Washington Report –December, 2008
Bill Finerfrock and David Connolly, Brian Conlon and Jessica Spielvogel
Capitol Associates
IRS proposes to withhold 3% on Most Medicare Payments
Senate begins “Advise and Consent” role for Obama Nominees
CMS Selects Final Five MACs
2007 Lowest Rate Of Overall Growth In Health Spending Since 1998
111th Congress Taking Shape
CMS suspends WellPoint Medicare Advantage Health Plan
DMEPOS Accreditation Deadline is September 30, 2009
OIG Identifies Management Challenges facing CMS
RAC Quarterly Report Released
CMS Transmittals
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IRS proposes to withhold 3% on Most Medicare Payments
On December 5, 2008, the Internal Revenue Service/Department of Treasury issued a proposed rule that, if adopted, would require federal agencies or their contractors to withhold 3% of payments for services or goods above a prescribed threshold. The proposed rule is in response to a statutory requirement included in the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA).
The preamble to the proposed rule makes it clear that that the withhold policy would apply to Medicare Part A and B payments. It states that “payments under government programs to provide health care or other services that are not based upon the needs or income of the recipients are subject to withholding, including programs where eligibility is based on the age of the beneficiary.” Thus, while the proposed rule applies to Medicare, it would not apply to Medicaid.
The IRS proposes to begin enforcing the rule the LATER of December 31, 2010 OR 6 months after the date of publication of the final rule.
The withhold requirement would apply to Medicare payments that exceed the proposed threshold amount - $10,000. The regulations would establish an “anti-abuse” mechanism to prevent agencies or contractors from artificially dividing payments into smaller amounts to avoid the threshold amount. An example is provided whereby a contractor is owe $15,000 for work performed and the agency divides the payments into a $7,000 payment on July 1 and an $8,000 payment on July 2nd. This type of arbitrary division solely for the purpose of avoiding the withhold would be prohibited under the IRS proposal.
Payments that are reasonably bundled together can cause the threshold to be breached even though individual services within the bundle did not exceed the threshold amount. Again, an example is provided where an entity provides a discreet billable service each day and the daily amount is less than $10,000 but at the end of the month, when the daily invoices are compiled and payment is made, the total is $35,000. This aggregate amount is subject to the withhold even though no individual billable event exceeded the threshold.
Finally, an entity receiving payments can exceed the $10,000 limit in the aggregate as long as the individual payments are appropriately below the $10,000 limit. Suppose an entity provided services each month to the government and the monthly amount billed and paid was $9,000. At the end of the year, the entity received $108,000.00 from the federal government but there was no withhold because the billed amounts each month were reasonably associated with the services provided during that billable period and at no time did the individual payments exceed $10,000.00.
The amounts withheld would be treated as a tax credit against INCOME tax when the entity (individual OR trust, estate, partnership, association, company or corporation) files a tax return.
Here is a link to the proposed rule:
Individuals and organizations wishing to comment on this proposal must submit those comments by March 5, 2009. HBMA is reviewing this proposed rule and will be submitting appropriate comments and sharing those comments with the membership.
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Senate begins “Advise and Consent” role for Obama Nominees
On January 8, 2009, the Senate Health, Education, Labor and Pensions (HELP) Committee held a hearing to consider the nomination of former Senator Tom Daschle to be Secretary of Health and Human Services.
In his opening statement, Daschle began by expressing his belief (and presumably that of the Obama Administration) that healthcare must be affordable and accessible to all Americans. He discussed the importance of preventive care as well as the need for quality care after Americans become sick. Daschle suggested that $16 billion in savings could be realized through improving preventive care. He explained further that insurance premiums are rising three times faster than inflation and that premiums have doubled in the last eight years. He stated that the new health care policy must guarantee high quality care, and noted that nearly one third of health care is inadequate and at worst harmful to Americans. He concluded with a general call to improving health care reform.
Senator Mike Enzi (R-WY), in his opening statement, warned against expanding insurance coverage through federal programs like Medicare, “any new insurance coverage must be delivered through private health insurance plans.” When asked about Enzi’s comments, Daschle said that the health care system in our country “will always be a public/private system.”
Senator Enzi asked Daschle if he would work in a collaborative manner with both parties. Daschle said he would, and also pledged to support reform legislation being considered under so-called regular order, not the budget reconciliation process to get legislation through Congress. Budget reconciliation is a method that prohibits filibuster and allows a simple majority to pass legislation. Regular order would require committee hearings and markups before a bill reaches the floor. In general it is a more collaborative, thorough process.
Senator Richard Burr (R-NC) asked Daschle about Medicare Advantage in rural markets and for his thoughts about the President-Elect’s proposed changes to Medicare Advantage and how it would affect patients’ choices in care. Daschle agreed that there are access and quality problems in rural areas. He felt strongly about the infrastructure in place with community health centers and how important they are to rural patients. He stated that as HHS Secretary, he would determine whether Medicare Advantage is cost-effective.
Daschle went on to explain that the role of the Centers for Medicare & Medicaid Services (CMS) would be a big one for health care reform. CMS could be utilized to increase quality, efficiency, and accessibility in the health care system. “CMS can be a gateway to reforming the way providers are paid to better align incentives with the provision of high quality care and make it more affordable.”
Senator Tom Harkin (D-IA) asked Daschle how he would integrate health care reform with vastly different policy areas such as education, mental health, and tax policy. Daschle responded that he would focus on primary care and make the goal of every department to promote wellness. He also advocated a “paradigm shift” to focus on wellness. He would concentrate on nutrition education by improving school lunches and incorporating physical exercise.
Senator Patty Murray (D-WA) asked Daschle about reforming and Medicare Sustainable Growth Rate (SGR) problem. Daschle agreed that the current SGR system is not working and is outdated. He proposed a system based on healthy outcomes rather than on procedures.
In addition to going before the HELP Committee, Secretary Designate Daschle will go before the Senate Finance Committee as part of the nomination process. No formal action on the Daschle nomination can or will be taken until after President-elect Obama is sworn in as the next President.
At press time, Senator Daschle’s nomination was expected to be approved by the Senate. However, there are late reports that the Republican staff on the Senate Finance Committee staff was examining Senator Daschle’s tax records and his association with an education-loan provider that is under committee scrutiny. As of press time, Senator Daschle’s nomination hearing before the Finance Committee had not been scheduled.
It is unlikely that Daschle will be confirmed along with most other Cabinet Secretary’s shortly after President Obama is sworn into office. However, barring something catastrophic in his background that has not yet come to light, the expectation is that Senator Daschle will ultimately be confirmed as Secretary of Health and Human Services.
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CMS Selects Final Five MACs
The Centers for Medicare & Medicaid Services (CMS) announced the final five contractors that will process and pay Medicare claims for health care services under the Medicare Fee-for-Service program.
The contractors and their states are as follows:
·Noridian Administrative Services has been awarded the contract for Jurisdiction 6: Illinois, Minnesota
and Wisconsin.
·National Government Serviceshas been awarded the contract for Jurisdiction 8: Indiana and Michigan.
·Cahaba Government Benefit Administrators, has been awarded the contract for Jurisdiction 10: Alabama,
Georgia and Tennessee.
·Palmetto Government Benefits Administrators, has been awarded the contract for Jurisdiction 11: North
Carolina, South Carolina, Virginia and West Virginia.
·Highmark Medicare Serviceshas been awarded a contract for Jurisdiction 15: Kentucky and Ohio.
The new contracts are for up to five years. The Contractors will process and pay 36 percent of the national volume of Medicare Part A and Part B claims.According to a press release announcing the awards, CMS has met its goal of awarding all 15 Medicare Administrative Contractor (MAC) contracts.
Several previously awarded MAC contracts have been challenged and the awards process is under review. It is possible that similar complaints could be filed against some or all of these awards. When a complaint is filed, the actual start of the contract is delayed until the merits of the challenge can be reviewed. If, in the view of the Government Accountability Office (GAO) the contract was awarded improperly, a re-bidding of the contract could be mandated by GAO.
Acting CMS Administrator Kerry Weems said “With these last awards, CMS completes a major step in its effort to improve the way in which the government contracts for claims administration for the largest part of Medicare across the United States,” “CMS will receive the best value for the critical function of processing and paying Medicare claims. This is another step toward ensuring that we have a highly functioning processing and payment system that helps to improve services to beneficiaries and health care providers in the Medicare fee-for-service benefit plan.”
According to information from CMS, the competitive selection of the new Part A and Part B MACs was made on a “best value” basis. Primary consideration was given to the technical quality of the offerors’ proposals. CMS conducted a technical and past performance evaluation, performed a cost realism analysis, and assessed overall cost reasonableness for each award.
The five MAC contractors are schedule to begin the transition from the Part B carrier immediately and should assume full responsibility for the claims processing work in their respective jurisdictions no later than March 2010. During the implementation period, the Part A and Part B MAC contractors are supposed to conduct “extensive outreach to health care providers, state medical associations and beneficiaries in their jurisdictions to provide education and information about the implementation.”
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2007 Lowest Rate Of Overall Growth In Health Spending Since 1998
According to the Centers for Medicare and Medicaid Services, health spending in the United States grew 6.1 percent in 2007 to $2.2 trillion or $7,421 per person. This was the slowest rate of growth since 1998 and 0.6 of a percentage point lower than the growth of 6.7 percent in 2006.
Despite this historically low rate of growth, health care spending continues to rise at a faster rate than overall economic growth, which grew by 4.8 percent in 2007.
In announcing this latest data, Acting CMS Administrator Kerry Weems said, “This is another reminder that the cost of health care continues to be a real and pressing concern facing the American public and the federal government,” “This report – like the reports issued last year on the financial status of Medicare and Medicaid – is a stark reminder that we must redouble our ongoing efforts to reform the delivery of health care services in this country to bring about the goal of affordable, high quality health for all Americans.”
According to the reports’ authors, the principle drive for the slower rate of growth was lower than expected growth in retail prescription drug spending.
Health spending as a percentage of the nation’s Gross Domestic Product (GDP) continued to climb, reaching 16.2 percent in 2007. This represents a 0.2 percentage point increase from 2006.
Analysts reported that prescription drug prices, as reflected in the National Health Expenditure Accounts, grew 1.4 percent in 2007, much slower than the 3.5 percent growth in 2006. This slower rate of growth is attributed to the increased use of generics and by the generic drug discount programs offered by large retail chain stores.
With the exception of prescription drugs, spending for most other health care services grew at about the same rate or faster than in 2006.
Overall hospital spending (government and commercial combined), which accounts for about 30 percent of total health care spending, grew 7.3 percent in 2007, compared to 6.9 percent in 2006.
By comparison, Medicare spending for hospital services remained stable at 4.6 percent. There was growth in Medicare managed care hospital spending due to an increase in the number of beneficiaries enrolled in a Medicare Advantage plan.
Overall spending for physician services increased 6.5 percent in 2007, the same rate of growth as in 2006. However, when examined more closely, rates of spending growth for physicians and clinics revealed disparate trends. While spending growth for physician services slowed, spending growth for outpatient services in stand-alone clinics and urgent care centers increased.
Total health care spending for public programs, such as Medicare and Medicaid, grew 6.4 percent in 2007, a decrease from the 8.2 percent growth rate reported in 2006.By comparison, health care spending from private sources grew 5.8 percent in 2007, compared to a 5.4 percent growth rate in 2006.
CMS analysts found that in 2007, private health insurance premiums grew 6.0 percent, the same rate as in 2006.
The report notes that 0ut-of-pocket spending grew 5.3 percent in 2007, an acceleration from 3.3 percent growth in 2006. This acceleration is largely attributed to increased out-of-pocket payments for prescription drugs and medical supplies.
In examining who is paying for healthcare, the breakdown is as follows:
Government 40 %Business 25 %
Households 31 %Other private sponsors 4 %
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111th Congress Taking Shape
On January 6th, new and returning Members of Congress were sworn into office. Determining Committee assignments and ratios are important parts of the organizing process. Committee assignments are generally a combination of seniority and politics (both partisan and geographic).
During the 110th Congress (2007/2008) Democrats held a majority of seats in both houses. That status continues in the 111th Congress albeit with larger majorities. As a consequence of the larger majorities, Committee ratios will be adjusted to reflect the stronger institutional position of the party.
The United States Senate has announced its Committee ratios for the 111th Congress but some Committee assignments remain undecided. There are two Committees in the Senate that have significant influence over health policy –Finance and Health, Education, Labor and Pensions (HELP). It should be noted that in the case of both the HELP Committee and the Finance Committee, the size of the committees will grow from 21 members to 23 members.
The Finance Committee has jurisdiction over tax policy as well as Medicare and Medicaid policy. The HELP Committee has jurisdiction over public health, food and drugs and health information technology.
Senate Committee Ratio Proposal
Committee / 110th ratio / Proposed 111th agreementFinance / 11/10 / 13/10
HELP / 11/10 / 13/10
Due to retirements and election defeats, several new members have been or will be appointed to these key health committees. Those who will be newly serving on these committees are in italics.
Senate Majority Leader Harry Reid (D-NV) has announced the following Democrat appointments to theseCommittees:
Finance Committee
Democrats / RepublicansMax Baucus, Montana, Chairman
John D. Rockefeller IV, West Virginia
Kent Conrad, North Dakota
Jeff Bingaman, New Mexico
John F. Kerry, Massachusetts
Blanche L. Lincoln, Arkansas
Ron Wyden, Oregon
Charles E. Schumer, New York
Debbie Stabenow, Michigan
Maria Cantwell, Washington
Bill Nelson, Florida
Robert Menendez, New Jersey
Thomas Carper, of Delaware / Chuck Grassley, Iowa
Orrin G. Hatch, Utah
Olympia J. Snowe, Maine
Jon Kyl, Arizona
Jim Bunning, Kentucky
Mike Crapo, Idaho
Pat Roberts, Kansas
John Ensign, Nevada
VACANCY
VACANCY
HELP Committee
Democrats / RepublicansEdward M. Kennedy, Massachusetts,
Chairman
Christopher J. Dodd, Connecticut
Tom Harkin, Iowa
Barbara A. Mikulski, Maryland
Jeff Bingaman, New Mexico
Patty Murray, Washington
Jack Reed, Rhode Island
Bernard Sanders, Vermont
Sherrod Brown, Ohio
Robert Casey, Pennsylvania
Kay Hagan, North Carolina
Jeff Merkley, Oregon
VACANCY / Michael B. Enzi, Wyoming
Judd Gregg, New Hampshire
Lamar Alexander, Tennessee
Richard Burr, North Carolina
Johnny Isakson, Georgia
Lisa Murkowski, Alaska
Orrin G. Hatch, Utah
Pat Roberts, Kansas
Tom Coburn, Oklahoma
VACANCY
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CMS suspends WellPoint Medicare Advantage Health Plan
The Centers for Medicare & Medicaid Services (CMS) has suspended marketing and enrollment for WellPoint Medicare Advantage, effective January 12, 2009. As a result of this action, WellPoint will not be able to market several of its Medicare Advantage Plans and will not be able to enroll new beneficiaries.
According to CMS, beneficiaries currently enrolled in WellPoint sponsored plans will continue to receive the coverage they have now. They will not lose any Medicare coverage. Providers or beneficiaries who have questions should first contact WellPoint.