What the Presidential Budget Means for Medicare

Presidential Budget for MedicarePresident Trump’s fiscal year (FY) 2020 budget allows for $87.1 billion in discretionary budget authority and $1.2 trillion in mandatory funding for the U.S. Department of Health and Human Services (HHS). Although the Centers for Medicare & Medicaid Services (CMS) commands the lion’s share of HHS’s budget, the Trump administration has found ways to cut $395 million in discretionary programs and siphon some of that savings — an additional $39,105 million, to be exact — into mandatory programs this year.

President Trump’s message is clear: “My 2020 Budget builds on the tremendous progress we have made and provides a clear roadmap for the Congress to bring Federal spending and debt under control.” The legislative package for Medicare, alone, is expected to net savings to the Medicare Trust Funds of $811 billion over 10 years, extending the solvency of the Hospital Insurance Trust Fund by approximately eight years, according to HHS’s FY2020 Budget in Brief.

Beyond the budgetary dollar figures, which are incomprehensible, and the political rhetoric, here’s what the administration’s requested budget means for Medicare-participating clinicians and facilities.

2020 Legislative Proposals For Medicare

The 2020 budget request for CMS seeks to reduce prescription drug costs, continue transforming the healthcare system to one that pays for quality and outcomes, combat the opioid crisis, and reform America’s health insurance system, according to HHS’s FY2020 Budget in Brief. If we narrow the focus, this means the administration seeks to expand value-based systems of care, spend less money, lower costs of services and supplies, simplify administrative duties, and streamline the appeals system.

Improving Value-based Systems Of Care

Beginning in 2021, the budget proposes to create a risk-adjusted monthly Medicare Priority Care payment for providers who are eligible to bill for evaluation and management (E/M) services and who provide ongoing primary care to Medicare patients. The payment would be funded by a 5 percent annual reduction to the valuations of all non-E/M services and procedures under the Physician Fee Schedule (PFS).

The budget would also:

  • Expand the basis for beneficiary assignment for accountable care organizations (ACOs) to include non-physician primary care services.
  • Consolidate the four quality reporting programs Medicare requires inpatient hospitals to participate in to one hospital quality payment program, similar to the Quality Payment Program for professional services; and require hospitals, as a Medicare Condition of Participation, to accurately report hospital acquired infections data.
  • Effective 2021, establish a new exception to the physician self-referral law for arrangements that arise due to participation in advanced Alternative Payment Models (APMs) so as not to impede care coordination, APM participation, and other financial arrangements that further the goals of a value-based system.
  • Beginning in 2021, implement a budget-neutral value-based purchasing program for hospital outpatient departments and ambulatory surgical centers (ASC), linking 2 percent of payments to performance on quality and outcome measures, and redesign the Outpatient Prospective Payment System (OPPS) and ASC PS to make risk-adjusted payments.
Promoting Competition

The budget proposes to change the way Medicare pays for durable medical equipment (DME) under the competitive bidding program, from a single payment amount based on the maximum winning bid to the winning suppliers’ own bid amounts; expand competitive bidding to additional geographic areas; and allow Medicare coverage for innovative non-DME alternatives to treat and manage diabetes.

Exercising Fiscal Stewardship

Effective 2021, the budget would establish a new process to distribute uncompensated care payments to hospitals based on share of charity care and non-Medicare bad debt; and reduce Medicare coverage of bad debts resulting from patients’ nonpayment of coinsurance and deductibles from 65 percent to 25 percent over three years, beginning in 2020, for $38.5 billion in savings over 10 years.

Trump’s budget would also pay on-campus and off-campus hospital outpatient departments at the physician office rate, for an estimated $150.1 billion savings to the Medicare trust fund over 10 years, and generate another $101.2 billion in savings by establishing a unified payment system for skilled nursing facilities, home health agencies, and inpatient rehabilitation facilities by 2025. Meanwhile, these post-acute care facilities would receive a lower annual Medicare payment update. Long-term care hospitals (LTCHs) would also be affected: The budget proposes to raise the intensive care unit stay threshold from three days to eight days “… to more accurately identify the chronically ill patients who typically receive the specialized care LTCHs provide.”

The budget also affords an increase to end-stage renal disease (ESRD) networks funding by updating the ESRD PPS withholding amount from 50 cents to $1.50, and inflating that amount annually by the CPI-U.

Reducing Burden

Much of the budgetary proposals for reducing administrative burden are simply tweaks to existing legislation such as the Affordable Care Act, the Medicare Improvements for Patient and Providers Act, Medicare Access and CHIP Reauthorization Act, and the Paperwork Reduction Act. For example:

  • Base the 5 percent bonus paid to Qualifying APM Participants (QPs) on the PFS revenues received through the advanced APMs in which they participate, rather than all Medicare PFS payments.
  • Eliminate the face-to-face provider visit for DME requirement.
  • Grant CMS authority to publish Medicare surveys and certification reports for all accredited facilities.
  • Remove the requirement for physicians to certify that all patients at critical access hospitals (CAHs) are expected to be discharged or transferred within 96 hours of admission.
  • Effective 2022, adopt a uniform set of broader claims-calculated measures and simplify patient surveys to assess performance in the Merit-based Incentive Payment System (MIPS) at the group practice level.
Improving The Medicare Appeals System

The budget seeks to change the Medicare Appeal Council’s standard of review from a de-novo to an appellate-level standard of review to increase adjudication capacity by up to 30 percent.

Other efficiencies Trump proposes to make to the system include:

  • Establish a post-adjudication user fee for level 3 and level 4 unfavorable Medicare appeals.
  • Expedite procedures for claims with no material fact in dispute.
  • Increase the minimum amount in controversy required for adjudication of an appeal by an Administrative Law Judge to the Federal District Court amount in controversy requirement, which is $1,630 in 2019, updated annually; and allow the Office of Medicare Hearings and Appeals to use Medicare magistrates for appealed claims below the amount-in-controversy threshold.
  • Limit the right for providers to appeal claims when no documentation is submitted; remand appeals to the first level of appeal when new documentary evidence is submitted into the administrative record at the second-level or above; and require a good-faith attestation on all appeals.
2020 Administrative Proposals For Medicare

The budget includes seven Medicare administrative proposals that HHS plans to implement in 2020, which will save an estimated $6 billion over 10 years. These proposals do not require Congressional action.

Improving Value-based Systems Of Care

The Centers for Medicare & Medicaid Innovation (CMMI) would use existing authorities to identify bundled payment arrangements for certain high-value devices and require the device manufacturer to bear some or all of the risk; and require CMS to issue additional guidance around the Medicare coverage process.

Promoting Competition

The budget proposes to strengthen the existing parallel review process between the FDA and CMS to reduce the time between FDA approval of a drug or device and Medicare coverage of that item; improve Medicare patient access to breakthrough devices; and add ventilators and orthotics to the next round of the DME competitive bidding program with implementation of prices beginning in 2021.

Exercising Fiscal Stewardship

The budget proposes to phase in the use of encounter data for Medicare Advantage payment risk adjustments. In payment year 2020, CMS is proposing to calculate risk scores by adding 50 percent of the risk score using encounter data and fee-for-service (FFS) diagnoses to 50 percent of the risk score using plan-reported Risk Adjustment Processing System and FFS diagnoses. CMS would increase the weighting of encounter data-based risk scores over subsequent years by moving to a risk score incorporating 75 percent of the encounter data/FFS-based risk score in payment year 2021 and a risk score of 100 percent encounter data/FFS-based risk score in 2022.

The budget would also require CMS to make public which Part B drugs have the highest reported drug wastage using data gathered from Part B claims.

Lowering The Cost Of Prescription Drugs

May 2018, President Trump and HHS Secretary Alex Azar released the American Patients First blueprint for bringing down prescription drug prices and out-of-pocket costs using four key strategies for reform: increased competition, better negotiation, incentives for lower list prices, and lowering out-of-pocket costs. Trump’s 2020 budget legislative proposals align with actions HHS has already taken to achieve these goals.

Increasing Competition

Reduce payment for innovator drugs from average sales price (ASP) plus 6 percent to ASP minus 33 percent when the manufacturer delays the release of competitor generic or biosimilar drugs. After a competitor is commercially available, CMS will pay for both innovator and competitor drugs as ASP plus 6 percent.

Improving Negotiation

Provide HHS with the authority to consolidate certain drugs covered under Part B into Part D when savings can be gained; initiate new Coverage Gap Discount Program contracts with pharmaceutical manufacturers on a quarterly, rather than annual, basis; and require all Part B drug manufacturers to report ASP data and allow CMS to reduce the payment rate for single-source drugs, biologics, and biosimilars when ASP data are not available from 106 percent to 103 percent of wholesale acquisition cost.

Lowering Out-of-Pocket Costs

Cap the growth of the ASP payment of Part B drugs at the Consumer Price Index for all Urban Consumers (CPI-U); allow CMS to redistribute savings from lower payments for drugs purchased under the 340B program to hospitals that provide at least 1 percent of patient care costs in uncompensated care; remove transitional pass-through payment for drugs, biologicals, and biosimilars from the Outpatient Prospective Payment System (OPPS); permanently authorize a current demonstration that allows CMS to contract with a single plan to provide Part D coverage to low-income Medicare beneficiaries while their eligibility is processed.

Other budget proposals for lowering the cost of prescription drugs include:

  • Exclude manufacturer discounts from the calculation of beneficiary out-of-pocket cost in the Medicare Part D Coverage Gap;
  • Eliminate cost-sharing on generic drugs and biosimilars for low-income beneficiaries; and
  • Establish a beneficiary out-of-pocket maximum in the Medicare Part D catastrophic phase.

These points only scratch the surface of the budget in its entirety. The administration is focused on ensuring federal health programs produce quality outcomes and results at the lowest possible cost for beneficiaries.

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