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Fiscal Cliff Avoided - Relevant Information


The Senate voted 89-8 to pass the American Taxpayer Relief Act (H.R. 8) on December 31, 2012. Later, the House approved the legislation by a vote of 257-167. We expect the President to sign the bill expeditiously.

According to the Bureau of National Affairs (BNA), “The legislation would maintain the reduced 2001 and 2003 tax rates for individuals earning up to $400,000 ($450,000 for married couples), while allowing income above that to be taxed at rates rising to 39.6 percent. The deal would permanently patch the alternative minimum tax and prevent the parallel tax system from creeping further into the middle class and eliminate the near annual debate on indexing the income exemption levels. The package includes an extension through 2013 of dozens of expired so-called tax extenders such as the research and development tax credit and deduction for state and local taxes. It includes a one-year extension of emergency unemployment benefits. It also includes a two-month delay in the automatic spending cuts, with the $24 billion cost paid for. It does not address the debt ceiling.” This means that Congress will have to deal with the debt ceiling in the next few months.

The legislation delays the sequester for two months, which under current law would have required there to be across-the-board cuts imposed as of today, January 2, 2013. This would have resulted in a 9.4% reduction in Defense and an 8.2% cut in domestic discretionary programs. Medicare cuts to providers under the sequester are limited to 2%, and Medicaid is exempt from the sequester.

The bill averts the 27% SGR cut to Medicare payments for physicians and other practitioners. The legislation has a zero conversion factor, which prevents the 27% cut to the entire fee schedule from taking place. The legislation does not preclude the implementation of the 2013 physician fee schedule final rule, so the various code changes within the fee schedule will go forward for 2013. Also, the legislation does not interfere with the new therapy cap amounts for 2013, which are $1900. Most importantly to NASL members, the bill also extends the Part B Outpatient Therapy Services exceptions process through December 31, 2013, on annual per beneficiary payment limits of $1900 for physical therapy and speech language pathology and $1900 for occupational therapy. The provision continues application of the cap for services received in hospital outpatient departments through December 31, 2013, and adds a new provider category, Critical Access Hospital (CAH) outpatient departments, which will now be subject to the therapy cap provisions. This legislation continues the Medical Manual Review (MMR) process for outpatient therapy services that exceed the $3700 threshold.

The bill includes language to provide new limited protections for beneficiaries from the economic consequences of claims that are denied for not meeting the exceptions criteria (including claims subject to MMR). More detail on this to come.

Among the health care offsets, added to pay for the SGR fix and the broader package, the Multiple Procedure Payment Reduction (MPPR) is increased to 50 percent and applied to therapy by reducing payment for practice expense of the second and subsequent therapies when therapies are provided on the same day, instead of the existing 25 percent discount. This provision provides $1.8 billion in savings over 10 years.

Nursing facilities have escaped direct cuts, while hospitals were cut $10.5 billion through an adjustment as part of their transition to MS-DRGs, which saves $10.5 billion, and another $4.2 billion by rebasing Medicaid Disproportionate Share Hospital (DSH) payments. Other sectors cut to pay for the bill include: pharmacy; radiology/imaging; requiring competitive bidding for diabetic supplies provided by retail pharmacies; rebasing end-stage renal disease (ESRD) payments; adjusting coding intensity for Medicare Advantage plans; and eliminating all unobligated funds from the health law’s Consumer Operated and Oriented Plans.

While Congress has extended the doc fix and the therapy cap exceptions process, including the $3,700 threshold, and imposed the MPPR at 50 percent, Congress will have to come back in two months and address the debt ceiling and the sequester. When they address these issues, more offsets will have to be found. So, our sector will be at risk again for cuts. We are disappointed that Congress included the MPPR cut. We did know that was a possibility and we lobbied against it. The merits of the policy were really not an issue; it was just a way to pay for what the Senate needed to do.

A list of the offsets is available here and a list of the programs that were extended is available here. The complete text of the bill is available here on NASL's website. The following is a recap of what we see in the legislation. The Act contains the following items relevant to NASL membership:

No 2% sequester cut to Medicare providers.

The SGR fix is extended through December 31, 2013.

Therapy cap exceptions process is extended through December 31, 2013, including the manual medical review process.

Multiple Procedure Payment Reduction (MPPR) for therapy is increased to 50%. This cut is scored as saving $1.8 billion over ten years and would go into effect on April 1, 2013.

Work Geographic Adjustment - The existing 1.0 floor on the “physician work” index is extended through December 31, 2013.

Increase statute of limitations for recovering overpayments - This provision increases the statute of limitations to recover overpayments from three to five years, based on recommendations from the Office of Inspector General (OIG) at the Department of Health & Human Services and saves $0.5 billion.

Apply competitive bidding to diabetic test strips purchased at retail pharmacies, which saves $0.6 billion.

Repeals the CLASS Program, which has been dormant for more than a year due to HHS’ inability to design a financially viable plan, and creates the Commission on Long Term Care to develop a plan for the establishment, implementation, and financing of a high-quality system that ensures the availability of long-term services and supports for individuals.

NASL will provide additional updates as sections of the bill are analyzed and more information becomes available.

(External article from NASL 1/1/2013)