By George G. Olsen, JD
In the middle of the night on June 28, 2002, the United States House of Representatives passed HR 4954-the Medicare Modernization and Prescription Drug Act of 2002. While the centerpiece of the legislation is the creation of a comprehensive Medicare prescription drug benefit, HR 4954 contains numerous provisions affecting virtually every type of Medicare provider.
THERAPY CAP MORATORIUM
The existing moratorium on the implementation of the $1,500 outpatient rehabilitation caps expires at midnight on December 31, 2002. As a result, without intervening legislation, physical therapists, occupational therapists, and speech-language pathologists will be subject to the therapy caps effective January 1, 2003. In an effort to prevent the re-establishment of the therapy caps, Representatives English (R-Pa), Cardin (D-Md), Blunt (R-Mo), and Pallone (D-NJ) introduced HR 3834, the Medicare Access to Rehabilitation Services Act of 2002, on March 4, 2002.
This legislation would repeal the therapy caps altogether and it enjoys broad and growing support among members of the House of Representatives. Unfortunately, when the Congressional Budget Office determined the cost of this legislation (as it must do for virtually all legislation), it concluded that the cost of repealing the caps would be $400 million in 2003, $600 million in 2004, and $7 billion over the 10-year period running from 2003 to 2013. Given the relatively few dollars available to make reforms for Medicare providers under this legislation, it was determined that repealing the therapy caps would be too expensive and that a 2-year extension of the existing moratorium was the only viable alternative. As a result, HR 4954 extends the current moratorium on the therapy caps only through calendar year 2004.
In addition to extending the moratorium, the legislation directs the Secretary of Health and Human Services (HHS) to submit the reports required under the Balanced Budget Act of 1997 (BBA), relating to alternatives to a single annual dollar cap on outpatient therapy, and the SCHIP Balanced Budget Refinement Act of 1999 (BBRA), relating to utilization patterns for outpatient therapy, by December 31, 2002. Both of these reports were due to be submitted to Congress long ago, but the Centers for Medicare and Medicaid Services (CMS), and the contractors it retained to perform some of the underlying analysis, were unable to deliver the reports to Congress on time.
The legislation also directs the Secretary of HHS to request the Institute of Medicine of the National Academy of Sciences "to identify conditions or diseases that should justify conducting an assessment of the need to waive the therapy caps." By September 1, 2003, the Secretary is expected to submit to Congress a preliminary report on the conditions and diseases as identified. The Secretary is to issue a final report no later than December 31, 2003. Congress expects that the reports required under the BBA, BBRA, and HR 4954 will enable it to determine what, if any, alternative reimbursement mechanism should be put in place in lieu of the therapy caps. (For information on direct access, see sidebar.)
PHYSICIAN FEE SCHEDULE
Under current law, Medicare pays for the services of physicians and certain nonphysician practitioners, including outpatient rehabilitation providers, on the basis of a fee schedule. The schedule is designed to relate payments for a given service to the actual resources used to furnish that service. To do this, the fee schedule assigns relative values to services that are supposed to reflect the work (time, skill, and intensity) to provide the service, practice expenses, and malpractice costs. These relative values are adjusted for geographic variations in cost and then converted into a dollar payment by a conversion factor. The conversion factor for 2001 was $38.2581. Late last year, CMS announced that the conversion factor for 2002 would be reduced by 5.4% to $36.1992. Accordingly, health care professionals reimbursed pursuant to the fee schedule suffered a payment reduction of 5.4% effective January 1, 2002.
CMS attributed the negative update adjustment factor in 2002 to the application of the sustainable growth rate system (SGR). The SGR is used to calculate the amount of allowed spending under the physician fee schedule for a given year. CMS estimated that under current law, applying the SGR methodology would result in an update for 2003 of -5.7%, -5.7% in 2004, –2.8% in 2005, and –0.1% in 2006. These reductions would build in diminutions in provider payments through 2006.
In order to address the obvious inequities generated by the SGR, HR 4954 modifies the calculation of the fee schedule updates for 2003 to 2005. For calendar 2003, the update to the conversion factor would be set at 2%. When calculating the adjustment factor for 2004 and 2005, actual 2002 spending would be used as the measure of allowable costs for 2002. In addition, January 1, 2002, rather than April 1, 1996, would be used as the beginning date for calculating the cumulative adjustment component.
The bill would also modify the formula for ascertaining the sustainable growth rate. For 2003, 2004, and 2005, one percentage point would be added to the gross domestic product (GDP) factor. The provision would also make a permanent change in the computation of the GDP beginning in 2002 by replacing the current factor that measures the 1-year change from the preceding year with the annual average change over the preceding 10 years. For 2003 to 2005, the 10-year rolling average GDP would be calculated and then increased by one percentage point. The provision would also eliminate the budget neutrality adjustment for 2003 to 2005.
REGULATORY REDUCTION IN CONTRACTING REFORM
HR 4954 includes a sweeping array of regulatory burden reductions and contractor reform provisions that were previously unanimously approved by the House of Representatives on December 4, 2001, in the Medicare Regulatory and Contracting Reform Act of 2001.
HR 4954 provides the following elements of regulatory relief for Medicare providers:
Among the education and outreach improvements included in the legislation are:
HR 4954 also includes significant reforms in the Medicare appeals and recovery processes including:
OUTLOOK
While the House of Representatives has passed its Medicare drug benefit bill, which contains the Medicare provisions described above, the Senate, just before its August recess, failed to pass a Medicare drug benefit bill. Instead, it passed a bill that changes the patent protection for prescription drugs and permits reimportation of drugs from Canada. There are no Medicare provider provisions in this bill.
With control of the Senate resting on just a single vote, it is far from certain that any Medicare drug benefit bill will be passed by the Senate this year. The more likely scenario is that the Medicare provider provisions will be included in a Senate bill somewhere near the end of the legislative session, perhaps an omnibus appropriations bill, and then conferenced with the House on that basis.
In the meantime, rehabilitation providers should continue to press their members of Congress for relief from the therapy caps and the physician fee schedule reductions, and to encourage enactment of the Medicare provider and contractor reforms. ®
George G. Olsen, JD, is a partner of the firm Williams & Jensen, PC, Washington, DC. He is also legal counsel for the National Association of Rehabilitation Agencies and Providers.
