Reg's Blog

Senior and Post-Acute Healthcare News and Topics

Elections Have Consequences

Heading into round 2 of a three round debate format (tonight), I think its time to put a few core concepts on paper (or e-media in this case) for folks to remember about this political season.  My role or task here is not to be partisan (your decision suffices on this front) but to be focused on the “heart” of the subject, not the rhetoric that permeates the debates and the political reports.  In short, rather than slicing and dicing on things that ultimately matter very little, let’s look quickly at why elections have consequences.

  • In the system of government tried and true in the U.S., the presidential election is relatively unimportant in the daily life consequences of citizens.  Promises about tax cuts, passage of certain legislation, removing certain regulations or adding new ones is pure rhetoric.  Our system does not afford the President such powers.  He/she is not a king or even a legislator as powerful as the Speaker of the House.  The election with more consequence is the one where seats in the House (all) and the Senate are open.  So goes the political balance, so goes the ability for any president to achieve policy agenda priority.
  • Where the President matters in elections isn’t often discussed in a debate or is certainly, glossed over.  The Presidency is a position of state; a leader to the international world and the domestic (entirety) world.  In this regard, the election is about certainty, purpose and vision.
  • The next president will likely play a very critical role in shaping the judicial branch of the government as four justices are over 76, one with pancreatic cancer and another who has openly said he will retire post this term and the election.  While the President can’t appoint any old person without confirmation, wide deference is given to this appointment and but in rare exceptions, confirmations are all but certain.
  • Rhetoric and policy language aside, the Presidency in an election is all about picking someone who can truly galvanize compromise, not push ideology.  The best at this role includes names like Reagan, Roosevelt, Kennedy and Lincoln.  They knew that ideology stabilized voters and painted a picture but that the true job was about action not rhetoric, photo opps and speeches.

What is at stake today is an array of deep challenges across a breath of policy fronts.  The following list is not exhaustive but prioritized by a guy who is an economist by study and a health policy and health care businessman by trade.

  • Its time to ignore the phony math and crazy skewed data published with regard to certain economic indicators spewed across the airwaves.  The reality is that economic growth expressed via GDP is stagnant and it has been for quite some time.  Unemployment, underemployment and personal income is at perilous levels and not improving.  The recent drop in unemployment is about as real at the main street level as the Tooth Fairy.  Yet, jobs do exist that pay well but the gap between skill levels and the job requirements continues to widen.  Manufacturing has changed and today, it requires skilled work.  So do health care jobs.  We also need to somehow, do a better job reminding our children that not everyone is suited for a career in management and most jobs, require that you show up, work hard and maybe, just maybe, get a little dirty now and then.
  • Bad, forget that, horrendous and irresponsible fiscal policy from Washington has the country facing what many are calling “the fiscal cliff”.  The timing could not be much worse given the health (lack thereof) of the economy.  Defense spending and sequestration cuts are hardly the major issue here – the cuts are very minimal and parceled out over a decade.  The issue here is revenue and Washington has boogered-up tax policy via tax credits, one-time reductions, etc. so as to create a Phantom Menace around personal and corporate income.  The first priority at hand is to create revenue certainty and simplicity via sane tax policy.  The next is to rationally, reign in non-essential spending.
  • There is no path to prosperity (sorry Paul) and no way forward without entitlement reform – large-scale, total.  Entitlements consume every dollar of revenue today and no tax policy fixes that equation.  Reform must occur.  One of the most ironic and frankly scary conversations I have with hospital folks is around Medicaid and Medicaid expansion.  When hospitals argue that Medicaid expansion is a good thing because it reduces the number of non-paid services provided, I know we have come to an end.  As the old Pogo cartoon strip relayed, “We have met the enemy and he is us”.  Continuing to do more of a dumb thing faster, with more money on a broader scale only produces more stupidity.  Expanding entitlements with debt financing is about as idiotic of a proposition as I can think of, regardless of who gets paid.
  • Drilling for more fossil fuel is not a solution to becoming energy sufficient, creating more end-product capacity is.  We need to invest in refinery capacity and modernization and locating the same where it logistically belongs.  We also need to drop the “green is good” at any cost if we expect the economy to recover.  Green is only as good as the return on the investment dictates.  Using food for fuel is a stupid idea especially since the only way it is economically feasible is with federal subsidies.  It is even more idiotic when viewed in light of the energy input required to produce an ounce of a product that is less efficient.  And no, I am not anti-environment as I am avid outdoorsman and a life supporter of Ducks Unlimited.  I am a pragmatist and I know that economies seek equilibrium – balance.
  • To rebuild the “American Dream” (if this language suits), we need to get everyone in the U.S. to again have “skin in the game”.  We aren’t there and in fact, we continue to widen the gap between those who pay and those who don’t.  In a bad CBS interview when Mitt Romney was asked if it was fair that a man of his status in life paid less by rate in taxes than someone earning $50,000 per year, Mitt bombed.  The fact is that Mitt pays more in rate, at his 15% or so, than the person earning $50,000 or $60,000 today.  This is even after giving millions to charity, which if imputed into this tax rate, raises it even higher.  Trust me, I am not a die-hard Mitt fan nor am I advocating for him.  The plain reality is that the incentives need to align so that everyone has skin in this game not disproportionately more by income.  If for no other reason than getting it right, we need to quit pointing fingers and bashing the Mitt Romney’s of the world as last I checked, Mitt earned his money and created lots of jobs.  He isn’t even as rich as Bill Gates or probably, Brad Pitt but no one bashes Brad.  How many jobs did Brad create?  I know the answer for Bill.  Class warfare is ugly and we are busiest today trying to escalate the war.
  • As I have written before and I live through it and see it daily, certainty is lacking.  The real issues we face require simplicity and certainty in order for jobs to grow, homes to be sold and businesses to grow and multiply.  This is less about numbers and more about policy.  Governments stink at and are incapable of redistributing “wealth” and legislating morality (unless the government is a totalitarian state and as history has shown, those don’t last real long).  Wealth balance comes from matching productive inputs with an investment return such that it is equal or greater in value to the input, to create sufficient and when needed growing levels of inputs – this system creates balance across executives and workers alike, proportionately.  We can’t evolve to a system that is punitive to those who take risk and lever their talent for handsome reward because arbitrarily to some, this isn’t fair.  I’ll defend Brad Pitt’s right to make gazillions if people are willing to reward his “input” in the form of acting talent, etc., even though I don’t think much of his movies or his acting.  Truth be told, he earned it and took the risks and leveraged whatever his gifts were and no governmental entity should try to redistribute his earnings to someone else in the guise of “fairness”.  He should pay proportionate by rate and rate alone, taxes but no different from someone who uses his/her talent to weld.  If Brad wants to  redistribute his wealth via charity, that is his choice.

Happy debate watching – enough said – for now.

October 16, 2012 Posted by | Policy and Politics - Federal | , , , , , , , | 1 Comment

Senate Back and Forth on Psychoactive Medication Regs

Last week, Senators Kohl, Grassley and Blumenthal introduced an amendment to an existing FDA bill that would require the informed consent of nursing home patients or their legal surrogates before certain anti-psychotic/psychoactive medications were given.  The target of this legislative initiative is to reduce the use of certain types of drugs commonly used to treat serious, chronic mental illness such as Risperdal and Haldol.  Despite FDA black box warnings with regard to the side-effects of these types of drugs and their unwarranted use in patients suffering from dementia (Alzheimer’s and other forms), research and evidence supports that use in the elderly to chemically control behaviors remains widespread, particularly in nursing homes.  A 2011 Inspector General report illustrated wide-spread use as documented by Medicare claims for psychoactive medications not corollary to a specific mental illness; one that would typically be treated by anti-psychotic therapy (schizophrenia, bipolar disorder, etc.).  Extrapolating from Medicare claim data, the report found that 14% of nursing home patients were undergoing inappropriate anti-psychotic therapy for non mental illness purposes – defined by OIG as atypical drug therapy. Perhaps most troubling is that (per the report), 88% of the use fell within the FDA black box warnings or, use for diagnoses unrelated to mental illness.  The link to the full report is

Despite the appearance of wide-spread, bipartisan support for the amendment, the amendment was removed from the final bill.  Procedurally, the original legislation already had significant proposed amendments and to garner passage, the final bill was streamlined.  Indications are that the legislative effort to require additional safe-guards such as informed consent to limit psychoactive/anti-psychotic therapies in the elderly is possible.  Interesting to note is that Senator Kohl is from Wisconsin; a state that enacted its own law requiring informed consent for psychoactive medication therapy in nursing homes.

Apparently, CMS is still searching for vehicles to curb unnecessary drug use in nursing home patients, particularly psychoactive therapies.  Recall earlier in the year, CMS was about to promulgate rules requiring the separation of pharmacy duties, requiring that consultant pharmacists not be employed by the dispensing pharmacy.  The logic used to justify the proposed (since dead) rule is the wide-spread use of psychoactive medications.  Theoretically, separating consulting and dispensing duties would reduce inappropriate therapies.  Curiously, rules exist and survey instructions the same, to hold nursing homes accountable for unnecessary drug use and to enforce the requirement that every medication have a corresponding clinical justification.   Accordingly, if the CMS/OIG indicates that clinical justification for the majority of psychoactive medications is erroneous or non-existent, then targeted enforcement of existing regulation seems the logical next step; though I am on principle, in favor of informed consent for anti-psychotic use.

May 29, 2012 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , | 1 Comment

The Unraveling of the PPACA

OK readers and requesters, I haven’t gone, as Robert Frost wrote, into the “woods lovely, dark and deep” but I have been preoccupied by work and things familial.  Sadly, energy wanes as one focuses intently on the delicate balance that is juggling a frenetic work schedule, a mile of other professional commitments, travel, and family.  Returning slowly to regularity in life will allow me to re-connect and be once again, more “informationally” fluid.

A major emphasis of my work has been translating health policy into actionable strategies for clients.  Some efforts are rather profound and deep and others are rather functional and tactile.  The latter was the case with the Medicare RUGs III, MDS 3.0, RUGs Hybrid, RUGs IV debacle, partially created by the PPACA and partially due to the lack of foresight on the part of Congress.  In the end, this mess evolved to where it should have been all along – a grouper and an assessment tool that actually matched.  Today, we are simply left gazing forward at what might be once CMS figures out how the RUGs IV payments are flowing and whether providers are using the system correctly.  I fully expect CMS, as they historically have, to go through a series of gyrations to fine tune the payment categories, equating the new system to that which was originally intended – something that is expense neutral (or close to) for the Medicare program.  History being what it is (a reasonably good predictor of future behavior), we saw and lived through a similar dance with previous PPS system versions.

Turning to the title of this post and topically, a question(s) I am asked all too often: What can we expect or not expect to happen next under the current phase-in process of the PPACA?  Following the law as written would provide an answer but clearly, the law as written is unraveling as we move seemingly, day by day.  Consider the following events of recent weeks/months.

  • A power-shift in Congress overloaded the House with Republicans and structurally, fiscal conservatives that swept into the majority on a platform of “anti-health care reform and anti-deficit spending”.  As the House fundamentally controls the majority of appropriations and budget policy, funding barriers to continue the roll-out of the PPACA are certain.
  • Over 1,000 waivers to certain elements of the PPACA have been granted, with more forthcoming, principally targeted at giving insurers, major corporations (multi-state businesses) and recently, labor unions relief from the mandated coverage limits imposed under the law.  Secondarily, states have sought relief from various Medicaid provisions that came part and parcel with the enhanced FMAP provided under the Stimulus bill (corollary to additional elements required under th PPACA).  From some vantage points, Medicaid may be the 10 ton gorilla in the room when all is said and done regarding the future of the PPACA.
  • A series of court cases and resulting decisions have established the framework of a constitutional challenge to the law.  Opinions/decisions affirming constitutionality were rendered by Democratic judicial appointees and opinions/decisions affirming unconstitutionally rendered by Republican judicial appointees.  Clearly, the matter of constitutionality of the key requirement of universal insurance purchase/participation for every American will be settled only by the Supreme Court.  The remaining question is “when”. If the key provision of universal (everyone must) purchase/participation is found unconstitutional, the PPACA is functionally dead.
  • Within the past week or so, Secretary Sebelius of HHS publicly went on the “record” in Congressional committee testimony that the financing of the PPACA included effective double-use (double counting) of the projected $500 billion in Medicare savings that is projected within the law.  This, while newsworthy, is not news to anyone who read the CBO scoring, read earlier testimony from Medicare’s Chief Actuary, or fundamentally, could follow basic arithmetic logic and principles.  The Medicare savings argument was flawed when first proffered on so many levels.  First, the savings was phantom money in so much that it required Congress to sustain actual rate cuts while relying on finding and stopping “fraud and abuse” thereby creating savings.  If in fact, the fraud and abuse savings were or are known, a 2,000 page piece of legislation surely wasn’t necessary to end the fraudulent and abusive practices (the same being already illegal) and render the savings.  Similarly, Congress has no known history of sustaining meaningful spending controls on entitlements, particularly Medicare.  Finally, the physician fee-schedule fix was never incorporated into the PPACA or its financial projections regarding Medicare spending – this tally alone evaporates all if not the majority of the projected savings.  Suffice to say, in order to net $500 billion in Medicare savings as foretold by the PPACA and its proponents, a perfect storm unlike any ever seen in Washington would need to occur, not to mention a real current spending reduction of close to $900 billion (adding in the Medicare physician fee schedule “fix” costs of approximately $400 billion as unaccounted spending, netted against the savings to achieve a net savings of $500 billion).  For those who would argue that the physician fee schedule fix won’t cost $400 billion, I humbly reply “do the math”.  Congress continues to avoid this issue in real time by creating temporary patches as the real numbers inclusive of a formulaic change in the law (change away from the sustainable growth algorithm) that prevents significant fee schedule cuts for physicians will require approximately $300 billion in “new” spending.  Add another $100 billion or so for the programs such as outpatient therapies that are tied to the fee schedule and $400 billion is conservatively, a solid figure.  The double-counting occurs as a result of creating the phony $500 billion and using the “dollars” to create new benefits and expanded eligibility levels and programs within the PPACA (primarily Medicaid expansion).  The costs of these new benefits greatly exceeds $500 billion in reality and thus, no savings will occur.
  • President Obama during a speech at the National Governor’s Association publicly announced his willingness to offer states greater flexibility and an accelerated date to file alternative plans to meet the PPACA requirements pertaining to exchanges and Medicaid expansion.  In effect, President Obama stated that the law was still a “work in progress” and states could devise their own alternatives, provided the alternatives were as comprehensive and provided the same level of benefits as required under the PPACA.  Until this revelation, states were operating under the premise that PPACA requirements dictating how Medicaid expansion would work, the exchange plan mandates for coverages, etc. were immovable objects, at least until 2014 by when, each state would have incurred enormous costs associated with implementation.  The conclusion: More unraveling about to occur.
  • Arizona became the first state in what promises to be a growing list, to apply to the federal government for a waiver allowing 300,000 people to be removed from its Medicaid program (disenrolled).  Arizona, like multiple states, saw its Medicaid enrollment explode due to the economic recession and provisions within the Stimulus Bill which provided enhanced Medicaid matches conditioned upon the creation of certain new programs of benefits and coverages under Medicaid.  The “rub” today is the sunset date of June 30 which ends the enhanced Medicaid funding.  By law, the money goes away but the programs and benefits it funded must be maintained by the state; hence, the need for a waiver. The evaporating Medicaid enhancement exposes the enormity of state Medicaid and other budget deficits – in Arizona, $1.1 billion total deficit and potential savings of $541 million if the waiver is granted (fully half of the state’s deficit).  From a PPACA perspective, the next move in Washington regarding a request such as that from Arizona will be fascinating.  A core element within reform used to achieve the coverage objectives is an expansion of Medicaid.  A waiver granted to Arizona is a virtual submission on the part of Washington that state Medicaid plans and budgets are incapable of meeting the financial requirements concurrent with expansion, absent significant cash infusions from Washington (not wholly provided with the PPACA).  For those of us who closely follow health policy, we’ve warned loudly and frequently that Medicaid as presently configured, is the worst vehicle to use to expand coverage.  The PPACA did nothing to alter the maniacal constructs of Medicaid, its funding, and its bureaucratic programmatic tenets.  It further did nothing to allocate sufficient resources to the states to support expansion thus leaving states to bear an enormous primarily unfunded mandate within their existing and growing, bankrupt Medicaid programs.  Aside from a Supreme Court ruling finding the PPACA universal participation/purchase requirements unconstitutional, the Medicaid issues are a strong and close second that could cause the PPACA to completely unravel.

The above notwithstanding, the PPACA gives us a glimpse into the future of health policy and ultimately, health care financing and delivery in the U.S.  Regardless of whether the law survives in whole or in part, certain elements I believe, are new realities and I have counseled clients to begin to plan accordingly.

  • Money is an issue and the goal of the PPACA while inherently flawed in the form finished, was to slow the growth of entitlement spending and “bend the cost curve”.  This need or goal is pressing for the U.S. as entitlement spending cannot be sustained at is present level.  This simply means that Medicare and Medicaid are fundamentally and completely exhausted (financially and programmatically).  Regardless of form and resultant policy, reimbursement levels will remain fundamentally flat to trending down – no other way for them to go unless new tax revenues are allocated to each program (not feasible).  Kicking the issue down the road as Washington and states have done is no longer an option as the “road” has ended or its end is clearly in sight.  The best providers can hope for is flat reimbursement with a recognition on the part of legislators that greater flexibility from overbearing regulations is needed to help offset the revenue loss (if I can’t pay you more I can at least make it cheaper for you to operate).
  • Greater emphasis will be placed on finding and eliminating waste and fraud – already happening but ramped up to an even higher level.  Realize that Medicaid and Medicare are self-wasting disasters by design in terms of how modern health care is delivered and financed but vigilance and enforcement is feel-good activity; results often are minimal in comparison to costs to obtain the results.  Providers thus will contend with more questions, more rules for disclosure, more reporting, more probes and more audits.  Clearly, the costs borne by providers to monitor and justify their billing practices to Medicare and Medicaid will rise.
  • Infrastructure investments in terms of technology will rise as providers will need to justify more directly, their care vs. their bills.  Simultaneous (or at least proximal), PPACA provisions and other federal provisions regarding privacy, electronic billing, health information exchanges, etc., will not evaporate entirely.  Providers will need to be able to communicate across functions and across related and unrelated provider organizations, patient information, quality measures, and care information (treatments plans, history, orders, etc.).
  • Terms and concepts brought forth under the PPACA such as Accountable Care Organizations, Competitive Bidding and Bundled Payments are here to stay, regardless of the life or death of the PPACA.  They make too much sense intuitively even if the same translates poorly in federal policy.  Organizations that take the “conceptual elements and goals” of things like Accountable Care Organizations and begin to develop programs and structural changes in “how” they do business will be far better off than those who believe that these concepts will die as the PPACA continues to unravel.  A future where reimbursement is more closely tied to outcomes and penalties for events such as avoidable re-hospitalization, repeat hospitalizations, avoidable institutional infections, etc. is virtually certain.
  • A renewed focus on primary and community based medical care, prevention, and chronic care management is forthcoming – soon.  Philosophically, although wrongly implemented and structured, the PPACA was Washington’s politicized attempt to create this focus.  There is solid logic behind such a focus as diminution in each of these areas (or in some cases, failure to fully launch) directly correlate to rapidly rising health costs (and correspondingly high rates of expensive, preventable chronic illness such as diabetes, obesity, heart disease, etc.).  Even Washington knows that ultimately, funding and enhanced payment for better primary, community and chronic disease care is necessary and smart.  The problem is, as has always been the case with policy elements measured in the billions or trillions of expenditures, politics gets in the way of functionality – hence the PPACA.

March 9, 2011 Posted by | Policy and Politics - Federal | , , , , , , , , , , | Leave a comment

RUGs IV Here to Stay!

The news we all hoped for came forth this afternoon, wrapped with a big bow just in time for the Holiday season – RUGs IV is here to stay.  The House this afternoon passed a companion version of the bill passed in the Senate yesterday.  President Obama is expected to sign the bill into law shortly.

The legislation calls for $19.2 billion in appropriations to make RUGs IV effective retroactively to October 1, 2010.  In addition, the legislation extends the Medicare Part B therapy cap exception provision presently in place, until the end of 2011.  Without such an extension to the exception process, the Part B therapy caps were set to be automatically reinstated with no exception on January 1, 2011.  As part of the extension of therapy cap exception process, the legislation also staves off pending cuts of approximately 25% in Medicare payments to physicians required by the current sustainable growth formula which drives the physician fee schedule (and related Part B services such as outpatient therapies) under Part B.  Without such a correction to the physician fee schedule, physician fees were set for the significant reduction on December 18 (Congress had already moved the date back to the 18th from the 1st of December).

The implementation of RUGs IV back to October 1 solves significant headaches for SNFs and CMS.  As difficult as it has been for providers to get up to speed on MDS 3.0 and RUGs IV, the process was significantly complicated by the unknown of how the planned RUGs Hybrid would work and whether CMS would seek to recoup potential overpayments from providers as a result of RUGs IV being used temporarily.  Many providers sought to establish liability accounts on their balance sheets for just such an event, even though estimating the liability was somewhat complex due to the lack of solid information regarding the Hybrid groups coming from CMS. 

Having spoken to a number of people within CMS, the implementation of RUGs IV back to October 1 is a true gift.  There were consistent difficulties in getting the Hybrid grouper to function in conjunction with MDS 3.0 and as such, a growing number of inquiries from the industry bombarded the agency expecting more information.  Even more troubling was the prospect of having to deal with payment recapture; a procedural boondoggle CMS was hoping to avoid.  In the end, I am confident that a number of people at CMS are rejoicing this evening.

On a final note, I wish to offer my personal congratulations to my industry colleagues and the trade associations who lobbied for this victory and to my readers, clients and business partners who required that I kept them informed and in many cases, helped me with additional information and of course, thoughtful inquiries that made me stay on top of this important issue.  This policy victory was long overdue but as the saying goes, “better late than never”.

December 9, 2010 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , | 1 Comment

Enhanced FMAP Funding Moving Through the Senate

On December 31st of this year, enhancements made to the Medicaid FMAP (Federal matching dollars) via the ARRA (Stimulus or American Recovery and Reinvestment Act) are set to evaporate.  In a series of bills and other legislative initiatives throughout the spring and early summer, Congress has failed to extend funding to prevent the evaporation of the additional FMAP funding.  See my related posts below for more information on Medicaid, the FMAP provisions, and the legislative activity to extend the enhanced match provided under the ARRA.

Yesterday, on a procedural vote to end debate in the Senate, another version of a “jobs” bill containing a slimmed down extension of the enhanced FMAP crept forward.  The vote to end debate and send the bill forward for a final vote was 61-38.  With such a definitive margin in support of a vote, it is all but certain the bill will pass on a final vote.  The measure then must go to the House, presently in recess, where it will be either voted upon “as is” or modified and returned to the Senate.  Speaker Pelosi has indicated that she will call the House back to session in order to produce a final bill for President Obama’s signature, prior to the re-opening of schools in late August/early September.

The bill provides $26 billion in additional funding with $10 billion targeted toward education and public service employment and $16 billion for extension of the enhanced FMAP.  The $10 billion is designed to prevent the lay-offs of teachers, firefighters, police and other municipal service worker jobs that are purportedly “at-risk” once continued funding provided in the ARRA evaporates.  Communities, states, and civil service employee unions have been pressuring Congress to extend some levels of Stimulus funding, claiming that without additional dollars, budget cuts would cause lay-offs of key positions such as teachers.  Republicans have effectively stalled previous legislative attempts to extend additional funding claiming that the dollars will add to the deficit and are effectively federal bail-outs for the teacher’s union and other municipal service employee unions.  In this round, Senate Majority Leader Reid brought forth additional cuts in other programs plus tax increases to generate a revenue offset to the new spending.  The resultant funding shift caused Republicans Snowe and Collins to vote in favor of ending debate (a show of support for the bill).

The $16 billion targeted toward additional Medicaid funding was heavily lobbied for by states and health care trade associations as critical to prevent reimbursement cuts and benefit reductions for seniors, the poor and the disabled.  With 48 out of 50 states having moderate to severe budget deficits and current Medicaid structural deficits, loss of the enhanced match would necessitate programmatic cuts.  In some cases, states that were in a July 1 fiscal year budget process and/or December 31 fiscal year budget process already installed programmatic cuts and reimbursement changes as the timing of their budgets required an assumption of lost Medicaid funding coming at the end of the year. 

While the probability of an extension to the additional FMAP provided under the ARRA appears strong, the House must still approve the bill prior to the funding becoming an actuality.  The timing will clearly assist most states but in some cases, a portion of the cuts already enacted in certain states will remain.  Additionally, the added funding is not without an early 2011 sunset date or in other words, the $16 billion is only a temporary “stay” of execution for state Medicaid budget problems.  In all likelihood, unless Congress consistently re-ups with more funding for continued FMAP support, states will need to significantly restructure their Medicaid programs over the next twelve to eighteen months in order to maintain basic solvency.  With the economy still in a very slow recovery mode, most states won’t see economic growth and resulting revenues from taxes sufficient over the next year to avoid cuts in their Medicaid programs.

August 5, 2010 Posted by | Policy and Politics - Federal | , , , , , , , | Leave a comment

Doc Fix Survives, Medicaid Ehanced Match Doesn’t

In another procedural vote on the revamped Jobs bill in the Senate, Democrats fell short of mustering 60 votes to end a Republican filibuster, effectively ending for now, legislative efforts to extend unemployment benefits.  The vote count was 57 to 41 to continue debate.  Dying with the extension of unemployment benefits are a series of pro-business tax cuts, tax increases on domestically produced oil and on investment fund managers as well as the extension of the enhanced Medicaid match provided in the Stimulus bill, set to end December 31 of this year.

In an attempt to keep the bill alive, Senate democrats removed the provision related to Part B/physician fee schedule cuts and crafted a smaller, temporary fix (see my posts from last week on this same subject).  This separate “temporary” patch provides for a 2.2% increase in the Part B fee schedule and delays any cuts to physician fees until November 30.  Prior legislative efforts deferred the fee schedule cuts, pegged at 21%, until June 1 of this year.  This past week, CMS began paying claims incurred after June 1 at the reduced fee schedule rate.  In response to an enormous push-back from physicians and the health care community in general, the House passed this temporary Senate measure, sending the bill to the President for signature.  Assuming the President signs the bill, providers that have submitted claims for services provided after June 1, will have to re-submit their claims to assure correct payment, including the modest increase of 2.2%.

What’s next (as I have been asked routinely over the past two-weeks)?  Is the enhanced Medicaid match extension dead?  Legitimate questions, no doubt.  In brief, here’s my take or EWAG (educated, wild-assed guess).

  • Typically, when legislation such as this stalls, there is a single, two-ton elephant that needs to be circumnavigated or removed from the room in order for things to proceed.  In this case, there are three elephants in the room.  First, and larger in size than the other two, is the upcoming mid-term elections.  The current “tone” in electoral politics is not good for Democrats and decidedly, anti-incumbent, anti-big government, and bail-out weary.  Any legislation that looks-like and feels-like a bail-out is perceived as poisonous by incumbents headed toward a November election date.  Even seats once believed safe, are up for grabs and some, such as Sen. Boxer in California and Sen. Reid in Nevada, are considered bell-weather contests marking a shift in electorate sentiment (assuming losses on the part of Boxer and Reid).  The second elephant is the rising federal debt, now at $13 trillion and climbing.  This elephant is a cousin of the first and the Democrats are beginning to feel ownership, correctly or incorrectly, of  this elephant.  With the EU struggling with an enormous debt load, principally due to burgeoning social welfare programs and a slow economy, economists, the Fed, and investment rating agencies such as Moody’s, are warning that the U.S. debt load could pose the same level of risk to the economy as is present across much of the EU.  In fact, the U.S. debt load is perilously close to the value of the GDP; an indicator of a level of negative economic wealth (more debt than assets).  Saving an economic lesson for later, the rising debt load is potentially crippling in so many ways to a recovering economy (enough said for now).  The third elephant is the moribund U.S. economy, incapable of soaking up large additional amounts of debt and virtually non-responsive to the government’s deficit spending in the form of targeted stimulus.  Simply put: The Stimulus and the continued bail-out packages coming from Washington have done virtually nothing to stimulate recovery while adding billions to the debt level.  Arguably, the instability and the spending levels have hurt the recovery more than helped.  With these three elephants present today in the House and in the Senate chambers, very little prior to November (mid-term elections) can get done and what will get done will be temporary in nature (the doc-fix for example).
  • I’m not sure that the enhanced or extension of the enhanced Medicaid match is dead but it is definitely, on life-support in its current form.  It seems that the tone of this Congress  now is to avoid issues that include big price tags unless such an issue is immediately pressing (the doc-fix) and can be pushed every so slightly, down the road, but just by a bit.  The problem here is that many states are stuck with June 30 fiscal years and/or balanced budget requirements.  For these states, the uncertainty of additional Medicaid match dollars from the Feds requires establishing a plan that includes cuts, reimbursement and benefit levels combined.  The real devil in some cases, is for states that have expanded their Medicaid programs via the use of added match funds through the Stimulus, as the expansion components cannot be cut by law.  The additional funds via the Stimulus bill came with “golden handcuffs”, requiring states that used the funds via expansion, to maintain these services.  In short, Medicaid is a real mess but frankly, that is nothing new given how ridiculous its financing provisions are and how “federal” money hungry the states have become, selling their fiscal stability souls for additional federal funds and then shifting budget problems elsewhere, hoping new or additional federal money would continue, bailing out their current spending sins.
  • The logic of once again deferring the Part B cuts, now to November, is to buy Congress time to craft a permanent solution.  Anyone who buys this rhetoric needs professional counseling.  This issue is nowhere close to a permanent fix as such a fix requires political willpower (non-existent today), a revisit to the recently passed PPACA where the budget numbers are already out of whack, and finally, a commitment to spend new money as part of the solution.  Fixing the problem means abandoning the flawed sustainable growth formula, recasting the actual costs associated with the PPACA (estimates of deficit reduction relied heavily on unsustainable and impractical Medicare cuts), and finding new money within the budget, deficit or not, to create parity and stability within the Part B fee “world”.

June 25, 2010 Posted by | Policy and Politics - Federal | , , , , , , , , , , , , | Leave a comment

Senate Doubles Back on “Doc Fix” Legislation

After a mid-week roadblock was established on a procedural vote all but derailing the American Jobs and Closing Tax Loopholes Act and the integrated provisions that included a “doc fix”, the Senate doubled-back on Friday and passed a separate measure that patches the pending cuts (21%) in the physician fee schedule set for June 1.  The latest temporary measure stalling cuts as required by the sustainable growth formula underpinning the current Medicare reimbursement calculations for Part B services (physician fees, therapy rates, etc.) expired on June 1.  In the interim, in anticipation of another patch to the cuts, CMS directed its fiscal intermediaries to “hold” or pend claims after June 1.  The Senate legislation now must return to the House where as of today, reception as indicated by Speaker Pelosi is not likely to be “warm”.

The Senate’s fix calls for a 2.2% increase to the current fees (non-cut) through November 30 at a price tag of $6.4 billion.  Integral within this temporary measure are funds to not only augment the physician fee schedule but to also impute the same increase to other health care services tied to Medicare Part B such as outpatient therapies.  Come November 30, Congress will have to either have a more permanent solution in-place or additional temporary measures will be required.

Physician reaction was as expected; frustration and mixed anger.  Physicians continue to grow more hostile toward Congress’ strategy of temporary payment fixes, calling for a revamp of the convoluted and antiquated formula known as the “sustainable growth formula”, tying Medicare reimbursements under Part B to economic growth in proportion to overall Medicare outlays.  During health care reform discussions and in the initial Senate version and subsequent House version of the Jobs and Closing Tax Loopholes Act, longer term fixes to the fee schedule were integrated with larger costs.  Politicians from both parties, worried about rapidly increasing deficit levels, systematically gutted these longer-term measures to the point where no legislation addressing the pending cuts was in place until late Friday.

The lengthy delay in addressing the pending cuts of June 1 caused CMS to extend a “hold” on claim adjudication, effectively stalling claims from June 1.  On Friday however, CMS directed its fiscal intermediaries to begin adjudicating claims using the discounted fee schedule.  In short, claims from June 1 will now be processed with a 21% reduction.  CMS’ reasons for starting to pay claims at the discounted level are two-fold: First, longer delays in adjudicating claims will produce a significant back-log in claims, headed into the 4th of July holiday period; and second, the Senate legislation must return to the House for passage and preliminary indications from the House are that passage in its current version is unlikely. Claims can ultimately be re-processed once a permanent (or more lengthy temporary) fix is reached however, such re-processing is neither quick nor without additional work on the part of providers and CMS’ intermediaries.

There is no question that physicians as well as other provider groups are growing tired of Congress’ inability to resolve the Part B fee schedule issues.  With health care reform a less than fully embraced law and policy analysts and economists pushing Congress on rising deficits, the political willpower to address Medicare issues involving “new” deficit spending is almost gone.  In fact, many policy analysts and economists, including myself, have consistently pointed out that Congress lacks the political will to pass along the steep Medicare cuts imbedded in the PPACA and integral to its claim of “deficit reduction”.   The “doc fix” saga is clear evidence of Congress’ inability to live up to the spending cuts it created under the PPACA.

June 19, 2010 Posted by | Policy and Politics - Federal | , , , , , , , , , | Leave a comment

Senate Sets Roadblock on Jobs Bill: Impact is Felt for Doc Fix and Medicaid Funding

Yesterday the Senate, via  a procedural vote, set a roadblock on the continued track toward passage for the American Jobs and Closing Tax Loopholes Act.  The original version, re-crafted by the House to lower the price tag and then sent to the Senate, found limited traction on Wednesday.  Oddly enough, the House version effectively trimmed the original Senate version and yet, even when fiscally re-shaped, it could not garner support in the Senate, the source from which it originated.  My read is that Senators, since the shaping of the original bill, have watched political winds shifting away from support for government bailouts, subsidies, and deficit spending initiatives.

What happened is a bit confusing for people unfamiliar with the parliamentarian rules and procedural machinations of the Senate.  In order for the Bill to come to the floor for a vote, sufficient votes (60) are required to close debate on the legislation.  Without the 60 vote total, debate can continue endlessly and lead into filibuster, effectively killing the Bill as it stands.  Yesterday’s vote showed a suprising lack of support among key Democrats such as Wisconsin Senators Feingold and Kohl.  Republicans were effectively unified in opposition.  As of late yesterday, Senate Democrats scrambled to re-craft yet another, scaled down version that at a minimum, would contain an extension of unemployment benefits and certain key tax measures.

Analyzing the issues, the Bill in its present shape has significant fiscal problems.  First, the diversity of the issues and spending priorities within the legislation create a lack of transparency which today, is politically repugnant to voters.  Second, much of the Bill appears politically as a continuation of federal bail-out spending.  Third, health care reform remains unpopular politically and Senators, wary of the “doc fix” price tag and its ties to an unresolved health care reform matter, don’t want to get any more negative fall-out regarding the costs of health care reform.

The implications for health care at this point are a bit unnerving.  Many states have already laid budgets assuming a continuation of the Medicaid stimulus support, set to end December 31.  Without continuation of the expanded Medicaid match, many states will need to recast budgets, integrating major spending reductions.  Second, the “doc fix” issue also impacts a number of other health care services such as Part B therapy rates which are tied to the physician fee schedule.  (See my related posts regarding Part B cuts and the American Jobs and Closing Tax Loopholes Act).  Without a fix or another delay of the pending cut (21%), physician fees and other Part B services such as therapy will be cut.

My impression is that Congress will scramble for the next week, attempting to unravel the bill and take on certain issues ala carte.  For example, I believe that unemployment benefits will get extended as in Washington, especially for Democrats and their union supporters, failing to do so is political suicide.  I believe Medicaid and the states will get their extended match but perhaps, more incrementally, maybe with an initial extension end date of March 30, 2011.  Finally, I think the “doc fix” issue will get delayed once again; another temporary stay of execution.  The doc fix may be the most politically difficult issue to deal with as its price tag is large and nearly every policy analyst and health care economist point to the need to address the underlying problem of the sustainable growth formula versus the current approach of pushing the inevitable to future dates via current infusions of new deficit dollars.

June 17, 2010 Posted by | Policy and Politics - Federal | , , , , , , , , , | Leave a comment

American Jobs and Closing Tax Loopholes Act – HR 4213

Funny title that is rather misleading given the gravity of the health care/post-acute care provisions that are included in this bill.  As is the case in Washington, especially these days, important health care provisions not addressed in the PPACA are coming forward in other bills; particularly bills involving unemployment benefits and COBRA benefits, etc.  Such is the case in this rather large expenditure bill which by title, is aimed at extending unemployment benefits, creating tax deductibility for COBRA premiums and removing a host of tax loopholes or tax deductions as some may call them. 

Imbedded within the bill are a series of important health care related provisions.  Briefly summarized, the provisions are;

  • A six month extension of the additional federal Medicaid match originally provided under the Stimulus bill.  The current added match is set to expire on December 31.  The extension provided under this bill would continue the match through June 30 of next year.  Fundamentally the issue here is the feds trying to provide a softer cushion or landing area for the states given the ramp-up in Medicaid spending that is coming under the PPACA, the current economies of most states (poor) and the harbinger of pending Medicaid cuts most states will require to keep their programs afloat.  While this match is likely a good thing in the interim, recall that it is in effect like giving a crack addict more crack.  Under Medicaid, the additional match comes only with additional state spending; spending that most states cannot afford without the additional federal money.  Unless the federal money is continually extended in some shape or form, the states will likely face the prospect of cutting their Medicaid budgets at some point, regardless of any economic recovery.
  • A provision that staves off any cuts to the physician fee schedule until 2014.  This doc-fix element includes increases in 2010 (for the balance of year) and 2011 with no increase specifically factored for 2012 and 2013 although, if spending on physician care remains (during this period) within Medicare spending limits, an increase may occur.  In 2014, the physician fee schedule would return to the current law based on the sustainable growth formula (per CBO, a cut in 2014 of 30%).  In addition, since Part B therapy rates are tied to the physician fee schedule, the rate cuts that are pending would be automatically fixed (in concert with the doc-fix) and in actuality, increases in rates would be forthcoming.  Physician fee-schedule cuts and the issue of physician fees being tied to the antiquated sustainable growth formula was a matter of contention during health care reform debate.  The House had passed a broad, permanent fix but the Senate failed to act.  The Senate desired something more temporary and less costly.  The final legislation as passed (PPACA) didn’t address the matter at all with the exception of counting the savings from the projected cuts as part of the financing elements that produced the “budget deficit reduction” effect.  In other words, Congress used the projected savings from the cuts as means of creating a positive financial projection from the CBO.  Most policy analysts and economists have claimed all along that one of the significant “risks” with the PPACA positive projections lied with the fortitude of Congress to sustain the significant Medicare cuts contained in the bill.  This measure is likely to create renewed calls that Congress is incapable of sustaining the Medicare cuts and in actuality, and as I have written multiple times before, the PPACA is nowhere close to deficit reducing.
  • The bill also contains a provision requiring CMS to implement RUGs IV by October 1, in concert with the roll-out and implementation of MDS 3.0.  This is a good thing for SNFs.  Without RUGS IV going hand-in-hand with MDS 3.0, there would be no case-mix payment system that matched the new assessment tool.  RUGs III is correlated to MDS 2.0. The end result would likely be comedic and tragic all at the same time as SNFs would have to complete the new MDS and try to correlate payment back to a case-mix system that didn’t match the new assessment tool.  I, and others, envisioned payment snafus abundant and the work to sort it out come RUGs IV roll-out in 2011, the responsibility of the SNF.

The Apex Healthcare E-Newsletter (my organization’s newsletter) for May was just released and posted yesterday and in this issue you can find additional information regarding this topic (the physician fee schedule fix and RUGs IV)

May 21, 2010 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , | 1 Comment

Health Care Reform Implications: Medical Device and DME

Over the next few days I’ll be pushing out a series of posts as my schedule permits, on the implications of health care reform for various industry segments.  These are not meant as in-depth analyses, more of a “summary” of the key points.

Reconciliation Act: This Bill has yet to pass the Senate and as a result, it is possible amendments could change these provisions.

The biggest implication is a 2.3% excise tax that goes into effect in 2013. The tax is on manufacturers of devices but exempts Class I devices such as canes, eyeglasses, and hearing aids. Oddly enough, the tax is tax-deductible and applies to all Class II and Class III devices sold beginning Jan 1, 2013. Clearly, the tax impact will be passed along in pricing, assuming price increases will be wholly or partially absorbed via reimbursement. If not, the clear implication is a reduction in margin for device manufacturers.

Other provisions less onerous but still potentially burdensome include a 90 day waiting period for approval of new DME claims to allow the Secretary to conduct analysis of potentially fraudulent claims. This provision assumes the Secretary will identify potential areas of risk and potential categories of supplies that are prone to fraud. I can’t tell from the language whether this will be a “universally applied” wait for all new claims or just certain claims for certain suppliers.

Also within the Reconciliation language is additional funding to fight fraud, waste and abuse. I suspect some allocation of these dollars will be for additional enforcement activity in the Medical Device/DME industry.

Senate Reform Bill: In the Senate Bill the reform bill that will become law today), there are a number of provisions that will impact the industry.

First, there is an imposition of an annual fee on manufacturers and importers of medical devices. The fee is based on 2010 annual sales and will be allocated across the industry based on market share. Best guesses suggest the fee will be in the range of $2 billion. The fee (tax) is non-deductible and doesn’t apply to Class I or Class II device sales or basically any devices sold via retail direct to consumers. Small manufacturers ($5 million or less) will be exempt and manufacturers with sales between $5 million and $25 million will pay 50% of the fee. The Secretary is charged with analyzing the sales of manufacturers and determining the relevant market share of sales for allocation. Again, this applies to non-domestic manufacturers and domestic importers of foreign devices.

The Senate bill expands competitive bidding for DME to 21 additional metro areas and requires the Secretary to nationalize the process and standardize bids by 2018.

Under Medicare, the Senate bill eliminates the 2% add-on payment for DME (above CPI) that Congress provided last year, effective 2014. Instead, the Senate bill incorporates a productivity improvement feature that effectively reduces the DME fee schedule by 1%, applied to the annual update factor for DME.

Finally, the Senate bill eliminates the option for patients to elect Medicare to purchase a power wheelchair within the first month of medical need approval. Instead, Medicare will pay rental on the chair for 13 months, incorporating a portion of the purchase price in its payments to the DME supplier. Effectively, Medicare pays for the chair to the DME supplier over the 13 months at the end of the period, transferring the ownership of the chair to the beneficiary.

In my opinion, the immediate and near-term questions center on whether the Senate will make adjustments to the Reconciliation Bill and will Congress maintain the taxes and fees outlined. Historically, the Congress post-passage of major entitlements and legislation that raises taxes and/or cuts payments has balked to lobbying pressure and ultimately, restored cuts and enhanced payments. In this scenario, anyone’s guess is as good as mine in terms of what could happen.

March 23, 2010 Posted by | Home Health, Policy and Politics - Federal, Uncategorized | , , , , , , , , | 2 Comments