer the discount in 2011. According to the guidance, "CMS must allow coverage in 2011 of Part D drugs irrespective of manufacturer discount agreements," which means that some of the brand drugs on plan formularies may not be discounted in the coverage gap, unless all manufacturers agree to the discounts by the 2010 deadline.

In press remarks following the release of the guidance, a CMS official explained that the formularies for the Part D plan sponsors had to be submitted by last month, and CMS has not yet issued a notice of "model manufacturer agreement", by the time the formularies were due for the 2011 plan year. As such, CMS indicated it won't know until closer to the end of the year whether all manufacturers will sign the discount agreements for next year.

According to the new law, manufacturers are required to have model agreements signed by July 1, 2010, for fiscal year 2011. In popular press this week, manufacturer representatives indicate they anticipate offering the discounts next year.

CMS has requested comments to the draft guidance by May 14.