The Latest Medicare Act’s Impact on Providers and Patients

Recently the House and Senate passed the Medicare Improvements for Patients and Providers Act of 2008. This Act affects Medicare providers and their patients in 10 major areas:

1. Increase provider reimbursement
2. Promote technology – ePrescribing and telehealth services
3. Promote coordination/transitions of care
4. Promote preventive services
5. Education
6. Coverage of drugs
7. Clinical effectiveness studies
8. Assist low-income individuals
9. Decrease reimbursement and increase regulations for Medicare Advantage Plans
10. Durable medical equipment coverage

Despite a planned Presidential veto because of the cuts this act imposes on Medicare management care plans, that veto threat was overridden by the House and Senate, who passed this legislation with enough votes to overcome a Presidential veto. As a result, the only questions left at this time are exactly when and how one’s specific practice will be affected. That will be dependent on the preparation one lays now to be ready to take advantage and to minimize the impact of this legislation.

Increase Provider Reimbursement
Perhaps the most scrutinized area of this legislation is provider reimbursement. Medicare had been scheduled to cut provider reimbursement by more than 10% starting January 1, 2008. This cut was placed on hold for six months until July 1, 2008, but like a bad student given an extension, once again Congress waited until the last minute to address this matter, and actually left for the July 4th holiday without a resolution. Upon return after the holiday, the legislation passed.

Section 131 - Physician payment, efficiency, quality incentives blocks the pending cuts scheduled under the sustainable growth rate (SGR) formula through December 31, 2009. In place of the cuts in reimbursement, providers will receive 1.1% update for 2009. In addition, there is an extension to the physician quality reporting initiative (PQRI) through December 31, 2010. The PQRI will also see an increase in the PQRI bonus to 2.0% for 2009 and 2010. The Act also makes improvements to the PQRI, including a requirement for the endorsement of measures by a consensus-based, standard-setting entity and permits group practices to report, using a sampling methodology, on measures targeting high-cost, chronic conditions. The focus on cost-cutting and pay for performance continues with a requirement for the Secretary to provide confidential feedback to providers regarding their resource use, and to submit a plan to Congress on transition to a value-based purchasing program for physicians. Despite this focus in the first year of the PQRI program, the Centers for Medicare & Medicaid Services (CMS) paid out just $36 million to 56,700 providers, which accounted for only $634.92 per provider on average. Providers delivering psychotherapy and related services will see restoration of a portion of cuts recently applied in these areas as addressed in Section 138 - Adjustment for Medicare mental health services.

Promote Technology – ePrescribing and Telehealth Services Congress is also providing incentives for using technology. Long talked about by the Institute of Medicine (IOM) and others, technology is viewed as an opportunity to increase quality while reducing costs.

Section 132 - Incentives for electronic prescribing provides positive incentives for practitioners who use a qualified ePrescribing system in 2009 through 2013. This incentive is hoped to increase the use of electronic prescribing from its current low use. In 2007, electronic prescriptions accounted for only 2% of the nation’s roughly 1.5 billion prescriptions, according to SureScripts®, the operator of an e-prescription network.¹ There are additional incentives, albeit negative ones, for practitioners who fail to use a qualified e-Prescribing system in 2011 and beyond by application of a reduction in payments of up to 2%. While this will apply to most prescribers, there is a prohibition of applying these financial incentives and penalties to those who write prescriptions infrequently, and, further, there is permission for the Secretary to establish a hardship exception to providers who are unable to use a qualified ePrescribing system, such as would be the case for prescribers in very rural areas. Beyond ePrescribing, Congress is expanding the use of telehealth services through the addition of hospital-based renal dialysis facilities, skilled nursing facilities, and community mental health centers to the list of sites where Medicare beneficiaries can receive telehealth services. This is covered in Section 149 - Adding certain entities as originating sites for payment of telehealth services.

Promote Coordination/Transitions of Care
Section 150 - MedPAC study and report on improving chronic care demonstration programs sets out a requirement for the Medicare Payment Advisory Commission (MedPAC) to examine the possibility of using a standing network of providers to test innovative approaches to care coordination and other chronic care delivered to the Medicare patient population. MedPAC is required to consider the results of the Medicare Coordinated Care Demonstration and Medicare Health Support pilot in developing the report on new approaches to chronic care demonstrations. The hope is that fee-for-service (FFS) Medicare can deliver some of the innovative approaches being utilized by managed care for a specifically frail group of Medicare patients. This type of coordinated chronic care approach is the basis for the Medical Home program.

Section 133 - Expanding access to primary care services increases funding and expands authority for the Medical Home Demonstration Project established in the Tax Relief and Health Care Act of 2006 (TRHCA 2006). It authorizes the Secretary to expand the duration and scope of the demonstration if certain quality and/or savings targets are achieved, and it waives application of administrative obstacles to launching the demonstration. The focus here is to improve coordination of care by moving away from our current fragmented system of care.

Promote Preventive Services
Section 101 - Improvements to coverage of preventive services authorizes the Secretary to cover new preventive services under the Medicare National Coverage Determinations process that are recommended by the U.S. Preventive Services Task Force. The law makes improvements to the “Welcome to Medicare Visit,” including waiving the deductible and extending coverage from six months to one year. There is likely to be continued expansion of preventive services, which is a change from Medicare being focused solely on acute care. The expectation is that a focus on preventive services will improve the health status of Medicare beneficiaries, and, thus, be cost-effective for Medicare in the long run.

Education
Section 152 - Kidney disease education and awareness provisions requires the Secretary to establish pilot projects to increase awareness, screening, and surveillance systems addressing the prevalence of chronic kidney disease (CKD). These programs will serve as a model for decreasing the incidence of CKD and preventing its tragic complications, including kidney failure and other severe illnesses. In addition, this section requires coverage of kidney disease education services furnished by qualified providers that will help beneficiaries manage comorbidities, prevent additional renal complications, and understand all of their options for renal replacement therapy, including home dialysis. Given the focus on the use of erythropoietin-stimulating agents related to their high cost and perceived overuse, this section is meant to ensure appropriate utilization of services to patients with CKD and their providers.

Coverage of Drugs
The Medicare Part D program provides outpatient drug benefits to Medicare beneficiaries, while Medicare Part B covers pharmaceuticals purchased and provided by physicians. These programs were addressed both in expanding coverage and leaving the door open for the Secretary to reduce access in some areas.

Section 175 - Inclusion of barbiturates and benzodiazepines as covered Part D drugs permits Medicare prescription drug plans to cover barbiturates (for certain conditions) and benzodiazepines beginning January 1, 2013. These medications had originally been designated as excluded drugs, prohibiting prescription drug plans from using Medicare Part D funds to cover them. For barbiturates and benzodiazepines, this will change—but not until the 2013 calendar year, when they will be covered under Medicare Part D. The Act codifies the Secretary’s current guidance relating to coverage of the “protected classes” of drugs under Part D, and authorizes modifications to the protected classes through rulemaking as a result of Section 176 - Formulary requirements with respect to certain categories or classes of drugs. This means that one or all of the protected classes can be eliminated by the CMS rather than by legislation. This significantly increases the likelihood that there will be elimination of one of these protected classes, which includes antidepressant, antipsychotic, anticonvulsant, antiretroviral, immunosuppressant, and antineoplastic drugs. The CMS requires prescription drug plan formularies to contain substantially all of the drugs within each protected class. The initial reasoning was the fear that forcing Medicare beneficiaries already controlled on a medication within these categories to use the one preferred by the plan could result in adverse effects because of the lack of class effect. This is now felt to be less of a factor than was first believed, especially within the category of antipsychotics because of the perceived potential overuse of this class of medications.

Section 182 - Revision of definition of medically accepted indication for Part D drugs provides clarification on the process and use of compendia for Medicare Parts B and D. This makes noncompendia off-label use of medications less likely. This, combined with the elimination of some protected classes, plus the elimination of the plan requirement for providing coverage of a medication in each of the Formulary Key Drug Types, is evidence of a move toward greater restrictions on access to medications.

Clinical Effectiveness Studies
Section 304 - Authorizes IOM studies on best practices specifically directs the IOM to establish clinical decision-making protocols, as well as standards on methodology for conducting systematic reviews of clinical effectiveness research. This is the beginning of establishing an organization in the United States like the National Institute for Health and Clinical Excellence (NICE), which is responsible for evaluating the clinical effectiveness of medications in the United Kingdom. This information is subsequently utilized for making determinations of coverage and payment. When Medicare Part D was first introduced, there was legislation to allow Agency for Healthcare Research and Quality (AHRQ) to complete these clinical effectiveness studies; however, funding was never provided, and there was concern regarding exactly what the basis for evaluation would be. This section moves the IOM to lay the foundation for clinical effectiveness research, which can then be accomplished by AHRQ, IOM, or other groups.

Assist Low-Income Individuals
Section 114 - Elimination of Medicare Part D late enrollment penalties paid by subsidy-eligible individuals codifies current guidance allowing for a special enrollment period for those individuals eligible for low-income subsidy to select a Part D plan or Medicare Advantage (MA) Plan that covers prescription drugs. Rather than being forced to pay 1% for each month that an individual was eligible for Medicare Part D but failed to enroll, individuals eligible for low-income subsidy will now be relieved of this penalty. This is important because of the approximately 3 million Medicare beneficiaries who have failed to enroll in Medicare Part D, many of whom are believed to be low-income. To further assist in the enrollment of these individuals, Section 113 - Eliminating barriers to enrollment directs the Commissioner of Social Security to provide applications for the Medicare Savings Program and low-income subsidy to individuals applying for Medicare benefits—and further, to provide assistance in completing such applications, and to coordinate with States so that more of these individuals are enrolled in the Medicare Part D program. In addition, to reach these individuals, Section 119 - Medicare enrollment assistance provides $25 million to State Health Insurance Assistance Programs (SHIPs) and Area Agencies on Aging to help enroll low-income seniors in assistance programs and help all seniors navigate the Medicare program. Through the elimination of the late enrollment penalty and other barriers to enrollment, combined with $25 million in funds, a greater number of low-income-subsidy individuals should be enrolled in the Medicare Part D program.

Decrease Reimbursement and Increase Requirements for Medicare Advantage Plans
The payment for the reversal of the provider reimbursement is paid for through reductions in payment to MA Plans. This is the portion that caused a threatened Presidential veto—specifically, Section 166 - Adjustment to the Medicare Advantage Stabilization Fund, which removes $1.8 billion from the stabilization fund for regional preferred provider organizations in 2012, and Section 161 - Phase-out of indirect medical education (IME), which phases out an adjustment to MA payment rates for indirect medical education by a maximum of .6 percentage points per year. These sections will effectively decrease the reimbursement to MA Plans, which is feared to have a negative effect on benefits and, thus, on plan expansion. However, direct reimbursement is not the only area that Congress has focused on to decrease the profitability and enrollment in MA Plans.

Section 164 - Revisions relating to specialized Medicare Advantage plans for special needs individuals extends the authority of specialized MA Plans to target enrollment to certain populations through December 31, 2010, and revises definitions, care management requirements, and quality reporting standards for all specialized plans. While this section continues the authorization of Special Needs Plans (SNPs), it also maintains a moratorium on new specialized MA Plans through December 31, 2010, thus restricting the introduction of new SNPs. Other areas where MA Plans will feel a decrease on their profitability and enrollment are in the following sections:

Section 162 - Revisions to requirements for Medicare Advantage private fee-for-service plans changes requirements for private fee-for-service (PFFS) plans in counties where there are two or more non-PFFS plans (either a health maintenance organization [HMO] or a preferred provider organization [PPO]). In these counties, PFFS plans could no longer “deem” providers into the plan. Instead, beginning in 2011, they would have to form provider networks, making it much more difficult for these plans to exist.

Section 163 - Quality improvement program revisions requires regional PPO and PFFS plans to have the same quality improvement programs as local PPOs, effective January 1, 2010. This increases the administrative burden on the part of these plans.

Section 165 - Limitation on out-of-pocket costs for dual eligibles and qualified Medicare beneficiaries enrolled in a specialized Medicare Advantage plan limits cost-sharing for dual-eligible beneficiaries enrolled in specialized MA Plans to what they would otherwise pay under Medicaid. Again, this makes it difficult for plans to control utilization through copayments, thus raising their medical losses. Given Congress’ lack of belief of an added quality benefit of MA Plans in comparison to traditional Medicare coverage, as well as the belief that these plans are paid in excess of Medicare FFS, Sections 168-169 - MedPAC studies directs MedPAC to study how comparable measures of performance and patient experience can be collected and reported in the MA and FFS programs. Also, these sections direct MedPAC to study alternative payment formulas for MA Plans, which could further reduce the profitability of these programs as they currently exist.

Durable Medical Equipment Coverage
The last section of note is Section 154 - Delay in and reform of Medicare DMEPOS competitive acquisition program, which imposes an 18-month delay to Round 1 of the Durable Medical Equipment (DME), Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Acquisition Program (CAP), with a corresponding 18-24-month delay of Round 2 and subsequent applications of the program. This process was to eliminate and cut the cost of many providers of DME; by delaying the introduction for DME, this market will remain unchanged rather than seeing a reduction in the available suppliers.

The Result

The result of the Medicare Improvements for Patients and Providers Act of 2008 is a mix of positives and negatives, the exact direction and magnitude of which depends on one’s perspective. On a positive note for most geriatric providers is the increase in provider reimbursement, the promotion of improvements in care delivery, the drive toward greater enrollment of the low-income subsidy into Medicare Part D, as well as the addition of coverage for barbiturates and benzodiazepines. On the negative side for some providers is a decrease in the expansion of some MA Plans and restrictions on pharmaceutical access. In the end, this act is a continuation of Medicare’s move toward pay for performance, but it also represents a step away from MA and back toward Medicare FFS. These moves will certainly strengthen Medicare FFS for now, but additional changes are inevitable.

The author reports no relevant financial relationships.

Medicare Improvements for Patients and Providers Act of 2008