Weekly Washington Healthcare Update

August 3, 2012

Pardon Our Dust

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This Week:

1. Congress

House of Representatives


2. Administration

Health and Human Services (HHS)

Centers for Medicare and Medicaid Services (CMS)

3. State Activities

4. Regulations Open for Comment

5. Reports

General Accountability Office (GAO)

Congressional Budget Office (CBO)


1. Congress

House of Representatives

Oversight Committee Hearing on IRS Implementation of ACA

On Thursday, the Oversight and Government Reform Committee held a hearing to explore Internal Revenue Service (IRS) activities related to enforcing rules and taxes established by the Affordable Care Act (ACA). While the hearing broadly addressed the role of the IRS in meeting its obligations under the law, including taxpayer outreach and information-collecting duties, the overriding focus was on the IRS’s interpretation of ACA language pertaining to the availability of health insurance tax credits through federally established health insurance exchanges. The issue of whether or not the bill had been correctly drafted to permit subsidies in the federally run exchanges was raised three weeks ago in a paper released by Jonathan Adler, professor of law at Case Western Reserve University. In addition to broad, partisan disagreement as to whether IRS has the authority to provide the tax credits, and to enforce the law’s employer mandate, in states where an exchange is operated by the federal government, Members also expressed differing views regarding the agency’s overall capacity to meet its responsibilities under the law.

Panel 1

Mr. Mark Everson
Vice Chairman

Ms. Nina Olson
National Taxpayer Advocate
Internal Revenue Service

Mr. Michael Cannon
Director of Health Policy Studies
Cato Institute

Mr. Timothy Stoltzfus Jost
Robert L. Willett Family Professor of Law
Washington and Lee University School of Law

Panel 2

Mr. Douglas Shulman
Internal Revenue Service

For full written testimonies, or to view the hearing, click here .


Finance Committee Approves Bill on Tax Extenders

The Senate Finance Committee approved the Family and Business Tax Cut Certainty Act of 2012, which extends some longstanding provisions of the so-called tax extenders package like the research and development tax credit. Many of these provisions have been allowed to expire before being renewed over the years. The number of “extenders” has been called into question. Thus, the committee struck a deal to let a number of the current tax breaks expire. To view an explanation of the legislation, click here.

2. Administration


Medical Loss Ratio Requirement Takes Effect

This week was the deadline for rebates to be issued to health plan enrollees whose plans did not meet the requirements under the Affordable Care Act’s Medical Loss Ratio (MLR) provisions. Plans must spend at least 80 percent of premium revenue directly on medical expenses for policyholders. The measure was enacted as a means to address what was viewed as excessive profits and spending by plans on activities that were not directly part of care delivery.


Medicare Releases Inpatient Hospital Rule for FY 2013

On Wednesday, CMS issued a final rule updating payment policies and rates for Medicare’s Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospitals (LTCH) Prospective Payment System (PPS). The rule includes measures to tie quality care to higher payments, and includes new quality reporting measures for general hospitals, long-term care facilities and psychiatric and cancer hospitals.

The rule provides for a 2.8 percent increase in payments for acute-care hospitals that participate in the Hospital Inpatient Quality Reporting (IQR) program, while increasing payments by 0.8 percent for those hospitals not participating in IQR. LTCHs are projected to increase by approximately 1.7 percent. The final rule will appear in the Aug. 31, 2012 Federal Register.

CMS Announces Payment Rates for Skilled Nursing Facilities for FY 2013

CMS issued a final rule notice to update Medicare payment rates for skilled nursing facilities (SNFs) that are paid under the SNF Prospective Payment System (PPS). The new rates will be effective for services furnished in FY 2013, beginning Oct. 1, 2012. Specifically, the FY 2013 market basket increase factor is 2.5 percent, which, when combined with a negative 0.7 percentage point multifactor productivity adjustment mandated by the Affordable Care Act, results in a net FY 2013 payment update of 1.8 percent. The FY 2013 SNF PPS notice also provides an update on SNF monitoring activities intended to assess the impact of FY 2012 SNF policy changes on the SNF PPS.

CMS estimates the total impact of the FY 2013 SNF payment rate update to be an increase of approximately $670 million.

The notice appeared in the Aug. 2, 2012 Federal Register. It can be downloaded from the OFR website

CMS Issues FY 2013 Inpatient Psychiatric Facility PPS Update

On Thursday, CMS issued a notice to update Medicare payment rates to freestanding inpatient psychiatric facilities (IPFs) and IPF units of acute care hospitals, including a small number of IPF units in critical access hospitals (CAHs) that are paid under the IPF Prospective Payment System (PPS). The new rates will apply to services furnished during fiscal year (FY) 2013, beginning with discharges on or after Oct. 1, 2012.

For FY 2013, the rate is estimated to increase aggregate payments by 1.9 percent. The market basket estimate is 2.7 percent. However, this amount is adjusted by -0.1 percent as required by the ACA as well as a -0.7 percent productivity adjustment. CMS estimates the total impact of the FY 2013 payment rate update to be an increase of approximately $36 million. The notice also addresses outlier payments for IPFs, which will continue at 2.0 percent of total payments for FY 2013.

The notice will be published on Aug. 7, 2012. It can be downloaded from the OFR website.

Nurse Training Program Winners Announced

On Monday, CMS announced the winners of a $200 million nurse training program authorized under the Affordable Care Act. Awardees consisted of hospitals in Philadelphia (PA), Houston (TX), Chicago (IL), Durham (NC) and Scottsdale (AZ), which will use the funds over four years to train new advanced practice nurses in hopes of enhancing patient access to primary care services. CMS did not elaborate on the number of nonwinning applications, nor did the agency release the amount each winning application would be awarded.

3. State Activities

Missouri Supreme Court Strikes Malpractice Measure

In a move that was denounced by the Missouri State Medical Association, that state’s supreme court struck down, 4–3, a law that placed caps on the noneconomic damages that can be awarded in the event of a medical error in a malpractice case. In particular, the court found that the state’s limits on the amounts juries can award someone injured from medical malpractice violated the constitutional right to a jury trial.

Tennessee: Medicaid Long-Term Care Cuts

In an effort to curb rising Medicaid costs, Tennessee recently revised its long-term care benefit for Medicaid patients, agreeing to pay up to $15,000 per year to keep patients in their homes or adult daycare facilities as opposed to nursing homes. While current federal law requires everyone who receives long-term care under Medicaid to first qualify to be admitted to a nursing home, Tennessee was awarded a waiver to implement an alternative policy. While critics have expressed concern that the amount of money being made available to individuals will not be adequate, given the large expense of providing long-term care, it’s certain other states will be closely monitoring Tennessee’s efforts.

4. Regulations Open for Comment

FDA Proposes Unique Device Identifier (UDI) Rule

The FDA will accept comments on the proposed rule to implement a Unique Device Identifier system for medical devices distributed in the United States. Comments on the proposed rule will be accepted either electronically or written until Nov. 7, 2012.

CMS Proposes Policy and Payment Changes for OPPS and ASC Payment System

CMS will accept comments on the proposed rule until Sept. 4, 2012. A final rule is expected by Nov. 1, 2012. For more information on the CY 2013 proposals for the OPPS and the ASC payment system, please visit the OFR website.

CMS Issues Medicare Physician Fee Schedule Proposed Rule

CMS will accept comments on the proposed rule until Sept. 4, 2012. A final rule is expected by Nov. 1, 2012. For more information, please visit the OFR website.

CMS Proposes Changes to Medicare Home Health PPS for CY 2013

CMS will accept comments on the proposed rule until Sept. 4, 2012. The rule was published on July 13, 2012, and can be viewed at the Federal Register website.

CMS Proposes Policy and Payment Rate Changes for End-Stage Renal Disease Facilities in 2013

CMS will accept comments on the proposed rule until Aug. 31, 2012. To read the proposed rule, please visit the OFR website.

5. Reports


Medicaid Expansion: States’ Implementation of the Affordable Care Act

In response to a Congressional request, the Government Accountability Office on Wednesday released its findings with regard to state activities to implement the Medicaid expansion provided for under the Affordable Care Act (ACA). Specifically, GAO found:

… in terms of states’ views on the fiscal implications of the Medicaid expansion on states’ budget planning, the GAO found that across fiscal years 2012 to 2020, the majority of state budget directors believe that three aspects of Medicaid expansion will contribute to costs: (1) the administration for managing Medicaid enrollment, (2) the acquisition or modification of information technology systems to support Medicaid, and (3) enrolling previously eligible but not enrolled individuals in Medicaid. At the same time, state budget directors expressed uncertainty about how other aspects of expansion will affect their budgets, such as the impact of shifting existing Medicaid enrollees into health benefit exchanges. Further, most state budget directors reported that their fiscal capacity and the state’s share of Medicaid expenditures create challenges for implementing the Medicaid expansion. A few state budget directors reported that CMS guidance was useful, while most commented that more guidance was needed to develop budget estimates in the following areas: Medicaid benefits packages (including essential and benchmark benefits), Medicaid eligibility determination, and the FMAP match for newly eligible adults. CMS officials indicated that the agency is planning to issue additional guidance or regulations at a later date in a number of areas, including clarification on eligibility groups, MAGI, and the FMAP methodology for the newly eligible population.

Tax Cheats Still Receiving Medicaid Reimbursement

In a report released late last week, the Congressional Budget Office found that 7,000 Medicaid providers who had approximately $791 million in unpaid federal taxes received a total of about $6.6 billion in Medicaid reimbursements during 2009. The study, conducted in response to increased federal matching Medicaid rates under the American Recovery and Reinvestment Act, compared Medicaid reimbursement information from three states (Florida, New York and Texas) to known IRS tax debts as of Sept. 30, 2009. These states were among those that received the largest portion of Recovery Act Medicaid funding.


Update on “Doc Fix” Cost

On Tuesday, CBO released an updated estimate of the budgetary impact over the 2013–2022 period of various alternative policies for modifying the payment rates that are scheduled to take effect under the SGR mechanism. The options examined funding “cliff options,” which simply postpone the scheduled cut, and “clawback options,” which allow the scheduled cut to grow.


A study recently conducted by Avalere Health and sponsored by the Alliance for Quality Nursing Home Care, found that due to regulatory and legislative changes affecting the payment policies for skilled nursing facilities, nursing homes stand to lose $65 billion in Medicare reimbursements over the next ten years. Specifically noting productivity adjustments contained in the Affordable Care Act and the effects of sequestration, the cuts identified by the study have caused concern within the nursing home industry that quality of care and access could suffer.

If you have any questions, please contact
Stephanie Kennan, Senior Vice President, or Brian Looser, Assistant Vice President, at McGuireWoods Consulting.

Founded in 1998, McGuireWoods Consulting LLC (MWC) is a full-service public affairs firm offering state and federal government relations, national/multistate strategies, infrastructure and economic development, strategic communications and grassroots issue management services. McGuireWoods Consulting is a subsidiary of the McGuireWoods LLP law firm and in 2010 was ranked in the Top 20 of The National Law Journal‘s “The Influence 50,” an annual report of the top public affairs firms in Washington, D.C.

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