CMS: Centers for Medicare and Medicaid Services

CMS Announces Therapy Cap Exemption Procedures

Exceptions Process:    CMS has established an exceptions process for the therapy caps that is effective retroactively to January 1, 2006.  Providers, whose claims have already been denied because of the caps, should contact their carrier to request that the claim be reopened and reviewed to determine if the beneficiary would have qualified for the exception.  In addition, providers who have not yet submitted claims for services on or after January 1, 2006 that qualify for the exception, should submit these claims for payment, and refund to the beneficiary any private payments collected because of the cap.

The exceptions process allows for two types of exceptions to caps for medically necessary services:  

For more information regarding automatic and manual exceptions, please refer to the CMS fact sheet which can be found here:http://www.cms.hhs.gov/apps/media/press/release.asp?Counter=178

Hospital Groups Urge Congress to Reject Plan for Cuts Through Administrative Action

Eight of the country's largest hospital groups are urging congressional leaders to reject the Bush administration's fiscal year 2007 proposals to cut Medicaid by $13.6 billion over five years.

"The President's Medicaid proposals would eliminate many of the Medicaid supplemental payments that allow hospitals to perform vital community services, and would shift health care costs to states who can ill afford to shoulder those burdens," the hospital groups said in a March 6 letter to the House and Senate budget chairmen.

The hospital groups said the Bush administration aims to reduce Medicaid spending administratively, circumventing any congressional input or oversight, according to the letter to Senate Budget Committee Chairman Judd Gregg (R-N.H.) and House Budget Committee Chairman Jim Nussle (R-Iowa).

To achieve the proposed savings, the administration likely would implement the Medicaid administrative savings proposals through the rulemaking process or simply issue guidance to states, making it more difficult for Medicaid stakeholders to comment on possible changes, according to Medicaid representatives.

Among the eight hospital groups sending the letter to the congressional budget leaders are the National Association of Public Hospitals and Health Systems (NAPH), American Hospital Association, and the Federation of American Hospitals.

In the letter, the hospital groups describe the president's administrative Medicaid savings proposals to be "incompatible with Congress' expectation that hospitals make substantial investments in health information technology, expand their role in public health and emergency preparedness, and absorb an increasing number of uninsured patients."

Budget Panel Action

The Senate Budget Committee March 9 approved its budget resolution for fiscal year 2007. The Senate budget did not call for Medicaid cuts.

However, in an effort to reduce entitlement spending, the Senate budget did adopt the administration's budget proposal to put in place an "enforcement tool" to curb entitlement spending when the general revenue funding makes up more than 45 percent of total Medicare outlays, according to an overview of the Senate budget resolution.

In reaction to the Senate panel's March 9 action, another interest group, AARP, commented on another government health program, Medicare. AARP Director of Advocacy David Sloane said that although the Senate Budget Committee rejected the direct Medicare cuts included in President Bush's fiscal year 2007 budget, the committee's resolution includes "a dangerous provision"--the 45 percent threshold--that will "ultimately hold Medicare and other mandatory federal programs hostage to rising health care costs."

The House Budget Committee is not expected to act on its budget resolution until the week of March 27.

An NAPH representative said Medicaid stakeholders must continue to ward off entitlement cuts, noting that many of the regulatory spending reductions were once floated to Congress by the Bush administration as measures to be adopted through legislative action.

Although the bulk of the president's Medicaid cuts would occur outside Congress, it is important that Medicaid stakeholders work to rally congressional support to help fight off the administrative changes, Lynne Fagnani, vice president of the National Association of Public Hospitals and Health Systems, said.

Hitting Hospitals

Unveiled in the president's FY 2007 budget proposal, the Medicaid regulatory changes would include:

capping payments to government providers to cost and curbing financing practices such as intergovernmental transfers, with the objective of cutting Medicaid expenditures by $3.8 billion over five years; and

decreasing the allowable provider tax rate from 6 percent to 3 percent, cutting federal Medicaid spending by $2.1 billion over five years.

One state government source said the Centers for Medicare & Medicaid Services reportedly is preparing to issue a regulatory proposal on the provider tax decrease in the coming months.

Among the states that could be affected by cutting the provider tax rate from 6 percent to 3 percent are Illinois, California, Florida, New York, Tennessee, Ohio, Pennsylvania, Georgia, and Iowa, according to NAPH.

Currently, states are allowed to levy taxes up to 6 percent on different classes of providers--such as hospitals, nursing homes, or health maintenance organizations--as long as the taxes are broad-based and uniform. States use revenues from such taxes to increase Medicaid provider payment rates, according to an analysis on the president's FY 2007 budget by the House Energy and Commerce Committee Democrats.

Additional proposed Medicaid savings to be achieved via regulations would include reductions and delays in payments to pharmacies, saving the federal government $430 million over five years, according to information prepared by the Democratic staff of the House Energy and Commerce Committee. This pharmacy payment delay would require states to exhaust all other third-party payment sources before paying Medicaid payment claims.

The president's budget also proposes administrative changes that would cut federal payments for school-based administration and transportation services now covered by Medicaid. This move is expected to produce $3.6 billion in savings over five years.

In addition, the president's budget proposes to clarify through regulation which services can be claimed as rehabilitative services, thus reducing federal Medicaid spending by $2.3 billion over five years.

AMA Says Survey Shows Doctors' Services will be Affected by Looming Medicare Cuts

An American Medical Association survey of 8,217 physicians released March 16 indicated that 29 percent plan to decrease the number of new Medicare patients they accept if reimbursements are cut by 5 percent in 2007.

The survey--of 5,266 members and 2,951 nonmembers--conducted in February and March, asked whether they intend to make changes in their plans to accept new patients or to treat established patients, if the pay cut goes into effect. The drop in Medicare payments is predicted as a result of the physician reimbursement formula.

In addition to the 29 percent, another 16 percent said they plan to stop accepting any new Medicare patients. Twenty percent said they may decrease the number of Medicare patients they already have, while 3 percent said they would stop treating established patients.

"The cuts come as the first wave of baby boomers begin to enter Medicare in five years. By the time the full force of the cuts take effect in 2015, 67 percent of physicians say they will be forced to decrease or stop taking new Medicare patients,"AMA President J. Edward Hill said in a statement. The survey said that nine years of cuts will total 34 percent by 2015.

Practice Changes

Asked about potential changes to their practices, 71 percent of respondents said they would make changes if a 5-percent cut went into effect next year. Of these, 55 percent would defer purchase of new medical equipment, 54 percent would reduce time spent with Medicare patients, 50 percent said they would defer purchase of information technology, 47 percent said they would begin deferring complex cases, and 45 percent said they would stop providing certain services.

"As we work to improve quality, the large gap between Medicare payments and practice costs is a huge barrier to physician investment in technology used to improve quality," Hill said. "If we want physicians to make investments to improve quality, Congress must ensure that payments keep up with practice costs."

In another survey question, about the effects of cuts on Medicare Advantage (managed care) participation, 58 percent said they would be less likely to participate, 28 percent were unsure, 12 percent said the cuts would have no effect, and 2 percent said they would be more likely to participate in the managed care program.

Public Citizen Files Federal Lawsuit on Legality of Deficit Reduction Measure

Public Citizen, a consumer advocacy organization, March 21 filed a federal lawsuit seeking to have the Deficit Reduction Act of 2005 overturned as unconstitutional because of a legislative drafting error leading to a difference between the bills approved by the House and Senate (Public Citizen v. Clerk, U.S. District Court for the District of Columbia, D.D.C. CV-00-523, filed 3/21/06).

The act is central in the Bush administration's efforts to control federal health care spending.

"Today's lawsuit simply requests the court uphold the Constitution," said Adina Rosenbaum, an attorney with Washington-based Public Citizen. "The entire law is invalid because the law the House passed is different from the law the Senate passed and the president signed."

The five-page complaint filed in the U.S. District Court for the District of Columbia seeks "declaratory and injunctive relief" and specifically asks that the measure be declared unconstitutional and an injunction be issued against the provision in the bill that increases federal court civil filing fees from $250 to $350 starting April 9. In the suit, Public Citizen as the plaintiff said it would be harmed by the increase in filing fees.

At issue is Pub. L. No. 109-171 signed Feb. 8 by President Bush. The measure, which was scored by the Congressional Budget Office as saving about $38.8 billion in spending on so-called mandatory programs--such as Medicare, Medicaid, and student loans--over five years was the result of months of tough political battling on Capitol Hill. No Democrat in either the House or the Senate voted in favor of the package during its final passage, and Vice President Cheney provided the decisive vote in the Senate.

Republicans portrayed the bill as a tough first step toward getting mandatory spending under control, while Democrats said it cut needed government services to fund tax breaks. Using the same budget reconciliation process that provided protection against a Democratic filibuster, Congress is expected to act soon on a package of $70 billion in tax breaks over five years, more than offsetting the $38.8 billion in budgetary savings in the Deficit Reduction Act.

Medicare Payments

One portion of the measure deals with Medicare payments for durable medical equipment, such as wheelchairs and hospital beds. Because of a Senate clerical error altering the medical equipment provision, the House did not vote on the same bill the Senate did. Because the same bill did not pass both chambers of Congress in identical form, it is unconstitutional, according to Public Citizen.

The White House has played down the issue, which was publicly disclosed by a Senate aide the day of the bill signing, which took place a week after the final House vote.

"Congress presented a bill certified by both chambers. It's been signed into law and we consider the matter closed," said Scott Milburn, spokesman for the White House's Office of Management and Budget, in a reply to a series of questions submitted by BNA via e-mail.

A labor-backed group that lobbied heavily against the measure, the Emergency Campaign for America's Priorities, hailed the lawsuit. "The courts and the public should not allow 'close enough' to be an acceptable constitutional or ethical standard for the Congressional Republican leadership or the President to hide behind. We fully expect the courts to agree with the plaintiff and strike down the unconstitutional Deficit Reduction Act of 2005," said ECAP spokesperson Cara Morris Stern.

One constitutional law scholar called the filing "a very serious lawsuit."

"There's no constitutional claim of 'close enough for government work,' " said Jamin Raskin, a professor of law at American University in Washington. "The Constitution requires bicameralism."