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Medicare Reform Bill Passed in Senate Stops Physician Pay Cut Short-Term

Bill has a number of provisions impacting Medicare, Medicaid and CHIP

Chairman Max Baucus (D-Mont.) and Ranking Member Chuck Grassley (R-Iowa)Dec. 19, 2007 – Late yesterday the Senate passed on a voice vote the Medicare reform legislation from the Finance Committee. The summary of Medicare provisions in the legislation being considered today in the House was released just yesterday by the Senate Finance Committee. The lead provision, which has garnered most of the public attention, addresses the 10 percent paycut for physicians that Medicare has approved for January. This bill offers a temporary solution - a 0.5% increase but just through June 30, 2008.


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Read more on Politics for Senior Citizens


Chairman Max Baucus (D-Mont.) and Ranking Member Chuck Grassley (R-Iowa) issued statements promising more Medicare reform legislation in early 2008.

(Note: See a list of key provisions in bill below this story. Also see below yesterday's report from the on the committee actions and reactions.)

In addition to stopping the paycut for doctors, the bill will, according to the committee news release, extend a number of expiring provisions vital to seniors’ care under the program. In particular, measures to ensure rural seniors’ access to care will be continued.

The bill also extends authorization for the Children’s Health Insurance Program (CHIP) through March 31, 2009, and extends funding for Transitional Medicaid Assistance and special diabetes programs. The bill is expected to cost approximately $6 billion, and the cost is fully offset with provisions noted below.

 “This bill takes needed, immediate steps to shore up Medicare by restoring physician payments and ensuring seniors’ continued access to health care in rural areas. But next year, Congress must move boldly to improve Medicare for America’s seniors. There’s more that Medicare can do for low-income and rural seniors,” said Baucus.


Senate Approves Medicare Bill That Would Delay Physician Fee Cut, Extend SCHIP Through March 2009
[Dec 19, 2007]


Daily Reports


The Senate on Tuesday by voice vote approved a "bare-bones" Medicare bill (S 2499) that would delay for six months a 10% physician fee cut and would extend SCHIP through March 2009, CQ Today reports. House Majority Leader Steny Hoyer (D-Md.) said the House will take up the measure on Wednesday.

The legislation would increase Medicare physician fees by 0.5% for six months and would extend several programs that provide higher Medicare reimbursement rates to rural health care providers and hospital laboratories. However, the legislation does not address future physician fee cuts, which means the 10% cut will go back into effect after the six months without additional legislative action.

The measure also would extend SCHIP funding through March 31, 2009. A summary distributed by the Senate Finance Committee showed that the legislation would provide enough funding for states to maintain their current enrollment levels (Armstrong, CQ Today, 12/18). In addition, the bill would extend for six months rural and low-income subsidies, as well as payments for rehabilitative therapy under Medicare (Johnson, CongressDaily, 12/18).

Other Provisions

The bill also would:

   ● Bar Medicare Advantage special needs plans from expanding service areas through Dec. 31, 2009, and prevent new SNPs from entering the program until that time;

   ● Place a "limited" moratorium on new long-term acute-care hospitals and establish new facility and medical review requirements to ensure patients receive appropriate levels of care at the facilities;

   ● Extend a system in which physicians report quality-of-care data;

Extend through June 30, 2008, a Medicaid program that helps low-income seniors and individuals pay their Medicare premiums;

   ● Extend the current abstinence-only education program until June 30, 2008; and

   ● Extend through June 30, 2008, a transitional medical assistance program that helps low-income individuals move from welfare to work by maintaining health insurance for children (Carey/Reichard, CQ HealthBeat, 12/18).

The Congressional Budget Office on Tuesday estimated that the measure would cost $5.3 billion over five years. The costs would be offset by $1.5 billion in cuts from a "stabilization fund" created under the Medicare prescription drug benefit to attract preferred provider organization plans to underserved areas; $1.4 billion in reduced payments to hospitals for inpatient rehabilitation services; and $1 billion in reduced payments for drugs administered by physicians rather than taken at home by beneficiaries. In addition, a data reporting requirement for Medicare Secondary Payer should reduce fraud and abuse, creating savings for Medicare. Under the program, Medicare takes over payment liability from private insurers after they have paid to treat certain conditions over a specific period of time (CQ Today, 12/18).

The bill would maintain current payment system for teaching hospitals. Republicans had proposed funding the measure by eliminating some payments for medical education, but House Ways and Means Committee Chair Charles Rangel (D-N.Y.) opposed the idea because he said the cuts would disproportionately hurt urban areas (CongressDaily, 12/18).

CBO estimated that the physician fee patch would cost $1.5 billion over five years and $6.4 billion over 10 years. Extending SCHIP would cost $800 million over 10 years. According to CBO, the legislation would save the government $100 million over five years and would be cost neutral over 10 years (CQ Today, 12/18).

Future of SCHIP
Extending SCHIP until 2009 would be a "victory for Republicans," according to CQ Today. Democrats had aimed to extend the program for a shorter period of time to make it a main issue during the 2008 presidential campaign. However, the "longer extension also offers a chance to secure Republican cooperation in expanding the program to cover more uninsured children," CQ Today reports (CQ Today, 12/18).

Finance Committee Chair Max Baucus (D-Mont.) said that the extension does not limit when SCHIP can be discussed again, saying, "We can still bring it up and try to do (children's health) legislation before" funding expires (Reuters, 12/18). In addition, the legislation does not address a CMS rule that prohibits states from expanding SCHIP income eligibility limits to higher income levels if they have not covered 95% of low-income children, so "any problems that develop as a result of it will give lawmakers an excuse to revisit SCHIP in the summer," CongressDaily reports (Johnson, CongressDaily, 12/19).

However, The Hill reports that supporters of SCHIP "might have to wait for the next president and the 111th Congress to get a result." According to The Hill, that "could be risky, since in 2009 SCHIP could well be subsumed by much larger debate over the future of the U.S. health care system if the focus of presidential candidates on health care issues holds steady" (Young, The Hill, 12/19).

The American Medical Association said that the six-month fix creates uncertainty for Medicare beneficiaries and the physicians who serve them. AMA said Congress should do away with the funding formula that created the cuts altogether. In addition, AARP and other groups "described the Medicare legislation that passed the Senate as woefully inadequate," hoping that "Congress would substantially lower payments" to MA plan providers "to pay for other programs that they wanted," the AP/Houston Chronicle reports.

Finance Committee ranking member Chuck Grassley (R-Iowa) said, "This is a disappointment for many of us," adding, "The purpose of moving forward with a six-month package now is to provide the opportunity for the Finance Committee to address these priorities next year" (Freking, AP/Houston Chronicle, 12/18). Senate Budget Committee ranking member Judd Gregg (R-N.H.) said of the Medicare physician fees, "There's a geometric progression which makes it worse each year," adding, "So what we ought to do is correct it permanently, take the hit and deal with it" (CongressDaily, 12/18).

House Energy and Commerce Committee ranking member Joe Barton (R-Texas) said, "If the House extends SCHIP, the next logical move is to convene a committee hearing and begin an honest, bipartisan exploration of how to improve children's health insurance" (The Hill, 12/19)


"Reprinted with permission from You can view the entire Kaiser Daily Health Policy Report, search the archives, and sign up for email delivery at The Kaiser Daily Health Policy Report is published for, a free service of The Henry J. Kaiser Family Foundation. © 2006 Advisory Board Company and Kaiser Family Foundation. All rights reserved.”


“The CHIP extension in this bill will maintain health coverage for more than six million children who currently have it, but I will keep working to reach more low-income, uninsured American children through that vital program. In 2008, it will also be time to change Medicare in a smart and fiscally responsible way, serving both the seniors who use Medicare and the taxpayers who fund this vital program.”

 “This bill includes essential policies for the government to make sure doctors can continue to treat Medicare beneficiaries and to preserve health care services in rural areas of the country. It’s a six-month extension that serves as a stop-gap until Congress can take care of the important Medicare business that got backed up this fall,” Grassley said.

“The package we’re presenting today also tells states what they need to know for the year ahead as they administer the children’s health insurance programs that low income families with children rely on. The longer extension of SCHIP will allow Congress to enter the new year with a renewed focus on reauthorization while also providing funding certainty to states."

A summary of the proposed provisions follows:

Summary of the Medicare, Medicaid and SCHIP Extension Act of 2007

Title I – Medicare

Increase in physician payment update; extension of the physician quality reporting system. Replaces the scheduled 10.1% cut to the Medicare physician reimbursement rate in 2008 with a 0.5% increase through June 30, 2008. Extends the physician quality reporting system. Revises the Physician Assistance and Quality Initiative fund.

Extension of incentive payment program for physician scarcity areas. Extends a provision that provides a 5% bonus payment to physicians practicing in physician shortage areas through June 30, 2008.

Extension of the floor on work geographic adjustment. Extends for six months the work geographic index (GPCI) floor of 1.0 through June 30, 2008.

Extension of treatment of certain physician pathology services. Extends for six months the provision that allows independent laboratories to continue to bill Medicare directly for the technical component of certain physician pathology services provided to hospitals as authorized by the Balanced Budget Act of 1997 through June 30, 2008.

Extension of exceptions process for therapy caps. Ensures Medicare beneficiaries access to therapy services through June 30, 2008.

Extension of payment rule for brachytherapy; extension to therapeutic radiopharmaceuticals. Extends the current “charges to cost” methodology which provides a separate payment for brachytherapy services through June 30, 2008. Includes therapeutic radiopharmaceuticals in this provision.

Extension of reasonable costs payments for certain clinical diagnostic laboratory tests in rural areas. Provides reasonable cost reimbursement for clinical lab tests performed by certain small rural hospitals as part of their outpatient services through June 30, 2008.

Extension of authority of specialized Medicare Advantage plans for special needs individuals. Extends the authority of specialized plans to target enrollment to certain populations through 2009. Includes a moratorium on new plans and expanded service areas through December 31, 2009.

Access to Medicare reasonable cost contract plans. Extends section 1876 authority for cost contracts through December 31, 2009.

Adjustment to the Medicare Advantage stabilization fund. Removes $1.5 billion from the stabilization fund for regional preferred provider organizations in 2012.

Medicare secondary payer reporting requirements. Requires the submission of data by group health plans and liability insurers to the Secretary of Health and Human Services that is necessary to appropriately identify individuals for whom Medicare is the secondary payer.

Payment for Part B drugs. Implements HHS OIG recommendation to require CMS to adjust its Average Sales Price (ASP) calculation to use volume-weighted ASPs based on actual sales volume. Establishes an appropriate reimbursement rate for generic albuterol.

Payment rate for certain diagnostic laboratory tests. Reimburses certain diabetes laboratory tests that are approved for home use at the same rate as other glycated hemoglobin tests beginning April 1, 2008.

Long-term care hospitals. Provides regulatory relief for three years to ensure continued access to current long-term care hospital services, while also imposing a limited moratorium on the development of new long-term care facilities. Establishes new facility and medical review requirements to ensure patients are receiving appropriate levels of care at these facilities and freezes the market basket update for the last quarter of rate year 2008. Requires the Secretary to conduct a study on long-term care hospital facility and patient criteria.

Payments for inpatient rehabilitation facility (IRF) services. Permanently freezes the inpatient rehabilitation services compliance threshold at 60%, effective for cost reporting periods starting July 1, 2006, and allows comorbid conditions to count toward this threshold. Sets the market basket update factor at 0% from April 1, 2008 through FY09. Requires the Secretary to study beneficiary access to inpatient rehabilitation services and care at IRFs and to make recommendations for classifying inpatient rehabilitation facility hospitals and units.

Accommodation of physicians ordered to active duty in the Armed Services.

Extends until June 30, 2008 a provision that permits physicians in the armed services to engage in substitute billing arrangements for longer than 60 days when they are ordered to active duty.

Treatment of certain hospitals for payment under Medicare. Extends until September 30, 2008, provisions that have allowed certain hospitals to be eligible for wage index reclassification that were otherwise unable to qualify for administrative wage index reclassification.

Medicare enrollment assistance. Provides $15 million to State Health Insurance Assistance Programs and $5 million for Area Agencies on Aging and Aging Disability Resource Centers for beneficiary outreach and assistance.

Title II - Medicaid and SCHIP

 Extension of qualifying individual (QI) program. Provides assistance through Medicaid for low-income seniors and individuals who need help meeting their Medicare premiums. Extends this program through June 30, 2008 to continue serving current populations.

Extension of transitional medical assistance and abstinence education programs. Extends the Transitional Medical Assistance program (TMA) through June 30, 2008.

This program helps low-income individuals transition from welfare to work by maintaining healthcare for their children. Extends the current abstinence-only education program until June 30, 2008.

Medicaid DSH extension. Extends authority for disproportionate share hospital funding under section 1923 of the Social Security Act for Tennessee and Hawaii through June 30, 2008.

Moratorium on certain payment restrictions. Imposes a six-month delay on implementation of proposed administrative regulations relating to school-based services and rehabilitation services.

Extending SCHIP funding through March 31, 2009. Extends the State Children’s Health Insurance Program through March 31, 2009. Provides adequate funding to States for the purpose of maintaining their current enrollment through that date.

Improving data collection. Provides an additional $10 million to improve data collection on the uninsured by the Census Bureau.

Title III - Other Provisions

 Special diabetes program. Extends the Special Diabetes Program through September 30, 2009 to fund type 1 diabetes research and type 2 treatment and prevention programs for Native Americans and Alaska Natives.

Medicare Payment Advisory Commission status. Clarifies the Medicare Payment Advisory Commission’s status as an agency of Congress.


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