President's FY2016 Budget: Centers for Medicare & Medicaid Services (CMS) Legislative Proposals

President's FY2016 Budget: Centers for Medicare & Medicaid Services (CMS) Legislative Proposals
President’s FY2016 Budget: Centers for
Medicare & Medicaid Services (CMS)
Legislative Proposals
Alison Mitchell, Coordinator
Analyst in Health Care Financing
Kirstin B. Blom, Coordinator
Analyst in Health Care Financing
Patricia A. Davis, Coordinator
Specialist in Health Care Financing
March 9, 2015
Congressional Research Service
7-5700
www.crs.gov
R43934
President’s FY2016 Budget: CMS Legislative Proposals
Summary
Federal law requires the President to submit an annual budget request to Congress no later than
the first Monday in February. The budget informs Congress of the President’s overall federal
fiscal policy based on proposed spending levels, revenues, and deficit (or surplus) levels. The
budget request lays out the President’s relative priorities for federal programs, such as how much
should be spent on defense, education, health, and other federal programs. The President’s budget
also may include legislative proposals for spending and tax policy changes. While the President is
not required to propose legislative changes for those parts of the budget that are governed by
permanent law (i.e., mandatory spending), such changes generally are included in the budget.
President Obama submitted his FY2016 budget request to Congress on February 2, 2015.
The Centers for Medicare & Medicaid Services (CMS) is the division of the Department of
Health & Human Services (HHS) responsible for administering Medicare, Medicaid, and the
State Children’s Health Insurance Program (CHIP). CMS also is responsible for administering the
private health insurance programs established in the Patient Protection and Affordable Care Act
(ACA; P.L. 111-148, as amended). CMS is the largest purchaser of health care in the United
States, with expenditures from CMS programs accounting for almost 30% of the nation’s health
expenditures. In FY2016, CMS estimates that almost 126 million individuals will receive
coverage through Medicare, Medicaid, and CHIP.
The CMS budget includes a mixture of both mandatory and discretionary spending. However, the
vast majority of the CMS budget is mandatory spending, such as Medicare benefit spending and
grants to states for Medicaid. In the President’s FY2016 budget, proposed Medicare outlays make
up 60% of the CMS budget and proposed Medicaid outlays comprise 36% of the CMS budget.
The CMS budget is divided into the following sections: Medicare, Medicaid, program integrity,
CHIP, state grants and demonstrations, private health insurance protections and programs, the
Center for Medicare & Medicaid Innovation, and program management. The President’s FY2016
budget contains a number of legislative proposals that would affect the CMS budget. Some of
these proposals are program expansions, and others are designed to reduce federal spending.
The President’s proposed budget for CMS would be $970.8 billion in net mandatory and
discretionary outlays for FY2016, which would be an increase of $73.6 billion, or 8.2%, over the
estimated net outlays for FY2015. This estimate includes the cost of the Medicare physician
payment adjustment ($8.8 billion), the net cost of legislative proposals ($5.4 billion), and the
estimated savings from program integrity investments ($0.9 billion).
This report begins with summaries of each section of the CMS budget. Then, for each legislative
proposal included in the President’s budget, this report provides a description of current law and
the President’s legislative proposal. The President’s budget includes legislative proposals for the
following sections of CMS: Medicare, Medicaid, program integrity, CHIP, state grants and
demonstrations, and program management. A table summarizing the Administration’s estimates of
the budgetary impact for each legislative proposal is at the end of each of these sections.
Congressional Research Service
President’s FY2016 Budget: CMS Legislative Proposals
Contents
Introduction...................................................................................................................................... 1
Budget Summary ............................................................................................................................. 2
Medicare .................................................................................................................................... 3
Medicaid .................................................................................................................................... 5
Program Integrity....................................................................................................................... 6
CHIP .......................................................................................................................................... 6
State Grants and Demonstrations .............................................................................................. 7
Private Health Insurance Protections and Programs.................................................................. 7
Center for Medicare & Medicaid Innovation ............................................................................ 8
Program Management ............................................................................................................... 8
Legislative Proposals ....................................................................................................................... 9
Medicare Legislative Proposals ..................................................................................................... 10
Medicare Part A ....................................................................................................................... 10
Establish a Hospital-Wide Readmissions Reduction Measure .......................................... 10
Extend Accountability for Hospital-Acquired Conditions ................................................ 10
Reduce Medicare Coverage of Bad Debts ........................................................................ 11
Better Align Graduate Medical Education Payments with Patient Care Costs ................. 11
Eliminate the 190-Day Lifetime Limit on Inpatient Psychiatric Facility Services ........... 12
Reduce Critical Access Hospital Reimbursements from 101% of Reasonable
Costs to 100% of Reasonable Costs ............................................................................... 12
Prohibit Critical Access Hospital Designation for Facilities That Are Less Than
10 Miles from the Nearest Hospital ............................................................................... 13
Encourage Appropriate Use of Inpatient Rehabilitation Facilities .................................... 13
Clarify the Medicare Fraction in the Medicare Disproportionate Share Hospital
Statute............................................................................................................................. 14
Medicare Parts A and B ........................................................................................................... 15
Implement Bundled Payment for Post-acute Care ............................................................ 15
Allow CMS to Assign Beneficiaries to Federally Qualified Health Centers and
Rural Health Clinics Participating in the Medicare Shared Savings Program ............... 15
Expand Basis for Beneficiary Assignment for Accountable Care Organizations to
Include Nurse Practitioners, Physician Assistants, and Clinical
Nurse Specialists ............................................................................................................ 16
Allow Accountable Care Organizations to Pay Beneficiaries for Primary Care
Visits up to the Applicable Medicare Cost-Sharing Amount ......................................... 17
Implement Value-Based Purchasing for Additional Providers .......................................... 17
Adjust Payment Updates for Certain Post-acute Care Providers ...................................... 18
Medicare Part B ....................................................................................................................... 19
Reform Medicare Physician Payments to Promote Participation in High-Quality
and Efficient Health Care Delivery Systems .................................................................. 19
Encourage Efficient Care by Improving Incentives to Provide Care in the Most
Appropriate Ambulatory Setting .................................................................................... 19
Make Permanent the Medicare Primary Care Incentive Payment in a BudgetNeutral Manner .............................................................................................................. 20
Exclude Certain Services from the In-Office Ancillary Services Exception..................... 21
Modify Reimbursement of Part B Drugs .......................................................................... 21
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President’s FY2016 Budget: CMS Legislative Proposals
Modify the Documentation Requirement for Face-to-Face Encounters for Durable
Medical Equipment Claims ............................................................................................ 22
Expand Coverage of Dialysis Services for Beneficiaries with Acute Kidney Injury ........ 23
Medicare Advantage ................................................................................................................ 23
Align Employer Group Waiver Plan Payments with Average Medicare Advantage
Plan Bids ........................................................................................................................ 23
Increase the Minimum Medicare Advantage Coding Intensity Adjustment ..................... 24
Allow for Federal/State Coordinated Review of Duals Special Need Plan
Marketing Materials ....................................................................................................... 25
Medicare Part D....................................................................................................................... 26
Establish Quality Bonus Payments for High-Performing Part D Plans ............................ 26
Align Medicare Drug Payment Policies with Medicaid Policies for Low-Income
Beneficiaries................................................................................................................... 26
Accelerate Manufacturer Discounts for Brand-Name Drugs to Provide Relief to
Medicare Beneficiaries in the Coverage Gap ................................................................. 27
Allow the Secretary to Negotiate Prices for Biologics and High-Cost Prescription
Drugs .............................................................................................................................. 28
Encourage the Use of Generic Drugs by Low-Income Beneficiaries ............................... 29
Ensure Retroactive Part D Coverage of Newly Eligible LowIncome Beneficiaries...................................................................................................... 30
Establish Authority for a Program to Prevent Prescription Drug Abuse in
Medicare Part D ............................................................................................................. 31
Require Mandatory Reporting of Other Prescription Drug Coverage ............................... 31
Suspend Coverage and Payment for Questionable Part D Prescriptions and
Incomplete Clinical Information .................................................................................... 32
Prohibit Brand and Generic Drug Manufacturers from Delaying the Availability
of New Generic Drugs and Biologics ............................................................................ 33
Modify Length of Exclusivity to Facilitate Faster Development of Generic
Biologics ........................................................................................................................ 33
Medicare Premiums and Cost Sharing .................................................................................... 34
Increase Income-Related Premiums Under Medicare Parts B and D................................ 34
Modify the Part B Deductible for New Beneficiaries ....................................................... 35
Clarify Calculation of the Late Enrollment Penalty for Medicare Part B Premiums ........ 36
Introduce a Part B Premium Surcharge for New Beneficiaries Who Purchase Near
First-Dollar Medigap Coverage ..................................................................................... 36
Introduce Home Health Co-payments for New Beneficiaries........................................... 37
Medicare Administrative Proposals ......................................................................................... 37
Strengthen the Independent Payment Advisory Board to Reduce Long-Term
Drivers of Medicare Cost Growth .................................................................................. 37
Integrate Appeals Process for Medicare-Medicaid Enrollees ........................................... 38
Reform the Medicare Appeals Process.............................................................................. 39
Provide Office of Medicare Hearings and Appeals and Departmental Appeals
Board Authority to Use Recovery Audit Contractor Collections ................................... 41
Other Proposals ....................................................................................................................... 41
Expand Sharing Medicare Data with Qualified Entities ................................................... 41
Extend the Qualified Individuals Program Through CY2016 ........................................... 42
Create Pilot to Expand the Program of All-Inclusive Care for the Elderly
Eligibility to Individuals Between the Ages of 21 and 55.............................................. 42
Estimated Cost/Savings for Medicare Legislative Proposals .................................................. 43
Medicaid Legislative Proposals ..................................................................................................... 46
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President’s FY2016 Budget: CMS Legislative Proposals
Medicaid Benefits.................................................................................................................... 46
Expand State Flexibility to Provide Benchmark Benefit Packages ................................... 46
Require Coverage of Early and Periodic Screening, Diagnostic, and Treatment for
Children in Inpatient Psychiatric Treatment Facilities ................................................... 47
Provide Home- and Community-Based Waiver Services to Children Eligible for
Psychiatric Residential Treatment Facilities .................................................................. 48
Require Full Coverage of Preventive Health and Tobacco-Cessation Services for
Adults in Traditional Medicaid ...................................................................................... 48
Pilot Comprehensive Long-Term Care State Plan Option................................................. 49
Allow States to Develop Age-Specific Health Home Programs ....................................... 50
Allow Full Medicaid Benefits to All Individuals in a Home- and CommunityBased Services State Plan Option .................................................................................. 50
Expand Eligibility Under the Community First Choice Option ........................................ 51
Expand Eligibility for the 1915(i) Home- and Community-Based Services State
Plan Option .................................................................................................................... 51
Medicaid Coverage .................................................................................................................. 52
Extend the Transitional Medical Assistance Program Through CY2016 .......................... 52
Permanently Extend “Express Lane” Eligibility Option for Children .............................. 53
Allow Pregnant Women Choice of Medicaid Eligibility Category ................................... 53
Create State Option to Provide 12-Month Continuous Medicaid Eligibility
for Adults........................................................................................................................ 54
Medicaid Payments ................................................................................................................. 55
Rebase Future Medicaid Disproportionate Share Hospital Allotments ............................. 55
Limit Medicaid Reimbursement of Durable Medical Equipment Based on
Medicare Rates ............................................................................................................... 55
Extend the Medicaid Primary Care Payment Increase Through CY2016 and
Include Additional Providers.......................................................................................... 56
Medicaid Prescription Drugs ................................................................................................... 57
Lower Medicaid Drug Costs and Strengthen the Medicaid Drug Rebate Program .......... 57
Promote Program Integrity for Medicaid Drug Coverage................................................. 59
Increase Access to and Transparency of Medicaid Drug Pricing Data ............................. 60
Estimated Cost/Savings for Medicaid Legislative Proposals .................................................. 61
Program Integrity Legislative Proposals........................................................................................ 63
Medicare .................................................................................................................................. 63
Retain a Portion of Medicare Recovery Audit Recoveries to Implement Actions
That Prevent Fraud and Abuse ....................................................................................... 63
Allow Prior Authorization for Medicare Fee-for-Service Items ....................................... 64
Allow Civil Monetary Penalties or Intermediate Sanctions for Providers and
Suppliers Who Fail to Update Enrollment Records ....................................................... 64
Assess a Fee on Physicians and Practitioners Who Order Services or Supplies
Without Proper Documentation ..................................................................................... 65
Establish Registration Process for Clearinghouses and Billing Agents ............................ 65
Allow Collection of Application Fees from Individual Providers..................................... 66
Increase the Amount of the Home Health Agency Surety Bond ....................................... 66
Medicaid .................................................................................................................................. 67
Expand Funding and Authority for the Medicaid Integrity Program ................................ 67
Support Medicaid Fraud Control Units for the Territories ................................................ 68
Track High Prescribers and Utilizers of Prescription Drugs in Medicaid ......................... 69
Consolidate Redundant Error Rate Measurement Programs ............................................. 69
Expand Medicaid Fraud Control Unit Review to Additional Care Settings...................... 70
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President’s FY2016 Budget: CMS Legislative Proposals
Prevent Use of Federal Funds to Pay State Share of Medicaid or CHIP........................... 70
Medicare and Medicaid ........................................................................................................... 71
Permit Exclusion from Federal Health Care Programs If Affiliated with
Sanctioned Entities ......................................................................................................... 71
Establish Gifting Authority for the Healthcare Fraud Prevention Partnership .................. 71
Strengthen Penalties for Illegal Distribution of Beneficiary
Identification Numbers................................................................................................... 72
Estimated Cost/Savings for Program Integrity Legislative Proposals ..................................... 72
CHIP Legislative Proposals ........................................................................................................... 74
Extend CHIP Funding Through FY2019........................................................................... 74
Extend Child Enrollment Contingency Fund .................................................................... 74
Extend Performance Bonus Fund ...................................................................................... 75
Estimated Cost/Savings for CHIP Legislative Proposals .................................................. 75
State Grants and Demonstrations Legislative Proposals................................................................ 76
Create Demonstration to Address Overprescription of Psychotropic Medications
for Children in Foster Care ............................................................................................ 76
Extend and Improve the Money Follows the Person Demonstration ................................ 77
Estimated Cost/Savings for State Grants and Demonstrations
Legislative Proposals ..................................................................................................... 77
Program Management Legislative Proposals................................................................................. 78
Provide Mandatory Administrative Resources for Implementation .................................. 78
Invest in CMS Quality Measurement ................................................................................ 79
Allow CMS to Reinvest Civil Monetary Penalties Recovered from Home Health
Agencies ......................................................................................................................... 79
Allow CMS to Assess a Fee on Medicare Providers for Payments Subject to the
Federal Levy Program .................................................................................................... 80
Estimated Cost/Savings for Program Management Legislative Proposals ....................... 80
Tables
Table 1. President’s Proposed FY2016 Budget for the Centers for Medicare & Medicaid
Services......................................................................................................................................... 2
Table 2. President’s Proposed FY2016 Budget for the Centers for Medicare & Medicaid
Services by Budget Section .......................................................................................................... 4
Table 3. Estimated Cost/Savings for Medicare Legislative Proposals Included in the
President’s FY2016 Budget Proposal ......................................................................................... 43
Table 4. Estimated Cost/Savings for Medicaid Legislative Proposals Included in the
President’s FY2016 Budget Proposal ......................................................................................... 61
Table 5. Estimated Cost/Savings for Program Integrity Legislative Proposals Included in
the President’s FY2016 Budget Proposal ................................................................................... 73
Table 6. Estimated Cost/Savings for CHIP Legislative Proposals Included in the
President’s FY2016 Budget Proposal ......................................................................................... 75
Table 7. Estimated Cost/Savings for State Grants and Demonstrations Legislative
Proposals Included in the President’s FY2016 Budget Proposal ................................................ 78
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President’s FY2016 Budget: CMS Legislative Proposals
Table 8. Estimated Cost/Savings for Program Management Legislative Proposals
Included in the President’s FY2016 Budget Proposal ................................................................ 81
Appendixes
Appendix. List of Abbreviations .................................................................................................... 82
Contacts
Author Contact Information........................................................................................................... 84
Acknowledgments ......................................................................................................................... 84
Congressional Research Service
President’s FY2016 Budget: CMS Legislative Proposals
Introduction
Federal law requires the President to submit an annual budget request to Congress no later than
the first Monday in February.1 The budget informs Congress of the President’s overall federal
fiscal policy based on proposed spending levels, revenues, and deficit (or surplus) levels. The
budget request lays out the President’s relative priorities for federal programs, such as how much
should be spent on defense, education, health, and other federal programs. The President’s budget
also may include legislative proposals for spending and tax policy changes. Although the
President is not required to propose legislative changes for those parts of the budget that are
governed by permanent law (i.e., mandatory spending), such changes generally are included in
the budget. President Obama submitted his FY2016 budget request to Congress on February 2,
2015.
The Centers for Medicare & Medicaid Services (CMS) is the division of the Department of
Health & Human Services (HHS) responsible for administering Medicare, Medicaid, and the
State Children’s Health Insurance Program (CHIP). CMS also is responsible for administering the
private health insurance programs established in the Patient Protection and Affordable Care Act
(ACA; P.L. 111-148, as amended).
CMS is the largest purchaser of health care in the United States, with Medicare and federal
Medicaid expenditures accounting for almost 30% of the total national health expenditures in
2013.2 In FY2016, CMS estimates 126 million individuals will be covered by Medicare,
Medicaid, or CHIP.3
This report summarizes the President’s budget request for each of the following sections of the
CMS budget: Medicare, Medicaid, program integrity, CHIP, state grants and demonstrations,
private health insurance protections and programs, the Center for Medicare & Medicaid
Innovation, and program management. Then, for each legislative proposal included in the
President’s budget, this report provides a description of current law and the President’s proposal.
The President’s budget includes legislative proposals for the following sections of CMS:
Medicare, Medicaid, program integrity, CHIP, state grants and demonstrations, and program
management. At the end of each of these sections, a table summarizes the Administration’s
estimates of costs or savings associated with each legislative proposal.
1
31 U.S.C. 1105(a).
Centers for Medicare & Medicaid Services (CMS), Office of the Actuary, National Health Statistics Group, National
Health Expenditures Data, 2014.
3
Department of Health & Human Services (HHS), Centers for Medicare & Medicaid Services: Fiscal Year 2016
Justification of Estimates for Appropriations Committees, February 2, 2015.
2
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President’s FY2016 Budget: CMS Legislative Proposals
Basic Budget Terminology
Budget Authority: When Congress appropriates money, it provides budget authority, that is, authority to enter
into obligations. Budget authority also may be provided in legislation that does not go through the appropriations
process (i.e., mandatory or direct spending legislation).
Discretionary Spending: Refers to budget authority and outlays that are provided in and controlled by
appropriation acts.
Mandatory Spending: Refers to budget authority that is provided outside of the annual appropriations process
(i.e., through authorizing legislation) and the outlays that result from such budget authority.
Outlays: Spending to pay a federal obligation. Occur when obligations are liquidated, primarily through the issuance
of checks, electronic fund transfers, or the disbursement of cash.
Offsetting Receipts: Certain receipts of the federal government are accounted for as offsets against outlays rather
than as revenues, such as Medicare Part B and Part D premiums.
Note: For more information about the federal budget process, see CRS Report 98-721, Introduction to the Federal
Budget Process, coordinated by Bill Heniff Jr.
Budget Summary
The CMS budget includes both mandatory and discretionary spending. However, a vast majority
of CMS spending is mandatory, such as Medicare benefit spending and grants to states for
Medicaid. Table 1 shows the President’s proposed FY2016 budget for CMS.
Table 1. President’s Proposed FY2016 Budget for the Centers for Medicare &
Medicaid Services
(dollars in billions)
Actual
FY2014
Current Law
Adjusted Baseline
Legislative Proposals
Savings from Program
Integritya
Total Net Outlays
FY2015-FY2016
FY2015
FY2016
$ Change
% Change
$826.7
$886.8
$957.4
$70.6
8.0%
0.0
5.3
8.8
3.4
64.6%
0.0
5.1
5.4
0.3
6.5%
0.0
0.0
-0.9
-0.9
—
$826.7
$897.2
$970.8
$73.6
8.2%
Source: Table created by the Congressional Research Service (CRS) based on data from the Department of
Health and Human Services (HHS), Fiscal Year 2016 Budget in Brief: Strengthening Health and Opportunity for All
Americans, February 2015.
Notes: Totals may not add due to rounding.
a.
Includes savings not subject to pay-as-you-go (PAYGO) from additional program integrity investments
above savings already assumed in current law.
Current Law: The President’s budget projects that under current law CMS mandatory and
discretionary net outlays would total $957.4 billion in FY2016,4 which is an increase of $70.6
billion, or 8.0%, over the estimated net outlays for FY2015.
4
The figures in this report are taken from the following two documents: HHS, Fiscal Year 2016 Budget in Brief:
(continued...)
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Adjusted Baseline: The President’s FY2016 budget would increase baseline Medicare spending
by assuming Medicare payments for physician services will remain at current levels rather than
decrease significantly according to the sustainable growth rate (SGR) formula under current law.5
The President’s budget estimates this adjustment will increase CMS’s net outlays by $5.3 billion
in FY2015 and $8.8 billion in FY2016. With this adjustment, CMS’s total net outlays are
estimated to be $966.2 billion in FY2016.
Legislative Proposals: The President’s FY2016 budget includes a number of legislative proposals
for Medicare, Medicaid, program integrity, CHIP, state grants and demonstrations, and program
management. The Administration estimates that if these legislative proposals are implemented,
CMS’s total net outlays would increase by $5.1 billion in FY2015 and a net of $5.4 billion in
FY2016.
Total Net Outlays: With the Medicare physician payment adjustment, the estimated impact of the
legislative proposals, and the estimated savings from program integrity activities ($0.9 billion),
the President’s budget estimates CMS’s net outlays would be $970.8 billion in FY2016, which is
an increase of $73.6 billion, or 8.2%, over the estimated net outlays for FY2015.
The CMS budget is divided into the following sections: Medicare, Medicaid, program integrity,
CHIP, state grants and demonstrations, private health insurance protections and programs, the
Center for Medicare & Medicaid Innovation, and program management. A description of each of
these sections appears below, along with a summary of the President’s budget proposals for each
section.
Medicare
Medicare is a federal program that pays for covered health care services of qualified
beneficiaries. It was established in 1965 under Title XVIII of the Social Security Act as a federal
entitlement program to provide health insurance to individuals aged 65 and older. Over the years,
Medicare has been expanded to include individuals under the age of 65 who cannot work because
they have a medical condition that is expected to last at least one year or result in death, have endstage renal disease (permanent kidney failure requiring dialysis or transplant), or have
amyotrophic lateral sclerosis (ALS, or Lou Gehrig’s disease). Medicare, which consists of four
parts (A-D), covers hospitalizations, physician services, prescription drugs, skilled nursing
facility care, home health visits, and hospice care, among other services.6
The President’s budget projects that under current law, Medicare outlays net of offsetting receipts
will be $583.5 billion in FY2016, which is an increase of $53.0 billion, or 10.0%, over FY2015
(see Table 2). The President’s budget makes adjustments to the baseline assuming congressional
(...continued)
Strengthening Health and Opportunity for All Americans, February 2015, p. 60-118, at http://www.hhs.gov/budget/
fy2016/fy-2016-budget-in-brief.pdf and HHS, Centers for Medicare & Medicaid Services: Fiscal Year 2016
Justification of Estimates for Appropriations Committees, February 2015, at http://www.cms.gov/About-CMS/AgencyInformation/PerformanceBudget/Downloads/FY2016-CJ-Final.pdf.
5
For more information about Medicare physician payments, see CRS Report R40907, Medicare Physician Payment
Updates and the Sustainable Growth Rate (SGR) System, by Jim Hahn.
6
For more information about the Medicare program, see CRS Report R40425, Medicare Primer, coordinated by
Patricia A. Davis and Scott R. Talaga.
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action preventing a reduction in Medicare physician payments for FY2016, which increases the
FY2016 baseline outlays net of offsetting receipts by $8.8 billion. The budget includes a number
of legislative proposals for Medicare, including some legislative proposals in the program
management section.7 If implemented, these legislative proposals in Medicare and program
management are estimated to decrease Medicare outlays by a net of $1.8 billion in FY2016 and a
cumulative $423.1 billion over the next 10 years.8 With the baseline adjustments and the
estimated impact of the legislative proposals, the President’s budget estimates that Medicare’s
total net mandatory and discretionary outlays for FY2016 will be $590.5 billion, which is an
increase of $54.1 billion, or 10.1%, over FY2015.
Table 2. President’s Proposed FY2016 Budget for the Centers for Medicare &
Medicaid Services by Budget Section
(dollars in billions)
Actual
FY2014
FY2015-FY2016
FY2015
FY2016
$ Change
% Change
Medicare
Current Law
$511.7
$530.5
$583.5
$53.0
10.0%
Physician Payment Adjustment
0.0
5.3
8.8
Legislative Proposals
0.0
0.6
-1.8a
511.7
536.4
590.5
54.1
10.1%
301.5
328.6
344.4
15.8
4.8%
0.0
4.5
6.6
301.5
333.1
351.0
17.9
5.4%
Current Law
9.3
10.6
14.0
3.4
32.1%
Legislative Proposals
0.0
0.0
0.6
Subtotal
9.3
10.6
14.6
4.0
37.7%
Current Law
0.5
0.6
0.6
b
3.7%
Legislative Proposals
0.0
0.0
c
Subtotal
0.5
0.6
0.6
d
8.0%
2.7
15.3
13.3
-2.0
-13.1%
Subtotal
Medicaid
Current Law
Legislative Proposals
Subtotal
CHIP
State Grants and Demonstrations
Private Health Insurance Programs
Current Law
Center for Medicare & Medicaid
Innovation
7
The “Medicare Legislative Proposals” and “Program Management Legislative Proposals” sections in this report
include an explanation of current law and a description of each legislative proposal pertaining to the Medicare program.
Tables at the end of each section summarize the costs or savings for each of the President’s legislative proposals.
8
The $1.8 billion in savings includes $2.4 billion in net savings from Medicare legislative proposals net of premiums
and offsetting receipts, in addition to the cost of $0.6 billion for program management legislative proposals.
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Actual
FY2014
FY2015-FY2016
FY2015
FY2016
$ Change
Current Law
1.0
1.3
1.6
0.3
Savings from Program Integritye
0.0
0.0
-0.9
-0.9
$826.7
$897.2
$970.8
$73.6
Total Net Outlays
% Change
23.1%
8.2%
Source: Table created by the Congressional Research Service (CRS) based on data from the Department of
Health and Human Services (HHS), Fiscal Year 2016 Budget in Brief: Strengthening Health and Opportunity for All
Americans, February 2015.
Notes: Funding for program management activities is included in the estimates in this table where appropriate.
Totals may not add due to rounding.
CHIP: State Children’s Health Insurance Program.
a.
The $1.8 billion in savings includes $2.4 billion in savings from Medicare legislative proposals net of
premiums and offsetting receipts, in addition to the cost of $0.6 billion for program management legislative
proposals.
b.
Funding for state grants and demonstrations is to increase by $21 million from FY2015 to FY2016.
c.
The Administration estimates the legislative proposals for state grants and demonstrations would cost $25
million in FY2016.
d.
With the legislative proposals included, the Administration estimates funding for state grants and
demonstrations would increase by $46 million from FY2015 to FY2016.
e.
Includes savings not subject to pay-as-you-go (PAYGO) from additional program integrity investments
above savings already assumed in current law.
Medicaid
Medicaid is a means-tested entitlement program that finances the delivery of primary and acute
medical services as well as long-term services and supports. Medicaid is jointly funded by the
federal government and the states. The federal government reimburses states for a portion (i.e.,
the federal share) of each state’s Medicaid program costs. Because federal Medicaid funding is an
open-ended entitlement to states, there is no upper limit or cap on the amount of federal Medicaid
funds a state may receive.9
The President’s budget projects that under current law Medicaid total net outlays will be $344.4
billion in FY2016, which is an increase of $15.8 billion, or 4.8%, over FY2015 (see Table 2).10
The President’s budget includes a number of legislative proposals that would impact Medicaid.11
If these proposals are implemented, the President’s budget estimates that total net outlays for
Medicaid would increase by $6.6 billion in FY2016 and by a cumulative $26.7 billion over the
9
For more information about the Medicaid program, see CRS Report R43357, Medicaid: An Overview, coordinated by
Alison Mitchell.
10
The federal Medicaid budget consists of funding for benefits and state administration. According to the President’s
budget, under current law, outlays for benefits are expected to increase by $17.3 billion, or 5.6%, and outlays for state
administration are estimated to decrease by $1.5 billion, or 7.6%, in FY2016.
11
The “Medicaid Legislative Proposals” section below includes a brief discussion of current and proposed law for each
of the legislative proposals for the Medicaid program. A table at the end of the section summarizes the costs or savings
for each of these proposals.
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next 10 years.12 Including the estimated impact of the legislative proposals, the President’s budget
estimates FY2016 net outlays for Medicaid would total $351.0 billion, which is an increase of
$17.9 billion, or 5.4%, over FY2015.
Program Integrity
Title II of the Health Insurance Portability and Accountability Act of 1996 (P.L. 104-191)
established the Health Care Fraud and Abuse Control (HCFAC) program to detect, prevent, and
combat health care fraud, waste, and abuse. HCFAC has traditionally focused on Medicare fraud,
waste, and abuse through activities such as medical review, benefit integrity, and provider audits.
In FY2009, discretionary funding was appropriated that allowed HCFAC to expand its activities
to Medicare Advantage and Medicare Part D, among other things. In addition, HCFAC mandatory
and discretionary funding is used to prevent fraud, waste, and abuse in the Medicaid program.
Spending on program integrity activities is built into the President’s budget summaries discussed
above for Medicare and Medicaid and is not explicitly broken out in Table 2. However, when the
funding for program integrity activities is broken out, the President’s budget requests total budget
authority for those activities of $2.0 billion in FY2016, including $1.3 billion in mandatory
funding for program integrity activities and $0.7 billion in discretionary funding. This funding
level is an increase of $0.1 billion, or 5.3%, over FY2015.13
CHIP
The Balanced Budget Act of 1997 (BBA97; P.L. 105-33) established the State Children’s Health
Insurance Program (CHIP) to provide health insurance coverage to targeted, low-income children
in families that have annual income above Medicaid eligibility levels but have no health
insurance. Authorization and funding for CHIP has been extended a number of times. Most
recently, the ACA extended federal funding for CHIP through FY2015. CHIP is funded jointly by
the federal government and the states, and federal CHIP funding is capped on a state-by-state
basis according to annual allotments (i.e., federal funds allocated to each state for the federal
share of its CHIP expenditures).14
The President’s budget projects that under current law CHIP’s total outlays will be $14.0 billion
in FY2016, which is an increase of $3.4 billion, or 32.1%, over FY2015 (see Table 2).15 Federal
funding for CHIP is expected to increase significantly because under current law, the federal
12
These figures include the Medicaid interaction, which are legislative proposals for other departments or agencies that
are estimated to have a budgetary effect on Medicaid. The Medicaid interactions are estimated to decrease federal
Medicaid outlays by $0.1 billion in FY2016 and $8.1 billion over the next 10 years.
13
The “Program Integrity Legislative Proposals” section below includes a description of current and proposed law for
each of the program integrity legislative proposals. A table at the end of each section summarizes the costs or savings
associated with each of the President’s legislative proposals.
14
For more information about the State Children’s Health Insurance Program (CHIP), see CRS Report R43627, State
Children’s Health Insurance Program: An Overview, by Evelyne P. Baumrucker and Alison Mitchell.
15
The federal CHIP budget consists of outlays for the state allotments and the Child Enrollment Contingency Fund,
which contains funds available to states with a federal CHIP funding shortfall and CHIP enrollment for children above
a target enrollment level. The President’s budget estimates outlays for benefits and state administration will increase by
$3.5 billion, or 32.7%, from FY2015 to FY2016, and outlays for the Child Enrollment Contingency Fund will decline
from $50 million to zero from FY2015 to FY2016.
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matching rate for CHIP is to increase by 23 percentage points in FY2016.16 The President’s
budget includes legislative proposals that would impact CHIP.17 If these proposals are
implemented, the President’s budget estimates CHIP outlays would increase by $0.6 billion in
FY2016 and by $35.1 billion over the next 10 years.
State Grants and Demonstrations
The state grants and demonstrations portion of the budget funds a diverse set of grant programs
and other activities. The grants and activities funded through this portion of the budget include
the Money Follows the Person Demonstration, the Medicaid Integrity Program, incentives for
prevention of chronic diseases in Medicaid, demonstrations to improve community mental health
services, and the Medicaid psychiatric residential treatment demonstration.18
The President’s budget projects that under current law FY2016 total outlays for state grants and
demonstrations will be $0.6 billion, which is an increase of 3.7% from FY2015 (see Table 2). The
President’s budget includes a few legislative proposals impacting the budget for state grants and
demonstrations that are estimated to increase funding by $0.6 billion over the next 10 years.19
Private Health Insurance Protections and Programs
The ACA included reforms that focus on restructuring the private health insurance market by
creating new programs (e.g., health insurance exchanges) and imposing requirements on private
health insurance plans.20 The Center for Consumer Information and Insurance Oversight within
CMS is charged with helping implement the provisions of the ACA related to the private health
insurance programs.
The President’s budget projects that under current law total outlays for the private health
insurance protections and programs will be $13.3 billion in FY2016, which is a decrease of $2.0
billion, or 13.1%, from FY2015 (see Table 2). The major changes for private health insurance
protections and programs include a reduction of $2.5 billion in funding for the Transitional
Reinsurance Program21 that is offset by increases in funding for the Risk Adjustment Program22
16
Although FY2015 is the last year states are to receive CHIP allotments, there are expected to be federal CHIP outlays
in FY2016 because states will have access to unspent funds from their FY2015 allotments and unspent FY2014
allotments redistributed to shortfall states (if any).
17
The “CHIP Legislative Proposals” section includes a brief discussion of current and proposed law for each of the
legislative proposals impacting CHIP. A table at the end of each section summarizes the costs or savings associated
with each of these proposals.
18
For more information about these programs, see HHS, Centers for Medicare & Medicaid Services: Fiscal Year 2016
Justification of Estimates for Appropriations Committees, at http://www.cms.gov/About-CMS/Agency-Information/
PerformanceBudget/Downloads/FY2016-CJ-Final.pdf.
19
The “State Grants and Demonstrations Legislative Proposals” section includes a brief discussion of current and
proposed law for each of the legislative proposals impacting state grants and demonstrations. A table at the end of each
section summarizes the costs or savings associated with each of these proposals.
20
For more information about the private health insurance protections and programs, see CRS Report R43854,
Overview of Private Health Insurance Provisions in the Patient Protection and Affordable Care Act (ACA), by Annie
L. Mach and Namrata K. Uberoi and CRS Report R42069, Private Health Insurance Market Reforms in the Affordable
Care Act (ACA), by Annie L. Mach and Bernadette Fernandez.
21
Under the Transitional Reinsurance Program, contributions are collected from health insurance issuers and group
health plans to fund payments to issuers of non-grandfathered individual market plans that enroll high-cost individuals.
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($2.5 billion) and health insurance exchange grants ($1.8 billion). The President’s budget does not
include any legislative proposals impacting the private health insurance protections and programs.
Center for Medicare & Medicaid Innovation
Section 3021 of the ACA established the Center for Medicare & Medicaid Innovation (the
Innovation Center), which is tasked with testing innovative health care payment and delivery
models with the potential to improve quality of care and reduce Medicare and Medicaid
expenditures. The ACA appropriated $10 billion to support the Innovation Center activities from
FY2011 through FY2019. The Innovation Center initiatives include Partnership for Patients,
Health Care Innovation Awards, bundled payments, Accountable Care Organizations (ACOs), the
Federally-Qualified Health Center Advanced Primary Care Practice demonstration, the
comprehensive primary care initiative, and the Strong Start initiative.23
The President’s budget projects that under current law total outlays for the Innovation Center will
be $1.6 billion in FY2016, which is an increase of $0.3 billion, or 23.1%, from FY2015 (see
Table 2). The President’s budget does not include any legislative proposals impacting the
Innovation Center.
Program Management
The program management portion of the CMS budget includes funding for the administration of
Medicare, Medicaid, CHIP, and other CMS activities. Funding for program management
activities is included the budget summaries discussed above but is not explicitly broken out in
Table 2. However, when the funding for program management activities is broken out, the
President’s budget projects that under current law spending for program management activities
(including both discretionary budget authority and mandatory spending) will be $6.8 billion in
FY2016,24 which is an increase of $1.1 billion, or 18.2%, over the FY2015 level.
Funding for program management consists of both discretionary and mandatory funding. The
discretionary funding for program management activities is projected to be $4.2 billion in
FY2016, which is an increase of $0.3 billion, or 6.8%, over FY2015 funding. The discretionary
funding for program management activities is broken into five different budget lines—program
operations, federal administration, survey and certification, research, and state high-risk pools.25
(...continued)
22
Under the Risk Adjustment Program, CMS collects charges from health insurance issuers that enroll healthier-thanaverage enrollees and redistributes those funds to health insurance issuers that enroll sicker-than-average enrollees.
23
For more information about these initiatives, see HHS, Centers for Medicare & Medicaid Services: Fiscal Year 2016
Justification of Estimates for Appropriations Committees, February 2015, at http://www.cms.gov/About-CMS/AgencyInformation/PerformanceBudget/Downloads/FY2016-CJ-Final.pdf.
24
The President’s budget request for CMS’s program management activities includes an adjustment for reimbursable
administration, which is an offsetting collection from non-federal sources estimated to be $2.5 billion in FY2016. This
reimbursable administration adjustment includes health insurance exchanges, risk adjustments, Clinical Laboratory
Improvement Amendments of 1988, sale of research data, coordination of benefits for the Medicare prescription drug
program, Medicare Advantage/prescription drug program education campaign, recovery audit contractors, and provider
enrollment fees.
25
For more information about each of these activities, see HHS, Centers for Medicare & Medicaid Services: Fiscal
Year 2016 Justification of Estimates for Appropriations Committees, February 2015, at http://www.cms.gov/AboutCMS/Agency-Information/PerformanceBudget/Downloads/FY2016-CJ-Final.pdf.
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Under current law, the mandatory funding for program management activities is projected to be
$0.1 billion in FY2016, which is a $0.2 billion decrease from FY2015 funding levels.
The President’s budget includes a few legislative proposals that would impact program
management activities. If these proposals are implemented, the President’s budget estimates that
total program level funding for program management activities would increase by $1.0 billion in
FY2016.26
Including the impact of the legislative proposals, the President’s budget estimates total program
level funding for program management activities would be $7.9 billion in FY2016, which is an
increase of $2.1 billion, or 36.5%, over FY2015. When risk corridor27 spending is included the
estimated program level funding for program management activities increases to $14.3 billion in
FY2016.
Legislative Proposals
The President’s FY2016 budget contains a number of proposals that would impact the CMS
budget. Some of these proposals are program expansions, and others are designed to reduce
federal spending. For each proposal, this report provides a description of current law and the
President’s proposal.28 This report groups these legislative proposals by the following program
areas: Medicare, Medicaid, program integrity, CHIP, state grants and demonstrations, and
program management. A table at the end of each of these sections summarizes the
Administration’s estimates of costs or savings associated with each legislative proposal and
classifies each proposal as new, modified from the President’s FY2015 budget, or repeated from
the President’s FY2015 budget.29 The Appendix includes a list of acronyms that are used
throughout the legislative proposal sections.
26
The legislative proposals impacting the mandatory funding for program management are discussed in the “Program
Management Legislative Proposals” section of the CMS budget. A table at the end of the section summarizes the costs
or savings associated with each of these proposals.
27
The temporary risk corridors program protects qualified health plans from uncertainty in rate setting from CY2014
through CY2016 through shared risk in losses and gains.
28
When years are not specified as a fiscal year, calendar year, plan year, or rate year, the type of year is not clearly
identified in the President’s budget documents.
29
Legislative proposals classified as “repeated” might have different start dates than the FY2015 proposal due to the
start date from the FY2015 budget lapsing or legislation having been enacted that impacted the start date from the
FY2015 budget.
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Medicare Legislative Proposals
Medicare Part A
Establish a Hospital-Wide Readmissions Reduction Measure
Current Law
Acute care hospitals (or inpatient prospective payment system hospitals) with higher than
expected readmission rates for Medicare aged beneficiaries who were initially admitted to the
hospital for one of five conditions are subject to up to a 3% reduction of their base discharge
payment amount. CMS has established a hospital-wide all-cause readmission measure that has
been implemented as part of its quality reporting program. As noted on page 50027 of the August
22, 2014, Federal Register, which discusses the FY2015 inpatient prospective payment system
final rule, CMS believes the definition of applicable condition in Section 1886(q)(5) A) of the
Social Security Act (which establishes the Hospital Readmissions Reduction Program ) prohibits
the adoption of the many categories of diagnosis and procedures comprising the hospital-wide allcause readmission measure as a single “condition.”
President’s Proposal
The President’s budget would permit the Secretary of HHS30 to adopt a comprehensive hospitalwide measure of readmissions as part of Medicare’s Hospital Readmissions Reduction Program in
a budget-neutral fashion. This proposal was not included in the President’s FY2015 budget.
The Administration estimates this proposal would have no budgetary impact over the next 10
years.
Extend Accountability for Hospital-Acquired Conditions
Current Law
Acute care hospitals are required to submit information indicating whether conditions established
by principal and secondary diagnosis are present on admission for Medicare inpatient discharges
on or after October 1, 2007. Present on admission is defined as present at the time the hospital’s
order for admission occurs. Depending upon the timing of that order, conditions that develop
during an outpatient encounter at the hospital, such an emergency department visit, may or may
not be considered present on admission.
President’s Proposal
The President’s budget would require hospitals to code patients’ conditions as present on arrival
at a hospital instead of present on admission for the purposes of Medicare’s Hospital-Acquired
30
Hereinafter, “the Secretary” refers to the Secretary of HHS unless otherwise specified.
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Condition reporting and payment program. This proposal was not included in the President’s
FY2015 budget.
The Administration estimates this proposal would have no budgetary impact over the next 10
years.
Reduce Medicare Coverage of Bad Debts
Current Law
Medicare reimburses providers for beneficiaries’ unpaid coinsurance and deductible amounts
after reasonable collection efforts. Medicare providers that receive bad debt reimbursement
include hospitals, skilled nursing facilities (SNFs), critical access hospitals, rural health clinics,
federally qualified health clinics, community mental health clinics, end-stage renal disease
facilities, health maintenance organizations reimbursed on a cost basis, competitive medical
plans, and health care prepayment plans.
Historically, Medicare reimbursed 100% of these bad debts. BBA97 had scheduled bad debt in
hospitals to be reduced from 100% reimbursement to 75% reimbursement in FY1998, to 60%
reimbursement in FY1999, and to 55% reimbursement in subsequent years. However, the
Benefits Improvement and Protection Act of 2000 (incorporated into the Consolidated
Appropriations Act of 2001; P.L. 106-554) froze the reduction at 70% reimbursement in FY2001
and for subsequent years. The Deficit Reduction Act of 2005 (DRA; P.L. 109-171) reduced the
payment amount for Medicare-allowable SNF bad debt from 100% to 70%, except for the bad
debt attributable to beneficiaries eligible for both Medicare and Medicaid (i.e., dual-eligible
beneficiaries), effective for cost reporting periods beginning on or after October 1, 2005. For
other Medicare providers, allowable beneficiary bad debt had been reimbursed at 100%. The
Middle Class Tax Relief and Job Creation Act of 2012 (P.L. 112-96) reduced Medicare bad debt
reimbursement to 65% for all providers. Providers that were reimbursed at 70% received 65%
bad debt reimbursement beginning in FY2013. Other providers that were reimbursed at 100% of
bad debt were reimbursed at 88% in FY2013 and at 76% in FY2014, and they are to be
reimbursed at 65% in FY2015 and subsequent years.
President’s Proposal
The President’s budget would reduce bad debt reimbursement to 25%. The scheduled reduction
would be phased in over three years beginning in FY2016 for all providers that receive bad debt
payments. This proposal was included in the President’s FY2015 budget.
The Administration estimates this proposal would save $31.1 billion over the next 10 years.
Better Align Graduate Medical Education Payments with Patient Care Costs
Current Law
Medicare pays hospitals with approved medical residency programs an additional amount to
support the higher costs of patient care associated with training physicians. These indirect
medical education payments are calculated as a percentage increase to Medicare’s inpatient
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payment rates. The indirect medical education payments vary depending on the size of the
hospital’s teaching program (subject to Medicare’s cap) as measured by the hospital’s ratio of
residents to hospital beds. Generally, teaching hospitals receive a 5.5% increase in indirect
medical education payments for every 10% increase in their resident-to-bed ratio. The Medicare
Payment Advisory Commission (MedPAC) has found that less than half of the indirect medical
education payments can be justified empirically. In its June 2010 report, MedPAC recommended
that Medicare’s funding of graduate medical education be changed to support the workforce skills
needed in a delivery system that reduces cost growth while maintaining or improving quality and
that the Secretary set standards for receiving such funds. These standards should be ambitious
goals for practice-based learning and improvement, interpersonal and communications skills,
professionalism, and systems-based practice, including interaction of community-based care with
hospital care.
President’s Proposal
The President’s budget would reduce indirect medical education funding by a total of 10%,
starting in FY2016. The Secretary would be given the authority to set standards for teaching
hospitals to encourage the training of primary care residents and emphasize skills that promote
high-quality and high-value health care. This proposal was included in the President’s FY2015
budget.
The Administration estimates this proposal would save $16.3 billion over the next 10 years.
Eliminate the 190-Day Lifetime Limit on Inpatient Psychiatric Facility Services
Current Law
Medicare Part A covers mental health services that require an inpatient admission either in a
general hospital or in a psychiatric hospital that primarily provides services to patients with
mental health conditions. Medicare will pay for no more than 190 days of care in a freestanding
inpatient psychiatric hospital during a beneficiary’s lifetime. This limit does not apply to days
provided by a distinct psychiatric unit that is part of a general hospital.
President’s Proposal
The President’s budget would remove Medicare’s 190-day lifetime limit on freestanding inpatient
psychiatric facilities. This proposal was not included in the President’s FY2015 budget.
The Administration estimates this proposal would cost $5.0 billion over the next 10 years.
Reduce Critical Access Hospital Reimbursements from 101% of Reasonable
Costs to 100% of Reasonable Costs
Current Law
As established by BBA97, critical access hospitals (CAHs) are limited-service rural facilities that
meet certain distance criteria or have been designated as necessary providers, offer 24-hour
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emergency care, have no more than 25 acute care inpatient beds, and have no more than a 96-hour
average length of stay.
Generally, CAHs receive enhanced cost-based Medicare payments, rather than the payments paid
to acute care hospitals under Medicare’s prospective payment systems (PPS). Since FY2004,
CAHs have received 101% of reasonable, cost-based reimbursement for inpatient care, outpatient
care, ambulance services, and SNF care provided in swing beds to Medicare beneficiaries. Prior
to this date, CAHs received Medicare payment based on 100% of reasonable costs for these
services.
President’s Proposal
The President’s budget would reduce Medicare’s reimbursement to CAHs to 100% of reasonable
costs, beginning in FY2016. This proposal was included in the President’s FY2015 budget.
The Administration estimates this proposal would save $1.7 billion over the next 10 years.
Prohibit Critical Access Hospital Designation for Facilities That Are Less Than
10 Miles from the Nearest Hospital
Current Law
To be certified as a CAH, a rural entity must meet certain distance criteria or have been
designated as a necessary provider by the state. Under federal distance standards, a CAH must
meet one of the following criteria: (1) be located 35 miles from another hospital or (2) be located
15 miles from another hospital in areas with mountainous terrain or with only secondary roads.
Until January 1, 2006, states could waive these federal mileage requirements for those entities
designated as necessary providers. The Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA; P.L. 108-173) eliminated this state authority. As of January 1,
2006, states are no longer permitted to designate a facility as a necessary provider CAH. Existing
necessary providers were grandfathered under the MMA.
President’s Proposal
The President’s budget would rescind the CAH designation for those entities that are within 10
miles from another hospital or CAH, which would eliminate their Medicare cost-based payments
(of 101%) beginning in FY2016. This proposal was included in the President’s FY2015 budget.
The Administration estimates this proposal would save $0.8 billion over the next 10 years.
Encourage Appropriate Use of Inpatient Rehabilitation Facilities
Current Law
Inpatient rehabilitation facilities (IRFs) are either freestanding hospitals or distinct units of other
hospitals that are exempt from Medicare’s inpatient PPS, which is used to pay acute care, general
hospitals. Until recently, the Medicare statute gave the Secretary the discretion to establish the
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criteria that facilities must meet to be considered IRFs. Since October 1, 1983, CMS has required
that a facility must treat a certain proportion of patients with specified medical conditions to
qualify as an IRF and receive higher Medicare payments. IRFs were required to meet the “75%
rule,” which determined whether a hospital or unit of a hospital qualified for the higher IRF
payment rates or was paid as an acute care hospital. According to the rule, at least 75% of a
facility’s total inpatient population must be diagnosed with one of 13 preestablished medical
conditions for that facility to be classified as an IRF. This minimum percentage is known as the
compliance threshold. The rule was suspended temporarily and reissued in 2004 with a revised
set of qualifying conditions and a transition period for the compliance threshold as follows: 50%
from July 1, 2004, and before July 1, 2005; 60% from July 1, 2005, and before July 1, 2006; 65%
from July 1, 2006, and before July 1, 2007, and 75% from July 1, 2007, and thereafter. During the
transition period, secondary conditions (comorbidities) were to be considered as qualifying
conditions. The DRA extended the 60% threshold an additional year beginning on July 1, 2006.
As established by the Medicare, Medicaid and SCHIP Extension Act of 2007 (P.L. 110-173),
starting July 1, 2007, the IRF compliance threshold is set at 60% and comorbidities are included
as qualifying conditions.
President’s Proposal
The President’s budget would reinstitute the 75% threshold, starting in FY2016. This proposal
was included in the President’s FY2015 budget.
The Administration estimates this proposal would save $2.2 billion over the next 10 years.
Clarify the Medicare Fraction in the Medicare Disproportionate Share
Hospital Statute
Current Law
Prior to FY2015, qualifying acute care hospitals received disproportionate share hospital (DSH)
funds through an adjustment within the inpatient PPS. Generally, DSH hospitals received the
additional payments based on their DSH patient percentage and the applicable formula
established in statute. The formula has two components: (1) a Medicare fraction that has patient
days provided to Medicare beneficiaries who qualify for Supplemental Security Income (SSI)
divided by total Medicare inpatient days and (2) a Medicare fraction that has patient days
provided to Medicaid beneficiaries divided by total hospital inpatient days. A few urban acute
care hospitals receive DSH payments under an alternative formula. The Medicare DSH payment
adjustment has been the subject of substantial litigation.
In FY2015, Medicare DSH funding to acute care hospitals changed. Qualifying inpatient PPS
hospitals that get Medicare DSH funding receive 25% of the amount of DSH funds established by
the existing DSH formula. The remaining DSH funds, reduced by the amount of the change in the
uninsured from the enactment of the ACA and other ACA adjustments, are distributed to these
qualifying DSH hospitals based on their share of uncompensated care. In FY2016, CMS is using
a hospital’s share of DSH patient days to approximate its share of uncompensated care. DSH
patient days are those days provided to patients who are eligible for SSI and entitled to Medicare
Part A benefits and those days provided to Medicaid patients.
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President’s Proposal
The President’s budget would clarify that hospital days for beneficiaries who have exhausted their
inpatient Medicare Part A benefits and who are enrolled in Medicare Advantage plans under Part
C of Medicare are included in the Medicare fraction of hospitals’ DSH formula. This proposal
was included in the President’s FY2015 budget.
The Administration estimates this proposal would have no budgetary impact over the next 10
years.
Medicare Parts A and B
Implement Bundled Payment for Post-acute Care
Current Law
Post-acute care services primarily include nursing and rehabilitation services following a
beneficiary’s inpatient hospital stay. These services are provided in institutional settings, such as
long term care hospitals (LTCHs), IRFs, and SNFs, as well as in community-settings by home
health agencies (HHAs). Use of post-acute care services and the availability of post-acute care
providers vary dramatically across states. The Institute of Medicine has noted that geographic
variation in overall Medicare spending is heavily influenced by the use of post-acute care
services, particularly SNFs and home health services. To encourage a more efficient use of postacute care and improve care coordination, in 2008, MedPAC recommended that Congress should
direct the Secretary to test bundled payments (single payments that cover the cost of an array of
items and services) for post-acute care. Additionally, as required by the ACA, a demonstration
project under way at the Innovation Center is testing bundled payments for post-acute care to
demonstration participants.
President’s Proposal
The President’s budget would implement a bundled payment for post-acute care providers
(LTCHs, IRFs, SNFs, and HHAs) beginning in FY2020. The bundled payment would be based on
patient characteristics and other factors and be set to produce a total cumulative reduction in
bundled payment rates of 2.85% by FY2022. Payments would be bundled for at least half of the
total payments for post-acute care providers. Beneficiary cost-sharing structures would not
change. This proposal was included in the President’s FY2015 budget.
The Administration estimates this proposal would save $9.3 billion over the next 10 years.
Allow CMS to Assign Beneficiaries to Federally Qualified Health Centers and
Rural Health Clinics Participating in the Medicare Shared Savings Program
Current Law
The ACA created Accountable Care Organizations (ACOs) under the Medicare program to
encourage coordinated care for beneficiaries, particularly those with chronic conditions. Ideally,
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groups of doctors, hospitals, and other health care providers voluntarily organize into ACOs with
the goal of delivering high-quality care to their Medicare patients in an efficient manner while
avoiding unnecessary duplication of services and minimizing or preventing medical errors. If the
providers can deliver care through the ACO such that Medicare spending is less than what the
care would have been had the beneficiaries received services under the traditional fee-for-service
Medicare program, the providers share in the achieved savings. Three models of ACOs exist
under the Medicare program: (1) the Medicare Shared Savings Program, (2) Advance Payment
ACO Models, and (3) Pioneer ACOs.31
Although the ACA did not define federally qualified health centers and rural health centers as
ACO professionals, the law allowed the Secretary to include “other Medicare providers and
suppliers as the Secretary determines appropriate.” In subsequent regulations,32 the Secretary used
this authority to declare federally qualified health centers and rural health clinics eligible to
participate independently in the Medicare Shared Savings Program.
President’s Proposal
The President’s budget “would allow the Secretary to assign more Medicare fee-for-service
beneficiaries to Federally Qualified Health Centers and Rural Health Clinics that participate in an
Accountable Care Organization under the Medicare Shared Savings Program.” Although the
President’s budget states that this “proposal could result in assignment of a greater number of
Medicare fee-for-service beneficiaries to Accountable Care Organizations,” it gives no specifics
on how this would increase assignment, as current regulations allow federally qualified health
centers and rural health clinics to form independent ACOs. This proposal was not included in the
President’s FY2015 budget.
The Administration estimates this proposal would save $80 million over the next 10 years.
Expand Basis for Beneficiary Assignment for Accountable Care Organizations
to Include Nurse Practitioners, Physician Assistants, and Clinical
Nurse Specialists
Current Law
Unlike managed care plans, Medicare beneficiaries do not elect to enroll in a particular plan but
are assigned to an ACO “based on their utilization of primary care services provided ... by a
[Medicare] ACO professional.”33 Current law describes an ACO professional as a physician (“a
doctor of medicine or osteopathy legally authorized to practice medicine and surgery by the State
in which he performs such function or action”) or a practitioner, including physician assistants,
nurse practitioners, and clinical nurse specialists. However, in general, assignment to an ACO is
31
For more detail on the different Accountable Care Organization (ACO) models, see http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/ACO/index.html?redirect=/aco/.
32
HHS, “Medicare Shared Savings Program: Accountable Care Organizations; Final Rule,” 76 Federal Register
67811, November 2, 2011, at http://www.gpo.gov/fdsys/pkg/FR-2011-11-02/pdf/2011-27461.pdf.
33
Ibid., p. 67851.
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made based on physician-based primary care furnished to the beneficiary. (If a beneficiary
receives no primary care services from any primary care physicians, other criteria are used.)
President’s Proposal
The President’s budget would allow the Secretary to base beneficiary assignment in the Medicare
Shared Savings Program on a broader set of primary care providers including nurse practitioners,
physician assistants and clinical nurse specialists. This proposal was not included in the
President’s FY2015 budget.
The Administration estimates this proposal would save $60 million over the next 10 years.
Allow Accountable Care Organizations to Pay Beneficiaries for Primary Care
Visits up to the Applicable Medicare Cost-Sharing Amount
Current Law
In general, Medicare beneficiaries enrolled in Part B are required to pay a 20% coinsurance (in
addition to an annual deductible and the monthly premium) for covered Medicare Part B services
they receive. Prevention services are an exception to this rule and include several types of
screening services, the “Welcome to Medicare” initial physical exam, and annual wellness visits.
For those services, beneficiaries have no cost sharing.
President’s Proposal
The President’s budget would allow ACOs participating in two-sided risk models to pay
beneficiaries for their cost-sharing portion of a primary care visit. The ACO would pay all or part
of the coinsurance associated with primary care visits, including cases in which the beneficiary
has supplemental insurance. This proposal was not included in the President’s FY2015 budget.
The Administration estimates this proposal would have no budgetary impact over the next 10
years.
Implement Value-Based Purchasing for Additional Providers
Current Law
Under a value-based purchasing system, health care providers would be awarded with payments
for the quality of care provided to Medicare beneficiaries. The intent is to give providers an
increased incentive to focus on quality of care rather than quantity of care. Current value-based
purchasing initiatives include the Hospital Value-Based Purchasing Program and the value-based
physician payment modifier. The Protecting Access to Medicare Act (PAMA; P.L. 113-93)
requires a SNF Value-Based Purchasing Program to be implemented on or before FY2019.
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President’s Proposal
The President’s budget would require that value-based purchasing programs be implemented,
beginning in CY2017, for several additional provider types, including HHAs, ambulatory surgical
centers, hospital outpatient departments, and community mental health centers. Additionally, the
SNF Value-Based Purchasing Program enacted by Congress would be implemented in FY2018.
The proposal would require that at least 2% of payments beginning in CY2017 and at least 5% of
payments beginning in CY2019 be tied to the quality and efficiency of care. This proposal is a
modification of a legislative proposal from the President’s FY2015 budget.
The Administration estimates this proposal would have no budgetary impact over the next 10
years.
Adjust Payment Updates for Certain Post-acute Care Providers
Current Law
Medicare payment amounts typically are updated each fiscal or calendar year to address potential
yearly changes in the cost of health care items and services. MedPAC has found that Medicare
payments generally exceed providers’ costs for providing post-acute services. Each year,
MedPAC makes recommendations for provider payment increases for the next fiscal or calendar
year. In its March 2014 report, MedPAC recommended that the Medicare payment updates for
SNFs, IRFs, LTCHs, and HHAs be eliminated for the upcoming year. The ACA reduced the
annual update policy for these post-acute providers to include an adjustment to account for
economy-wide productivity improvements that result in cost savings. The productivity adjustment
for SNFs, IRFs, and LTCHs was implemented on October 1, 2011. The productivity adjustment
for HHAs was implemented on January 1, 2015. The annual payment updates for IRFs, HHAs,
and LTCHs are subject to other reductions as well. The amount and timing of such reductions
vary by provider. Every type of post-acute provider may be subject to an update less than zero
that would result in a lower payment rate than in the preceding year.
President’s Proposal
The President’s budget would implement additional payment update reductions for IRFs, LTCHs,
and HHAs of 1.1 percentage points each year from 2016 through 2025. This proposal would
establish a payment update floor of zero from 2016 through 2025—payment updates for these
providers would not drop below zero due to the 1.1 percentage point reduction. The annual
payment update for SNFs would be set at a -2.5% update in FY2016. The SNF payment update
would gradually increase to a -0.97% update in FY2023. This proposal was included in the
President’s FY2015 budget.
The Administration estimates this proposal would save $102.1 billion over the next 10 years.
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Medicare Part B
Reform Medicare Physician Payments to Promote Participation in HighQuality and Efficient Health Care Delivery Systems
Current Law
Payments for physician and other practitioner services under Medicare Part B are based on feefor-service rates as set by the Medicare physician fee schedule. Sustainable growth rate (SGR) is
the statutory method for determining the annual updates to the Medicare physician fee schedule.
Under the SGR formula, if expenditures over a period are less than the cumulative spending
target for that period, the annual update is increased. However, if spending exceeds the
cumulative spending target over a certain period, future updates are reduced to bring spending
back in line with the target. In the first few years of the SGR system, the actual expenditures did
not exceed the targets and the updates to the physician fee schedule were close to the Medicare
economic index (a price index of inputs required to produce physician services). Beginning in
2002, the actual expenditure exceeded allowed targets, and the discrepancy has grown with each
year. However, with the exception of 2002, when a 4.8% decrease was applied, Congress has
enacted a series of laws to override the reductions.
Recent efforts to repeal and replace the SGR have included proposals to replace Medicare
physician fee schedule fee-for-service payments, which incentivized increased volume of services
while being indifferent to quality or value of care. The proposals would replace the current
Medicare payment methodology with alternative payment models that attempt to reward quality
and efficiency of care.
President’s Proposal
The President’s budget would “accelerate physician participation in high-quality and efficient
health care delivery systems by repealing the SGR formula and reforming Medicare physician
payments in a manner consistent with the reforms included in recent bipartisan, bicameral
legislation.” This proposal was not included in the President’s FY2015 budget.
The Administration estimates this proposal would cost $44.0 billion over the next 10 years.
Encourage Efficient Care by Improving Incentives to Provide Care in the Most
Appropriate Ambulatory Setting
Current Law
Medicare payment rates often vary for the same ambulatory services provided to similar patients
in different settings, such as physicians’ offices, hospital outpatient departments, and ambulatory
surgical centers. CMS uses the Medicare physician fee schedule to pay for physician and other
practitioner services; outpatient services provided by hospital outpatient departments are paid
under the Medicare outpatient PPS, and those provided by ambulatory surgical centers are paid
under its own PPS. Medicare makes two payments for services provided in hospital outpatient
departments or ambulatory surgical centers: one to the physician for the professional services
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under the physician fee schedule and one for the hospital outpatient department or ambulatory
surgical centers facility fee under their respective PPS. These Medicare payments for services
provided in hospital outpatient departments and ambulatory surgical centers generally are higher
than Medicare payments for the same services provided in physician offices. In addition,
beneficiary out-of-pocket costs generally are higher because beneficiaries are subject to cost
sharing on both the professional fee and the facility fee. Hospitals are buying physician practices
and turning them into provider-based clinics, which are paid in the same way as hospital
outpatient departments, increasing total Medicare payments as well as beneficiary out-of-pocket
costs.
President’s Proposal
The President’s budget would lower payments to off-campus hospital outpatient departments
under Medicare’s outpatient PPS to either the Medicare physician fee schedule payment or the
rate for surgical procedures covered under the payment system for ambulatory surgical centers
rate. The payment reductions would be phased in over a four-year period starting in CY2017. The
Secretary would be given the authority to adjust payments in the event of beneficiary access
problems. This proposal was not included in the President’s FY2015 budget.
The Administration estimates this proposal would save $29.5 billion over the next 10 years.
Make Permanent the Medicare Primary Care Incentive Payment in a BudgetNeutral Manner
Current Law
Medicare pays physicians for covered services furnished to beneficiaries on the basis of the
Medicare physician fee schedule. In certain circumstances, physicians receive an additional
payment to encourage targeted activities. These bonuses, typically a percentage increase above
the Medicare fee schedule amounts, can be awarded for a number of activities, including
demonstrating quality achievements, participating in electronic prescribing, or practicing in
underserved areas. The ACA established an additional 10% bonus on select evaluation and
management (and general surgery) codes under the Medicare fee schedule for five years,
beginning January 1, 2011. The bonus has been available to primary care practitioners who (1)
are physicians who have a specialty designation of family medicine, internal medicine, geriatric
medicine, or pediatric medicine, or are nurse practitioners, clinical nurse specialists, or physician
assistants; and (2) furnish 60% of their services in the designated primary care codes.
President’s Proposal
The President’s budget would make this 10% primary care bonus payment permanent, beginning
CY2016, in a budget neutral manner within the Medicare physician fee schedule. This proposal
was not included in the President’s FY2015 budget.
The Administration estimates this proposal would have no budgetary impact over the next 10
years.
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Exclude Certain Services from the In-Office Ancillary Services Exception
Current Law
The Ethics in Patient Referrals Act, commonly referred to as the Stark law,34 enacted limitations
on physician self-referrals in 1989. The Stark law, as amended, and its implementing regulations
prohibit certain physician self-referrals for designated health services 35 that may be paid for by
Medicare or Medicaid. In its basic application, the Stark law provides that if a physician (or an
immediate family member of a physician) has a financial relationship with an entity, the
physician may not make a referral to the entity for the furnishing of designated health services for
which payment may be made under Medicare or Medicaid. It also provides that the entity may
not present (or cause to be presented) a claim to the federal health care program or bill to any
individual or entity for designated health services furnished pursuant to a prohibited referral.
Under one general exception to the Stark law, physicians and group practices are permitted to
order and provide certain self-referred designated health services in their offices when they meet
specific statutory requirements. Although the exception was intended to protect the convenience
of patients and to allow patients to receive certain services during their doctor visits, concerns
have been raised that it has the potential to promote the overuse of these services.
President’s Proposal
Effective in 2017, the President’s budget proposal would exclude radiation therapy, therapy
services, advanced imaging, and anatomic pathology services from the in-office ancillary services
exception to the Stark law, except when a practice is clinically integrated and required to
demonstrate cost containment, as defined by the Secretary. This proposal is a modification of a
legislative proposal from the President’s FY2015 budget.
The Administration estimates this proposal would save $6 billion over the next 10 years.
Modify Reimbursement of Part B Drugs
Current Law
Medicare covers some drugs (including some biologics—drugs derived from living cells) under
Medicare Part B, rather than under Medicare’s Part D outpatient prescription drug benefit. Part B
drugs are administered “incident to physician services.” Providers purchase Part B drugs and bill
Medicare when they administer the drugs to patients. Physicians and other providers receive two
Medicare Part B drug payments: (1) for administration of the drug and (2) for purchasing and
supplying the drug. Medicare reimburses providers for supplying most Part B drugs based on a
formula of 106% of the drug’s average sales price (ASP), regardless of providers’ drug
acquisition cost. CMS reimburses providers for brand-name biologic products at 106% of ASP.
For biosimilar products (generic biologics), CMS pays providers 106% of the reference biologic
drug’s ASP, where the reference product is the brand-name biologic.
34
42 U.S.C. §1395nn.
A list of designated health services can be found at 42 U.S.C. §1395nn(h)(6). Services include clinical laboratory
services, radiology services, and inpatient and outpatient hospital services.
35
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Providers negotiate with drug wholesalers and other entities to purchase Part B drugs. Higher
volume Part B drug purchasers often can purchase Part B drugs at prices considerably below
106% of ASP, thereby earning profit each time they administer a drug. When ASP exceeds market
prices, the Secretary has authority to substitute another payment methodology that would reduce
reimbursement for Part B drugs. The HHS OIG has found that a number of Part B drugs’ payment
based on the 106% of ASP reimbursement methodology exceeded market prices. CMS published
a final rule to substitute a lower Part B drug payment when market prices were lower than what
Medicare was paying and began making the payment substitutions on January 1, 2013.
President’s Proposal
Beginning in CY2016, the President’s proposed budget would reduce Medicare Part B drug
reimbursement from 106% of ASP to 103% of ASP, except when providers’ drug acquisition costs
are more than 103% of ASP. When providers’ Part B drug acquisition costs exceed 103% of ASP,
then drug manufacturers would be required to pay providers rebates that would reduce the cost to
the provider to ASP plus 3% less a standard overhead fee to be determined by the Secretary.
These Part B drug rebates would be excluded from ASP calculations. Using a percentage based
on the ASP plus 3% formula, the Secretary also would be given authority to substitute a budgetneutral flat fee to pay a portion of or the total amount that exceeded ASP. This proposal was
included in the President’s FY2015 budget.
The Administration estimates this proposal would save $7.4 billion over the next 10 years.
Modify the Documentation Requirement for Face-to-Face Encounters for
Durable Medical Equipment Claims
Current Law
The ACA required that, beginning January 1, 2010, a physician must document that a physician,
nurse practitioner, physician assistant, or clinical nurse specialist has had a face-to-face encounter
with the patient during the six-month period prior to prescribing durable medical equipment
(DME) under the Medicare program.
President’s Proposal
The President’s budget would modify the requirement by allowing certain nonphysician
practitioners to document the face-to-face encounter. This proposal was included in the
President’s FY2015 budget.
The Administration estimates this proposal would have no budgetary impact over the next 10
years.
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Expand Coverage of Dialysis Services for Beneficiaries with Acute
Kidney Injury
Current Law
Individuals diagnosed with end-stage renal disease (ESRD; i.e., permanent kidney failure)
generally are entitled to Medicare and able to receive coverage for routine dialysis, a process of
filtering an individual’s blood that is otherwise performed by functioning kidneys, as well as for
other medical benefits in the Medicare program. Medicare will provide payment for beneficiaries
with ESRD that receive routine dialysis in an ESRD facility but typically will not provide
payment for beneficiaries with ESRD that receive dialysis treatment in a hospital outpatient
department. In contrast, Medicare cannot provide payment to ESRD facilities for acute dialysis,
that is, nonroutine, short-term dialysis for individuals who have acute kidney injury and do not
have ESRD. Individuals with acute kidney injury must receive acute dialysis in available hospital
outpatient departments for Medicare to cover the service.
President’s Proposal
The President’s budget would allow Medicare payment to be made to ESRD facilities to cover
short-term dialysis treatment of individuals with acute kidney injury. This proposal was not
included in the President’s FY2015 budget.
The Administration estimates this proposal would save $0.2 billion over the next 10 years.
Medicare Advantage
Align Employer Group Waiver Plan Payments with Average Medicare
Advantage Plan Bids
Current Law
Medicare Advantage (MA or Part C) is an alternative to original fee-for-service Medicare wherein
beneficiaries can receive all Medicare-covered benefits (except hospice) through a private health
plan. Under MA, employers and unions may sponsor MA plans for their Medicare-eligible
employees, retirees, and/or their Medicare-eligible spouses and dependents. The Secretary has
statutory authority to waive or modify requirements that may hinder the design, offering, or
enrollment in these plans, which are referred to as Employer Group Waiver Plans. Like other MA
plans, the Employer Group Waiver Plans are paid a per person monthly amount to provide all
Medicare-covered benefits except hospice, and the method for determining the payment is the
same for all Employer Group Waiver Plans and non-Employer Group Waiver Plans. Payments to
MA plans are based on a comparison of each plan’s estimated cost of providing Medicare covered
services (a bid) relative to the maximum amount the federal government will pay for providing
those services in the plan’s service area (a benchmark). If a plan’s bid is less than the benchmark,
its payment equals its bid plus a rebate. Starting in 2012, the size of the rebate is dependent on
plan quality, ranging from 50% to 70% of the difference between the bid and the benchmark. The
rebate must be returned to enrollees in the form of additional benefits, reduced cost sharing,
reduced Part B or Part D premiums, or some combination of these. If a plan’s bid is equal to or
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above the benchmark, its payment is the benchmark amount and each enrollee in the plan pays an
additional premium that is equal to the amount by which the bid exceeds the benchmark.
Employer Group Waiver Plans tend to bid closer to the benchmark relative to the bids of nonEmployer Group Waiver Plans because Employer Group Waiver Plans do not compete for
enrollment and, therefore, have no incentive to bid below the benchmark.
President’s Proposal
The President’s budget would establish payment amounts for Employer Group Waiver Plans
based on average non-Employer Group Waiver Plans’ MA plan bids in each individual market
beginning in CY2017 instead of a payment based on the Employer Group Waiver Plans’ own
bids. This proposal was included in the President’s FY2015 budget.
The Administration estimates this proposal would save $7.2 billion over the next 10 years.
Increase the Minimum Medicare Advantage Coding Intensity Adjustment
Current Law
MA plans are paid a per person monthly amount to provide the covered benefits to enrolled
beneficiaries. In general, MA payments are risk adjusted to account for the variation in the cost of
providing care. Risk adjustment is designed to compensate plans for the increased cost of treating
older and sicker beneficiaries and thus discourage plans from preferential enrollment of healthier
individuals. The risk scores for each MA enrollee are based on the diagnoses identified by the
enrollee’s doctors and submitted to the MA plan, which then submits them to CMS to be used to
adjust the base payment for the plan enrollee. The risk adjustment model that is used to determine
the relative cost of various disease categories (called condition categories) and thus the
adjustment to the unadjusted plan payment is based on diagnoses collected from billing
information for beneficiaries in original Medicare. In part because some medical providers
serving beneficiaries in original Medicare are paid based on the services they provide rather than
the diagnoses of the beneficiary, there tend to be differences between the completeness of
diagnosis data collected for beneficiaries in original Medicare compared with data collected for
those enrolled in MA.
The DRA required the Secretary to adjust MA risk scores for patterns of diagnosis coding
differences between MA plans and providers under Parts A and B of Medicare for plan payments
in 2008, 2009, and 2010. The ACA required the Secretary to conduct further analyses on the
differences in coding patterns and adjust for those differences after 2010. Starting in 2014, the
ACA specified minimum coding intensity adjustments, which were subsequently amended by the
American Taxpayer Relief Act of 2012 (P.L. 112-240). In 2014, the coding intensity adjustment
was the value of the adjustment in 2010 plus 1.5 percentage points; for 2015-2018, the adjustment
is to be not less than the adjustment for the previous year increased by 0.25 percentage points;
and starting in 2019, the coding intensity adjustment is to be not less than 5.9%. The minimum
required adjustments are to be applied to risk scores until the Secretary implements risk
adjustment using MA diagnostic, cost, and use data.
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President’s Proposal
The President’s budget would increase the minimum coding intensity adjustment; starting in
CY2017, the yearly increase to the minimum coding intensity adjustment would be raised from
the current law level of 0.25 percentage points to 0.67 percentage points until the minimum
adjustment reached an 8.76% adjustment in 2021. It would be held at that level thereafter. This
proposal was included in the President’s FY2015 budget.
The Administration estimates this proposal would save $36.2 billion over the next 10 years.
Allow for Federal/State Coordinated Review of Duals Special Need Plan
Marketing Materials
Current Law
Section 231 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003
(MMA; P.L. 108-173) established MA plans to provide coordinated care for individuals with
special needs. MA special needs plans are permitted to target enrollment to one or more type of
individual with special needs, including beneficiaries who (1) are institutionalized, (2) are eligible
for Medicare and Medicaid (i.e., dual-eligible beneficiaries), and/or (3) have severe or disabling
chronic conditions. In general, special needs plans are required to meet all statutory and
regulatory requirements that apply to MA plans. CMS is required to review MA plan marketing
materials for accuracy, content, and other requirements. For duals special needs plans, because
the marketing materials are sent to Medicaid beneficiaries, state Medicaid agencies are also
required to conduct a separate review to determine if the materials comply with different
Medicaid rules and regulations. To integrate Medicare and Medicaid programs benefits more
effectively and improve coordination between the federal government and states to ensure that
dual-eligible beneficiaries get access to the items and services to which they are entitled, the ACA
established the Federal Coordinated Health Care Office (also known as the Medicare-Medicaid
Coordination Office) within CMS.
President’s Proposal
This proposal would authorize the Secretary to permit CMS to conduct a coordinated review of
duals special needs plan marketing materials provided to dual-eligible beneficiaries. Coordinated
MA plan marketing material review with a unified set of standards could reduce the
administrative burden on states and CMS while also potentially improving the marketing material
quality. This proposal was not included in the President’s FY2015 budget.
The Administration estimates this proposal would have no budgetary impact over the next 10
years.
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Medicare Part D
Establish Quality Bonus Payments for High-Performing Part D Plans
Current Law
CMS uses a star ratings system to assess the quality of Part D stand-alone prescription drug plans
(PDP) and MA plans with a prescription drug component (MA-PD). PDP sponsors are rated on
up to 15 quality and performance measures, whereas MA-PD plan sponsors are evaluated on up to
48 measures. A 5-star rating is excellent; a 4-star rating is above average; a 3-star rating is
average; a 2-star rating is below average; and a 1-star rating is poor. The average PDP star rating
(weighted by enrollment) is 3.75 stars for 2015.36 About 51% of PDPs have a 2015 rating of 4
stars or more, accounting for about 53% of PDP enrollment. The average star rating for MA-PDs
(weighted by enrollment) is 3.92 stars in 2015. About 40% of MA-PDs have a 2015 ranking of 4
stars or more, accounting for about 60% of MA-PD enrollees.
President’s Proposal
The President’s budget would allow CMS to revise the Part D payment system to reimburse PDPs
and MA-PDs based on their star rating. Plans earning four stars or more would have a larger
portion of their costs reimbursed by CMS, and plans with ratings below four stars would receive a
smaller subsidy. The proposal is based on a similar MA quality bonus payment program. This
proposal was included in the President’s FY2015 budget.
The Administration estimates this proposal would have no budgetary impact over the next 10
years.
Align Medicare Drug Payment Policies with Medicaid Policies for LowIncome Beneficiaries
Current Law
Medicare Part D provides coverage of outpatient prescription drugs to beneficiaries who choose
to enroll in this optional benefit. About 69% of eligible Medicare beneficiaries are enrolled in Part
D.37 Beneficiaries with limited income and resources may qualify for the low-income subsidy
(LIS), which provides assistance with their Part D premiums, cost sharing, and other out-ofpocket expenses. In 2014 an estimated 11.5 million Medicare beneficiaries, 30% of Part D
enrollees, qualified for low-income subsidies.38 Medicare beneficiaries who qualify for Medicaid
36
CMS, “Fact Sheet - 2015 Star Ratings.” Available at CMS webpage “Part C & D Performance Data” in 2015 Star
Ratings Technical Notes zip file, at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/
PrescriptionDrugCovGenIn/PerformanceData.html.
37
Shinobu Suzuki and Rachel Schmidt, MedPAC, “Status Report on Part D,” January 15, 2015, at
http://www.medpac.gov/-research-areas-/drugs-devices-tests.
38
Board of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds,
2014 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical
Insurance Trust Funds, July 28, 2014, Table IV.B7,http://www.cms.gov/Research-Statistics-Data-and-Systems/
(continued...)
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based on their income and assets (dual-eligible beneficiaries), who are recipients of Medicare
Savings Programs, or who receive SSI, automatically are eligible for the full LIS. Others who do
not qualify for one of the above but have limited assets and incomes below 150% of the federal
poverty level (FPL) also may be eligible for the LIS and receive assistance for some portion of
their premium and cost-sharing charges.
Prescription drug coverage is provided through PDPs, which offer only prescription drug
coverage, or through MA-PDs, which offer prescription drug coverage that is integrated with the
health coverage provided under Part C. Part D plan sponsors determine payments for drugs and
are expected to negotiate prices with drug manufacturers, which may involve an agreement from
the manufacturer to provide a rebate. Annual price increases are limited to the rate of consumer
inflation.
Under Medicaid, basic prescription drug rebates are determined by the larger of either a
comparison of a drug’s quarterly average manufacturers’ price (AMP) with the best price for the
same period or a flat percentage (23.1%) of the drug’s quarterly AMP. The basic rebate
percentage for multisource, non-innovator, and all other drugs is 13% of AMP.
President’s Proposal
Beginning in CY2017, the President’s budget would require drug manufacturers participating in
Part D to pay the difference between rebates provided to Part D plans and the corresponding
Medicaid rebate levels for brand name and generic drugs provided to LIS beneficiaries.
Manufacturers would be required to provide an additional Part D rebate for brand-name and
generic drugs when prices for the drugs rise faster than the rate of inflation. This proposal was
included in the President’s FY2015 budget.
The Administration estimates this proposal would save $116.1 billion over the next 10 years.
Accelerate Manufacturer Discounts for Brand-Name Drugs to Provide Relief to
Medicare Beneficiaries in the Coverage Gap
Current Law
The Medicare Part D standard drug benefit includes a coverage gap or “doughnut hole”—a period
when enrollees who have reached the plan’s initial coverage limit but have not yet spent enough
to qualify for more generous catastrophic coverage—face higher out-of-pocket costs. In 2015, an
enrollee in a standard plan pays a $320 deductible, and 25% coinsurance or co-payments on drug
spending, up to the initial coverage limit of $2,960. Between $2,960 and the catastrophic
threshold of $7,062.76—the current coverage gap—a beneficiary faces higher cost sharing.39
(...continued)
Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2013.pdf at https://www.cms.gov/Research-StatisticsData-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/TrusteesReports.html.
39
For low-income subsidy (LIS) beneficiaries who are not eligible for manufacturer discounts on brand-name drugs in
the coverage gap, the catastrophic threshold is $6,680.
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Prior to the ACA, Part D enrollees who did not receive a low-income subsidy generally paid the
full cost of drugs in the coverage gap. The ACA gradually phases out the coverage gap through a
combination of manufacturer discounts on brand-name drugs and federal subsidies for brandname and generic drugs. By 2020, enrollees in Part D standard plans will have a 25% cost share
for all prescriptions from the time they meet the deductible until they reach the catastrophic limit,
after which cost sharing is negligible.
In accordance with the ACA, manufacturers in 2011 began providing a 50% discount for brandname drugs purchased in the coverage gap. From 2011 to 2020, the federal government is
providing gradually increasing subsidies for brand-name and generic drugs. By 2020, the
government will subsidize 25% of the cost of brand-name drugs (in addition to the
manufacturer’s 50% discount) and 75% of the cost of generic drugs in the coverage gap.
President’s Proposal
The President’s budget would increase the manufacturer discount for brand-name drugs to 75%
from 50%, beginning in CY2017. The change would effectively eliminate the coverage gap for
brand-name drugs in CY2017, though federal generic drug subsidies would continue to be phased
in through CY2020. This proposal was included in the President’s FY2015 budget.
The Administration estimates this proposal would save $9.4 billion over the next 10 years.
Allow the Secretary to Negotiate Prices for Biologics and High-Cost
Prescription Drugs
Current Law
Medicare Part D is designed as a market-oriented program, with private insurers submitting bids
to CMS each year to provide a standard package of benefits or alternative coverage that is at least
actuarially equivalent to a standard plan. Insurers compete for enrollees by offering lower prices
or more generous benefits. Although all Part D insurers must meet certain minimum
requirements, there can be significant differences among plans in terms of benefit design, specific
drugs included in a formulary (i.e., list of covered drugs), and cost sharing for particular drugs.
Part D plan sponsors negotiate rebates, discounts and other price reductions with pharmaceutical
manufacturers. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003,
which created Part D, prohibits the Secretary from interfering in negotiations between drug
manufacturers and pharmacies and plan sponsors and from requiring a particular formulary or
instituting a price structure for the reimbursement of covered Part D drugs.40 In addition, CMS
regulations41 allow insurers offering Part D plans to place prescription drugs that cost $600 per
month or more on a specialty price tier. To control usage or encourage use of less expensive
medications, Part D sponsors may charge enrollees higher cost sharing for specialty-tier drugs
than for other drugs—up to 33% of the price of a specialty-tier drug, depending on the specific
plan design. Many of the drugs placed on Part D plan specialty tiers are biologics, which are
complex drugs derived from living cells. There has been concern among Part D beneficiaries and
40
41
Social Security Act, §1860D-11(i).
42 CFR 423.578(a)(7).
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plan sponsors about the rising cost of specialty-tier drugs for treating certain diseases such as
hepatitis and cancer. Only 0.25% of 2013 Medicare Part D claims were for specialty-tier drugs,
but they accounted for 11% of Part D drug spending.42
President’s Proposal
The President’s budget recommends giving the Secretary authority to negotiate with
manufacturers to determine Part D prices for biologics as well as for other high-cost drugs
eligible to be placed on the specialty drug tier. As a condition of participating in Part D,
pharmaceutical manufacturers would be required to supply HHS with all data and information
necessary to come to a price agreement. Negotiated drug prices would be indexed to the
consumer price index, meaning they would be allowed to rise only as fast as overall consumer
inflation. Plan sponsors would be allowed to negotiate additional discounts off this price. HHS
would monitor the pharmaceutical industry to ensure the changes did not lead to increased
introduction of physician-administered drugs (which could be covered under Medicare Part B) or
to excessive price inflation for Part D drugs already on the market. This proposal was not
included in the President’s FY2015 budget.
The Administration estimates this proposal would have no budgetary impact over the next 10
years.
Encourage the Use of Generic Drugs by Low-Income Beneficiaries
Current Law
LIS beneficiaries enrolled in Medicare Part D may qualify for additional assistance with some, or
all, of their prescription drug cost sharing. LIS beneficiary cost sharing varies by income, and is
adjusted annually.
For 2015,
•
Dual-eligible beneficiaries (who qualify for both Medicare and Medicaid) who
are institutionalized or are receiving home- and community-based services have
no drug co-payments or coinsurance;
•
Full-benefit, dual-eligible LIS beneficiaries with income below 100% of FPL
have a co-payment of $1.20 for generic drugs and $3.60 for brand-name drugs,
until they reach the catastrophic threshold, when their co-payment is zero;
•
Full-benefit, dual-eligible LIS beneficiaries with income above 100% of FPL,
and other LIS beneficiaries with incomes up to 135% of FPL and limited assets,
pay $2.65 for a generic drug and $6.60 for a brand-name drug until they reach the
catastrophic threshold, when their co-payment is zero.
42
CMS, “Medicare Part D Specialty Tier,” April 7, 2014, at http://www.cms.gov/Medicare/Prescription-DrugCoverage/PrescriptionDrugCovGenIn/Downloads/SpecialtyTierMethodology.pdf. Although specialty drug claims have
held steady as a proportion of all claims since 2011 (0.24%), they have assumed a larger share of program costs (rising
from 8.5% in 2011 to 11.0% in 2013), reflecting price inflation or new drugs.
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•
Other beneficiaries with incomes up to 150% of FPL and limited assets pay a flat
15% coinsurance rate for all drugs up to the catastrophic threshold; cost sharing
above that level is $2.65 for a generic drug or a preferred, multiple source drug
and $6.60 for a brand-name drug.
LIS beneficiaries are more likely to have multiple, chronic ailments than other Part D
beneficiaries, and they also are more likely to have higher drug costs. At the same time, a smaller
share of LIS beneficiary prescriptions is filled with lower-cost, generic drugs, as compared with
non-LIS beneficiaries. CMS data show that non-LIS enrollees had a generic dispensing rate of
about 80% in 2011, compared with about 75% for LIS enrollees.43 Part D plan sponsors often use
incentives, such as higher co-payments for expensive drugs, to persuade enrollees to switch to
cheaper generics. Because LIS beneficiaries pay a set amount, regardless of the price of a drug,
such incentives may be less successful with the LIS population.
President’s Proposal
The President’s budget proposes reducing co-payments for generic drugs for LIS beneficiaries. At
the same time, the proposal would increase co-payments for brand-name drugs to twice the level
under current law. The Secretary would have authority to exclude brand-name drugs in
therapeutic classes from the requirement to double co-payments if therapeutic substitution with
another, lower-priced drug was not clinically appropriate or a generic substitute was not available.
LIS beneficiaries could submit an appeal to continue buying brand-name drugs at current rates.
The proposed cost-sharing change would not apply to LIS beneficiaries who are in an institution.
Part D LIS beneficiaries with incomes between 135% and 150% of FPL would face higher cost
sharing only if they reached their plan’s catastrophic coverage limit. This proposal was included
in the President’s FY2015 budget.
The Administration estimates this proposal would save $8.9 billion over the next 10 years.
Ensure Retroactive Part D Coverage of Newly Eligible LowIncome Beneficiaries
Current Law
Generally, there is a two-step process for low-income persons to gain a low-income subsidy for
their Part D coverage. First, a determination must be made that the individuals qualify for the
assistance; second, the individuals must enroll, or be enrolled, in a specific Part D plan. Some LIS
individuals who have not elected a Part D plan are enrolled into one automatically by CMS. CMS
identifies plan sponsors offering basic prescription drug coverage with a premium at or below the
Part D low-income premium subsidy amount, set annually through a formula. If more than one
sponsor in a region meets the criteria, CMS auto-enrolls beneficiaries on a random basis among
available plans. There is also a facilitated enrollment process for enrollees in Medicare Savings
programs, SSI enrollees, and persons who applied for and were approved for low-income subsidy
assistance. The basic features applicable to auto-enrollment are the same for facilitated
enrollment.
43
CMS, “2011 Medicare Part D Drug Utilization Trends,” December 26, 2013, Slide 15, at http://www.cms.gov/
Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/ProgramReports.html.
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President’s Proposal
The President’s budget would allow CMS to contract with a single Part D plan to provide
coverage for LIS beneficiaries while their eligibility is being processed, rather than assigning
these beneficiaries to plans through the current, random process, which would mean one plan
would serve as the contact point for LIS beneficiaries who seek reimbursement for retroactive
drug claims. CMS would pay the single plan through an alternative method. This proposal was
included in the President’s FY2015 budget. (This proposal affects both the Medicare and
Medicaid budgets.)
The Administration estimates this proposal would have no budgetary impact over the next 10
years.
Establish Authority for a Program to Prevent Prescription Drug Abuse in
Medicare Part D
Current Law
As part of overall efforts to prevent prescription drug abuse, HHS requires Part D sponsors to
conduct drug utilization reviews, which can help to identify inappropriate or even illegal activity
by an enrollee, prescriber, or pharmacy. The CMS Medicare Part D Overutilization Monitoring
System tracks whether sponsors have adequate systems to identify beneficiaries who may be
overutilizing prescribed drugs. CMS provides Part D sponsors with quarterly reports of
beneficiaries identified as having potential overutilization issues. Plan sponsors must develop
criteria to identify which beneficiaries should be subject to special case management.
President’s Proposal
The President’s budget would give the Secretary the authority to require that high-risk Medicare
Part D beneficiaries use only certain prescribers and/or pharmacies to obtain controlled
substances. The proposal is similar to restrictions already in place in many state Medicaid
Programs. CMS would be required to ensure that Part D beneficiaries had continued reasonable
access to services of “adequate” quality. This proposal was not included in the President’s
FY2015 budget.
The Administration estimates this proposal would have no budgetary impact over the next 10
years.
Require Mandatory Reporting of Other Prescription Drug Coverage
Current Law
Generally, Medicare is the primary payer for medical services, meaning that it pays health claims
first. If a beneficiary has other health insurance, that insurance is billed after Medicare has made
payments to fill possible gaps in Medicare coverage. In certain situations, however, federal
Medicare Secondary Payer laws prohibit Medicare from making payments when payment has
been made, or can reasonably be expected to be made, by another insurer such as an employersponsored group health plan. To identify cases where Medicare is the secondary payer, HHS
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matches information about Medicare recipients against data from the Social Security
Administration and Internal Revenue Service. The Medicare, Medicaid, and SCHIP Extension
Act of 2007 requires private insurers such as group health plans, liability insurers, no-fault
insurers, and workers’ compensation plans to submit coverage information regularly to HHS
regarding Medicare beneficiaries. Even though Medicare Secondary Payer laws require that
employer- and union-sponsored health plans report enrollment information to HHS, other group
health plans are not required to inform HHS or Part D plan sponsors that they provide drug
benefits to enrollees.
President’s Proposal
The President’s budget would extend mandatory Medicare Secondary Payer reporting to
prescription drug coverage in an effort to ensure that all drug coverage that is primary to
Medicare is communicated to HHS and to Part D sponsors, thereby permitting sponsors to
comply with Medicare Secondary Payer requirements. This proposal was not included in the
President’s FY2015 budget.
The Administration estimates this proposal would save $0.5 billion over the next 10 years.
Suspend Coverage and Payment for Questionable Part D Prescriptions and
Incomplete Clinical Information
Current Law
Recent investigations of the Part D program, including a 2011 Government Accountability Office
(GAO) study, found that some beneficiaries had obtained overlapping prescriptions from multiple
physicians for frequently abused prescription drugs.44 CMS has taken several actions to reduce
the potential for inappropriate utilization of Part D prescription drugs, with an emphasis on
opioids and acetaminophen. CMS has instructed plan sponsors to institute controls at the point of
sale to better control access to medications and to use quantity limits to guard against
overutilization of drugs. Plan sponsors must institute closer reviews of filled prescriptions to
identify at-risk beneficiaries and enter into case management with the beneficiaries’ prescribers.
President’s Proposal
This proposal would give the Secretary authority to suspend Part D coverage and payment for
drugs prescribed by providers who mis-prescribe or overprescribe drugs that have the potential to
be abused by beneficiaries. The Secretary would be allowed to suspend coverage and payment for
Part D prescription drugs when the prescriptions present an imminent risk to patients. In addition,
the proposal would allow the Secretary authority to require that providers include additional
information on certain Part D prescriptions, such as diagnosis codes, to obtain coverage. This
proposal was included in the President’s FY2015 budget.
44
Government Accountability Office, “Medicare Part D: Instances of Questionable Access to Prescription Drugs,”
September 2011, http://www.gao.gov/assets/590/585424.pdf.
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The Administration estimates this proposal would have no budgetary impact over the next 10
years.
Prohibit Brand and Generic Drug Manufacturers from Delaying the
Availability of New Generic Drugs and Biologics
Current Law
The Drug Price Competition and Patent Term Restoration Act of 1984 (P.L. 98-417, commonly
known as the Hatch-Waxman Act) established the abbreviated new drug application path to Food
and Drug Administration (FDA) marketing approval of a generic version of a drug after a brandname product’s patent has expired. An abbreviated new drug application allows a sponsor of a
generic version of an FDA-approved drug to use, in the abbreviated new drug application, safety
and effectiveness data that the brand-name firm had provided to the FDA in its new drug
application. Because the generic sponsor, therefore, does not have to repeat all of the expensive
and time-consuming clinical testing FDA requires in an original new drug application, generic
prices generally are much lower than the brand-name product’s price. The sponsor of a proposed
generic product may challenge a brand-name manufacturer’s patent by filing an abbreviated new
drug application with a paragraph IV certification (that the patent is invalid or not infringed). The
FDA provides to the first successful paragraph IV filer(s) a 180-day market exclusivity, not
allowing another generic entry on the market during that period.
Brand-name and generic sponsors engaged in litigation within the Hatch-Waxman statutory
framework sometimes conclude their litigation through settlement, rather than awaiting a formal
decision from a court. In some settlements, the brand-name company pays the generic firm in
exchange for the generic firm’s agreement not to market the pharmaceutical. These arrangements
have been termed reverse payments or pay-for-delay agreements.
President’s Proposal
Beginning in 2016, this legislative proposal would authorize the Federal Trade Commission to
prohibit pay-for-delay agreements between brand and generic pharmaceutical companies that
delay entry of generic drugs and biologics into the market. This proposal was included in the
President’s FY2015 budget. (This proposal affects both the Medicare and Medicaid budgets.)
The Administration estimates this proposal would save Medicare $10.1 billion over the next 10
years.
Modify Length of Exclusivity to Facilitate Faster Development of Generic
Biologics
Current Law
The Biologics Price Competition and Innovation Act of 2009 (incorporated into the ACA)
established a licensure pathway for competing versions of previously marketed biologics. In
particular, the legislation created a regulatory regime for two types of follow-on biologics, termed
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biosimilar and interchangeable biologics. It afforded the FDA a prominent role in determining the
particular standards for biosimilarity and interchangeability for individual products.
In addition, the legislation created FDA-administered periods of data protection and marketing
exclusivity for certain brand-name drugs and follow-on products. Brand-name biologic drugs
receive four years of marketing exclusivity, during which time other companies are prevented
from filing an application for approval of a follow-on product. Brand biologics also receive 12
years of data exclusivity, during which time the follow-on manufacturer cannot rely on the
clinical data generated by the innovator firm in support of FDA approval of a competing version
of the drug. Unlike market exclusivity, data protection does not block competitors that wish to
develop their own clinical data in support of their application for marketing approval. In addition,
the first applicants to establish that their product is interchangeable with the brand-name biologic
are provided a term of marketing exclusivity.
President’s Proposal
The President’s budget would award brand biologics 7 years of data exclusivity rather than the
current 12 years, and no additional exclusivity periods would be provided for “minor” changes in
product formulations. The proposal also would modify how Part B pays for biosimilar and new
biological products. For these products, reimbursement would be based on the weighted average
sales price of the reference biological product and all of its biosimilars, plus 6%. This proposal is
a modification of a legislative proposal from the President’s FY2015 budget. (This proposal
affects both the Medicare and Medicaid budgets.)
The Administration estimates this proposal would save $4.4 billion over the next 10 years.
Medicare Premiums and Cost Sharing
Increase Income-Related Premiums Under Medicare Parts B and D
Current Law
Most Medicare beneficiaries enrolled in Part B pay premiums, which are set by law at 25% of the
program’s estimated (projected) costs per aged enrollee (i.e., enrollees aged 65 or older). Since
2007, higher-income beneficiaries have paid a larger share of premiums—35%, 50%, 65%, or
80%, depending on income. In 2015, the income thresholds for those premium shares are
$85,000, $107,000, $160,000, and $214,000, respectively, for single filers. (For married couples,
the corresponding income thresholds are twice those values.) The ACA imposed similar incomerelated premiums for Part D beginning in 2011. In addition, the ACA suspended inflation
indexing of income thresholds for Parts B and D through 2019 at 2010 levels. In 2015, fewer than
5% of Part B enrollees are expected to pay these higher income-related premiums.
President’s Proposal
Beginning in CY2019, the President’s budget would increase the applicable percentage of the
program’s cost per aged enrollee for higher-income beneficiaries to between 40% and 90%,
replacing the current 35% to 80% range under current law. The proposal also would lower the
highest income threshold and increase the number of high-income brackets from four to five. The
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new income thresholds would be $85,000, $107,000, $133,500, $160,000, and $196,000, and the
respective applicable cost percentages would be 40%, 52.5%, 65%, 77.5%, and 90%. The
proposal also would further suspend inflation indexing of the income thresholds until 25% of
beneficiaries under Parts B and D were subject to these premiums. This proposal was included in
the President’s FY2015 budget.
The Administration estimates this proposal would save $66.4 billion over the next 10 years.
Modify the Part B Deductible for New Beneficiaries
Current Law
In addition to paying monthly premiums for Medicare Part B, Medicare beneficiaries pay certain
out-of-pocket cost-sharing amounts for their Part B services including an annual deductible. Prior
to 2003, the amount of the Part B deductible was set in statute. The Medicare Prescription Drug,
Improvement, and Modernization Act set the 2005 deductible level at $110 and required that the
deductible be increased each year by the annual percentage increase in the Part B expected per
capita costs for enrollees aged 65 and older beginning with 2006 (rounded to the nearest $1). The
2015 Part B annual deductible is $147.
President’s Proposal
The President’s budget would increase the annual deductible by an additional $25 in calendar
years 2019, 2021, and 2023 for new Medicare enrollees. Specifically, under this proposal there
would be two categories of beneficiaries, and the members of one group would pay a different
annual deductible amount than the members of the second. The first group, comprised of
beneficiaries who enroll in Medicare prior to January 1, 2019, would not be affected by this
proposal. The annual Part B deductible for members of this first group would continue to be
adjusted each year according to the current methodology. The deductible for Medicare
beneficiaries in the second group, that is, those who enroll in Medicare beginning on January 1,
2019, and thereafter, would pay deductibles that would be subject to both the annual adjustments
based on expected costs (current method) plus an additional increase of $25 starting in 2019,
another $25 increase in 2021, and a third $25 increase in 2023. For example, in a scenario under
which the deductible amount remained the same through 2023 (unlikely), in 2023, new
beneficiaries would pay a $75 higher deductible than those who had been enrolled in Medicare
prior to 2019. However, because deductibles are expected to grow each year due to expected
growth in annual per capita costs, the application of the annual growth rate adjustments to the
incrementally larger deductible amounts would mean that the difference in deductible amounts
paid by individuals in the two groups would likely be greater than $75. This proposal was
included in the President’s FY2015 budget.
The Administration estimates this proposal would save $3.7 billion over the next 10 years.
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Clarify Calculation of the Late Enrollment Penalty for Medicare
Part B Premiums
Current Law
Most people who elect to participate in the Medicare Part B program pay a premium. Those who
do not sign up for Part B when first eligible, or who drop it and then sign up again later, may have
to pay a late enrollment penalty for as long as they are enrolled in Part B.45 Monthly premiums
may go up 10% for each full 12-month period that one could have had Part B but did not sign up
for it. By law, a Social Security beneficiary who is also enrolled in Medicare Part B must have the
Part B premium automatically deducted from his or her Social Security benefits. If the annual
Social Security cost-of-living increase is not sufficient to cover the standard Medicare Part B
premium increase, most beneficiaries are protected by a hold-harmless provision in the Social
Security Act (§1839(f)). Specifically, if in a given year the increase in the standard Part B
premium would cause a beneficiary’s Social Security check to be less in dollar terms than it was
the year before, then the Part B premium is reduced to ensure that the amount of the individual’s
Social Security check does not decline.
President’s Proposal
The President’s budget would clarify that the hold-harmless provision only applies to the annual
increase in the standard Part B premium and that it does not apply to late enrollment penalties.
This proposal is consistent with current CMS practice. This proposal was not included in the
President’s FY2015 budget.
The Administration estimates this proposal would have no budgetary impact over the next 10
years.
Introduce a Part B Premium Surcharge for New Beneficiaries Who Purchase
Near First-Dollar Medigap Coverage
Current Law
Medigap is private health insurance that supplements Medicare coverage. It typically covers some
or all of Medicare’s deductibles and coinsurance, and it also may include additional items or
services not covered by Medicare, such as coverage while traveling overseas. Medigap is
available to Medicare beneficiaries who have fee-for-service Medicare Part A and voluntarily
enroll in Medicare Part B by paying the monthly premium. Individuals who purchase Medigap
must pay a monthly premium, which is set by the insurance company selling the policy. There are
10 standardized Medigap plans with varying levels of coverage. Two of the 10 standardized plans
cover Parts A and B deductibles and coinsurance in full (i.e., offer first-dollar coverage). In 2013,
about 66% of all Medigap enrollees were covered by one of these two plans.46
45
For more information, see CRS Report R40082, Medicare: Part B Premiums, by Patricia A. Davis.
America’s Health Insurance Plans, Center for Policy and Research, Trends in Medigap Coverage and Enrollment,
2013, November 2014, p. 7, at http://www.ahip.org/Epub/Trends-in-Medigap-Enrollment—and-Coverage-Options2013/Trends-in-Medigap-Enrollment—and-Coverage-Options,-2013.aspx.
46
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President’s Proposal
The President’s budget, beginning in 2019, would impose a Part B premium surcharge for new
Medicare beneficiaries who select a Medigap plan with very low cost-sharing requirements. The
surcharge would be equal to approximately 15% of the average Medigap premium (or about 30%
of the Part B premium). This proposal was included in the President’s FY2015 budget.
The Administration estimates this proposal would save $4.0 billion over the next 10 years.
Introduce Home Health Co-payments for New Beneficiaries
Current Law
For beneficiaries who are eligible for Medicare-covered home health care, Medicare provides
payment for a 60-day episode of home health care under a prospective payment system. The 60day episode covers in-home skilled nursing, physical and occupational therapy, medical social
services, and aide visits as well as medical supplies. Medicare originally required a 20%
coinsurance for home health services covered under Part B in addition to having met the annual
Part B deductible; however, legislative changes eliminated Medicare cost sharing for home health
services. There are currently no Medicare cost-sharing requirements for home health services;
however, beneficiaries may be responsible for co-payments associated with Medicare-covered
DME and osteoporosis drugs provided during a home health episode of care. In its March 2014
report, MedPAC recommended that Congress establish a per episode co-payment for home health
episodes that are not preceded by hospitalization or post-acute care use.
President’s Proposal
Beginning in CY2019, the President’s budget would institute a $100 co-payment for new
beneficiaries for each home health 60-day episode with five or more visits that is not preceded by
a hospital or inpatient post-acute stay. This proposal was included in the President’s FY2015
budget.
The Administration estimates this proposal would save $830 million over the next 10 years.
Medicare Administrative Proposals
Strengthen the Independent Payment Advisory Board to Reduce Long-Term
Drivers of Medicare Cost Growth
Current Law
The ACA established the Independent Payment Advisory Board (IPAB) to develop and submit
detailed proposals to Congress and the President to reduce the growth rate of Medicare spending.
Proposals will be required only in certain years when the CMS chief actuary determines that the
projected Medicare per capita growth rate exceeds predetermined spending targets, and the
proposals will have to meet specific savings targets. Recommendations made by the board
automatically go into effect unless Congress enacts specific legislation to prevent their
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implementation. The first year the board’s proposals can take effect is 2015 (which ties to the
2013 determination year). For the first five years of implementation, the target growth rate will
depend on changes in consumer price indices. However, beginning with the sixth year of
implementation, the Medicare target per capita growth rate will be the projected five-year average
percentage increase in nominal gross domestic product (GDP) per capita plus 1.0 percentage
point. In its April 2013 and 2014 determinations (for implementation in 2015 and 2016), the CMS
actuary noted that the conditions for activating the IPAB trigger would not be met for 2015 or
2016. Based on projections of the rate of growth in health care expenditures, the Congressional
Budget Office has estimated that IPAB activity will not be triggered in any of the next 10 fiscal
years.
President’s Proposal
The President’s budget would lower the target rate applicable beginning in 2018 from GDP
per capita growth plus 1 percentage point to GDP per capita growth plus 0.5 percentage points.
This proposal was included in the President’s FY2015 budget.
The Administration estimates this proposal would save $20.9 billion over the next 10 years.
Integrate Appeals Process for Medicare-Medicaid Enrollees
Current Law
The Medicare and Medicaid appeals processes for beneficiaries differ significantly, and even
within Medicare the appeals process differs. Although the Medicare Parts A, B, C, and D appeals
processes are conceptually similar, there is substantial variation that has the potential to confuse
beneficiaries and increase administrative costs for providers and states. The difficulty in
navigating the appeals processes may be more significant for dual-eligible beneficiaries, or lowincome Medicare beneficiaries who also are eligible for Medicaid, because they need to navigate
both systems.47
For dual-eligible beneficiaries, Medicaid pays after Medicare. As a result, if services are covered
by Medicare, Medicare pays for the dual-eligible beneficiary’s treatment first. Then, if Medicaid
covers the services, Medicaid pays any remaining cost. If services are covered only by Medicaid,
then Medicaid is the only and primary payer. However, dual-eligible beneficiaries sometimes are
in the situation where coverage of an item or service under one program is possible only after the
other program has denied coverage. Medicaid will cover some services (depending on the state)
only after Medicare has denied coverage for the item or service and Medicare’s noncoverage
decision has been appealed. The Medicare and Medicaid appeals process interactions are
important for dual-eligible beneficiaries because these beneficiaries may experience treatment
delays or care interruptions while going through Medicare’s appeal process. In addition, the
interaction of the Medicare and Medicaid appeals processes can be expensive for both programs,
potentially adding administrative costs and duplicative treatments.
47
National Senior Citizens Law Center, Issue Brief, Building an Integrated Appeals System for Dual Eligibles, Issue
Brief, October 2011, http://www.nsclc.org/wp-content/uploads/2011/10/Building-an-Integrated-Appeals-System-forDuals.pdf.
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President’s Proposal
The President’s budget would create an integrated Medicare and Medicaid appeals process for
dual-eligible beneficiaries. This proposal was included in the President’s FY2015 budget. (This
proposal affects both the Medicare and Medicaid budgets.)
The Administration estimates this proposal would have no budgetary impact over the next 10
years.
Reform the Medicare Appeals Process
Current Law
When Medicare beneficiaries, providers, suppliers, and other parties, including state Medicaid
agencies, are dissatisfied with a Medicare payment, eligibility, or coverage decision, they have
the option to appeal that decision. There are five levels in the Medicare fee-for-service claims
appeals process. Individuals and entities dissatisfied with CMS’s decision at one level may appeal
to the next level. At the first level, staffs of the Medicare administrative contactor who were not
associated with the initial claim determination make a claim determination. The second level of
review is conducted by an independent contractor. There is no claim-value threshold to appeal
claims at the first two appeal levels. At the third level of appeal, administrative law judges review
the claims; the amount in controversy at this level in CY2015 must total at least $150. Appellants
have the right to a hearing before an administrative law judge and may submit new evidence;
CMS, generally through contractors, also may choose to participate in administrative law judges’
appeal hearings, which can include cross-examination of witnesses and submission of evidence. If
a party to the administrative law judge hearing is dissatisfied with the administrative law judge’s
decision, the party may request a review by the Medicare Appeals Council administered by the
HHS Departmental Appeals Board. There are no requirements regarding the amount of money in
controversy at this fourth level of appeal. Finally, at the fifth level, a party may seek a judicial
review in federal district court. At this level, the amount in controversy must be at least $1,460 in
CY2015. (The minimum amount thresholds at the third and fifth level of appeals are recalculated
each year.)
Under current law, no fees are levied when individuals and other entities file Medicare fee-forservice appeals or appeal to higher levels. The Office of Medicare Hearings and Appeals
implemented a voluntary program that permitted appellants to consolidate claims and enabled the
Secretary to propose settlements based on a sample of claims that was extrapolated to a larger
group of disputed claims.
President’s Proposal
The President’s budget includes the following six proposals to reform the Medicare appeals
process:
•
Establish a Refundable Filing Fee. This proposal would institute a per-claim
filing fee at each fee-for-service appeal level for providers, suppliers, and state
Medicaid agencies, including those acting as beneficiary representatives. The
filing fee would be refunded when appellants received fully favorable
determinations. There would not be a filing fee for beneficiaries. This proposal
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would enable HHS to invest revenue from filing fees in improvements that would
reduce the Office of Medicare Hearings and Appeals appeal backlog. The
Administration estimates that collections from the filing fee would be $4 million
in FY2016.
•
Increase Minimum Amount in Controversy for Administrative Law Judge
Adjudication of Claims to Equal Amount Required for Judicial Review. This
proposal would increase the amount-in-controversy minimum required for
administrative law judge adjudication to the same amount in controversy required
for federal district court adjudication ($1,460 in CY2015). The proposal would
better align the value of the claims appealed to the administrative law judge
appeal level with the cost to adjudicate those claims. Appeals not reaching the
amount-in-controversy minimum would be adjudicated by a Medicare magistrate
(see proposal below). The amount-in-controversy minimum for administrative
law judge adjudication would be adjusted annually consistently with the federal
district court amount in controversy.
•
Establish Magistrate Adjudication for Claims with Amount in Controversy
Below New Administrative Law Judge Amount-in-Controversy Threshold.
This proposal would allow the Office of Medicare Hearings and Appeals to
assign claim appeals when the claim value was below the federal district court
minimum amount in controversy ($1,460 in CY2015) to attorney adjudicators.
This proposal would allow the Office of Medicare Hearings and Appeals to
assign higher amount in controversy and more complex appeal claims to
administrative law judges, which would help the Office of Medicare Hearings
and Appeals to reduce the appeal backlog and expedite future appeal processing.
•
Expedite Procedures for Claims with No Material Fact in Dispute. This
proposal would allow the Office of Medicare Hearings and Appeals to issue
decisions without a hearing if there was agreement on the material facts of the
appeal, such as appeals of claims in which Medicare does not cover a particular
drug or device or if a finding in favor of the appellant would be outside an
administrative law judge’s authority.
•
Remand Appeals to the Redetermination Level with the Introduction of New
Evidence. This proposal would remand appeals to the first appeal level
(redetermination) when new evidence was submitted for the record at the second
or subsequent appeal levels. Exceptions may be made if evidence was provided
to the lower-level adjudicator but erroneously omitted from the record or if an
adjudicator denied an appeal on a new and different basis than was made at an
earlier determination. This proposal would provide an incentive for appellants to
include all evidence early in the appeals process and ensure the same record was
considered at all appeal levels.
•
Sample and Consolidate Similar Claims for Administrative Efficiency. This
proposal would authorize the Secretary to use sampling and extrapolation to
adjudicate claim appeals and to consolidate at all appeal levels similar appellant
cases into a single administrative appeal. Entities that were appealing
extrapolated overpayments or that had consolidated appeals previously would be
required to file one appeal request for any remaining disputed claims.
These proposals were not included in the President’s FY2015 budget.
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The Administration estimates these proposals would have no budgetary impact over the next 10
years.
Provide Office of Medicare Hearings and Appeals and Departmental Appeals
Board Authority to Use Recovery Audit Contractor Collections
Current Law
The Office of Medicare Hearings and Appeals’ workload increased from 60,000 appeals in
FY2011 to an estimated 516,000 appeals in FY2014. The Office of Medicare Hearings and
Appeals’ rapid workload increase was attributable to a number of factors, including increasing
program integrity scrutiny, stricter interpretation of payment rules and requirements, and
increasing Medicare enrollment. However, Medicare’s fee-for-service Recovery Audit Contractor
(RAC) program was responsible for many of the additional appeals, accounting for nearly
200,000 appeals in FY2014. RACs are responsible for reducing Medicare’s fee-for-service
improper payment rates by identifying over- and underpayments. RACs differ from other
program integrity contractors in that they only are paid a percentage of the overpayments they
recover from Medicare providers. The Secretary is authorized to retain a portion of RAC
recoveries to be deposited in the program management account to administer the RAC program.
President’s Proposal
The President’s budget would expand the Secretary’s authority to retain a portion of fee-forservice RAC overpayment recoveries to administer the RAC program, as well as to fund the
administration of the RAC appeals at the Office of Medicare Hearings and Appeals and the HHS
Departmental Appeals Board. This proposal was not included in the President’s FY2015 budget.
The Administration estimates this proposal would cost Medicare $1.3 billion over the next 10
years.
Other Proposals
Expand Sharing Medicare Data with Qualified Entities
Current Law
The ACA includes a provision that allows CMS to make standardized extracts of Medicare Parts
A, B, or D claims data available to qualified entities for the purpose of publishing reports
evaluating the performance of providers of services and suppliers. The ACA also requires that
qualified entities combine claims data from sources other than Medicare with the Medicare data
when evaluating the performance of providers and suppliers.
President’s Proposal
The President’s budget would expand the scope of how qualified entities could use Medicare data
beyond that of performance measurement. The proposal would allow qualified entities to use the
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data for fraud prevention activities and for value-added analysis for physicians. Also, qualified
entities would be able to release raw claims data, instead of simply summary reports, to interested
Medicare providers for care coordination and practice improvement. This proposal would make
claims data available to qualified entities for a fee equal to Medicare’s cost of providing the data.
This proposal was included in the President’s FY2015 budget.
The Administration estimates this proposal would have no budgetary impact over the next 10
years.
Extend the Qualified Individuals Program Through CY2016
Current Law
BBA97 required state Medicaid programs to pay Medicare Part B premiums for a new group of
low-income Medicare beneficiaries—qualifying individuals (QIs)—whose income was between
120% and 135% of FPL. BBA97 also amended the Social Security Act to provide for Medicaid
payment for QIs through an annual transfer from the Medicare Part B Trust Fund to be allocated
to states. States (and the District of Columbia) receive 100% federal funding to pay QI’s
Medicare premiums up to the federal allocation, but they receive no additional matching beyond
this annual allocation. In September 2014, approximately 499,700 QI Medicare beneficiaries
received financial assistance from state Medicaid programs to pay their Part B premiums. The QI
program has been reauthorized and funded a number of times since it was established by BBA97.
Most recently, Section 201 of PAMA authorized the QI program through March 31, 2015, and
appropriated $1.035 billion in funding.
President’s Proposal
The President’s budget would extend authorization and funding for the QI program through
December 31, 2016. This proposal was included in the President’s FY2015 budget. (This proposal
affects both the Medicare and Medicaid budgets.)
The Administration estimates this proposal would cost $975 million over the next 10 years.
Create Pilot to Expand the Program of All-Inclusive Care for the Elderly
Eligibility to Individuals Between the Ages of 21 and 55
Current Law
The Program of All-Inclusive Care for the Elderly (PACE) is an integrated care program that
provides comprehensive long-term services and supports to individuals aged 55 and older who
require an institutional level of care, many of whom are eligible for both Medicare and Medicaid
and are known as dual-eligible beneficiaries. The PACE program was established in the Social
Security Act in Section 1894 for Medicare and Section 1934 for Medicaid. Setting up a PACE
program is optional for states under Medicaid. PACE providers receive capitated payments from
both Medicaid and Medicare to cover an enrollee’s benefits. In many cases, the PACE program
enables enrollees to receive services through an adult day health center rather than through an
institution such as a nursing facility.
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President’s Proposal
The President’s budget would create a pilot demonstration in selected states to expand PACE
eligibility to individuals who qualify and are 21 years old to 55 years old. This proposal was
included in the President’s FY2015 budget. (This proposal affects both the Medicare and
Medicaid budgets.)
The Administration estimates this proposal would have no budgetary impact over the next 10
years.
Estimated Cost/Savings for Medicare Legislative Proposals
If implemented, these legislative proposals in Medicare are estimated to decrease Medicare
outlays by a net of $2.4 billion in FY2016 and a cumulative $423.1 billion over the next 10 years.
Table 3 shows the estimated cost/savings for each legislative proposal in Medicare.
Table 3. Estimated Cost/Savings for Medicare Legislative Proposals Included in the
President’s FY2016 Budget Proposal
(dollars in millions)
New (N),
Modified
(M), or
Repeated
(R) from the
President’s
FY2015
Budget
Administration’s Cost/Savings
Estimates
FY2016
FY2016FY2020
FY2016FY2025
Medicare Part A
Establish a Hospital-Wide Readmissions Reduction
Measure
N
—
—
Extend Accountability for Hospital-Acquired Conditions
N
—
—
—
Reduce Medicare Coverage of Bad Debts
R
-$370
-$10,530
-$31,080
Better Align Graduate Medical Education Payments with
Patient Care Costs
R
-1,000
-6,700
-16,260
Eliminate the 190-Day Lifetime Limit on Inpatient
Psychiatric Facility Services
N
400
2,150
5,000
Reduce Critical Access Hospital Reimbursements from
101% of Reasonable Costs to 100% of Reasonable Costs
R
-110
-710
-1,730
Prohibit Critical Access Hospital Designation for Facilities
That Are Less Than 10 Miles from the Nearest Hospital
R
-50
-320
-770
Encourage Appropriate Use of Inpatient Rehabilitation
Facilities
R
-170
-1,010
-2,230
Clarify the Medicare Fraction in the Medicare DSH
Statute
R
—
—
—
R
—
-430
-9,260
—
Medicare Parts A and B
Implement Bundled Payment for Post-acute Care
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New (N),
Modified
(M), or
Repeated
(R) from the
President’s
FY2015
Budget
Administration’s Cost/Savings
Estimates
FY2016
FY2016FY2020
FY2016FY2025
Allow CMS to Assign Beneficiaries to Federally Qualified
Health Centers and Rural Health Clinics Participating in
the Medicare Shared Savings Program
N
—
-20
-80
Expand Basis for Beneficiary Assignment for Accountable
Care Organizations to Include Nurse Practitioners,
Physician Assistants, and Clinical Nurse Specialists
N
—
-10
-60
Allow Accountable Care Organizations to Pay
Beneficiaries for Primary Care Visits up to the Applicable
Medicare Cost-Sharing Amount
N
—
—
—
Implement Value-Based Purchasing for Additional
Providers
M
—
—
—
Adjust Payment Updates for Certain Post-acute Care
Providers
R
-1,600
-25,170
-102,070
Reform Medicare Physician Payments to Promote
Participation in High-Quality and Efficient Health Care
Delivery Systems
N
430
9,090
43,990
Encourage Efficient Care by Improving Incentives to
Provide Care in the Most Appropriate Ambulatory
Setting
N
—
-6,740
-29,500
Make Permanent the Medicare Primary Care Incentive
Payment in a Budget-Neutral Manner
N
—
—
—
Exclude Certain Services from the In-Office Ancillary
Services Exception
M
—
-2,120
-6,020
Modify Reimbursement of Part B Drugs
R
-320
-2,880
-7,380
Modify the Documentation Requirement for Face-to-Face
Encounters for Durable Medical Equipment Claims
R
—
—
—
Expand Coverage of Dialysis Services for Beneficiaries
with Acute Kidney Injury
N
-10
-90
-200
Align Employer Group Waiver Plan Payments with
Average Medicare Advantage Plan Bids
R
—
-2,730
-7,160
Increase the Minimum Medicare Advantage Coding
Intensity Adjustment
R
—
-6,780
-36,240
Allow for Federal/State Coordinated Review of Duals
Special Need Plan Marketing Materials
N
—
—
—
R
—
—
—
Medicare Part B
Medicare Advantage
Medicare Part D
Establish Quality Bonus Payments for High-Performing
Part D Plans
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New (N),
Modified
(M), or
Repeated
(R) from the
President’s
FY2015
Budget
Administration’s Cost/Savings
Estimates
FY2016
FY2016FY2020
FY2016FY2025
Align Medicare Drug Payment Policies with Medicaid
Policies for Low-Income Beneficiaries
R
—
-32,790
-116,130
Accelerate Manufacturer Discounts for Brand-Name
Drugs to Provide Relief to Medicare Beneficiaries in the
Coverage Gap
R
—
-2,490
-9,430
Allow the Secretary to Negotiate Prices for Biologics and
High-Cost Prescription Drugs
N
—
—
—
Encourage the Use of Generic Drugs by Low-Income
Beneficiaries
R
—
-3,090
-8,860
Ensure Retroactive Part D Coverage of Newly-Eligible
Low-Income Beneficiaries
R
—
—
—
Establish Authority for a Program to Prevent Prescription
Drug Abuse in Medicare Part D
N
—
—
—
Require Mandatory Reporting of Other Prescription Drug
Coverage
N
-10
-170
-480
Suspend Coverage and Payment for Questionable Part D
Prescriptions and Incomplete Clinical Information
R
—
—
—
Prohibit Brand and Generic Drug Manufacturers from
Delaying the Availability of New Generic Drugs and
Biologics
R
-690
-4,070
-10,060
Modify Length of Exclusivity to Facilitate Faster
Development of Generic Biologics
M
—
-910
-4,400
Increase Income-Related Premiums Under Medicare Parts
B and D
R
—
-7,880
-66,410
Modify the Part B Deductible for New Beneficiaries
R
—
-120
-3,740
Clarify Calculation of the Late Enrollment Penalty for
Medicare Part B Premiums
N
—
—
—
Introduce a Part B Premium Surcharge for New
Beneficiaries Who Purchase Near First-Dollar Medigap
Coverage
R
—
-310
-3,970
Introduce Home Health Co-payments for New
Beneficiaries
R
—
-70
-830
Strengthen the Independent Payment Advisory Board to
Reduce Long-Term Drivers of Medicare Cost Growth
R
—
—
-20,879
Integrate Appeals Process for Medicare-Medicaid
Enrollees
R
—
—
—
Reform the Medicare Appeals Process
N
—
—
—
Premiums and Cost Sharing
Administrative Proposals
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New (N),
Modified
(M), or
Repeated
(R) from the
President’s
FY2015
Budget
Provide Office of Medicare Hearings and Appeals and
Departmental Appeals Board Authority to Use Recovery
Audit Contractor Collections
Administration’s Cost/Savings
Estimates
FY2016
FY2016FY2020
FY2016FY2025
N
127
635
1,270
Expand Sharing Medicare Data with Qualified Entities
R
—
—
—
Extend the Qualified Individuals Program Through
CY2016
R
775
975
975
Create Pilot to Expand PACE Eligibility to Individuals
Between the Ages of 21 and 55
R
—
—
—
140
1,038
2,559
45
1,782
18,348
-2,413
-102,470
-423,087
Other Proposals
Savings from Program Integrity Proposalsa
Interactionsb
Total Proposals Impacting Medicarec
Source: Table created by CRS based on data from the HHS, Fiscal Year 2016 Budget in Brief: Strengthening Health
and Opportunity for All Americans, February 2015.
Notes: Totals may not add due to rounding.
DSH: Disproportionate share hospital.
PACE: Program of All-Inclusive Care for the Elderly.
a.
See “Program Integrity Legislative Proposals” for descriptions of the program integrity legislative proposals
impacting Medicare.
b.
Adjusts for savings realized through IPAB and other Medicare interactions.
c.
Note that Table 1 shows that Medicare legislative proposals would save $1.8 billion in FY2016 because it
includes a legislative proposal from the “Program Management Legislative Proposals” section of this report.
The $1.8 billion in savings includes $2.4 billion in savings from Medicare legislative proposals net of
premiums and offsetting receipts, in addition to the cost of $0.6 billion for program management legislative
proposals.
Medicaid Legislative Proposals
Medicaid Benefits
Expand State Flexibility to Provide Benchmark Benefit Packages
Current Law
As an alternative to traditional Medicaid benefits, DRA gave states the option to change their
Medicaid benefit packages for certain populations. States were allowed to offer benefit packages
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similar to certain types of commercial insurance, such as the Blue Cross Blue Shield plan
available through the Federal Employees Health Benefits Program. These types of benefits were
referred to as benchmark or benchmark-equivalent benefits under the DRA but are now more
commonly referred to as alternative benefit plans. The state option to provide these benefits can
be found in Section 1937 of the Social Security Act. Following passage of the ACA, alternative
benefit plans are required to offer essential health benefits as defined in Section 1302 of the act.
Who can enroll in alternative benefit plan coverage depends on the individual’s eligibility
pathway into Medicaid and on state decisions. Under Section 1937 of the Social Security Act,
states can choose whether to require enrollment in alternative benefit plan coverage for certain
groups, with some limitations. For example, “full benefit eligible individuals” as defined under
Section 1937(a)(2) of the Social Security Act can be required to enroll in alternative benefit plans,
but individuals who are institutionalized or who are dually eligible for Medicare and Medicaid
cannot be required to enroll. Individuals made eligible for Medicaid under Section 2001(a) of the
ACA in states that have chosen to expand Medicaid must enroll in alternative benefit plan
coverage, but individuals eligible under Section 2001(e) of the ACA, an optional expansion group
defined as individuals who are under the age of 65 with income above 133% of FPL, cannot be
required to enroll in alternative benefit plans.
President’s Proposal
The President’s budget would allow states to enroll non-elderly, nondisabled adults with income
that exceeds 133% of FPL in alternative benefit plans. This proposal was included in the
President’s FY2015 budget.
The Administration estimates this proposal would have no budgetary impact over the next 10
years.
Require Coverage of Early and Periodic Screening, Diagnostic, and Treatment
for Children in Inpatient Psychiatric Treatment Facilities
Current Law
States have the option to provide inpatient psychiatric care for Medicaid enrollees aged 21 and
younger. This benefit is sometimes referred to as “Psych under 21.” Under this option, Medicaid
enrollees aged 21 years and younger can receive inpatient psychiatric hospital services in three
settings: psychiatric hospitals, psychiatric units in general hospitals, and psychiatric residential
treatment facilities. CMS historically has prohibited states from claiming Medicaid expenditures
under the inpatient psychiatric facility benefit unless the expenditures were made to qualified
providers of such services. Since inpatient psychiatric facilities are not qualified providers for the
Early and Periodic Screening, Diagnostic and Treatment (EPSDT) benefit that is a mandatory
benefit for most Medicaid enrollees aged 21 and younger, children in inpatient psychiatric
facilities do not receive that benefit. Under EPSDT, children receive well-child visits,
immunizations, laboratory tests, and other screening services at regular intervals. In addition,
medical care that is necessary to correct or ameliorate identified defects, physical and mental
illness, and other conditions must be provided, including some services that states may not
otherwise cover in their Medicaid programs.
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President’s Proposal
The President’s budget would lift the exclusion of Medicaid enrollees aged 21 and younger in
inpatient psychiatric treatment facilities from receiving EPSDT coverage. This proposal was not
included in the President’s FY2015 budget.
The Administration estimates this proposal would cost $0.4 billion over the next 10 years.
Provide Home- and Community-Based Waiver Services to Children Eligible
for Psychiatric Residential Treatment Facilities
Current Law
Psychiatric hospitals, psychiatric units in general hospitals, and psychiatric residential treatment
facilities are the three settings in which Medicaid enrollees aged 21 years and younger can
receive inpatient psychiatric hospital services. Of these three settings, psychiatric residential
treatment facilities are the only setting that is not a qualified inpatient facility for the purposes of
home- and community-based services (HCBS). For individuals to be eligible for a Section
1915(c) HCBS waiver, they need to require the level of care provided in hospitals, nursing
facilities, or intermediate care facilities for individuals with intellectual disabilities. Psychiatric
residential treatment facilities are not recognized as hospitals, nursing facilities, or intermediate
care facilities for individuals with intellectual disabilities under the Medicaid statute. Therefore,
states have been unable to use the 1915(c) waiver authority to provide home- and communitybased alternatives to institutional care for children receiving care in psychiatric residential
treatment facilities.
President’s Proposal
The President’s budget would add services in psychiatric residential treatment facilities to the list
of qualified institutional benefits for 1915(c) waivers. Thus, it would extend coverage of HCBS
under 1915(c) waivers to eligible individuals who meet the level of care need for services in
psychiatric residential treatment facilities. This proposal was included in the President’s FY2015
budget.
The Administration estimates this proposal would cost $1.6 billion over the next 10 years.
Require Full Coverage of Preventive Health and Tobacco-Cessation Services
for Adults in Traditional Medicaid
Current Law
The ACA added Section 2713 to the Public Health Service Act. Section 2713 requires that health
plans provide coverage of preventive services without any cost sharing (such as a co-payment,
coinsurance, or deductible) when an enrollee obtains services in the plan’s provider network,
effective September 23, 2010. These preventive services include evidence-based items or services
assigned a grade of A or B by the United States Preventive Services Task Force; routine
immunizations for adults and children recommended by the Advisory Committee on
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Immunization Practices of the Centers for Disease Control and Prevention; preventive care and
screenings for infants, children, and adolescents provided for in guidelines supported by the
Health Resources and Services Administration; and preventive services for women provided for
in guidelines supported by the Health Resources and Services Administration. The requirements
in Section 2713 are applicable to group health plans or health insurance issuers offering group
health insurance coverage.
Preventive services in Medicaid generally are optional for states with the exception of preventive
services for children as part of EPSDT services. The ACA added other requirements for
preventive services in Medicaid specific to pregnant women and adults. Section 4107 of the ACA
requires that states provide comprehensive tobacco- cessation services for pregnant women,
including counseling, without any cost sharing. The ACA also requires that the alternative benefit
plans through which adults made eligible for Medicaid under the ACA will receive Medicaid
coverage provide coverage of the preventive services described above in Section 2713 of the
Public Health Service Act.
President’s Proposal
The President’s budget would require coverage of preventive health services as defined in Section
2713 of the Public Health Service Act for all adults enrolled in Medicaid. The proposal would
also expand Section 4107 of the ACA (i.e., comprehensive tobacco-cessation services without
cost sharing) to all Medicaid eligible populations. This proposal was not included in the
President’s FY2015 budget.
The Administration estimates this proposal would cost $0.8 billion over the next 10 years.
Pilot Comprehensive Long-Term Care State Plan Option
Current Law
Medicaid law and other provisions in the Social Security Act, as amended, contain several
authorities that permit states to offer long-term services and supports to individuals in need of
long-term care. In general, Medicaid law provides states with two broad authorities, which either
cover certain long-term services and supports as a benefit under the Medicaid state plan or cover
home- and community-based long-term services and supports through a waiver program. States
are required to offer certain Medicaid institutional services, such as nursing facility services.
However, the majority of HCBS offerings are optional for states.48
President’s Proposal
The President’s budget proposes establishing a comprehensive long-term care state plan option
under an eight-year pilot program for up to five states. The proposal would authorize participating
states to provide home and community-based care at the nursing facility level of care. This
48
For more information about Medicaid coverage of long-term services and supports, see CRS Report R43328,
Medicaid Coverage of Long-Term Services and Supports, by Kirsten J. Colello.
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proposal’s stated intention is to create equal access to HCBS and nursing facility services for
Medicaid program participants. This proposal was not included in the President’s FY2015 budget.
The Administration estimates this proposal would cost $4.1 billion over the next 10 years.
Allow States to Develop Age-Specific Health Home Programs
Current Law
Section 2703 of the ACA created the option for states to establish health homes for Medicaid
enrollees with chronic conditions through a state plan amendment, beginning January 1, 2011.
States can receive 90% in federal Medicaid matching funds for the first eight fiscal quarters of
their state plan amendment. Health homes are service delivery models designed to coordinate care
for enrollees with chronic physical and mental health conditions. Section 2703 of the ACA
defines a chronic condition as including but not limited to the following: a mental health
condition, substance use disorder, asthma, diabetes, heart disease, and being overweight as
evidenced by having a body mass index of over 25. Individuals eligible under Section 2703 are
eligible for Medicaid in the state and have at least two chronic conditions; have one chronic
condition and are at risk of a second chronic condition; or have one serious and persistent mental
health condition. States must enroll all individuals that meet these criteria, according to what is
known as the comparability rule under Section 1902(a)(10)(B) the Social Security Act.
President’s Proposal
The President’s budget would allow states to target their health homes established under Section
2703 to specific age groups. This proposal was not included in the President’s FY2015 budget.
The Administration estimates this proposal would cost $1.0 billion over the next 10 years.
Allow Full Medicaid Benefits to All Individuals in a Home- and CommunityBased Services State Plan Option
Current Law
States may elect to provide the Section 1915(i) HCBS state plan option to medically needy
individuals enrolled in Medicaid. Under current law, states may choose to follow institutional
income and resource eligibility rules for the medically needy living in the community. This allows
states to treat medically needy individuals as if they are living in institutions by not counting
income and resources from a spouse or parent. However, when a state elects to apply institutional
rules for the medically needy instead of community rules, medically needy enrollees only can
receive Section 1915(i) HCBS and no other Medicaid services.
President’s Proposal
The President’s budget would provide states with the option to offer full Medicaid state plan
benefits to medically needy individuals who access HCBS through the Section 1915(i) state plan
optional benefit. This proposal was not included in the President’s FY2015 budget.
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The Administration estimates this proposal would cost $38 million over the next 10 years.
Expand Eligibility Under the Community First Choice Option
Current Law
The Community First Choice option allows states to offer community-based attendant services
and supports as an optional Medicaid state plan benefit and to receive an increased federal
medical assistance percentage rate of six percentage points. To be eligible, enrollees must be (1)
eligible for Medicaid under an existing eligibility pathway that offers state plan services; (2) in an
eligibility group under the state plan that covers nursing facility services or, if not in such a group,
have income at or below 150% of FPL; and (3) meet institutional level-of-care criteria.
Individuals also may be eligible for Community First Choice services under a Section 1915(c)
HCBS waiver. One optional eligibility pathway, the Special Income Rule, allows states to extend
Medicaid coverage to individuals in nursing facilities or other institutions with higher levels of
income (up to 300% of the maximum SSI benefit). Under current law, states can extend the
Community First Choice option to individuals with higher incomes only if they offer either the
optional Special Income Rule eligibility pathway or a Section 1915(c) HCBS waiver that includes
the special income group.
President’s Proposal
The President’s budget would provide states with the option to make Community First Choice
services available to individuals who would be Medicaid eligible under the state plan if they were
in a nursing facility. This proposal could reduce the need for states to offer a Section 1915(c)
HCBS waiver to provide Community First Choice services to Medicaid enrollees with higher
levels of income. This proposal was not included in the President’s FY2015 budget.
The Administration estimates this proposal would cost $3.6 billion over the next 10 years.
Expand Eligibility for the 1915(i) Home- and Community-Based Services State
Plan Option
Current Law
Section 1915(i) of the Social Security Act allows states to offer HCBS under the Medicaid state
plan without obtaining a Secretary-approved waiver. To be eligible, Medicaid enrollees’ incomes
must be less than or equal to 150% of FPL. In addition, they must have a level-of-care need that
is less than the level of care required in an institution. States may extend eligibility to enrollees
with incomes up to 300% of the maximum SSI benefit for those eligible for HCBS under waiver
programs (i.e., Section 1115 of the Social Security Act or Sections 1915(c), (d) or (e) of the
Social Security Act). For eligible enrollees who meet the higher financial eligibility threshold and
waiver criteria, their level-of-care need may have to meet the level of care provided in an
institution.
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President’s Proposal
The President’s budget proposes to expand Medicaid eligibility under the Section 1915(i) HCBS
state plan option by removing the requirement that individuals under the higher financialeligibility threshold also be eligible under a waiver program. This proposal was not included in
the President’s FY2015 budget.
The Administration estimates this proposal would cost $1.3 billion over the next 10 years.
Medicaid Coverage
Extend the Transitional Medical Assistance Program Through CY2016
Current Law
States are required to continue Medicaid benefits for certain low-income families that would
otherwise lose coverage because of changes in their income.49 This continuation of benefits is
known as transitional medical assistance (TMA). Federal law permanently requires four months
of TMA for families that lose Medicaid eligibility due to (1) increased spousal support
collections, or (2) an increase in earned income or hours of employment. Congress expanded
work-related TMA benefits in 1988, requiring states to provide at least 6, and up to 12, months of
TMA coverage to families losing Medicaid eligibility due to increased hours of work or income
from employment, as well as to families that lose eligibility due to the loss of a time-limited
earned-income disregard (such disregards allow families to qualify for Medicaid at higher income
levels for a set period of time). Congress created an additional work-related TMA option in the
American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5). Under the ARRA option,
states may choose to provide work-related TMA for a full 12-month period rather than two 6month periods and may waive the requirement that the family must have received Medicaid in at
least 3 of 6 months preceding the month in which eligibility is lost. Congress has acted on
numerous occasions to extend these expanded TMA requirements (which are outlined in Sections
1902(e)(1) and 1925 of the Social Security Act) beyond their original sunset date of September
30, 1998. Most recently, PAMA extended the authorization and funding of expanded TMA
requirements through March 31, 2015.
President’s Proposal
The President’s budget would extend the TMA program through December 31, 2016, and would
permit states that adopt the ACA Medicaid expansion to opt out of TMA. The provision would
also clarify that states are permitted to determine income eligibility for TMA based on modified
adjusted gross income. This proposal is a modification of a legislative proposal from the
President’s FY2015 budget.
49
Under the ACA, states are required to transition to a new income-counting rule based on modified adjusted gross
income to establish uniform standards for what income to include or disregard in determining Medicaid eligibility for
most non-elderly and nondisabled individuals, children under the age of 18, and adults and pregnant women under the
age of 65, beginning January 1, 2014. With the transition to modified adjusted gross income, the extension of
transitional medical assistance eligibility for individuals losing coverage under Section 1931 due to increased child
support will no longer be relevant, as child support is not counted as income under modified adjusted gross
income‐based methodologies.
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The Administration estimates this proposal would cost $1.8 billion over the next 10 years.
Permanently Extend “Express Lane” Eligibility Option for Children
Current Law
The Children’s Health Insurance Program Reauthorization Act (CHIPRA; P.L. 111-3) of 2009
created a state plan option for “Express Lane” eligibility available to states through September
30, 2013. Under this option, states are permitted to rely on a finding from specified Express Lane
agencies (e.g., those that administer programs such as Temporary Assistance for Needy Families,
Medicaid, CHIP, and the Supplemental Nutrition Assistance Program) for (1) determinations of
whether a child has met one or more of the eligibility requirements necessary to determine his or
her initial eligibility, (2) eligibility redeterminations, or (3) renewal of eligibility for medical
assistance under Medicaid or CHIP. PAMA permits states to rely on Express Lane findings for
child eligibility determinations through September 30, 2015.
President’s Proposal
The President’s budget would allow for a permanent extension of the state option to rely on
“Express Lane” eligibility determinations for Medicaid and CHIP-eligible children. This proposal
was included in the President’s FY2015 budget. (This proposal affects both the Medicaid and
CHIP budgets.)
The Administration estimates this proposal would cost $0.7 billion over the next 10 years.50
Allow Pregnant Women Choice of Medicaid Eligibility Category
Current Law
Under current law, states must cover pregnant women with annual income less than 133% of FPL
based on modified adjusted gross income. Benefit coverage is limited to pregnancy and 60 days
of postpartum coverage, and it may be limited to services that are related to pregnancy and other
conditions that may complicate pregnancy. However, some states offer enhanced pregnancy
services through their pregnancy-specific eligibility pathways, and federal regulations give states
the option to provide low-income pregnant women with all Medicaid services that are covered
under the state plan for other categorically needy beneficiaries.
Under the ACA, states have the option to expand Medicaid eligibility starting on January 1, 2014,
to individuals under the age of 65 who are not pregnant who are otherwise not eligible for
Medicaid, and who have income at or below 133% of FPL (effectively 138% of FPL, with the 5%
income disregard included in the law). Although women who are pregnant at the time of their
Medicaid eligibility determination must be enrolled through one of Medicaid’s pregnancy-related
eligibility pathways, Medicaid regulations specify that states are not required to track the
pregnancy status of women eligible through the ACA Medicaid expansion group (or any other
50
The President’s budget estimate for this proposal includes impacts on CHIP for a total cost of $1.2 billion over 10
years.
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Medicaid eligibility group). Individuals eligible through the ACA Medicaid expansion receive
coverage through Medicaid alternative benefit plans. Alternative benefit plans must cover at least
the 10 essential health benefits that also apply to the qualified health plans offered in the health
insurance exchanges, and they must include maternity and newborn care. Under Medicaid
regulations, women enrolled in the ACA Medicaid expansion group who become pregnant may
request to be moved to the Medicaid mandatory coverage category, or they must stay in the ACA
Medicaid expansion group. As a result of these program rules and regulations, women who are
eligible only for pregnancy-related services may receive less generous benefits than others in
their income group based on their pregnancy status.
President’s Proposal
The President’s budget would allow Medicaid enrollees who are pregnant to choose the eligibility
category most suited to their needs. This proposal was not included in the President’s FY2015
budget.
The Administration estimates this proposal would have no budgetary impact over the next 10
years.
Create State Option to Provide 12-Month Continuous Medicaid Eligibility
for Adults
Current Law
Under current law, Medicaid and CHIP enrollees generally are required to report changes that
may impact their eligibility status (e.g., changes in family income and/or composition). However,
states may choose to extend coverage for a period of 12 months to Medicaid-eligible children,
regardless of changes in annual income. This policy is known as 12-month continuous eligibility.
Even within that 12-month period, there are some circumstances that may prompt an eligibility
redetermination, such as when a child ages out of a given eligibility category. Although no
explicit statutory authority for 12-month continuous eligibility exists in CHIP, a number of states
also extend this policy to children eligible under separate CHIP programs.
President’s Proposal
The President’s budget would extend the state option for 12 months of continuous eligibility to all
Medicaid-eligible adults or, at state option, to adults determined eligible for Medicaid based on
modified adjusted gross income rules. This proposal was not included in the President’s FY2015
budget.
The Administration estimates this proposal would cost $27.7 billion over the next 10 years.51
51
The President’s budget estimate for this proposal includes savings of $23.0 billion for subsidies in the health
insurance exchanges for people who would have received coverage without 12-month continuous Medicaid eligibility.
The net cost of this proposal is estimated to be $4.7 billion over 10 years.
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Medicaid Payments
Rebase Future Medicaid Disproportionate Share Hospital Allotments
Current Law
Under federal law, states are required to make Medicaid DSH payments to hospitals treating large
numbers of low-income and Medicaid patients. States receive federal matching funds for making
DSH payments, up to a capped federal allotment that generally equals the previous year’s
allotment increased by the percentage change in the consumer price index for all urban
consumers. In FY2014, federal Medicaid DSH allotments to states totaled $11.7 billion. The ACA
required the Secretary to make aggregate reductions in Medicaid DSH allotments for each year
from FY2014 to FY2020. Since the ACA, three laws have amended the ACA DSH reductions.
Under current law, Medicaid DSH allotment reductions are to begin in FY2017 and end in
FY2024. In FY2025, states’ Medicaid DSH allotments are to rebound to their pre-ACA reduced
levels with annual inflation adjustments for FY2016 through FY2025.
President’s Proposal
Instead of having the Medicaid DSH allotments rebound to their pre-ACA reduced levels, the
President’s budget proposes to extend the ACA-reduced Medicaid DSH allotment levels to
FY2025 and subsequent years. The FY2025 Medicaid DSH allotments would be each state’s
FY2024 allotment increased by the percentage change in the consumer price index for all urban
consumers, and the allotments for subsequent years would be the previous year’s allotment
increased by the percentage change in the consumer price index for all urban consumers. This
proposal was included in the President’s FY2015 budget.
The Administration estimates this proposal would save $3.3 billion over the next 10 years.
Limit Medicaid Reimbursement of Durable Medical Equipment Based on
Medicare Rates
Current Law
States generally are free to set payment rates for items and services provided under Medicaid as
they see fit, subject to certain exceptions and a general requirement that payment policies are
consistent with efficiency, economy, and quality of care and are sufficient to provide access
equivalent to the general population’s access. Providers for which federal upper payment limits
apply under Medicaid include hospitals and nursing facilities. Federal regulations specify that
states cannot pay more in the aggregate for inpatient hospital services or nursing facility services
than the amount that would be paid for the services under the Medicare principles of
reimbursement. No upper payment limit currently applies to durable medical equipment (DME)
under Medicaid.
Historically, Medicare has paid for most DME on the basis of fee schedules. Unless otherwise
specified by Congress, fee schedule amounts are updated each year by a measure of price
inflation. The Medicare Prescription Drug, Improvement, and Modernization Act established a
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Medicare competitive acquisition program (i.e., competitive bidding) under which prices for
selected DME sold in specified areas would be determined not by a fee schedule but by suppliers’
bids.
President’s Proposal
The President’s budget would limit federal reimbursement for a state’s Medicaid spending on
certain DME to what Medicare would have paid in the same state for the services. This proposal
was included in the President’s FY2015 budget.
The Administration estimates this proposal would save $4.3 billion over the next 10 years.
Extend the Medicaid Primary Care Payment Increase Through CY2016 and
Include Additional Providers
Current Law
For the most part, states establish their own payment rates for Medicaid providers. Federal statute
requires that these rates be sufficient to enlist enough providers so that covered benefits are
available to Medicaid enrollees at least to the same extent they are available to the general
population in the same geographic area. Low Medicaid physician payment rates in many states
and their impact on provider participation have been perennial concerns for policymakers. The
ACA required that Medicaid payment rates for certain primary care services be raised to what
Medicare paid for these services for CY2013 and CY2014. Physicians in subspecialties of family
medicine, general internal medicine, and pediatrics were eligible to receive the increased primary
care rates for certain primary care services. The federal government paid the entire cost of the
increased primary care rates (i.e., the difference between Medicare payment rates and the
Medicaid payment rates as of July 1, 2009) for those two calendar years. On December 31, 2014,
the ACA requirement for enhanced primary care rates and the 100% federal financing of that
requirement expired.
President’s Proposal
The President’s budget would extend the enhanced primary care rates through December 31,
2016. In addition, the budget proposal would expand the providers eligible for the enhanced
primary care rates to obstetricians, gynecologists, and nonphysician practitioners (such as
physician assistants and nurse practitioners). Under this proposal, primary care services provided
in an emergency room would be excluded from the enhanced primary care rates. This proposal is
a modification of a legislative proposal from the President’s FY2015 budget.
The Administration estimates this proposal would cost $6.3 billion over the next 10 years.
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Medicaid Prescription Drugs
Lower Medicaid Drug Costs and Strengthen the Medicaid Drug
Rebate Program
Current Law
For drug manufacturers to sell their products to state Medicaid programs, they must agree to the
conditions of the Medicaid Drug Rebate program. Among other drug rebate requirements, drug
manufacturers must pay state Medicaid programs rebates on covered outpatient drugs and report
certain drug pricing information, such as their best price for selected drugs. Drug manufacturers
may dispute state drug rebate claims as far back as 1991. With certain exceptions, federal
Medicaid law requires states participating in the Medicaid rebate program to cover all outpatient
drugs offered by drug manufacturers that have signed drug pricing agreements with the Secretary.
Prenatal vitamins and fluorides are included in the rebate program. Through unadvertised
emergency-supply programs, some drug manufacturers provide certain patients with free
medication.
For the purpose of determining prescription drug rebates, Medicaid distinguishes between two
types of drugs: (1) single source drugs (generally, those still under patent) and innovator multiple
source drugs (drugs originally marketed under a patent or an original new drug application but for
which generic equivalents now are available); and (2) all other, non-innovator, multiple source
drugs.52 Rebates for the first drug category (i.e., drugs still under patent or those once covered by
patents) have two components: a basic rebate and an additional rebate. For these single source
and multiple source innovator drugs (i.e., brand-name drugs), Medicaid’s basic rebate is the larger
of (1) the greater of the drug’s average manufacturer’s price (AMP) or the best price for the same
period, or (2) a flat percentage (23.1%) of the drug’s quarterly AMP. Drug manufacturers also
owe an additional rebate when they raise a drug’s price faster than the inflation rate since the drug
was first introduced to the market. The additional rebate is added to the basic rebate to get a brand
drug’s total rebate. Medicaid rebates for generic drugs have only a basic rebate component,
without an adjustment when prices rise faster than inflation. For generic drugs, manufacturers’
Medicaid rebates are 13% of each drug’s AMP.
Manufacturers sometimes market their innovator single source products, or versions of these
products, as over-the-counter products, before their patents expire. When AMPs for over-thecounter sales are combined with AMPs for single source product sales, drug manufacturers’
Medicaid rebate obligations can be reduced because over-the-counter prices generally are lower
than the innovator product AMPs, thus reducing the innovator product AMPs.
Prior to the ACA, modifications to existing drugs—new dosages or formulations—generally were
considered new products for purposes of reporting AMPs to CMS. As a result, when drug makers
introduced new formulations of existing products, they sometimes would have lower additional
rebate obligations for these line-extension products. The ACA included a provision that required
manufacturers to pay Medicaid rebates (both basic and additional) on line-extension products as
if they were the original product.
52
For more information on these and other Medicaid prescription drug issues, see CRS Report R43778, Medicaid
Prescription Drug Pricing and Policy, by Cliff Binder.
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Authorized generics are drugs that the original patent holder has licensed to a generic drug
manufacturer to sell at a negotiated, reduced price that is higher than the price would be if the
drug were subject to competition from other generic drug manufacturers. Including authorized
generic sales with brand sales has the effect of lowering a product’s AMP, thereby decreasing
manufacturers’ Medicaid rebate obligations for those products (both the basic and the additional
rebate might be decreased).
Medicaid law requires the Secretary to establish federal upper limits when there are at least three
generically and pharmacologically equivalent drugs manufactured. Medicaid drug federal upper
limits help to ensure that federal payments do not exceed market rates. Medicaid drug federal
upper limits are calculated based on the weighted average price of all drugs identified by each
product billing code.
President’s Proposal
The President’s budget would introduce the following legislation to lower the cost of Medicaid
outpatient drugs and strengthen the Medicaid drug rebate program:
•
clarify that even when manufacturers convert innovator multiple source products
into over-the-counter products, those drugs still are to be considered brand-name
drugs for calculating Medicaid rebates;
•
collect an additional inflation rebate for generic drugs when manufacturers
increase prices faster than the inflation rate;
•
clarify that certain vitamins and fluorides are included as Medicaid-covered
outpatient drugs when prescribed for prenatal care;
•
make a technical correction to the ACA alternative rebate for new drug
formulations provision that amended federal Medicaid law to ensure that
Medicaid rebates are applicable to line-extension drugs;
•
limit to 12 quarters the time for manufacturers to dispute state utilization data,
which would provide an incentive to manufacturers and states to resolve
outstanding disputes;
•
require manufacturers to exclude authorized generic drug sales from AMP
calculations used as the basis to compute Medicaid rebate obligations for single
source drugs;
•
revise Medicaid federal upper limit calculations to include only generic drug
prices; and
•
exempt manufacturers’ emergency drug supply program sales from the Medicaid
rebate calculations and best price.
These proposals were modifications of provisions that were included in the President’s FY2015
budget.
The Administration estimates the eight policies under this proposal would save $6.3 billion over
the next 10 years.
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Promote Program Integrity for Medicaid Drug Coverage
Current Law
Medicaid drug rebates paid by manufacturers to Medicaid are calculated based on each
manufacturer’s AMP for each drug. AMP is defined in law. Studies and legal settlements between
drug manufacturers and state Medicaid programs have shown irregularities in how manufacturers
interpreted CMS guidance on what sales transactions should be included in AMP.53 States are
permitted to exclude coverage for certain drugs, but they also may cover these drugs.
Manufacturers sometimes include in their AMP calculations Medicaid-excluded drug transactions
as well as other non-FDA approved products. By including these excluded and non-approved
drug sales in their AMP calculation, manufacturers can reduce the amount of Medicaid rebates.
CMS has the authority to survey drug manufacturers, and the HHS OIG has the authority to audit
drug manufacturers. CMS and OIG monitor Medicaid prescription drug prices submitted by
manufacturers and the rebates these companies pay to the Medicaid program, which are shared
between states and the federal government. Even though drug manufacturers’ methodologies and
assumptions for reporting drug prices can affect rebates, CMS generally does not verify that
manufacturers’ documentation supports their prices, and it does not routinely check that their
price determinations are consistent with Medicaid statute, regulations, or the rebate agreement.54
Under federal law and regulation, outpatient prescription drugs may be covered by Medicaid if
the drugs were FDA approved.55 Federal regulations limit Medicaid drug reimbursement for a
drug prescribed off-label to those indications where a drug is listed in one or more of several
named compendia, which are reference documents that list how most drugs may be used both onand off-label (i.e., when drugs are prescribed for indications or dosage forms that were not FDA
approved). Even though current law requires drug manufacturers to list their products with the
FDA, not all drugs on the market are properly listed. Under federal law, individuals and entities
that participate in a federal health program can be subject to fines, program exclusion, and/or
criminal penalties for fraud, but these penalties are not specifically applicable to the Medicaid
drug rebate program.
President’s Proposal
The President’s budget includes the following policies that would promote program integrity for
Medicaid drug coverage:
•
require manufacturers that improperly reported in their AMP calculations drugs
not covered by Medicaid or not FDA approved to compensate states for any drug
rebate underpayments;
•
if cost effective, allow more regular audits and surveys of drug manufacturers to
ensure compliance with the Medicaid drug rebate agreements;
53
See Government Accountability Office (GAO), Medicaid Drug Rebate Program: Inadequate Oversight Raises
Concerns about Rebates Paid to States, GAO-05-102, February 2005.
54
Ibid.
55
For more information on the Food and Drug Administration’s (FDA’s) drug approval process, see CRS Report
R41983, How FDA Approves Drugs and Regulates Their Safety and Effectiveness, by Susan Thaul.
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•
require drug manufacturers to electronically list their products with the FDA in
order to be covered and reimbursed by Medicaid, which would align Medicaid
drug coverage requirements with Medicare’s requirements; and
•
increase penalties on drug manufacturers that knowingly report false information
under Medicaid drug rebate agreements that are used to calculate Medicaid
rebates.
This proposal was a modification of a proposal included in the President’s FY2015 budget.
The Administration estimates the policies under this proposal would save $10 million over the
next 10 years.
Increase Access to and Transparency of Medicaid Drug Pricing Data
Current Law
Section 6001 of the DRA amended the Social Security Act to require the Secretary to survey retail
pharmacy prices and appropriated $5 million annually for five years to fund the survey and other
reporting requirements. The retail price survey was to be a nationwide survey of average
consumer prices of outpatient drugs, net of all discounts and rebates (price concessions). To
obtain information on retail consumer prices and price concessions, CMS implemented a two-part
survey. Part I of the survey collected consumer price information, and part II collected
information on pharmacies’ acquisition costs. Acquisition cost is used to help states set reasonable
prescription drug payment rates. CMS retained a vendor to assist in the survey but suspended the
consumer price survey in July 2013 due to budget limitations.
Even though the Social Security Act gives the Secretary authority to survey wholesalers to verify
manufacturer prices when necessary, the statute does not provide the authority to collect
wholesale prices on a regular basis, nor does the authority apply the data collection to all
Medicaid-covered drugs. To determine if drug manufacturers are accurately reporting required
pricing information on AMP, average sales price, and, where appropriate, best price, it would be
necessary for CMS to collect wholesale acquisition cost data from drug wholesalers.
President’s Proposal
The President’s budget included the following policies to increase transparency and access to
Medicaid drug pricing data:
•
provide mandatory funding for five years ($6 million annually) to sustain the
nationwide pharmacy survey that incorporates retail drug prices paid by cash,
third-party insured, and Medicaid-insured consumers. The proposal also would
fund the collection of drug invoice prices paid by retail community pharmacies;
and
•
authorize the Secretary to survey wholesale acquisition costs for all Medicaidcovered drugs on a regular basis, which would enable CMS to verify AMPs
reported through drug wholesalers and to better set Medicaid drug federal upper
limits.
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This proposal was a modification of a proposal included in the President’s FY2015 budget.
The Administration estimates the policies under this proposal would save $30 million over the
next 10 years.
Estimated Cost/Savings for Medicaid Legislative Proposals
If these Medicaid proposals are implemented, the President’s budget estimates that total net
outlays for Medicaid would increase by $6.6 billion in FY2016 and by a cumulative $26.7 billion
over the next 10 years. Table 4 shows the estimated cost/savings for each legislative proposal in
Medicaid.
Table 4. Estimated Cost/Savings for Medicaid Legislative Proposals Included in the
President’s FY2016 Budget Proposal
(dollars in millions)
New (N),
Modified
(M), or
Repeated
(R) from the
President’s
FY2015
Budget
Administration’s Cost/Savings
Estimates
FY2016
FY2016FY2020
FY2016FY2025
Medicaid Benefits
Expand State Flexibility to Provide Benchmark Benefit
Packages
R
Require Coverage of Early and Periodic Screening,
Diagnostic, and Treatment for Children in Inpatient
Psychiatric Treatment Facilities
N
Provide Home- and Community-Based Waiver Services
to Children Eligible for Psychiatric Residential Treatment
Facilities
N
Require Full Coverage of Preventive Health and TobaccoCessation Services for Adults in Traditional Medicaid
R
Pilot Comprehensive Long-Term Care State Plan Option
N
Allow States to Develop Age-Specific Health Home
Programs
N
Allow Full Medicaid Benefits to All Individuals in a Homeand Community-Based Services State Plan Option
N
Expand Eligibility Under the Community First Choice
Option
N
Expand Eligibility for the 1915(i) Home- and CommunityBased Services State Plan Option
N
Create Pilot to Expand PACE Eligibility to Individuals
Between the Ages of 21 and 55a
R
—
—
—
30
180
425
0
597
1,625
95
431
754
0
2,345
4,085
200
570
1,010
1
15
38
238
1451
3,581
26
439
1,341
—
—
—
Medicaid Coverage
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New (N),
Modified
(M), or
Repeated
(R) from the
President’s
FY2015
Budget
Extend the Transitional Medical Assistance Program
Through CY2016
M
Permanently Extend “Express Lane” Eligibility Option for
Children
R
Allow Pregnant Women Choice of Medicaid Eligibility
Category
N
Create State Option to Provide 12-Month Continuous
Medicaid Eligibility for Adults
N
Extend the Qualified Individual Programa
R
Administration’s Cost/Savings
Estimates
FY2016
FY2016FY2020
FY2016FY2025
1,075
1,825
1,825
20
215
680
—
—
—
600
10,200
27,700
—
—
—
0
0
-3,290
-305
-1,780
-4,270
5,010
6,290
6,290
-276
-2,543
-6,325
-1
-5
-10
6
30
30
—
—
—
—
—
—
Savings from Program Integrityb
-19
-305
-700
Interactionsc
-84
-7,242
-8,055
$6,617
$12,713
$26,734
Medicaid Payments
Rebase Future Medicaid Disproportionate Share Hospital
Allotments
R
Limit Medicaid Reimbursement of Durable Medical
Equipment Based on Medicare Rates
R
Extend the Medicaid Primary Care Payment Increase
Through CY2016 and Include Additional Providers
M
Medicaid Prescription Drugs
Lower Medicaid Drug Costs and Strengthen the Medicaid
Drug Rebate Program
M
Promote Program Integrity for Medicaid Drug Coverage
M
Increase Access to and Transparency of Medicaid Drug
Pricing Data
M
Other
Ensure Retroactive Part D Coverage of Newly-Eligible
Low-Income Beneficiariesa
R
Integrate Appeals Process for Medicare-Medicaid
Enrolleesa
R
Total Proposals Impacting Medicaid
Source: Table created by CRS based on data from HHS, Fiscal Year 2016 Budget in Brief: Strengthening Health and
Opportunity for All Americans, February 2015.
Notes: Totals may not add due to rounding.
PACE: Program of All-Inclusive Care for the Elderly.
a.
These proposals impact both the Medicare and Medicaid programs. See the “Medicare Legislative
Proposals” section for descriptions of these legislative proposals.
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b.
See “Program Integrity Legislative Proposals” for descriptions of the program integrity legislative proposals
impacting Medicaid. Excludes savings not subject to pay-as-you-go (PAYGO) and excludes the proposal to
Expand Funding and Authority for the Medicaid Integrity Program, which is described in the “Program
Integrity Legislative Proposals” but accounted for in the tables in the “State Grants and Demonstrations
Legislative Proposals.”
c.
These interactions are legislative proposals for other departments or agencies that are estimated to have a
budgetary effect on Medicaid. The following is a list of the Medicaid Interactions in the President’s FY2016
budget request: extending CHIP funding through FY2019, establishing hold-harmless for federal poverty
guidelines, creating demonstration to address overprescription of psychotropic medications for foster care
children, extending Special Immigrant Visa Program, extending Supplemental Security Income time limits for
Qualified Refugees, modernizing child support, modifying length of exclusivity to facilitate faster
development of generic biologics, and prohibiting brand and generic drug manufacturers from delaying the
availability of new generics drugs and biologics.
Program Integrity Legislative Proposals
Medicare
Retain a Portion of Medicare Recovery Audit Recoveries to Implement Actions
That Prevent Fraud and Abuse
Current Law
Under Section 306 of the MMA, Congress authorized a three-year demonstration to test the
feasibility of using recovery audit contractors (RACs) that were paid solely on a contingency
basis to identify Medicare fee-for-service overpayments. The RAC demonstration was successful
and was converted to a permanent program by Section 302 of the Tax Relief and Healthcare Act
of 2006 (P.L. 109-432). RACs are responsible for reducing Medicare’s improper payment rates by
identifying underpayments and overpayments made to providers and recovering overpayments.
RACs are paid a percentage of the overpayments they recover from Medicare providers and
suppliers. In FY2013, RAC contractors for Medicare Parts A and B identified approximately $2.3
billion in claim corrections, $2.2 billion of which were overpayments and $102 million of which
were underpayments. Under current law, CMS may use RAC recoveries to administer the RAC
program but not for other purposes, such as implementing new system edits and provider
education and training.
President’s Proposal
This proposal would amend the Social Security Act to authorize the Secretary to use RAC
recoveries for other program integrity activities. This proposal was included in the President’s
FY2015 budget.
The Administration estimates this proposal would cost $2.8 billion over the next 10 years.
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Allow Prior Authorization for Medicare Fee-for-Service Items
Current Law
Under current law, Medicare covers DME, including power wheelchairs and other power mobility
devices, when it is determined to be medically necessary. There is a history of fraud and abuse
associated with DME and power mobility devices, wherein beneficiaries receive power mobility
devices that are not medically necessary or Medicare is charged for equipment that is never
delivered. The Secretary has the authority to require prior authorization for DME items. CMS
began a demonstration in 2012 that requires power mobility devices in seven states to receive
Medicare prior authorization before beneficiaries receive equipment. The demonstration was
extended to an additional 12 states in 2014.
Medicare also covers certain imaging services. Over the last decade, the growth of imaging
services provided under the Medicare program has exceeded those of most other Part B services.
A GAO study (GAO-12-966) found that “[f]rom 2004 through 2010, the number of self-referred
and non-self-referred advanced imaging services—magnetic resonance imaging (MRI) and
computed tomography (CT) services—both increased, with the larger increase among selfreferred services.” These and other findings raise concerns about whether advanced imaging
services are being used appropriately in the Medicare program.
President’s Proposal
The President’s budget proposal would extend the Secretary’s authority to require prior
authorization to all Medicare fee-for-service items. In addition, the proposal would require the
Secretary to impose prior authorization requirements for power mobility and advanced imaging
services. This proposal was included in the President’s FY2015 budget.
The Administration estimates this proposal would save $90 million over the next 10 years.
Allow Civil Monetary Penalties or Intermediate Sanctions for Providers and
Suppliers Who Fail to Update Enrollment Records
Current Law
Participating Medicare providers and suppliers are required to submit updated enrollment
information within specified time frames to comply with Medicare law. CMS uses provider and
supplier enrollment records to monitor provider status. Current provider records help to ensure
that providers that could pose a higher risk of fraudulent activity receive greater scrutiny when
applying and afterward in submitting reimbursement claims.
President’s Proposal
This provision in the President’s FY2016 budget would authorize the Secretary to impose civil
monetary penalties on providers and suppliers that fail to update enrollment records on a timely
basis. This proposal was included in the President’s FY2015 budget.
The Administration estimates this proposal would save $29 million over the next 10 years.
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Assess a Fee on Physicians and Practitioners Who Order Services or Supplies
Without Proper Documentation
Current Law
Section 6406(b) of the ACA required certain Medicare providers and suppliers at increased fraud
risk, including home health agencies (HHAs) and DME suppliers, to maintain and upon request
provide documentation to support services ordered for Medicare beneficiaries. In addition,
Section 6407(a)-(b) required providers and suppliers to ensure that Medicare beneficiaries for
whom their services were ordered had a recent face-to-face encounter with a physician (or certain
practitioners working with a physician) to determine the beneficiaries’ eligibility for an initial
episode of care. Physicians ordering services were required to document that those beneficiaries
seen during the face-to-face encounter met Medicare’s criteria for the ordered service. The faceto-face encounter was required to have occurred within 90 days prior to or within 30 days after
the start of care.
President’s Proposal
President’s FY2016 budget would allow the Secretary to assess an administrative fee on providers
for high-risk, high-cost claims, such as home health and DME, that were improperly documented.
The Secretary would assess the administrative fee only when the ordering provider’s
documentation for the service (such as documentation for the face-to-face encounter) was
insufficient to support the need for the service. There would be no administrative fee if the
documentation was adequate to support the services ordered by the provider and the services were
found to be reasonable and necessary. Under this proposal, the administrative fee for insufficient
documentation for higher-risk services would be set at $50 for Part B supplies or services and
$100 for Part A services. This proposal was not included in the President’s FY2015 budget.
The Administration estimates this proposal would have no budgetary effect over the next 10
years.
Establish Registration Process for Clearinghouses and Billing Agents
Current Law
Many Medicare providers contract with third parties to prepare, edit, and/or submit claims on
their behalves. These billing companies are referred to as clearinghouses and billing agents.
Unlike the Medicare providers that contract with them, billing agents are not required to obtain
provider identifiers or otherwise enroll as Medicare providers and suppliers. When billing agents
and clearinghouses submit provider claims to Medicare, CMS receives information only on the
provider, not on the entity actually submitting the reimbursement claim. CMS cannot identify or
otherwise monitor billing agents. Billing agents and their employees have access to patient and
provider information needed to access the Medicare system that could be misused without the
provider’s knowledge to submit false claims. CMS does not have authority to require billing
agents and other billing companies to register or to certify that their employees have not been
barred from participation in or otherwise sanctioned by Medicare. The ACA authorized the
Secretary to require billing agents and related entities that submit claims on behalf of Medicaid
providers to register with the Secretary and state Medicaid agency as determined by the Secretary.
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President’s Proposal
This proposal would expand the ACA’s provider screening activities by authorizing the Secretary
to establish a process for clearinghouses and billing agents that act on behalf of Medicare
suppliers and agents to register with Medicare. This proposal would align Medicare’s billing
agent requirements with the requirements for billing agents serving Medicaid providers. In
addition, this proposal would authorize the Secretary to charge billing companies an application
fee to register as new Medicare suppliers. This proposal was not included in the President’s
FY2015 budget.
The Administration estimates this proposal would have no budgetary effect over the next 10
years.
Allow Collection of Application Fees from Individual Providers
Current Law
Section 6401(a) of the ACA authorized the Secretary to impose an application and revalidation
fee on institutional providers that wanted to enroll or reenroll as Medicare providers. The
Secretary was authorized to use the Medicare institutional application fee to offset the cost of
program integrity activities, including provider enrollment and screening. The Medicare
institutional provider application fee is adjusted annually based on changes to the consumer price
index for all urban consumers. The CY2015 Medicare application fee was $553, but the Secretary
was authorized to waive the fee when it might pose a hardship to the provider.
President’s Proposal
This proposal would authorize the Secretary to require noninstitutional Medicare suppliers and
providers to pay application fees when enrolling or revalidating as Medicare providers. The
noninstitutional application fee would start at $50 and then be adjusted annually for inflation. The
Secretary also would be authorized under this provision to grant hardship exemptions from the
enrollment revalidation fee at the Secretary’s discretion. The funds collected from the Medicare
noninstitutional provider application/revalidation fee would be used to help support provider
screening activities. This proposal was not included in the President’s FY2015 budget.
The Administration estimates this proposal would have no budgetary effect over the next 10
years.
Increase the Amount of the Home Health Agency Surety Bond
Current Law
Medicare covers part-time or intermittent home health services under both Parts A and B.56 Home
health services include skilled nursing services, physical and occupational therapy, speech
56
For more information on Medicare home health services, see CRS Report R42998, Medicare Home Health Benefit
Primer: Benefit Basics and Issues, by Scott R. Talaga.
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therapy, medical social services, and home health aide services. Home health service providers
consistently have been associated with high improper payment rates and other vulnerabilities.57
HHS has been unable to collect most improper payments from HHAs. BBA97 required the
Secretary to impose surety bonds on Medicare HHAs. Regulations promulgated in 1998 set the
surety bond amount at the greater of $50,000 or 15% of the annual amount paid in Medicare
claims. Those regulations are pending. Congressional oversight agencies such as OIG and GAO
recommended that CMS require surety bonds that would help to improve overpayment recoveries
from HHAs.
President’s Proposal
The proposal would increase the required surety bond amount for Medicare HHAs, making it no
less than $50,000 and commensurate with the volume of payments made by Medicare to an HHA.
This policy would align the HHA surety bond requirements with Medicare’s requirements for
DME suppliers and better ensure that potential overpayments made to new HHAs could be
collected. This proposal was not included in the President’s FY2015 budget.
The Administration estimates this proposal would have no budgetary effect over the next 10
years.
Medicaid
Expand Funding and Authority for the Medicaid Integrity Program
Current Law
Program integrity initiatives are designed to combat fraud, waste, and abuse. This includes
processes directed at reducing improper payments, as well as activities intended to prevent,
detect, investigate, and ultimately prosecute health care fraud and abuse. Program integrity
encompasses a broad range of activities intended to ensure proper payments are made. Among
other changes, the DRA amended the Social Security Act to add Section 1936, which established
the Medicaid Integrity Program (MIP). Section 1936 appropriated as much as $75 million
annually in MIP funding to support and enhance state program integrity efforts by expanding and
sustaining national activities such as provider audits, overpayment identification, payment
integrity, and quality-of-care education. Section 1936, as originally enacted, restricted how MIP
funding could be used and required that the Secretary employ 100 full-time equivalent staff.
Moreover, Section 1936 restricted MIP funding to contractor payments and limited the
Secretary’s ability to use MIP funds for equipment, travel, benefits, training, and salaries.
President’s Proposal
The President’s budget would increase MIP funding by $0.6 billion over 10 years and increase the
Secretary’s flexibility to use MIP funding for a broader range of MIP activities. The additional
investment would start with $25 million in FY2016 and gradually increase to an additional $0.1
57
HHS, Office of Inspector General, Surety Bonds Remain an Unused Tool to Protect Medicare from Home Health
Overpayments (OEI-03-12-00070), September 2012.
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billion for MIP activities in FY2025. Thereafter, the total MIP appropriation would be adjusted
annually for inflation by the consumer price index. This new MIP funding would support the
expansion of the Medicaid Financial Management program reviews of state financing practices;
update the Medicaid claims and oversight systems to enhance auditing; and promote other efforts
to assist states in fighting fraud, waste, and abuse. This proposal also would expand the MIP’s
authority to increase program flexibility in protecting state and federal resources. This proposal
was not included in the President’s FY2015 budget. (This proposal affects both the program
integrity and the state grants and demonstrations portion of the CMS budget.)
The Administration estimates this proposal would cost $0.6 billion over the next 10 years.
Support Medicaid Fraud Control Units for the Territories
Current Law
Different federal Medicaid rules apply to the U.S. territories than to the states and the District of
Columbia.58 For example, federal funding for states is an open-ended entitlement, but Medicaid
funding for the territories is a capped allotment. U.S. territories administer their Medicaid
programs similarly to states, although Medicaid rules applicable to the territories differ from
those applicable to states. Territories are not required to cover the same eligibility groups and they
use different financial standards to determine eligibility. Territories generally have tailored their
Medicaid programs to maximize federal funds to provide as many services as possible. In 2005, a
GAO report reviewing the Medicaid eligibility and benefit coverage in the territories found that
some of the territories did not meet the Medicaid eligibility requirements and that none of the
territories covered all the Medicaid mandatory benefits.59
Medicaid Fraud Control Units (MFCUs) are separate state government entities certified to
investigate and prosecute health care providers suspected of defrauding a state’s Medicaid
program. In addition, MFCUs have authority to review complaints about nursing home resident
neglect or abuse and patient abuse complaints in other health care facilities receiving Medicaid
payments. Subject to limitations, MFCUs are funded partially through a grant from the HHS OIG
(75%) and partially with matching state funds (25%). Currently, no territories operate MFCUs.
President’s Proposal
The President’s budget would encourage territories to establish MFCUs by exempting federal
support for MFCUs from the territories’ Medicaid funding cap and by exempting territories from
the statutory ceiling on quarterly federal payments for the units. This proposal was included in the
President’s FY2015 budget.
The Administration estimates this proposal would cost $0.01 billion over the next 10 years.
58
The five territories are American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Puerto Rico,
and the Virgin Islands.
59
Government Accountability Office, U.S. Insular Areas: Multiple Factors Affect Federal Health Care Funding,
GAO-06-75, October 14, 2005.
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Track High Prescribers and Utilizers of Prescription Drugs in Medicaid
Current Law
Medicaid statute gives states broad authority to implement prescription drug monitoring
activities, although not all states have adopted these activities. Several states have implemented
voluntary or mandatory “lock-in” programs that require Medicaid beneficiaries who use
prescription drugs at levels above certain medically necessary utilization guidelines to obtain
services only from designated providers, such as one pharmacy or a specific primary care
provider. States also have linked Medicaid data with statewide prescription drug monitoring
programs to help identify controlled substance abuse. In addition to Medicaid authority to impose
restrictions, some states have passed laws to increase penalties on individuals who participate in
diverting Medicaid drugs from medically necessary uses to drug abuse or fraudulent activities.
President’s Proposal
The President’s budget would require states to monitor high-risk Medicaid drug billing to identify
and remediate prescribing and utilization patterns that could indicate potential abuse or excessive
prescription drug utilization. States could choose one or more drug classes subject to overuse or
abuse, and states would be required to develop and review or update their high-utilization
remediation plan. This proposal was included in the President’s FY2015 budget.
The Administration estimates this proposal would save $0.7 billion over the next 10 years.
Consolidate Redundant Error Rate Measurement Programs
Current Law
The Improper Payments Information Act of 2002 (IPIA; P.L. 107-300) required federal agencies
to review annually the programs they oversee that may be susceptible to erroneous payments, in
order to estimate improper payments and report the estimates to Congress before March 31 of the
following year. In addition, if estimated improper payments exceeded $10 million per year, IPIA
required federal agencies to identify ways to reduce erroneous payments. In response to IPIA,
CMS implemented the Medicaid Payment Error Rate Measurement program, which estimates
improper Medicaid and CHIP payments. In addition to Payment Error Rate Measurement, federal
Medicaid law requires states to assess Medicaid eligibility quality control by calculating and
reporting erroneous Medicaid payment and eligibility determination rates. States have discretion
to develop and implement their own Medicaid eligibility quality-control methodologies. Under
CMS Payment Error Rate Measurement regulations, states now have the option to use Payment
Error Rate Measurement to fulfill the Medicaid eligibility quality-control requirement.
President’s Proposal
The President’s budget would authorize the Secretary to consolidate the Medicaid eligibility
quality-control and Payment Error Rate Measurement programs. This proposal was included in
the President’s FY2015 budget.
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The Administration estimates that this proposal would have no budgetary effect over the next 10
years.
Expand Medicaid Fraud Control Unit Review to Additional Care Settings
Current Law
MFCUs are separate state government entities certified to investigate and prosecute health care
providers suspected of defrauding the state’s Medicaid program. MFCUs also have authority to
review complaints about nursing home resident neglect or abuse and patient abuse complaints in
other health care facilities receiving Medicaid payments. MFCUs may review complaints alleging
misappropriation of patient funds. MFCUs may not receive federal matching funds for patient
abuse or neglect investigations that occur in noninstitutional settings, such as home- and
community-based settings.
President’s Proposal
The President’s budget would allow MFCUs to receive federal matching funds for the
investigation and prosecution of abuse and neglect in noninstitutional settings. This proposal was
included in the President’s FY2015 budget.
The Administration estimates this proposal would have no budgetary effect over the next 10
years.
Prevent Use of Federal Funds to Pay State Share of Medicaid or CHIP
Current Law
Both Medicaid and CHIP are funded jointly by the federal government and states. The federal
government’s share of most Medicaid expenditures is called the federal medical assistance
percentage, and federal CHIP matching funds are paid to states at an enhanced federal medical
assistance percentage. The federal government provides broad guidelines to states regarding
allowable funding sources for the state share (also referred to as the nonfederal share) of
Medicaid and CHIP expenditures. However, to a large extent, states are free to determine how to
fund their share of Medicaid expenditures. Federal regulations stipulate that the state share of
Medicaid and CHIP cannot be funded with federal funds.
President’s Proposal
The President’s budget would codify the principle that states are prohibited from using federal
funds to pay the state share of Medicaid or CHIP, unless specific exceptions were authorized in
law. This proposal was included in the President’s FY2015 budget.
The Administration estimates this proposal would have no budgetary impact over the next 10
years.
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Medicare and Medicaid
Permit Exclusion from Federal Health Care Programs If Affiliated with
Sanctioned Entities
Current Law
The OIG has authority to exclude health care providers (individuals and entities) convicted of
crimes from participation in federal health care programs.60 The OIG’s exclusion authority is
mandatory in some circumstances (depending on the severity of the conviction) and permissive in
others where OIG has discretion whether or not to exclude an individual from federal health care
program participation.61 The ACA extended the OIG’s permissive exclusion authority to apply to
individuals or entities that knowingly make false statements, omission, or misrepresentations of
material facts in federal health care program enrollment applications, agreements, bids, or
contracts to participate or enroll as a provider or supplier including explicit applicability to
Medicare Advantage plans, prescription drug plans, and these organizations’ providers and
suppliers. Under current law, a loophole exists where entities and corporate officers, managing
employees, and owners can evade federal health care program exclusions by resigning from a
sanctioned entity. This loophole extends to entities and individuals with relationships to a
sanctioned entity or individual.
President’s Proposal
The President’s budget would further expand OIG’s authority to exclude individuals and entities
from federal health programs if they were affiliated with sanctioned entities. The proposal would
eliminate the loophole that allows the officers, managing employees, or owners of sanctioned
entities to evade exclusion from federal health programs by resigning their positions or divesting
their ownership interests. This proposal was included in the President’s FY2015 budget.
The Administration estimates this proposal would save $70 million over the next 10 years.
Establish Gifting Authority for the Healthcare Fraud Prevention Partnership
Current Law
The Healthcare Fraud Prevention Partnership is a voluntary public-private partnership between
the federal government, state officials, law enforcement, private health insurance plans and their
national associations, and healthcare antifraud associations. The Healthcare Fraud Prevention
Partnership was established in September 2012 when the Secretary and Attorney General signed
its charter. Its intent is to facilitate the exchange of information and data to detect and prevent
health care fraud. Under current law, federal funding for the Healthcare Fraud Prevention
60
For exclusion purposes, federal health care programs are defined as any plan or program that provides health
benefits, whether directly, through insurance, or otherwise, which is funded directly in whole or part, by the United
States Government. (§1128B(f) of the Social Security Act).
61
There are convictions that can result in mandatory exclusion and 16 offenses for which the Secretary or OIG may use
permissive authority to exclude individuals or entities.
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Partnership comes from the Health Care Fraud and Abuse Control (HCFAC) account, but there
are limitations on how HCFAC account expenditures may be used and HCFAC may accept gifts
made only for unspecified purposes.
President’s Proposal
The President’s budget would authorize the Secretary to accept gifts to the Medicare trust funds
for particular activities funded through the HCFAC account, such as the Healthcare Fraud
Prevention Partnership. This proposal would allow for gifts to be made to support the Healthcare
Fraud Prevention Partnership directly, and it would allow both public and private partners to
support the antifraud program. This proposal was not included in the President’s FY2015 budget.
The Administration estimates this proposal would have no budgetary impact over the next 10
years.
Strengthen Penalties for Illegal Distribution of Beneficiary
Identification Numbers
Current Law
There are no specific penalties for selling, trading, bartering, or otherwise distributing beneficiary
or identification numbers or billing privileges. Beneficiary identification numbers and provider or
supplier billing privileges could be used to submit fraudulent claims to federal health care
programs.
President’s Proposal
The President’s budget proposal would strengthen penalties for knowingly distributing Medicare,
Medicaid, or CHIP beneficiaries’ identification or billing privileges. This proposal was included
in the President’s FY2015 budget.
The Administration estimates this proposal would have no budgetary impact over the next 10
years.
Estimated Cost/Savings for Program Integrity Legislative Proposals
If these program integrity proposals are implemented, the President’s budget estimates that total
spending for program integrity would increase by $0.1 billion in FY2016 and by a cumulative
$2.4 billion over the next 10 years. Table 5 shows the estimated cost/savings for each legislative
proposal for program integrity.
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Table 5. Estimated Cost/Savings for Program Integrity Legislative Proposals
Included in the President’s FY2016 Budget Proposal
(dollars in millions)
New (N), Modified
(M), or Repeated
(R) from the
President’s
FY2015 Budget
Administration’s Cost/Savings
Estimates
FY2016
FY2016FY2020
FY2016FY2025
$141
$1,109
$2,758
—
-40
-90
-1
-11
-29
—
—
—
—
—
—
—
—
—
—
—
—
25
180
580
1
5
10
-20
-310
-710
—
—
—
—
—
—
—
—
—
—
-20
-70
—
—
—
—
—
—
$146
$913
$2,439
Medicare
Retain a Portion of Medicare Recovery Audit Recoveries
to Implement Actions That Prevent Fraud and Abuse
R
Allow Prior Authorization for Medicare Fee-for-Service
Items
R
Allow Civil Monetary Penalties or Intermediate Sanctions
for Providers and Suppliers Who Fail to Update
Enrollment Records
R
Assess a Fee on Physicians and Practitioners Who Order
Services or Supplies Without Proper Documentation
N
Establish Registration Process for Clearinghouses and
Billing Agents
N
Allow Collection of Application Fees from Individual
Providers
N
Increase the Amount of the Home Health Agency Surety
Bond
N
Medicaid
Expand Funding and Authority for the Medicaid Integrity
Program
N
Support Medicaid Fraud Control Units for the Territories
R
Track High Prescribers and Utilizers of Prescription
Drugs in Medicaid
R
Consolidate Redundant Error Rate Measurement
Programs
R
Expand Medicaid Fraud Control Unit Review to
Additional Care Settings
R
Prevent Use of Federal Funds to Pay State Share of
Medicaid or CHIP
R
Medicare and Medicaid
Permit Exclusion from Federal Health Care Programs If
Affiliated with Sanctioned Entities
R
Establish Gifting Authority for the Healthcare Fraud
Prevention Partnership
N
Strengthen Penalties for Illegal Distribution of Beneficiary
Identification Numbers
R
Total Program Integrity Savings from Legislative Proposalsa
Source: Table created by CRS based on data from HHS, Fiscal Year 2016 Budget in Brief: Strengthening Health and
Opportunity for All Americans, February 2015.
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Notes: Totals may not add due to rounding.
a.
Note that Table 1 shows program integrity savings of $0.9 billion because that figure is the overall program
integrity savings, which includes the impact of savings not subject to pay-as-you-go (PAYGO) in addition to
the legislative proposals.
CHIP Legislative Proposals
Extend CHIP Funding Through FY2019
Current Law
Federal funding for CHIP is provided through FY2015 with appropriation amounts specified in
statute. Those amounts represent the overall annual ceiling on federal CHIP spending to the
states, the District of Columbia, and the territories. CHIP was established as part of BBA97. Since
that time, other federal laws have extended federal funding. For instance, CHIPRA provided
federal funding for FY2009 through FY2013, and the ACA provided federal funding for FY2014
and FY2015.
President’s Proposal
The President’s budget would extend federal CHIP funding through FY2019. This proposal was
not included in the President’s FY2015 budget.
The Administration estimates this proposal would cost $33.0 billion over the next 10 years.
Extend Child Enrollment Contingency Fund
Current Law
State allotments are the federal funds allocated to each state for the federal share of its CHIP
expenditures. State CHIP allotment funds are provided annually, and the funds are available to
states for two years. If a state’s CHIP allotment for the current year, in addition to any allotment
funds carried over from the previous year, is insufficient to cover the projected CHIP
expenditures for the current year, a few different shortfall funding sources are potentially
available. These sources include Child Enrollment Contingency Funds, redistribution funds, and
Medicaid funds. For FY2009 through FY2015, Child Enrollment Contingency Funds have been
available to states with both a funding shortfall (i.e., current-year CHIP allotment plus any unused
CHIP allotment funds from the previous year are insufficient to cover the federal share of the
state’s CHIP program) and CHIP enrollment for children exceeding a target level.
President’s Proposal
The President’s budget would extend the Child Enrollment Contingency Fund through FY2019.
This proposal was not included in the President’s FY2015 budget.
The Administration estimates this proposal would cost $0.2 billion over the next 10 years.
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Extend Performance Bonus Fund
Current Law
CHIPRA established performance bonus payments for states that increased their Medicaid (not
CHIP) enrollment among low-income children above a defined baseline. From FY2009 through
FY2013, performance bonus payments were available to states. To qualify for bonus payments,
states had to have (1) implemented five out of eight specified enrollment and retention provisions
and (2) achieved state-specific targets for increasing Medicaid enrollment among children. There
were two tiers of bonus payments depending on how much a state’s enrollment exceeded the
baseline. From FY2009 through FY2013, CHIPRA performance bonus payments totaled $1.1
billion over the 5 years and went to 27 states. Some states received payments in more than one
year. The performance bonus payments expired after FY2013.
President’s Proposal
The President’s budget would extend the performance bonus payments through FY2019. This
proposal was not included in the President’s FY2015 budget.
The Administration estimates this proposal would cost $1.4 billion over the next 10 years.
Estimated Cost/Savings for CHIP Legislative Proposals
If these CHIP proposals are implemented, the President’s budget estimates that total net outlays
for CHIP would increase by $0.6 billion in FY2016 and by a cumulative $35.1 billion over the
next 10 years. Table 6 shows the estimated cost/savings for each legislative proposal in CHIP.
Table 6. Estimated Cost/Savings for CHIP Legislative Proposals Included in the
President’s FY2016 Budget Proposal
(dollars in millions)
New (N),
Modified
(M), or
Repeated
(R) from the
President’s
FY2015
Budget
Administration’s Cost/Savings
Estimates
FY2016
FY2016FY2020
FY2016FY2025
Extend CHIP Funding Through FY2019
N
$500
$33,000
$33,000
Child Enrollment Contingency Fund
N
50
200
200
Extend Performance Bonus Fund
N
—
1,250
1,400
Permanently Extend “Express Lane” Eligibility for
Childrena
R
10
250
490
$560
$34,700
$35,090
Total Changes in Outlays from Legislative Proposals
Source: Table created by CRS based on data from HHS, Fiscal Year 2016 Budget in Brief: Strengthening Health and
Opportunity for All Americans, February 2015.
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Notes: Totals may not add due to rounding.
CHIP: State Children’s Health Insurance Program.
a.
This legislative proposal impacts both Medicaid and CHIP. See the “Medicaid Coverage” section for a
description of this legislative proposal.
State Grants and Demonstrations Legislative
Proposals
Create Demonstration to Address Overprescription of Psychotropic
Medications for Children in Foster Care
Current Law
Nearly all children in foster care are eligible for Medicaid and generally are entitled to the same
set of Medicaid benefits as other children enrolled in Medicaid, including coverage for
psychotropic medications (i.e., prescribed drugs that affect the brain chemicals related to mood
and behavior to treat a variety of mental health conditions). Certain factors, such as longer
involvement with the child welfare agency, being of school age, and living in a group setting,
forecast a greater chance that a child in foster care will take psychotropic medications.62 Little
research has been conducted to show that psychotropic medications are effective and safe for
children with mental health disorders. Federal child welfare law (Title IV-B, Subpart 1 of the
Social Security Act) requires states to provide HHS with information about protocols they have in
place for the appropriate use and monitoring of psychotropic medications.
President’s Proposal
The President’s budget proposes a five-year joint initiative between CMS and HHS’s
Administration for Children and Families, which administers child welfare programs and
activities. This proposal would provide performance-based incentive payments to states through
Medicaid to reduce reliance on psychotropic medications for children in foster care by
encouraging the use of evidence-based screening, assessment, and treatment of trauma and mental
health disorders. This proposal is paired with another legislative proposal in the Administration
for Children and Families to support state efforts to build provider and system capacity that
would receive separate funding. This proposal was included in the President’s FY2015 budget.
The Administration estimates this proposal would cost $0.5 billion over the next 10 years.
62
Ramesh Raghavan et al., “Psychotropic Medication Use in a National Probability Sample of Children in the Child
Welfare System,” Journal of Child and Adolescent Psychopharmacology, vol. 15, no. 1, 2005, p. 97.
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Extend and Improve the Money Follows the Person Demonstration
Current Law
Under the Money Follows the Person demonstration, HHS is authorized to award competitive
grants to states to transition institutionalized Medicaid beneficiaries into community-based
residential settings with the goal of increasing the use of Medicaid HCBS. Money Follows the
Person was established under the DRA and was extended by Section 2403 of the ACA, which
also appropriated an additional $2.25 billion through FY2016. For each eligible Medicaid
beneficiary who is transitioned, the state Medicaid program receives an increased federal
Medicaid matching rate for 12 months. Eligible beneficiaries must reside in an institution for at
least 90 consecutive days and continue to require the level of care provided in an institution.
Medicare-covered days for short-term rehabilitative services do not count toward the 90-day
period.
President’s Proposal
The President’s budget proposes to extend the Money Follows the Person demonstration through
FY2020 within the existing appropriation. The proposal would authorize funds to be used to
prevent individuals from entering an institution rather than only transitioning individuals from an
institutional setting to a community-based setting. It also would reduce the institutional
requirement from 90 days to 60 days and allow Medicare-covered days to count toward this
requirement. Finally, the proposal would allow individuals in certain mental health facilities to
transition to community-based residential settings. This proposal was included in the President’s
FY2015 budget.
The Administration estimates this proposal would have no budgetary impact over the next 10
years.
Estimated Cost/Savings for State Grants and Demonstrations
Legislative Proposals
If these state grants and demonstrations proposals are implemented, the President’s budget
estimates that spending for state grants and demonstrations would increase by $0.6 billion over
the next 10 years. Table 7 shows the estimated cost/savings for each legislative proposal in state
grants and demonstrations.
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Table 7. Estimated Cost/Savings for State Grants and Demonstrations Legislative
Proposals Included in the President’s FY2016 Budget Proposal
(dollars in millions)
New (N),
Modified
(M), or
Repeated
(R) from the
President’s
FY2015
Budget
Create Demonstration to Address Overprescription of
Psychotropic Medications for Children in Foster Care
R
Expand Funding and Authority for the Medicaid
Integrity Programa
N
Extend and Improve the Money Follows the
Person Demonstration
R
Total Changes in Outlays from Legislative Proposals
Administration’s Cost/Savings
Estimates
FY2016
FY2016FY2020
FY2016FY2025
—
$390
$500
25
180
580
—
—
—
$25
$570
$1,080
Source: Table created by CRS based on data from HHS, Fiscal Year 2016 Budget in Brief: Strengthening Health and
Opportunity for All Americans, February 2015.
Notes: Totals may not add due to rounding.
a.
This legislative proposal impacts both the program integrity and the state grants and demonstrations
sections of CMS. See the “Program Integrity Legislative Proposals” section for description of this legislative
proposal.
Program Management Legislative Proposals
Provide Mandatory Administrative Resources for Implementation
Current Law
The program management portion of the CMS budget includes funding for the administration of
Medicare, Medicaid, CHIP, and other CMS activities. The program management activities
include both discretionary and mandatory appropriations. Under current law, the mandatory
program management funding ($0.1 billion) was established by the following five laws: the ACA,
ARRA, the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA; P.L. 110275), PAMA, and the Improving Medicare Post-Acute Care Transformation Act of 2014 (P.L.
113-185).
President’s Proposal
The President’s budget would increase mandatory funding for program management by $0.4
billion for implementation of the mandatory health care proposals in the President’s budget. CMS
plans to use this funding to implement systems changes and process improvements needed to
generate additional savings, improve efficiency and enhance program integrity in a timely
manner. This proposal was included in the President’s FY2015 budget.
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In addition, the President’s budget would increase mandatory funding for program management
by $0.6 billion to implement the reform Medicare physician payments and accelerate physician
participation in high-quality and efficient health care delivery systems (discussed in “Medicare
Legislative Proposals.” This proposal was not included in the President’s FY2015 budget.
The Administration estimates these two proposals would cost $1.0 billion over the next 10 years.
Invest in CMS Quality Measurement
Current Law
Under current law, two provisions authorize specified quality and performance measurement
duties for a contracted consensus-based entity. Section 183 of MIPPA (Section 1890 of the Social
Security Act) requires the Secretary to have a contract with a consensus-based entity (e.g., the
National Quality Forum) to carry out specified performance-improvement and qualitymeasurement duties. These duties include, among others, priority setting, measure endorsement,
measure maintenance, convening multi-stakeholder groups to provide input on the selection of
quality measures and national priorities, and annual reporting to Congress. Section 3014 of the
ACA added new duties for the consensus-based entity and required the Secretary to establish a
pre-rulemaking process to select quality measures for use in federal health programs. This process
involves duties shared between the consensus-based entity and the Secretary and includes
gathering multi-stakeholder input; making measures under consideration available to the public,
transmitting the input of multi-stakeholder groups to the Secretary, and publishing the rationale
for the use of any quality measure in the Federal Register. Under current law, funding for these
sections will expire on March 31, 2015.
President’s Proposal
The President’s budget would extend funding for the consensus-based entity to carry out the
duties established under both Section 183 of MIPPA (Section 1890 of the Social Security Act) and
Section 3014 of the ACA (Section 1890A of the Social Security Act). It would provide $30
million for each fiscal year from FY2016 through FY2018, with funds available until expended.
The proposal does not specify the allocation of funding between the duties in the two sections.
This proposal was included in the President’s FY2015 budget.
The Administration estimates this proposal would cost $90 million over the next 10 years.
Allow CMS to Reinvest Civil Monetary Penalties Recovered from Home
Health Agencies
Current Law
Section 1891 of the Social Security Act requires Medicare HHAs as a condition of participation
to comply with certain requirements, such as quality of care and safety standards. To verify an
HHA’s compliance with Medicare’s conditions of participation, CMS contracts with each state
survey agency to conduct a recertification survey every three years. HHAs that are out of
compliance can be cited for deficiencies and face intermediate sanctions, such as directed plans of
correction and temporary management changes. Beginning July 1, 2014, intermediate sanctions
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for noncompliant HHAs included suspension of Medicare payments for new patient admissions
and civil monetary penalties. Unless otherwise specified, Medicare law requires that civil
monetary penalties levied and collected are returned to the Medicare trust funds. However,
Section 6111 of the ACA permitted the Secretary to retain a portion of civil monetary penalties
levied against noncompliant SNFs to support initiatives that improve the quality of SNF care.
President’s Proposal
The President’s budget would allow civil monetary penalties collected from HHAs to be retained
and invested for activities to improve the quality of care of patients receiving home health
services. This proposal was included in the President’s FY2015 budget.
The Administration estimates these two proposals would cost $10 million over the next 10 years.
Allow CMS to Assess a Fee on Medicare Providers for Payments Subject to the
Federal Levy Program
Current Law
Under the Federal Payment Levy Program, the Internal Revenue Service and the Department of
the Treasury collect overdue taxes and non-tax debts through a continuous levy on certain federal
payments disbursed by the Financial Management Service, including Medicare fee-for-service
payments. CMS may reduce federal payments subject to the levy by 15%, or by the exact amount
of the tax owed if it is less than 15% of the payment. CMS also may reduce federal payments
subject to the non-tax levy by 100%, or by the exact amount of the non-tax debt owed if it is less
than 100% of the payment.
President’s Proposal
The President’s budget would authorize CMS to assess a fee to offset the administrative costs of
the Federal Payment Levy Program. The Department of the Treasury would continue to receive
the full amount of the levy, and Medicare providers would be required to pay CMS fees to cover
administrative costs for operating the Federal Payment Levy Program, which are estimated to be
$2 million in FY2016. This proposal was included in the President’s FY2015 budget.
The Administration estimates this proposal would have no budgetary impact over the next 10
years.
Estimated Cost/Savings for Program Management Legislative Proposals
If these program management proposals are implemented, the President’s budget estimates that
spending for program management would increase by $0.1 billion in FY2016 and by a
cumulative $1.1 billion over the next 10 years. Table 8 shows the estimated cost/savings for each
legislative proposal in program management.
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Table 8. Estimated Cost/Savings for Program Management Legislative Proposals
Included in the President’s FY2016 Budget Proposal
(dollars in millions)
New (N),
Modified
(M), or
Repeated
(R) from the
President’s
FY2015
Budget
Provide Mandatory Administrative Resources for
Implementation
N
Invest in CMS Quality Measurement
R
Allow CMS to Reinvest Civil Monetary Penalties
Recovered from Home Health Agencies
R
Allow CMS to Assess a Fee on Medicare Providers for
Payments Subject to the Federal Levy Program
R
Total Changes in Outlays from Legislative Proposals
Administration’s Cost/Savings
Estimates
FY2016
FY2016FY2020
FY2016FY2025
$85
$970
$1,000
30
90
90
1
5
10
—
—
—
$116
$1,065
$1,100
Source: Table created by CRS based on data from HHS, Fiscal Year 2016 Budget in Brief: Strengthening Health and
Opportunity for All Americans, February 2015.
Notes: Totals may not add due to rounding.
CMS: Centers for Medicare & Medicaid Services.
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Appendix. List of Abbreviations
ACA: The Patient Protection and Affordable Care Act (P.L. 111-148, as amended)
ACO: Accountable Care Organizations
ALS: Amyotrophic Lateral Sclerosis
AMP: Average Manufacturers’ Price
ARRA: The American Recovery and Reinvestment Act of 2009 (P.L. 111-5)
ASP: Average Sales Price
BBA97: Balanced Budget Act of 1997 (P.L. 105-33)
CAH: Critical Access Hospital
CHIP: State Children’s Health Insurance Program
CHIPRA: Children’s Health Insurance Program Reauthorization Act (P.L. 111-3)
CMS: Centers for Medicare & Medicaid Services
CT: Computed Tomography
DME: Durable Medical Equipment
DRA: Deficit Reduction Act of 2005 (P.L. 109-171)
DSH: Disproportionate Share Hospital
EPSDT: Early and Periodic Screening, Diagnostic and Treatment
ESRD: End-Stage Renal Disease
FDA: Food and Drug Administration
FPL: Federal Poverty Level
GAO: Government Accountability Office
GDP: Gross Domestic Product
HCBS: Home- and Community-Based Services
HCFAC: Health Care Fraud and Abuse Control
HHA: Home Health Agency
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HHS: U.S. Department of Health & Human Services
IPAB: Independent Payment Advisory Board
IPIA: Improper Payments Information Act of 2002 (P.L. 107-300)
IRF: Inpatient Rehabilitation Facility
LIS: Low-Income Subsidy
LTCH: Long-Term Care Hospital
MA: Medicare Advantage
MA-PD: Medicare Advantage Plans with a Prescription Drug Component
MedPAC: Medicare Payment Advisory Commission
MFCU: Medicaid Fraud Control Unit
MIP: Medicaid Integrity Program
MIPPA: Medicare Improvements for Patients and Providers Act of 2008 (P.L. 110-275)
MMA: Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (P.L. 108173)
MRI: Magnetic Resonance Imaging
OIG: Department of Health & Human Services Office of Inspector General
PACE: Program of All-Inclusive Care for the Elderly
PAMA: Protecting Access to Medicare Act of 2014 (P.L. 113-93)
PAYGO: Pay-As-You-Go
PDP: Prescription Drug Plans
PPS: Prospective Payment System
QI: Qualified Individuals
RAC: Recovery Audit Contractors
SGR: Sustainable Growth Rate
SNF: Skilled Nursing Facility
SSI: Supplemental Security Income
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TMA: Transitional Medical Assistance
Author Contact Information
Alison Mitchell, Coordinator
Analyst in Health Care Financing
[email protected], 7-0152
Suzanne M. Kirchhoff
Analyst in Health Care Financing
[email protected], 7-0658
Kirstin B. Blom, Coordinator
Analyst in Health Care Financing
[email protected], 7-2397
Paulette C. Morgan
Specialist in Health Care Financing
[email protected], 7-7317
Patricia A. Davis, Coordinator
Specialist in Health Care Financing
[email protected], 7-7362
Carol Rapaport
Analyst in Health Care Financing
[email protected], 7-7329
Evelyne P. Baumrucker
Analyst in Health Care Financing
[email protected], 7-8913
Amanda K. Sarata
Specialist in Health Policy
[email protected], 7-7641
Cliff Binder
Analyst in Health Care Financing
[email protected], 7-7965
Scott R. Talaga
Analyst in Health Care Financing
[email protected], 7-5956
Kirsten J. Colello
Specialist in Health and Aging Policy
[email protected], 7-7839
Sibyl Tilson
Specialist in Health Care Financing
[email protected], 7-7368
Jim Hahn
Specialist in Health Care Financing
[email protected], 7-4914
Jennifer A. Staman
Legislative Attorney
[email protected], 7-2610
Elicia J. Herz
Specialist in Health Care Financing
[email protected], 7-1377
Acknowledgments
Research assistant Austin Frerick assisted with many aspects of this report, including preparing the report’s
tables, fact checking, and reviewing for consistency.
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