Congress Passes Budget Bill with Temporary Physician Pay Fix, Medicare Extenders

The Senate on Dec. 18 approved a two-year budget plan by a vote of 64-36, averting another possible government shutdown in early January. The bill, which passed the House by a margin of 332-94, now goes to the President’s desk for his signature. The legislation extends the 2 percent sequester cut for some Medicare payments for two years until 2023; includes a temporary fix for Medicare physician payments for the first three months of 2014; delays the start of reductions in Medicaid disproportionate share payments; extends the sunset deadlines for other Medicare payments; and reinforces Medicaid’s status as the payer of last resort for health care services.

The legislation—the Bipartisan Budget Act of 2013—sets discretionary federal spending at just over $1 trillion for fiscal year 2014. “It’s a compromise—and that means neither side got everything they wanted, and both sides had to give a bit,” said Senate Budget Committee Chairwoman Patty Murray, D-Wash., prior to the vote. “If we didn’t get a deal, we would have faced another continuing resolution that would have locked in the automatic cuts or worse, a potential government shutdown in just a few short weeks,” said Murray.

“This bill is only a small step,” said House Budget Committee Chairman Paul Ryan, R-Wis. “We need to do a lot more. But it’s a small step in the right direction.”

Physician Payment Fix

The statutory formula for the annual physician fee schedule (PFS) update has resulted in a negative update for the PFS conversion factors for the last decade, although Congress has always intervened to avoid actual draconian payment cuts to physicians. The Bipartisan Budget Act of 2013 provides for a 0.5 percent update to the conversion factor for the first three months of 2014; physicians faced about a 20 percent cut in Medicare reimbursement for 2014 prior to Congress’ action. The law notes that “it is appropriate to reform physician reimbursements under the Medicare program” but that further reform legislation will have to wait until 2014. Congress urged CMS to focus its efforts to facilitate reform by doing the following: (1) simplifying and reducing administrative burdens on physicians; (2) providing timely feedback for physicians; and (3) encouraging the development of new models.

Medicaid DSH Payments

Under Medicaid, hospitals that serve a disproportionate number of low-income people receive additional payments. The number of low-income people without any form of insurance coverage was presumed to decrease in 2014 with the implementation of the Affordable Care Act, so under Social Security Act sec. 1923(f) disproportionate share hospital (DSH) payments were scheduled to be reduced each year from 2014 to 2022. This law delays the start of these reductions until 2016, in part because many states elected not to expand their Medicaid programs, and hospitals in those states were concerned about decreased reimbursements if the Medicaid DSH cuts started in 2014.

Therapy Services

Therapy services furnished in an outpatient hospital setting have traditionally been exempt from the application of the annual dollar cap on Medicare reimbursement for these services. However, this law extends the requirement that Medicare temporarily apply the therapy caps to therapy services furnished in an outpatient hospital until March 31, 2014. Congress also provided that exceptions to the payment limitation may be made when provision of additional therapy services is determined to be medically necessary. This exceptions process was initially effective only for services provided in calendar year 2006, but a series of laws have extended the sunset date for the exceptions process; this new law extends it to March 31, 2014.

Medicaid Third-Party Liability

The law allows states to delay paying for certain claims—to the extent that it doesn’t harm a Medicaid recipient’s access to care—to ensure payment. It allows states to collect medical child support in cases where health insurance is available from a non-custodial parent. The law also allows Medicaid to recuperate costs from beneficiary liability settlements. These changes are estimated to save $1.4 billion over 10 years.