This week’s note from the instructor is written by Kimberly Hoy, JD, regulatory specialist for HCPro, Inc.
The OIG recently released a report on problems with how Medicare contractors process claims with “G” modifiers indicating provision of an advanced beneficiary notice or ABN (GA and GX) and indicating Medicare non-coverage (GY and GZ). The report, entitled Medicare Payments for Part B Claims with G Modifiers, highlights $744 million of claims paid with one of these “G” modifiers.
The OIG report seems to imply that the $744 million was paid in error because it was for claims providers “expected to be denied as not reasonable and necessary or as not covered by Medicare”. However, this is misleading because the vast majority of these claims (97.7%) were for services with the GA modifier, which in fact simply indicates that an (advance beneficiary notice of noncoverage) ABN was given, but does not necessarily indicate the service isn’t covered.
An ABN may be given for a covered service if the provider initially believes it is non-covered, but later discovers information (e.g., additional diagnostic information from the physician or even results from the test the ABN was given for) indicating it is covered. In many cases, the provider would continue to include the GA modifier on their claim because they did in fact give the patient an ABN, even though the service turns out to be covered based on information obtained after provision of the ABN.
Arguably, based on the definition of the GA modifier (“Waiver of liability statement issued, as required by payer policy”), an ABN isn’t required, and therefore the GA is inapplicable and shouldn’t be reported. However, many providers think that because they believed it was required at the time it was given and they did give the ABN, it would be incomplete reporting to not indicate they provided the ABN.
Additionally, it is operationally very difficult to verify every case where an ABN was provided to ensure no additional information was obtained. Trying to do so would mean the provider would have to essentially run ABN software to evaluate whether to give the ABN, and then run it again with final bill information to determine whether it was in fact necessary. Most providers do not have a process to re-run the ABN software to verify the ABN was needed and simply leave the GA modifier on the line if an ABN was given at the time of service.
Equally troubling, though, are the 2.3% of claims paid with modifiers that clearly indicate that the service is not a benefit of Medicare (GX and GY) or clearly indicate that it’s not medically necessary and no ABN was provided, which should result in hospital liability. These modifiers are used by providers to indicate instances where they are not seeking payment from Medicare, but need to bill the service for some other reason (e.g., coverage by another payer), and yet Medicare contractors inexplicably paid them.
This could mean that a provider billed a service correctly indicating it as non-covered, but the contractor in fact paid them, causing the provider to have an overpayment. The provider may not even be aware they have the overpayment, because of automatic posting from the remittance advice.
I would recommend that providers take a look at this report as well as their own use of these modifiers to be sure they are using them correctly. I would expect that CMS may issue additional guidance to contractors on proper processing of these modifiers in upcoming transmittals that may affect provider use of these modifiers.
Note from the instructor: CMS clarifies payment amount to be applied to payment caps and manual review thresholds for outpatient therapy services provided by critical access hospitals
This week’s note from the instructor is written by Judith Kares, JD, regulatory specialist for HCPro, Inc.
In the April 2, 2013 issue of the Medicare Insider, Debbie Mackaman discussed the provisions of the American Taxpayer Relief Act (the “ATRA”) related to outpatient therapy services furnished in various outpatient settings (including outpatient hospital departments) on and after January 1 through December 31, 2013 (CY 2013). In particular, she noted the following individual beneficiary therapy payment caps and manual medical review thresholds applicable to outpatient therapy services provided during CY 2013:
Therapy payment caps:
- Physical therapy (PT) and speech language pathology (SLP) combined — $1900
- Occupational therapy (OT) — $1900
Manual review thresholds:
- PT and SLP combined — $3700
- OT — $3700
In the event that providers furnish what they believe to be medically necessary therapy services in excess of the applicable therapy caps for a specific beneficiary, they are to report those services with the –KX modifier. If providers furnish therapy services in excess of the manual review thresholds for a specific beneficiary, those services are to be manually reviewed by the Recovery Auditors (RAs), effective April 1, 2013. The RA reviews will be either pre- or post-payment, depending upon the state in which the provider is located.
Special Rules for CAH Outpatient Therapy Services
Under the ATRA, critical access hospitals (CAHs) will not be subject to the payment caps and review thresholds for the outpatient therapy services they furnish to Medicare beneficiaries. The outpatient therapy services provided by a CAH, however, will count toward all other providers’ therapy payment caps for those specific beneficiaries. For example, if a patient is seen at a CAH and receives physical therapy services payable by Medicare, the payment for those services will count toward another hospital’s payment cap and review threshold for that beneficiary if the patient transfers care or starts a new episode of care at that facility during CY 2013.
Initially, CMS indicated that the amount that should be applied against a specific beneficiary’s payment cap and review threshold for services provided by a CAH should be the amount that would be payable for those services under the Medicare Physician Fee Schedule (MPFS). In a recent Transmittal (R1216OTN) and related MLN Matters Article (MM8278), CMS clarified that Medicare payments for outpatient hospital therapy services should include a multiple procedure payment reduction when more than one unit or procedure is provided to the same patient on the same day by the same provider. Therefore, when multiple outpatient hospital therapy services are provided to the same patient on the same day by the same provider, the payment amounts applied against payment caps and review thresholds should reflect applicable multiple procedure payment reductions, rather than the full MPFS amount that would otherwise apply.
Potential Payment Adjustment
In those instances where a CAH furnished outpatient therapy services to a beneficiary to whom a hospital has also provided outpatient therapy services, the hospital should check to see
- Whether multiple outpatient hospital therapy services were provided to the same patient on the same day by that same CAH; and
- If so, whether full MPFS payment amounts for the CAH outpatient therapy services were applied against that specific beneficiary’s payment caps or review thresholds, resulting in denial of claims that would have been payable if the multiple reduction rules had been appropriately applied.
If the answer to both queries above is “yes,” the hospital will need to request that its FI or AB MAC adjust such claims.
Note from the Instructor: Guidance on Implementing Sequestration under the Medicare Fee-for-Service Program
This week’s note from the instructor is written by Judith Kares, JD, CPC, regulatory specialist for HCPro, Inc.
A number of hospitals and other providers have been asking CMS for additional guidance on the practical aspects of implementing “sequestration” under the Medicare program. Sequestration, as enacted under the Budget Control Act of 2011 (the “Budget Control Act”) and subsequently amended by the American Taxpayer Relief Act of 2012 (the “Taxpayer Relief Act”), calls for mandatory across-the-board reductions in Federal spending. These reductions specifically include a two percent reduction in payments for Medicare Fee-for-Service (FFS) claims with dates of service or dates of discharge on or after April 1, 2013.
As all of us are aware, Congress has been kicking the can down the road with respect to addressing a number of financial challenges, including growing national deficits (among them deficits arising from the growing cost of health care services). Presumably, in an effort to force itself to do so, Congress enacted the Budget Control Act. Under the Budget Control Act, a Joint Select Committee on Deficit Reduction (the “Joint Committee”) was established and specifically tasked with developing recommendations to reduce the deficit significantly over a period of ten years. They were to report back to Congress with their recommendations by November 23, 2011. Congress was then required to consider the Joint Committee’s recommendations by December 23, 2011.
If the Joint Committee failed to refer agreed upon legislation to Congress or did not meet the required savings threshold set out in the Budget Control Act, a sequestration process would be put into effect, government-wide, to reduce Federal outlays by the proposed amount. Instead of blanket across-the-board cuts to all programs, the Budget Control Act imposed exemptions from the sequestration process. Certain programs, such as Social Security and Medicaid, were to be exempt altogether. Any cuts to Medicare were to be limited to no greater than 2% of the program’s costs, and any such cuts were to come primarily from payments to providers.
Unfortunately, the Joint Committee failed to report the requisite recommendations for deficit reduction. Under the Budget Control Act as originally enacted, this failure would have resulted in the sequestration process starting automatically, effective February 1, 2013 through January 31, 2022. Congress, however, subsequently passed The Taxpayer Relief Act in 2012, which postponed the start of sequestration from February 1, 2013 to April 1, 2013, and the President issued a sequestration order to that effect on March 1, 2013. Nevertheless, the current Administration continues to urge Congress to take prompt action to address the current budget uncertainty and the economic hardships imposed by sequestration.
Practical Guidance on Implementing Sequestration
As noted above, a number of hospitals and other providers have been asking CMS for additional guidance on the practical aspects of implementing “sequestration” under the Medicare program. After researching CMS’ responses to various inquiries, it appears that CMS is primarily referring them to the various Medicare Administrative Contractors (MACs) for more specific answers to their questions. The MACs, including Noridian Administrative Services, LLC (Noridian), which is currently the MAC for Jurisdictions 3 and 6, have been providing this guidance in the form of multiple pronouncements under the title “Mandatory Payment Reduction in the Fee-for-Service Program–‘Sequestration’.” These publications generally follow a user-friendly Q&A format and are available on the indvidual MAC Websites. A prime example is an update issued by Noridian on April 22, 2013, which can be found at the following Website: https://www.noridianmedicare.com/p-meda/mandatory_payment_reductions_in_the_in_the_medicare_fee_for_service_program_sequestration.html.
The remainder of this Note will provide a summary of general and specific guidance from various MACs on implementation of sequestration under the Medicare FFS Program.
Timing/Effective Dates of Current Sequestration Order
The current sequestration order signed by the President on March 1, 2013, covers all Medicare FFS payments for services with dates of service or dates of discharge (or a start date for rental equipment or multi-day supplies) April 1, 2013, through March 31, 2014.
Under sequestration, Medicare FFS claims with dates-of-service or dates-of-discharge on or after April 1, 2013, will incur a 2 percent reduction in Medicare payment. Claims for durable medical equipment (DME), prosthetics, orthotics, and supplies, including claims under the DME Competitive Bidding Program, will be reduced by 2 percent based upon whether the date-of-service, or the start date for rental equipment or multi-day supplies, is on or after April 1, 2013. Any claims for rental payments with a “FROM” date of service on or after April 1, 2013, will be subject to the 2% reduction, regardless of when the rental period began. On the other hand, the initial and subsequent monthly rental payments billed with a “FROM” date of service beginning on or prior to March 31, 2013 would not be affected by the 2% reduction.
To prevent making overpayments, CMS has also recently directed the MACs to reduce interim and pass-through payments related to the Medicare cost report by 2 percent. Beginning April 1, 2013, the 2 percent reduction will be applied to Periodic Interim Payments (PIP), Critical Access Hospital (CAH) and Cancer Hospital interim payments, and pass-through payments for Graduate Medical Education, Organ Acquisition, and Medicare Bad Debts.
Scope of FFS Items and Services Subject to Sequestration
According to the MACs, all FFS Medicare claims payments are subject to the 2% reduction. There are no exemptions provided in the law for drugs or any other health care item or service provided under the FFS program. As noted above, the 2% reduction also applies to certain interim payments payable under the FFS program.
Calculation of Sequestration Reduction
Payment adjustments required under sequestration are applied to all claims after determining the Medicare payment amount, including application of the current fee schedule, coinsurance, any applicable deductible, and any applicable Medicare Secondary Payment adjustments. All fee schedules, Pricers, etc., are unchanged by sequestration. It is only the final payment amount that is reduced by 2%.
Calculation for Assigned Claims
The following example illustrates application of the sequestration reduction to the approved Medicare payment amount for an assigned claim:
A provider bills a service with an approved amount of $100.00, and $50.00 is applied to the deductible. A balance of $50.00 remains. Medicare normally would pay 80% of the approved amount after the deductible is met, which is $40.00 ($50.00 x 80% = $40.00). The patient is responsible for the remaining 20% coinsurance amount of $10.00 ($50.00 – $40.00 = $10.00). However, due to the sequestration reduction, 2% of the $40.00 calculated payment amount is not paid, resulting in a payment of $39.20, instead of $40.00 ($40.00 x 2% = $0.80). Please note that the beneficiary’s deductible and coinsurance liability for this assigned claim is not affected by sequestration.
Calculation for Unassigned Claims
Medicare’s payment to beneficiaries for unassigned claims, however, is subject to the 2% sequestration reduction. The non-participating physician who bills on an unassigned basis collects his/her full payment from the beneficiary, and Medicare reimburses the beneficiary the Medicare portion (e.g., 80% of the reduced fee schedule amount. [NOTE: The "reduced fee schedule" refers to the fact that Medicare’s approved amount for claims from non-participating physicians/practitioners is 95% of the full fee schedule amount]). This reimbursed amount to the beneficiary would be subject to the 2% sequestration reduction, just like payments to physicians on assigned claims. Both are claims payments, but to different parties. If the Limiting Charge applies to the service rendered, physicians/practitioners cannot collect more than the Limiting Charge amount from the beneficiary.
The following example illustrates application of the sequestration reduction to the approved Medicare payment amount for an unassigned claim:
A non-participating provider bills an unassigned claim for a service with a Limiting Charge of $109.25. The beneficiary remains responsible to the provider for this full amount. However, sequestration affects how much Medicare reimburses the beneficiary. The non-participating fee schedule approved amount is $95.00 (assuming that the otherwise approved Medicare amount is $100), and $50.00 is applied to the deductible. A balance of $45.00 remains. Medicare normally would reimburse the beneficiary for 80% of the approved amount after the deductible is met, which would be $36.00 ($45.00 x 80% = $36.00). However, due to the sequestration reduction, the $36.00 calculated payment amount is reduced by 2%, resulting in a payment of $35.28, instead of $36.00 ($36.00 x 2% = $0.72), to the beneficiary.
CMS encourages physicians, practitioners, and suppliers who bill unassigned claims to discuss with their Medicare patients the impact of the sequestration reductions to Medicare payments.
Reporting the Sequestration Reduction
Claim adjustment reason code (CARC) 223 is used to report the sequestration reduction on the Remittance Advice (RA). CARC 223 is defined as “Adjustment code for mandated Federal, State or local law/regulation that is not already covered by another code and is mandated before a new code can be created.”
For institutional Part A claims, the adjustment is reported on the RA at the claim level. For Part B physician/practitioner claims and institutional provider outpatient claims, the adjustment is reported at the line level.
Hospitals and other providers are encouraged to check with their local contractors for new updates, as well as additional guidance and clarification on the practical application of sequestration to the Medicare Program.
This week’s note from the instructor is written by Debbie Mackaman, RHIA, CHCO, regulatory specialist for HCPro, Inc.
During the last quarter of 2012, hospital outpatient departments temporarily fell under the therapy caps and manual medical review provisions as required under the Middle Class Tax Relief and Job Creation Act. On January 2, 2013, the American Taxpayer Relief Act revised those provisions that impacted outpatient therapy services, including those provided in hospital outpatient departments for services furnished between January 1 and December 31, 2013.
- Private therapy practices and physician offices;
- Part B Skilled Nursing Facilities;
- Home Health Agencies (TOB 034X);
- Outpatient Rehabilitation Facilities (ORFs) and Comprehensive Outpatient Rehabilitation Facilities (CORFs);
- Hospital Outpatient Departments (TOB 013X including TOB 012X); excluding CAHs.
Critical access hospitals (CAHs) will not be included in applying the payments caps to their outpatient therapy services or reporting the –KX modifier; however, the therapy visits provided at a CAH will count towards all other providers’ therapy payment caps. In other words, if a patient is seen at a CAH and receives physical therapy that Medicare pays $1,000 for, those services will count toward another hospital’s payment cap if the patient transfers care or starts a new episode of care at another facility in the same calendar year. Of interest is that the CMS representative on the recent March Rural Health Open Door Forum stated that CAHs will be considered for inclusion in the therapy caps in 2014 through the proposed rule making process.
The manual medical review provision of the law affects therapy claims that exceed $3,700 threshold cap for PT and SLP services combined and a separate one for OT services. Although the manual medical review provision has been in place with dates of service beginning January 1, 2013, some MACs put this process on hold until further notice. CMS has announced that effective April 1, 2013, Recovery Auditors (RA) will review all therapy claims which have exceeded the $3,700 threshold cap for the year. Although PT and SLP services are combined for triggering the threshold, the medical review will be conducted separately for each discipline.
Recovery Auditors will conduct both prepayment and post payment reviews when services exceed the threshold cap.
- Recovery Audit Prepayment Review Demonstration will be conducted in eleven states -FL, CA, MI, TX, NY, LA, IL, PA, OH, NC, and MO. The claims will be reviewed and compared to the medical record before the claim is processed for payment whenever the $3,700 threshold cap is met.
- The ADR will be sent to the provider by the MAC with instructions to send the records to the RA who will then have 10 business days after receiving the medical record to conduct the prepayment review. The provider will receive a review results letter describing the RA’s findings and their determination.
- The remaining states will fall under post payment review by RAs for all therapy claims that reach the $3,700 threshold cap. The request for medical records will occur immediately after the claim has been processed for payment.
- CMS did not indicate a separate timeframe for completion of the post payment review outside of the current RA process; however, if the RA determines than an improper payment has been made, a demand letter will be sent to the provider from the MAC who will initiate the take back.
- For both prepayment and post payment reviews, the current medical record request limits will not apply to therapy services since they are based on a payment cap. All therapy claims that hit the cap will fall into review outside of the usual RA ADR limits.
Keep in mind that all providers must report the National Provider Identifier (NPI) on the claim form of the physician or non-physician practitioner who is responsible for reviewing the therapy plan of care to prevent claims from being rejected and further delaying payment. Additional guidance on the therapy payment cap and manual medical review can be found on the CMS Therapy Cap web page.
Performant Recovery added four new issues across three categories—Two for outpatient hospital claims, one for physician/nonphysician practitioner claims, and one for DME claims—to its CMS-approved list for providers in Region A. (See link for individual state applicability).
For DME claims
- Osteogenesis stimulators – JA. Potential incorrect billing occurred when claims for Osteogenesis Stimulators were billed without an ICD-9-CM code supporting medical necessity and without all other required criteria described in NHIC’s Local Coverage Determination (LCD) L11501 and related article (A35349).
For hospital outpatient claims
- Cardiovascular nuclear medicine – J13. Potential incorrect billing occurred for claims billed with ICD-9-CM codes that are not listed by National Government Services (NGS) Local Coverage Determination (LCD) L26859 (related article A46181) as medically necessary.
- Nerve conduction studies (NCS) – Maximum units- J13. Potential incorrect billing occurred for claims reporting CPT codes 95900 and 95904 for units in excess of what is medically necessary per utilization guidelines outlined in National Government Services (NGS) Local Coverage Determination (LCD) L26869 and related article A51823.
For physician/nonphysician practitioner
- Nerve conduction studies (NCS) – Maximum units- J13. Potential incorrect billing occurred for claims reporting CPT codes 95900 and 95904 for units in excess of what is medically necessary per utilization guidelines outlined in National Government Services (NGS) Local Coverage Determination (LCD) L26869 and related article A51823.
The Revenue Cycle Institute has released a new white paper, “2013 Recovery Auditor Benchmarking Report,” by Debbie Mackaman, RHIA, CHCO, Director of Medicare and compliance for HCPro, Inc.
HealthDataInsights added a new issue for supplies claims to its CMS-approved list for providers in all Region D states.
According to the HDI website, the new issue is:
- Blood glucose monitor device bundling. Certain blood glucose monitor supplies are included in the allowance for a blood glucose monitor device when provided at the same time, and thus are not separately payable.
The Revenue Cycle Institute has released a new white paper, “ICD-10-PCS Introduces Procedure Guidelines and Coder Confusion,” by Jennifer Avery, CCS, CPC-H, CPC, CPC-I , regulatory specialist for HCPro, Inc.
With the recent news that legislation has been introduced to reform Recovery Auditors (RA) and that the American Hospital Association (AHA) and four health systems are suing the U.S. Dept. of Health and Human Services (HHS) for unfair Medicare practices in regards to the RA program, I thought it would be of interest to our readers to take a look at the OIG’s report and recommendations on their administrative law judge (ALJ) appeals review from 2010.
Prior to 2005, the OIG had found that at different levels of appeal, standards were not consistently applied and that CMS’s ability to defend its initial decisions was limited. Regulatory changes were then implemented, including requiring ALJs to follow new regulations that addressed how Medicare policy must be applied, when new evidence may be accepted and how CMS can participate in appeals. In addition, oversight was transitioned from the Social Security Administration (SSA) to HHS.
The third level of appeal that is conducted by ALJs differs substantially from the first two levels when appeals are filed with the Medicare administrative contractor (MAC) or the qualified independent contractor (QIC). One of the major differences is that the appellant has the right to a hearing before an ALJ; however, under certain circumstances, the ALJ may not conduct a hearing and may instead make a decision after reviewing the evidence in the case file or on-the-record review. Prior to 2005, ALJs were bound by Medicare laws, regulations, and National Coverage Determinations when making decisions, but were not bound by Local Coverage Determinations or CMS program guidance. In 2005, new regulations were introduced that required ALJs to “give substantial deference” to these policies and to provide an explanation if they decline to follow one of these policies in an appeal. Another change in 2005 was that an appellant must explain in writing the reason for submitting new evidence and ALJs may accept the new evidence only if they determine that the appellant had “good cause” for waiting until the ALJ level to submit it. As a party to the ALJ hearing, CMS or their contractors may also submit evidence, call or cross-examine witnesses during the hearing, and appeal to the next level. The OIG was disappointed to find that CMS participated in only 10% of the appeals that ALJs decided in FY 2010 and when CMS participated, ALJs were less likely to decide fully in favor of appellants.
After review of the data and extensive interviews with various staff, the OIG identified that providers filed 85% of the 40,682 appeals that ALJs decided in FY 2010. Certain providers filed appeals much more frequently than others – referred to by the OIG as “frequent filers.” ALJs reversed prior-level decisions by QICs and decided fully in favor of appellants in 56% of appeals in FY 2010. In contrast, QICs decided fully in favor of appellants in 20A% of appeals in FY 2010. What the OIG found was that ALJs differed from QICs in their interpretation of Medicare policies, in their degree of specialization, and in their use of clinical experts which ultimately contributed to different decisions at the ALJ and QIC levels.
During the interview process, both ALJ and QIC staff indicated that ALJs tended to interpret Medicare policies less strictly than QICs. Most ALJ staff noted that ALJs often decided in favor of appellants when the intent but not the letter of a Medicare policy was met. In contrast, most QICs noted that they try to follow Medicare policy strictly. In addition, ALJ and QIC staff commonly noted that some Medicare policies are unclear and that leads to more fully favorable decisions and to more variation among ALJs.
The OIG also noted at least two other findings. The ALJ and CMS staff raised concerns that the acceptance of new evidence and the organization of case files reduced the efficiency of the appeals system and that ALJ staff handled suspicions of fraud inconsistently.
The OIG report provides very clear recommendations to CMS and/or the Office of Hearings and Appeals (OHMA) and here is a summary of those that providers should be aware of.
- Develop and provide coordinated training on Medicare policies to ALJs and QICs at least annually with the focus on Medicare policy for consistency at the second and third level appeals;
- Identify and clarify Medicare policies that are unclear and can be interpreted differently by soliciting input from MACs;
- Improve the efficiency of the appeals process by standardizing case files and accelerating OMHA’s Electronic Records Initiative to transition from paper to electronic files;
- Revise the current regulations to provide more clear guidance to ALJs regarding when to accept new evidence submitted by providers;
- Seek statutory authority to establish a “modest filing fee” for those providers who have been identified as “frequent filers” as a means to encourage them to assess the appeal before filing;
- Determine whether specialization among ALJs would improve efficiency; however, the current statutory requirement is that appeals are randomly assigned and further development of this recommendation would be necessary; and,
- Increase CMS participation in ALJ appeals making strategic decisions about which contractors are best suited to do this and which appeals most warrant CMS participation such as Part A hospitals and frequent filer appeals.
With the recent OIG report, legislation and lawsuit, it is apparent that changes are on the horizon and we can only hope it will be a win-win solution for all parties involved.
Clarification regarding $716 billion in cost savings to Medicare Program under the Affordable Care Act
Ever since the creation of the Medicare Program—designed to provide health coverage for certain vulnerable portions of the population (the aged, disabled and those with end-stage renal disease [ESRD]) —Medicare, at the direction of Congress, has been attempting to assure that its beneficiaries have access to high quality care, while at the same time containing the costs of that care to assure the economic viability of the program itself. Several important steps in that direction were incorporated into the Affordable Care Act (ACA), some of which have already been implemented, and several of which are being implemented as of the beginning of FY 2013.
Early cost containment efforts
These efforts have led to the development of prospective payment methodologies (e.g., the Inpatient Prospective Payment System [IPPS] and Outpatient Prospective Payment System, [OPPS], etc.) that encourage providers to be more cost effective. They have also led to a number of demonstration projects designed to provide alternative delivery mechanisms to improve the coordination and efficiency of care provided. In recent years, particularly with respect to inpatient stays, CMS has been moving toward pay for performance, which is designed to reward those hospitals that meet and/or exceed certain quality of care standards. CMS has also attempted to assure that those hospitals who fail to provide an acceptable level of care during an inpatient stay are not rewarded for their failure to meet such standards.
Cost savings under the Affordable Care Act
Medicare Advantage plan reimbursement. As part of the ACA, Congress continued its efforts to contain costs while at the same time assuring the delivery of high quality care without a reduction in benefits. To that end, approximately $716 billion in savings have been built into the ACA. These are savings, not cuts to Medicare benefits. A significant portion of savings will come from a reduction in reimbursement to Medicare Advantage plans. Medicare Advantage plans utilize a managed care delivery mechanism to deliver the very same inpatient (Part A) and outpatient (Part B) benefits that are otherwise available to beneficiaries who enroll in what is referred to as “Original” Medicare. Under original Medicare, beneficiaries are generally unrestricted in their selection of providers, whereas certain Medicare Advantage plans may have more restricted provider networks.
The precursors to today’s Medicare Advantage plans were initially introduced as part of a Medicare risk demonstration project that was designed to provide for a more cost effective managed care model for delivering exactly the same benefits offered under original Medicare (Parts A and B). Starting with an initial cost savings of 5% (Medicare risk plans were paid 95% of what it would have cost the Medicare program for those same services if provided under original Medicare), Medicare had come to a point where Medicare Advantage plans were not able to provide the same benefits more cost effectively, particularly to the extent that they attempted to extend their services to rural and other more remote areas. As a result, they were receiving subsidies to provide exactly the same benefits at a higher cost than under original Medicare. Prior to the implementation of the related ACA changes, they were receiving up to 114% of what the comparable costs would have been under original Medicare.
Under the ACA, certain adjustments are now being made to reduce these subsidies. Such reduction in subsidies, however, does not result in a reduction in the services provided to Medicare Advantage enrollees. That is, whatever Medicare Advantage plans receive in reimbursement, there will be no cuts in benefits, because they are bound to provide equivalent benefits to those offered to original Medicare beneficiaries under Part A (inpatient) and Part B (outpatient). Many Medicare Advantage plans also provide prescription drug benefits under Part D.
Other sources of cost savings. Some of the other savings included in that $716 billion are accounted for by the implementation of decreases in facility reimbursement that have been in the works for a number of years, starting in FY 2004, with the voluntary reporting of certain quality indicators. For the first time, during FY 2013, hospitals will be reimbursement based upon their performance (either by achievement or improvement), as identified by quality data submitted by the hospitals themselves. This is a meaningful step toward pay for performance across the board. Beneficiaries have access to these performance scores, which may be helpful to them in making their own health care decisions. Additional savings will also come from reduced Medicare payments that would otherwise be made to hospitals to account for certain excess (preventable) hospital readmissions.
Cost savings to extend economic viability of Medicare program. The ACA cuts to Medicare costs are to be used to extend the economic viability of the Medicare Program. The initial projections were that they would do so for eight more years (through 2024, rather than 2016), without any decrease in the benefits that beneficiaries will receive. Let us hope that these cost containment efforts are successful without compromising the quality of care provided.