May 22, 2015

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In This Issue
Congress’s Week: Medicare Reform, Health Reform Oversight and Observation Status
Medicare OEP Bill Heads to Ways and Means Markup Hearing
The Tallies are In…
And the Rates Keep Going Higher
Hit Parade
HUPAC Round Up
What We’re Reading
Tools
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Congress’s Week: Medicare Reform, Health Reform Oversight and Observation Status

Legislators were busy this week on Capitol Hill with numerous health-related hearings. Topics included reviewing ways to improve Medicare, how to audit the Administration’s implementation of PPACA, how to improve Medicare’s controversial observation status provision, and overwhelmingly passing the bipartisan CURES bill to modernize the adoption and approval of new medical technologies and pharmaceuticals.

On Tuesday, the House Ways and Means Health Subcommittee held a hearing to discuss ways to improve competition within Medicare. The hearing looked into Medicare payment reform, particularly with hospitals and providers. Representative Sam Johnson (R-TX-3) called for repealing a ban on that as it has prevented expansion of local physician-owned hospitals and Representative Tom Price (R-GA-6) called for repealing requirements for the Medicare bidding process on durable medical equipment. The hearing was followed by the introduction of four bills that would achieve greater competition in Medicare: H.R. 2488, to restore the second Medicare open enrollment period (an issue that has been specifically pushed by NAHU); H.R. 2505, to require annual reporting of Medicare Advantage (MA) enrollment; H.R. 2506, to delay the authority to terminate poor performing MA contracts; and H.R. 2507, to expand an annual regulatory schedule for MA payments. This was the first hearing in what is expected to be a series over the coming year.

On Wednesday, the House Ways and Means Oversight Subcommittee met to review the Obama Administration’s actions in implementing the PPACA. Witnesses included Galen Institute President Grace Marie Turner, law professor Jonathan Adler, and attorneys Elizabeth Papez and Robert Weiner. Oversight Committee Chairman Peter Roskam (R-IL-6) called the hearing to investigate the Administration’s use of executive action to make significant changes to the law through the regulatory process, with at least 31 major changes made by the Administration since the law was passed. Some of the major points of contention were the Administration’s authority to delay the employer mandate penalties, the “keep your plan” policy, the $3 billion authorized by the Administration for cost-sharing payments to insurers, and a $300 million fund for co-ops last year. During the hearing, Roskam highlighted his new legislative proposal to create a federal oversight position to audit the Administration’s implementation of the law, which he terms the “SIGMA Act” (Special Inspector General for Monitoring the Affordable Care Act) that would monitor the eight agencies that have authority in implementing the law.

Also on Wednesday, the Senate Special Committee on Aging held a hearing regarding Medicare’s controversial observation status provision. Medicare’s recovery audit contractor program, introduced under the Medicare Modernization Act of 2003, encourages hospitals to provide high-quality treatment to Medicare beneficiaries and penalizes them for hospital readmissions that could have been avoided with proper treatment. An unintended consequence of this has been that hospitals have avoided admitting patients for fear of eventually being charged with a readmission penalty, and instead have placed beneficiaries in a limbo observation status. The problem with this is that beneficiaries are discharged from the hospital to skilled nursing facilities or rehabilitation centers.  If the patient had been admitted, Medicare would typically cover the rehabilitation costs, but without the hospital admission, patients are being forced to pick up the tab for their care that otherwise would have been billed to Medicare under normal circumstances. Over the past five years, there has been a 69% increase in the number of beneficiaries treated under observation status.

Medicare beneficiaries are charged a one-time deductible for hospital services over their first 60 days during a stay, but patients who are not admitted for at least three days are not eligible for Medicare coverage in skilled nursing home facilities and patients who are considered outpatient also face a 20% copay for any physician services. The recent uptick in Medicare beneficiaries treated under observation status by hospitals to avoid being admitted is being blamed on the recovery audit contractor program. Committee Chair Susan Collins (R-ME) noted that these provisions are resulting in significant out-of-pocket costs for seniors living on fixed incomes who can’t afford them, with copayments and prescription drug costs charged to the beneficiary instead of covered by Medicare if not for the loophole. The Medicare Payment Advisory Commission has recommended that the Centers for Medicare and Medicaid Services (CMS) withdraw the two-midnight payment rule for inpatient hospital stays, which would eliminate the need for hospitals to avoid admissions.

Finally, on Thursday, the House Energy and Commerce Committee voted 51-0 to pass the bipartisan 21st Century Cures bill. The full committee markup hearing went about as smoothly as the subcommittee markup hearing last week. This time eight amendments were proposed to the bill, but all were quickly withdrawn as members fell in line to support the legislation, more than a year in the making. Chairman Fred Upton (R-MI), the bill’s primary sponsor, spent the past week searching for a potential budgetary offset to cover the estimated $13 billion costs of the bill. Upton proposes using $5.2 billion from the Strategic Petroleum Reserve and another $5-7 billion in an offset to Medicare Part D drug plans, a move that America’s Health Insurance Plans strongly opposes.

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