Medicare

Fixing Medicare’s Insolvency Requires Both the Administration and Congress – So Where Are They?

by Matt Gontarchick

The 2022 Medicare Trustees Report was full of grim news – namely, that the Hospital Insurance (HI) Trust Fund is projected to hit insolvency by 2028.  Given the serious implications insolvency could have on access to care, stakeholders have been begging Congress and the administration to do something.   

However, Washington has avoided serious attempts to address the HI Trust Fund’s insolvency for years, primarily because the most obvious fixes would be unpopular among voters.  Since the payroll taxes predominantly finance the HI Trust Fund, lawmakers could opt to raise payroll taxes to add more years to the fund.  Unfortunately, higher payroll taxes would mean less take-home pay for employees and would put pressure on employers, which sounds like a sure-fire way to anger the electorate.  Inflation and general concerns over cost-of-living issues would also exacerbate the impact of higher payroll taxes on workers. 

Lawmakers could also maximize existing revenue streams by cutting Medicare spending, but this would spark political backlash from the health care sector.  The pandemic has stretched hospitals’ operating margins even thinner and reducing already-low Medicare reimbursement rates would make life even more difficult for providers.  Medicare could shift costs to beneficiaries in the form of higher deductibles and co-payments, but this would once again be political damaging as seniors will then have to grapple with the combined effects of higher health care costs and inflation.

The federal government could also incur Medicare savings by making the program more cost effective, but that’s no easy task.  During a series of congressional hearings of the Fiscal Year (FY) 2023 budget request for the Department of Health and Human Services (HHS), Secretary Xavier Becerra repeatedly said value-based payment models could be used to save Medicare dollars and extend the HI Trust Fund’s solvency.  Unfortunately, these payment models haven’t had much of effect on Medicare’s finances.  Out of the 40 payment models launched by HHS over the past 10 years, only five have delivered “statistically significant savings.”  Even if all value-based payment models were to start immediately reducing costs, it would likely take years for these savings to make a serious dent on Medicare’s finances.

Congressional Action in Sight?

The urgency of addressing Medicare Part A’s finances isn’t lost on members of Congress.  During Becerra’s appearances before congressional committees last spring, Republican lawmakers repeatedly questioned the secretary about the administration’s plans for addressing the HI Trust Fund’s pending insolvency.  In response, Becerra repeatedly told lawmakers that they will have to work with HHS to develop legislation to improve the outlook for the HI Trust Fund. Rep. Adrien Smith (R-NE), one of the GOP members to question Becerra about the HI Trust Fund, penned a June 2022 op-ed that underscored the need for “bipartisan action” to shore up Part A revenue.

It’s not that Congress hasn’t taken action in the past.  There is a statutory requirement for the administration to submit a report to Congress when more than 45% of Medicare hospital spending is projected to come from general revenue – not the HI Trust Fund – within seven years.  However, as both Smith and Becerra confirmed in the recent HHS budget hearings, the Biden administration has no plans to meet this requirement. 

Fortunately, a viable proposal to address the HI Trust Fund has emerged in recent days.  On July 7,  Senate Democrats reached an agreement to extend the solvency of the HI Trust Fund to 2031 by closing a Net Investment Income tax (NIIT) loophole involving pass-through businesses.  Primarily targeting high-income earners, the proposal to close the tax loophole was first put forth by the Biden administration back in 2021 as a part of its Fiscal Year (FY) 2022 budget request.   Senate Democrats are reportedly including this proposal in a broader reconciliation package to secure the support of Sen. Joe Manchin (D-VW), whose decision to withdraw support from last year’s package caused it to fall apart. 

The proposal from Senate Democrats is getting attention in the House, too.  On July 11, Rep. Lloyd Doggett (D-TX) introduced legislation that would similarly close the NIIT loophole.

However, the proposal is still in its infancy at this point, and it doesn’t have a strong likelihood of becoming law.  The Senate Parliamentarian has yet to complete the review of the new reconciliation proposal, and as last year has shown, delicate negotiations on a new reconciliation bill could collapse at any point.  However, as the Senate attempts to revive a reconciliation bill and the comments made during recent congressional hearings show that lawmakers are definitely concerned about Part A’s finances and recognize the importance of taking action before it’s too late.  

Medicare

The Medicare Trustees Report Is Still Bad News

by Matt Gontarchick

The Medicare Hospital Insurance (HI) Trust Fund will become insolvent in 2028, according to the latest report by the Medicare Board of Trustees in June 2022.  Last year’s report projected the HI Trust Fund’s insolvency date to 2026, which means the fund now has just two additional years of breathing room. 

In brief, the HI Trust Fund funds Medicare Part A, which reimburses providers for inpatient hospital services, hospice care, and skilled nursing facility and home health care services and is funded primarily through payroll taxes.  In contrast, a separate account known as the Supplementary Medical Insurance (SMI) Trust Fund funds physicians and other outpatient services under Part B and prescription drugs under Part D and is funded through general tax revenue and the premiums enrollees pay.

Better-than-expected recovery in economic growth, pay, and employment convinced the Medicare trustees to push out the HI Trust Fund’s insolvency date by two years.  The trustees also noted in their report that the COVID-19 pandemic isn’t expected to have a serious impact on Medicare’s finances. 

New projections that the HI Trust Fund will become insolvent two years later than initially expected isn’t the good news it seems to be.  In fact, the HI Trust Fund is in a world of trouble.  As the trustees noted in their report, there is much uncertainty on the economy, population demographics, and access to health care that indicate serious problems with the HI Trust Fund’s estimates on future expenditures, and there may be cause for concern regarding the report’s projected insolvency date. 

For example, the trustees made the economic projections that were included in the report back in February 2022 – right before COVID-19 cases started to shoot up again and inflation began to climb.  An analysis from the Committee for a Responsible Federal Budget says the trustees’ estimates appear to “understate inflation and overstate real economic growth.”  If inflation and poor economic growth is persistent into next year, the report might estimate a sooner insolvency date in their 2023 report.

Furthermore, the HI Trust Fund still faces a massive shortfall to the tune of a $350 billion deficit over the next 10 years.  The trustees project there will be a shortfall of 0.7% of payroll, or 0.3% of Gross Domestic Product (GDP).  This means either a 24% payroll tax or a 15% spending cut is required to prevent the fund from becoming insolvent.

Additionally, Medicare spending is expected to quickly increase.  According to the report, Medicare spending is projected to grow from 3.9% of GDP to 6% by 2040 before hitting 6.5% around 2070.  Medicare Advantage (MA) is cited as a primary driver of rising spending, as MA plans are argued to be more expensive than traditional Medicare.  On top of this, an aging population is driving overall health care spending higher, which includes the kind of inpatient services that Part A pays for. High spending means addressing the HI Trust Fund’s finances – whether by upping payroll taxes or cutting spending – is only going to get harder down the road.

There is some disagreement on how dire the situation is for the HI Trust Fund’s finances.  Even if the HI Trust Fund were to be depleted in the next few years, it would still pay roughly 90% of its current level.   However, this is far from an ideal scenario.  Insolvency essentially means Medicare Part A payments to providers would be reduced to levels that could only be covered by incoming tax revenues.  By only being able to pay nine-tenths of current program expenditures, an insolvent HI Trust Fund would affect providers by either delaying payments for all providers or having Medicare reimburse at a decreased rate for Part A care.  Either scenario could result in many seniors potentially losing access to care.    

Thus, the HI Trust Fund going insolvent is a big deal, and lawmakers will have to get their act together at some point to shore up Medicare’s finances.  It is important that lawmakers act sooner rather than later to bolster the trust fund by reducing spending, increasing revenues, or some combination of both.  Acting sooner would also boost the public’s trust in Medicare and stabilize the fund, heading off scenarios where providers face declining reimbursement and beneficiaries could lose access to care.

Politics

Health Care: Is It Top of Mind for Voters in the Midterms?

by Matt Gontarchick

Inflation.  Baby formula.  Gun control.  Countless important issues are at the top of voters’ minds as the midterm election approaches.  However, unlike previous election years, many voters aren’t saying health care is the most important issue to them.  How does health care stack up against a plethora of other important issues this year, and what could change in the coming months to bring health care to the forefront of the national conversation?

What the Polls Tell Us

According to a Kaiser Family Foundation (KFF) poll conducted in March 2022, health doesn’t appear to be a leading issue among voters.  When asked to name what they think will be the most important factor when voting for the 2022 midterm election, 37% of voters cited the economy, inflation, and rising prices.  Other issues mentioned by voters include climate change (4%), crime (3%), the Russian invasion into Ukraine (3%), and the COVID-19 pandemic (2%).

With inflation having reached a 30-year high of 8.5% in April 2022, it shouldn’t be surprising that voters are naming economic-related issues as their top concern.  However, what’s unusual about the 2022 polling is that compared to previous election years, health care isn’t even close to being a top issue for voters.

In October 2020, for example, 12% of voters told KFF that health care is their top issue, making it the fourth most-cited issue.  Meanwhile, the economy was a top issue for 29% of voters, while the COVID-19 pandemic and public safety each respectively garnered 18% and 13%.

Health care was even more important to voters in 2018, a midterm election year that saw Democrats regain control of the House after flipping 41 seats.   That year, 26% of respondents told KFF that health care was their top issue, placing it third on the list of topics important to voters.  Corruption in Washington came in first place with 32%, while the economy and jobs came in second with 27%. 

Even though voters might not cite health care as a top concern now, several factors could change in the coming months that could make health care top of mind for voters come November.

  • Expiration of enhanced ACA premium tax credits.  The American Rescue Plan Act of 2021 increased Premium Tax Credits (PTCs) for Marketplace insurance coverage and extended eligibility for PTCs to more individuals, making health insurance more affordable for millions in America. However, those ACA premium subsidies expire at the end of the year, and if Congress fails to renew them, 13 million Americans will start 2023 with higher insurance premiums that they may not be able to afford.  Importantly, those impacted would start receiving notices about their premium increases in October, just a month before they’re set to vote in the midterm election.  Furthermore, higher insurance premiums would make consumers less likely to receive care, potentially resulting in a combined $5.1 billion decline in spending on hospitals and physician practice services.   Democratic lawmakers that face difficult midterm races are already sounding the alarm, it remains unclear if the Senate can pass any type of legislation before the election that includes a renewal of the ACA premium subsidies.
  • Higher Medicare Part B premiums.  The Medicare Part B base premium increased by 14.5% from $148.50 a month to $170.0 a month in 2022.  On top of this, the annual deductible for all Part B beneficiaries increased from $203 in 2021 to $233 in 2022.  When the Biden administration finalized Part B premiums and deductibles in November 2021, inflation for the upcoming year wasn’t anticipated to be much different from the usual level of 2%.  However, with inflation currently hovering above 8%, higher Part B premiums are especially difficult for seniors to absorb, and continued higher-than-average inflation over the coming months could make health care costs a more important issue for seniors.
  • End of public health emergency (PHE).  The administration has repeatedly pledged to provide 60 days’ notice before letting the PHE expire.  The end date for the current PHE is July 16, 2022, and since the administration declined to say in mid-May that it will let the PHE expire, it is all but certain that come mid-summer, the PHE will be extended through October 2022 – less than a month before the midterm election on November 8.  The end of the PHE would immediately trigger a 151-day period for temporary Medicare telehealth waivers to unwind and a 365-period for states to initiate redetermination of Medicaid eligibility for all Medicaid enrollees.  While the end of telehealth waivers and loss of Medicaid coverage for certain individuals wouldn’t occur until long after Election Day, starting the countdown less than a month before voters cast their ballots could cause some voters to consider health care as an important issue.   However, due to the potential political implications of ending the PHE in October, it seems safe to assume that the administration will ensure the PHE remains in place until after the midterm election. 

Inflation, foreign conflicts, and public safety are likely to continue to dominate voters’ thinking as the 2022 campaign season continues.  However, a loss of ACA premiums subsidies, pressure from high Part B premiums, and the end of the PHE all have the potential to change the calculus for some voters as they decide who to cast their ballots for on November 8.

Congress

What Lawmakers Talked About during the HHS FY23 Budget Hearings

by Matt Gontarchick

Xavier Becerra made the rounds on Capitol Hill recently in his capacity as Secretary of Health and Human Services (HHS) to testify on the Biden administration’s Fiscal Year (FY) 2023 budget request for HHS.  Beyond the secretary’s submitted testimony – which was virtually the same for every hearing – here is a countdown of the top five health-related topics on lawmakers’ minds that were discussed across seven congressional hearings on the HHS budget request.

5. Ending the PHE

In a few hearings, lawmakers questioned Becerra on when the administration plans to unwind the COVID-19 public health emergency (PHE), which is currently set to expire on July 16, 2022.  Each and every time, Becerra reiterated the administration’s commitment to providing 60 days’ before ending the PHE in order to give states and health care providers time to prepare.  In recent weeks, the administration has given no indication that it will simply let the current PHE expire in two months.  Since May 16, 2022 marked exactly 60 days before the current PHE expiration date, the administration is all but certain to renew the PHE for another 90-day period come July.

4. Telehealth Waivers

One reason why lawmakers are so interested in how long the PHE will last is because several emergency health care flexibilities are tied to the end of the PHE.  These flexibilities include several Medicare telehealth waivers that waive geographic site originating requirements and allow coverage of audio-only services, among other items.  During the hearings, Becerra repeatedly thanked lawmakers extending temporary telehealth waivers for 151 days – 5 months –  beyond the end of the PHE in the Fiscal Year (FY) 2022 omnibus. 

Members were also strongly supportive of extending at least some of the telehealth waivers permanently. Some of the telehealth benefits lawmakers cited include increased access to health care in rural areas and relief for the health care workforce shortage.  Becerra voiced agreements on telehealth’s many benefits during the hearings, and he urged lawmakers to work with the administration on developing legislation to make the temporary telehealth authorities permanent.  Fortunately, members are already hard at work and a bipartisan group of House members have already introduced legislation to permanently expand coverage of audio-only telehealth and remove geographic restrictions on originating sites.

3. No Surprises Act

Members from both parties across multiple committees criticized the secretary for not following congressional intent in implementing the No Surprises Act because the rulemaking process establishes the Qualifying Payment Amount (QPA) as the presumptive out-of-network rate in the independent dispute resolution (IDR) process.  They argued that doing so tips the scale in favor of insurers during the IDR process. During the hearing, authors of the No Surprises Act like House Ways and Means Committee Chairman Richard Neal (D-MA) said members went to great lengths to ensure that the legislation established a level playing for all factors to be considered in the IDR process.   

In February 2022, a district court ruling struck down provisions of the No Surprises Act that gave weight to the QPA.  Becerra assured members during the hearings that the administration’s final rule on the No Surprises Act will heed the court’s ruling, although he declined to provide a timeline  on when  the rule will be released.  The secretary also said that HHS is working with the Department of Justice (DOJ) on whether to appeal or accept the ruling.  Additionally, Becerra was confident that the new rule will protect patients from surprise medical bills. 

2. 988 Suicide Hotline

988 will officially become the new suicide hotline on July 16, 2022, and members were curious to see how the administration is ensuring the hotline will work from day one.  States and territories will be responsible for operating the actual hotline, and Becerra explained that the administration is providing states with funding to make sure they can onboard enough counselors and behavioral health professionals to take incoming calls.  In the event that existing state call centers are overwhelmed, Becerra told lawmakers that HHS is working to set-up back-up call centers.  As the launch date approaches, Becerra assured the congressional committees that HHS is “keeping tabs” with states on call center preparation, although he noted that some states will be in a better position than others to take calls right away once the new hotline goes live this summer.

1. ARPA-H

The FY 2022 omnibus established the Advanced Research Projects Agency for Health (ARPA-H) as the newest biomedical research agency within HHS.  While members were unanimous in their support of the new agency, some including Reps. Rosa DeLauro (D-CT) and Anna Eshoo (D-CA) were critical of the administration’s decision to house ARPA-H within the organizational structure of the National Institutes of Health (NIH).  DeLauro, Eshoo, and others had been advocating for ARPA-H to be an independent agency within HHS because they felt this arrangement would help cultivate an independent culture within the new agency that would best facilitate the development of new cures.  Additionally, some members including Sen. Jerry Moran (R-KS) and Rep. Tom Cole (R-OK) were concerned that the administration’s was proposing additional FY 2023 funding for ARPA-H at the expense of additional funding for existing research projects at NIH.

Becerra assured lawmakers that the placement of ARPA-H was purely administrative, and he explained that having NIH assume functions like accounting and human resources would allow ARPA-H to focus on developing breakthroughs from the get-go.  To further point to the new agency’s independence, he said the ARPA-H director would report to the secretary – not the NIH director – and he added that ARPA-H would not be “physically housed” within the NIH campus. 

Becerra additionally told the congressional panels that ARPA-H will be operational once a director is appointed.  While the secretary said the search for a director is currently underway, he was unable to provide a timeline. 

CMS

Tracking CMMI’s Shift to Health Equity

by Matt Gontarchick

Health equity is the latest focus of the Center for Medicare and Medicaid Innovation (CMMI), which was launched a decade ago to develop and test health care payment models with the goal of saving money for Medicare.  This push for health equity goes back to the very beginning of the Biden administration when he first issued an executive order (EO) on advancing health equity in January 2021.  What steps has CMMI taken to push for health equity since then, and how will CMMI pull it off?

CMMI’s shift to health equity kicked off in October 2021, when the center released a white paper announcing a “strategic refresh” that would judge the success of its models not just on whether they save money but also whether they improve health equity.  Of note, the white paper found that only six models of the more than 50 models CMMI currently has generated substantial savings for Medicare.

CMMI followed-up this strategic refresh in February 2022 when it launched the Accountable Care Organization (ACO) Realizing Equity, Access, and Community Health (REACH) Model, a redesign of the Global and Professional Direct Contracting (GPDC) Model.  A key feature of the ACO REACH model is a requirement for model participants to develop a health equity plan that identifies underserved communities and outlines initiatives to reduce health disparities within their beneficiary populations. 

The ACO REACH Model won’t be the last CMMI model to make health equity a cornerstone.  In March 2022, CMMI Director Liz Fowler said creating a health equity plan will  likely be a requirement for future innovation center models.

CMMI took another bold step on health equity in March 2022 when Chief Medical Officer Dora Lynn Hughes announced in a Health Affairs blog post that the innovation center has added “Advancing Health Equity” as one its five strategic objectives.  In the blog post, Hughes outlines ways CMMI intends to achieve this new objective:

  • Developing new models and updating existing models to promote and incentivize health equity, as demonstrated by the ACO REACH Model.
  • Increasing the participation of safety net providers to ensure models reach underserved communities.
  • Increasing collection and analysis of equity data, primarily by coordinating with other offices in the Department of Health and Human Services (HHS).
  • Monitoring and evaluating models for health equity impact by analyzing beneficiary experience and equity assessments.

Can CMMI pull off its health equity goals?  After all, only a fraction of the center’s 50 models achieved the goal of saving Medicare money, which makes the center’s capability to tack on and carry out another goal seem overly ambitious.

Fortunately, CMMI has a plan.  In her blog post, Hughes stated that the center will have to collaborate with offices and agencies across HHS, particularly those focused on social determinants of health like food, housing, and transportation.  Outside of the government, Hughes said CMMI is already meeting with groups that have not previously engaged with the center, like community-based organizations and patient advocacy groups, and that CMMI is hosting roundtable discussions on health equity to help inform its work. 

On top of this, the Centers for Medicare and Medicaid Services (CMS) is working hard to advance health care interoperability, which CMS Administrator Chiquita Brooks-LaSure said in March 2022 is essential to addressing the “inequities in our health care system.”  Better data collection is one of the four ways CMMI hopes it will achieve its health equity goal, and Brooks-La Sure recently announced that CMS will soon publish a rule on health data exchange.  While CMMI’s success at creating models that reduce Medicare costs may be limited at best, the center has laid out some specific actions it hopes to take to achieve its new goal, increasing the odds this goal can become reality.    

Congress

Congress’s Long-Standing History of Delaying Medicare Cuts

by Matt Gontarchick

Medicare cuts are coming.  Automatic spending cuts like Medicare sequestration and PAYGO were initially put in place with the goal of reigning in federal spending, but time after time, Congress has delayed them to shield the popular health care program from payment cuts.  These cuts are nothing new – in fact, they’re part of a long-standing tradition that began with the Sustainable Growth Rate (SGR).

PAYGO and Sequestration: A Brief History

Two laws currently trigger mandatory cuts to Medicare if lawmakers pass legislation that adds to the deficit.  The first, the Statutory Pay-As-You-Go (PAYGO) Act of 2010, requires the president to implement spending cuts to mandatory programs like Medicare and farm support if the Office of Management and Budget (OMB) determines there is a deficit on six- or 11-year PAYGO scorecards. 

The second law is the Budget Control Act (BCA) of 2011, which sets off across-the-board cuts to both mandatory and discretionary spending if spending exceeds explicitly set limits, or “caps.”  These cuts included a maximum 2% reduction in payments to Medicare providers known as Medicare sequestration.

However, Medicare is an incredibly popular program, with over 61 million beneficiaries.  Lawmakers are certainly sensitive to the political consequences of cutting funding to the popular federal health care program, which is why they’ve taken action to avoid automatic cuts as much as possible.  To date, neither the Medicare sequester nor the PAYGO cuts have ever gone into effect.

The SGR’s Precedent for Delaying Medicare Cuts

Congress’s strong tradition of delaying cuts to Medicare goes back to the SGR, which was implemented as part of the Balanced Budget Act of 1997.  The SGR created a formula that was intended to prevent Medicare spending growth for the Physician Fee Schedule (PFS) from exceeding GDP growth.  However, health care spending was continually outpacing GDP growth, making it clear that cuts to the PFS were inevitable.  To avoid the reimbursement cuts for physician services, Congress passed legislation to prevent the cuts from going into effect 17 times between 2003 and 2015.

The need for Congress to keep kicking the can down the road to prevent PFS cuts came to an end in 2015, when lawmakers enacted the Medicare Access and CHIP Reauthorization Act (MACRA).  It replaced the SGR formula with the Merit-Based Incentive Payments System (MIPS), which measures Medicare providers based on performance.  While MIPS hasn’t been without its faults, the new law means Congress no longer has to take action every year to address the SGR. 

It’s worth noting the SGR is not the same as PAYGO and sequestration – while the former only impacted physician payment, the latter affects reimbursement to Medicare providers more broadly. However, both have negative implications for providers and patients if they’re carried out, which is why Congress has regularly prevented such cuts from going into effect. 

Fortunately, Congress no longer has to deal with the SGR on an annual basis because after 15 years, lawmakers finally stepped up to pass legislation to make structural changes to the way physicians are paid.  Does that mean lawmakers will one day step up to make the structural necessary to stop kicking the can down the road every year with Medicare sequestration and PAYGO cuts? 

Congress last took action to address the Medicare sequester and PAYGO when it enacted the Protecting Medicare and American Farmers from Sequester Cuts Act in December 2021.  The law waives a 4% PAYGO cut until 2023, and it imposes a moratorium on the Medicare sequester until April 1, when a 1% cut goes into effect.  In July, the Medicare sequester then increases to 2%. 

While structural changes to address Medicare sequestration and PAYGO are possible, Congress is more polarized now than it was when passed MACRA seven years ago, leaving little room to pass comprehensive legislation to reform the budgeting process.  Additionally, the BCA and the PAYGO Act are far more complex than the legislation that eventually replaced SGR and would require significantly more effort for lawmakers to advance.  Therefore, until there’s widespread agreement among both parties on how to reform Medicare’s payment system, the near-annual ritual of delaying Medicare cuts is likely to continue to for some time.

Telehealth

The Uncertain Future for Telehealth

by Matt Gontarchick

April 16, 2022.  That’s the date the current public health emergency (PHE) is set to expire.  The Department of Health and Human Services (HHS) initially promised to provide 60 days’ notice to states and health care organizations before ending the PHE.  However, the Biden administration has been mum on its plans regarding the PHE and has given no indication on whether they will extend the PHE again, leaving stakeholders in doubt as to what will happen to the many temporary health policies that are tied to the PHE.

Background: HHS declared a PHE for the COVID-19 pandemic on January 31, 2020.  Since then, the PHE has been renewed by HHS eight times in 90-day increments with the most recent renewal being on January 14, 2022.my

The conversation over whether to renew the PHE couldn’t be timelier, as a growing number of federal and state officials have been discussing plans to loosen COVID-19 restrictions as the US shifts to treating COVID-19 as an endemic than a pandemic.  For example, Dr. Anthony Fauci, Chief Medical Advisor to the President, recently commented that the US is exiting the “full-blow” pandemic phase of the COVID-19 crisis, and a number of blue states and cities have begun to announce plans to roll-back certain pandemic requirements like indoor masking.  Additionally, over 70 Republican members of Congressman sent a letter to HHS Secretary Xavier Becerra last week requesting for a concrete timeline on when the PHE will come to an end. 

However, ending the PHE is no simple matter.  That’s because numerous temporary policies related to telehealth, COVID-19 treatments and vaccines, and Medicaid are specifically tied to the PHE.  In this blog post, we’ll focus on telehealth, while COVID-19 treatments and Medicaid will be covered in future installments. 

The CARES Act notably expanded Medicare coverage of telehealth services to make it easier for beneficiaries to access health care services while minimizing the exposure to COVID-19.  These temporary changes include:

  • Waiving Medicare’s geographic site originating requirement to allow beneficiaries to access telehealth in all settings.
  • Allowing audiologists, physical therapists, occupational therapists, speech-language pathologists, and other providers to provide telehealth services under Medicare.
  • Coverage of telehealth services conducted through audio-only technology like telephones and audio-visual technology like smartphone in more instances.
  • Reimbursement of 238 telehealth services, compared to 202 prior to the PHE.
  • Coverage of telehealth services without a pre-existing doctor-patient relationship.

However, all these temporary changes and waivers will expire once the PHE ends.  While members of Congress have put forth multiple legislative proposals to extend Medicare’s temporary telehealth provisions beyond the PHE, few have gained traction.  Adding to the uncertainty is the administration’s lack of communication on whether to renew the PHE another 90 days leaving both providers and beneficiaries in limbo over the status of temporary telehealth flexibilities.   

That’s why stakeholders are pushing for the PHE to stick around after April.  On February 10, the Federal of American Hospitals sent a letter to HHS requesting that the PHE be extended “well beyond” its current expiration date in two months’ time.  FAH argued that an abrupt end to PHE-authorized operations like telehealth run the risk of “destabilizing fragile health care networks” as these temporary measures have been in place for about two years allowing for patients to rely on their care.

And over the course of the past two years, telehealth usage has surged to the point that it now plays a vital role in the way people access health care.  According to HHS, telehealth utilization saw a 63-fold increase in 2020.  The adoption of telehealth in behavioral health was particularly noticeable, which saw about a third of its visits done remotely in 2020.  While telehealth usage has declined somewhat since 2020 and outpatient visits have returned to pre-pandemic levels, overall telehealth utilization remains elevated compared to 2019 levels, and patients and providers don’t  want to give up this health care tool that benefited so many patients.    

CMS

Where Are We at with Medicare’s Temporary Telehealth Waivers?

by Matt Gontarchick

Telehealth usage has exploded during the COVID-19 pandemic, thanks to legislation like the CARES Act that expanded Medicare coverage of telehealth services to make it easier for beneficiaries to access health care services while minimizing their exposure to COVID-19.  Now that the final stage of the pandemic is (hopefully) winding down, what are the implications for telehealth? 

It’s all about the PHE.  Expanded telehealth coverage is set to expire at the end of the COVID-19 public health emergency (PHE), which is currently January 16, 2021.  The Secretary of the Health and Human Services (HHS) has the authority to renew the PHE for 90-day increments, meaning the PHE could potentially extend through April 2022 – or longer.  Below are key Medicare telehealth coverage restrictions and rules that have been waived for the duration of the PHE.

  • Qualifying Technology: Medicare may now cover telehealth services conducted through devices like smartphones that offer audio-visual capabilities and can be used to facilitate two-way, real-time communication between a beneficiary and a practitioner.  Previously, this was limited to beneficiaries in rural areas.  Additionally, the requirement for visual capabilities is now waived for certain services, meaning some beneficiaries can now use audio-only telehealth services.
  • Geographic Location: Medicare will reimburse for telehealth services anywhere in the US, with no pre-existing patient relationship required.
  • Qualifying Service: Medicare can reimburse 238 telehealth services, compared to 101 prior to the PHE. 
  • Qualifying Originating Site Type: Telehealth services can be provided to all patients in all settings, including at a beneficiary’s home.
  • Qualifying Site Practitioner: Any health care practitioner who can bill Medicare may now furnish Medicare telehealth service.

All of these temporary changes expire once the PHE ends, but Congress could take action and can change that. Lawmakers from both parties have been pushing to take some of these temporary telehealth coverage extensions and make them permanent, beyond the PHE. 

  • Several bills (S. 368, S. 1988, H.R. 341, H.R. 1332, and H.R. 5425) would strike Medicare’s geographic site originating requirement and allow Medicare beneficiaries to access telehealth services in all settings. 
  • Another (H.R. 2168) would permanently allow audiologists, physical therapists, occupational therapists, speech-language pathologists, and other providers to provide telehealth services under Medicare.
  • Additional bills (H.R. 5425 and S. 1988) would ensure permanent Medicare coverage of certain telehealth services using audio-only technology.

However, none of these have bills have advanced in either chamber since their introduction, and the Build Back Better Act, Democrats’ social spending and climate package, does not contain any provisions that address Medicare coverage of telehealth services.

It would be amiss not to highlight a major barrier to continued telehealth coverage is reimbursement.  Under the PHE, telehealth services are reimbursed under Medicare at the same rate as in-person services, and lawmakers and stakeholders disagree over whether permanently expanded telehealth services should be reimbursed at or below the level of in-person services. 

So, what does the future hold for telehealth?  In summer and fall 2020, more than a quarter of Medicare beneficiaries used telehealth services, representing a massive increase in telehealth utilization since before the pandemic.  Given that the waiver of Medicare’s telehealth restrictions will expire once the PHE ends, the question of what telehealth coverage will look like post-pandemic looms large.  The numerous proposals on Capitol Hill to expand certain telehealth flexibilities suggest lawmakers want to ensure beneficiaries have continued access to telehealth services.  However, absent any serious progress on these proposals, Medicare beneficiaries are still staring down the very real possibility of losing popular, safe, and convenient ways to access medical treatment that they gained in the early days of the pandemic.   

Congress

What Will Congress Do about Pending PAYGO Cuts?

by Matt Gontarchick

The debt ceiling, appropriations, infrastructure, reconciliation – Congress has a lot on its plate right now.  On top of that, Congress has another item to address that health care stakeholders have been watching closely: an automatic 4% cut to Medicare starting on January 1, 2022.

What’s going on?  In March, the $1.9 trillion American Rescue Plan Act passed and raised the deficit. This triggered automatic PAYGO cuts to Medicare and other programs because of a law signed in 2010, the Pay-As-You-Go (PAYGO) Act, which prohibited new legislation from increasing the federal budget deficit. 

What’s Congress doing?  Congress has always acted to waive PAYGO cuts, but not in March of 2021 when lawmakers failed to reach an agreement. At the time, the House overwhelmingly voted to waive PAYGO, but a similar proposal in the Senate failed to garner enough votes to override a filibuster.  So far, there has been little word from lawmakers about the plans to address PAYGO as the end of the year approaches.

Why does it matter?  The American Hospital Association (AHA) estimates that a 4% reduction in Medicare spending, or about $36 billion, would result in $9.4 billion in cuts to hospitals provider for fee-for-service (FFS) Medicare reimbursement in calendar year 2022.  These losses would come at a time when hospitals and other providers are still grappling with revenue losses related to the COVID-19 pandemic.

It’s not just PAYGO: Health care providers are facing other cuts at the year’s end that, combined with PAYGO, could prove devastating.  These include:

  • Medicare sequestration.  Congress passed legislation back in April to extend the moratorium on 2% cuts to Medicare payments, known as sequestration, through the end of 2021.  The 2% cuts were initially postponed by Congress as a part of the CARES Act in 2020 to help providers struggling with the financial burden of the pandemic.
  • 2021 Physician Fee Schedule.  Finalized in July, the 2021 Physician Fee Schedule will cut payments to physicians next year by 3.75%.  The cut was initially set to go into effect in 2021, but Congress provided an extra $3 billion in funding in late 2020 to hold on the cuts until the beginning of 2022.

The bottom line: The combination of PAYGO, Medicare sequestration, and the Physician Fee Schedule could mean a 9% reduction in Medicare physician payments next year.

What’s being done?  Leading stakeholder organizations including the AHA and the American Medical Association (AMA) have sent letters to congressional leadership urging action to waive pending PAYGO cuts, as well as the coming Medicare sequester and Physician Fee Schedule cut.  Furthermore, on October 14, 245 bipartisan House members sent a letter to congressional leaders on the aforementioned Medicare cuts.  Congress has provided much assistance to health care providers over the course of the pandemic, and providers are urging Congress to take action once again to help the industry make it through what is hopefully the final stage of the pandemic.   

Administration

What Does Health Care Rulemaking Look Like This Year?

by Matt Gontarchick

Even Congress tries to complete $4.5T in domestic policy changes plus appropriations in the next 3 months, the Biden Administration is cranking away on health care rulemaking.  Here’s a quick overview of some key rules on the horizon from the Department of Health and Human Services (HHS).

Go deeper:  Refresh your memory on OMB and rulemaking here.

Below are the health care rules currently under review at www.reginfo.gov.  At the moment, the public is unable to comment on the any of the rules listed until their publication in the Federal Register.

TitleCategoryTypeStatus
Streamlining HHS
Guidance Practices		Internal HHS PolicyProposed RuleReceived at OMB on
6/28/21
Reporting Requirements Related to Air
Ambulance and Agent
and Broker Services and HHS Enforcement
Provisions		InsuranceProposed RuleReceived at OMB on
7/7/21
Establishing
Over-the-Counter
Hearing Aids and
Aligning Other
Regulations		Medical DevicesProposed RuleReceived at OMB on
8/18/21
Medicare Coverage of
Innovative Technology (MCIT) and Definition of “Reasonable and
Necessary”		MedicareProposed RuleReceived at OMB on
8/27/21
Securing Updated and Necessary Statutory
Evaluations Timely		Internal HHS PolicyProposed RuleReceived at OMB on
8/31/21
Premarket Tobacco
Product Applications
and Recordkeeping
Requirements		Tobacco ProductsFinal RuleReceived at OMB on
4/5/21
Format and Content of Reports Intended to
Demonstrate
Substantial Equivalence		Tobacco ProductsFinal RuleReceived at OMB on
4/5/21
Medical Device De
Novo Classification Process		Medical DevicesFinal RuleReceived at OMB on
6/28/21
Updating Payment
Parameters and
Improving Health
Insurance Markets for
2022 and Beyond		InsuranceFinal RuleReceived at OMB on
8/19/21

Don’t Be Caught “Surprised”

HHS has more rules coming out on the No Surprises Act. 

  • By October 1, the Biden administration is required to publish a rule on an audit process to ensure that plans and insurers are complying with the QPA calculation and requirement. 
  • By December 27, the administration must outline the details of an independent dispute resolution (IDR) process if providers and health plans fail to agree on an out-of-network rate.

Annual Payment Rules

Expected around late October/early November, CMS will post the final Medicare payment policies and reimbursement rates for FY 2022, including the Home Health Prospective Payment System, the Hospital Outpatient Prospective Payment System (HOPPS), and the Physician Fee Schedule. 

  • Stakeholders can still comment on the proposed HOPPS and Physician Fee Schedule at regulations.gov through September 13 and September 17, 2021, respectively. 

All eyes may be on Congress this fall as lawmakers work to finish FY 2022 appropriations, a $1.2T bipartisan infrastructure bill, and a $3.5T “human” infrastructure package.  However, keen observers would be remiss to ignore the Executive Branch, where forthcoming rulemaking will surely impact health care providers of all stripes.

CMS

After 10 Years, How Is the CMS Innovation Center Doing?

by Matt Gontarchick

The Center for Medicare and Medicaid Innovation (CMMI), also known as the CMS Innovation Center, just celebrated its tenth birthday last year.  Tasked to address growing concerns about rising costs, quality of care, and inefficient spending, CMMI is a powerful tool for innovation in the US health care system.  After a decade, is CMMI delivering on its promise to innovate health care, or does the young agency still have much to accomplish?

All About CMMI

Created upon enactment of the Affordable Care Act (ACA) in 2010, CMMI is statutorily mandated to design, implement, and test new health care payment and delivery models for Medicare and Medicaid.  Managed by the Centers for Medicare and Medicaid Services (CMS), CMMI has launched over 40 new payment models since its inception, including accountable care organizations, medical homes models, and bundled payment models.  CMMI separately awards grants to state agencies, researchers, and other organizations for projects to design and implement new payment models with the same goals of improving care and lowering costs, and some of CMMI’s work includes multi-payer alignment models that impact patients with commercial insurance. 

2020 Report to Congress

Released on August 4, the 2020 Report to Congress provides an in-depth look at the performance of CMMI models and serves as a key indicator of how the center is doing in its effort to address rising costs and boost quality.  While the report focuses on CMMI’s activities from October 1, 2018, to September 30, 2020, it also highlights some actions taken from September 30 to December 31, 2020. 

In the 2020 Report, CMS estimated that over 27.8 million Medicare and Medicaid beneficiaries plus enrollees in commercial insurance plans have received care from over 500,000 health care providers or plans participating in alternative payment models under CMMI.  The 2020 Report analyzed a total of 38 active models within CMMI, including 11 new models announced since the 2018 Report and 27 active models that were launched prior to October 2018.

Summary of Findings

Unfortunately, only a handful of CMMI models met either goal of reducing costs or improving quality.   Furthermore, only the five following models delivered “statistically significant savings” to the Medicare Trust Fund according to the report:

Additionally, a few models led to improvements in quality but did not yield any noteworthy savings, including the Comprehensive End-Stage Renal Disease (ESRD) Care (CEC) Model and the Comprehensive Care for Joint Replacement (CJR) Model.

Saving money and raising quality aren’t the only metrics for a model’s success.  For CMS to consider permanently expanding a model for the federal health care entitlement programs, models must meet several additional criteria, including assurance from the CMS Office of the Actuary that a model’s expansion would not deny or limit coverage or provision of benefits under Medicare, Medicaid, and CHIP.   According to the report, only three models met the criteria:

How Can CMMI Improve?

While the 2020 Report to Congress does not explicitly offer recommendations on how to improve model performance, it does identify four issues that contributed to lower-than-expected model performance:

  • Selection bias created by voluntary models.
  • Benchmark inaccuracy.
  • Quality measure misalignment.
  • The need for greater data transparency.

These four issues identified in the report suggest a few ways CMMI models could produce better quality and provide for lower costs, mainly through mandatory model participation and more data transparency.  The idea of making more payment models mandatory is not a new idea.  In a July 2021 interview with Health Affairs, CMMI Director Liz Fowler explained that a shift towards mandatory models, which had already begun during the previous administration, will continue under the Biden administration and are likely to play a greater role in CMMI’s future.

The fact that CMMI models are underperforming is not lost on CMS leadership.  In a recent Health Affairs blog post, a few top agency officials including CMS Administrator Chiquita Brooks-LaSure and Fowler acknowledged only a handful of models have incurred savings and met the requirements to be expanded.  In addition to recounting a few recommendations from outside experts, such as MedPAC’s endorsement for streamlining and harmonizing models, Brooks-LaSure and Fowler offered several takeaways to inform how model performance could be improved.

  • CMMI needs to reevaluate how it designs financial incentives in order to boost meaningful provider participation.
  • Challenges in setting financial benchmarks have undermined models’ effectiveness, underscoring a need to ensure models are not resulting in overpayment and explore ways to improve or replace the current risk adjustment methodology. 
  • Since providers find it hard to accept downside risk if they lack the tools to change care delivery, CMMI should help ensure providers have options for managing risk, such as support in transforming care, waivers, and data. 

Despite dozens of underperforming models, CMS recognizes that the Innovation Center has room for improvement, and the agency’s leaders are keen on delivering a strategy that works.  Hopefully, through streamlining current models, implementing more mandatory models, boosting participation in voluntary models, improving financial incentives, and ensuring model participants have the tools they need to succeed, CMMI models could hopefully be in a better position to  both reduce costs and improve quality in time for the center’s 20th anniversary.

Congress

What You Need to Know about Medicare Insolvency

by Matt Gontarchick

Medicare is in trouble.  The Hospital Insurance (HI) trust fund, which finances Medicare Part A, already spends more than it brings in, and without help from Congress, the trust fund is projected to become insolvent in just a few years.  Unfortunately, the HI trust fund has been down this road before, requiring Congress to take action to stave off insolvency and extend the lifespan of the trust fund at several points in the past.  What exactly does insolvency mean for Medicare, and how can lawmakers put the program on solid financial footing?

The State of the Trust Fund

Concerns over Medicare insolvency aren’t exactly new.  Since the program’s creation in 1965, Medicare has faced insolvency on a fairly regular basis.  Even before the start of the COVID-19 pandemic, the HI Trust Fund was projected to hit insolvency by 2030.  However, the pandemic has exacerbated the trust fund’s financial outlook considerably.  Since payroll taxes are the chief source of revenue for the trust fund, job losses from COVID-19 have resulted in less incoming revenue for Part A.  Another factor which hastened the fund’s depletion is the fact that $60 billion of funding provided to the Provider Relief Fund under the CARES Act came from the HI trust fund.

What Does Insolvency Actually Mean?

Contrary to what many believe, insolvency wouldn’t mean the HI trust fund had completely run out of money or would be unable to pay out claims.  Rather, it would mean the trust fund would no longer have any assets.  Once the trust fund depletes, the Congressional Budget Office (CBO) projects annual program revenues from payroll taxes will only cover about 92% of annual program outlays.  Absent any congressional action, insolvency would mean Medicare payments to providers would be reduced to levels that could only be covered by incoming tax revenues.  This could affect providers through one of two scenarios.  In the first scenario, the Centers for Medicare and Medicaid Services (CMS) would reimburse claims as revenue comes into the trust fund, but as tax revenues come in at a slower rate than provider claims, the amount of time between the filling of claims and reimbursement would grow, resulting in delayed payments for providers.  Under the second scenario, CMS would pay a decreased rate for all Part A care.  According to a CBO report from September 2020, Part A would only have enough tax revenue to pay 83 cents for each dollar billed upon the trust fund reaching insolvency.  This means that for every $100 owed to providers for Part A-covered services, CMS would only be able to reimburse $83. 

It should also be noted that the HI trust fund’s exact date of insolvency is unknown.  In September 2020, CBO initially projected the trust fund would become insolvent by 2024.  However, improved estimates for job growth and the employment rate in a February 2021 report from CBO prompted many analysts to push the anticipated date on insolvency back two years.  

Déjà Vu All Over Again

Lawmakers have come to Medicare’s rescue in the past when the program faced similar financial problems, only to take back or delay some of the financial pain the laws inflicted on providers.  When Medicare approached insolvency in the 1990s, Congress ushered in major changes to the program via the Balanced Budget Act (BBA) of 1997, which increased cost sharing for beneficiaries, reduced the growth of payments to providers, and expanded prospective payments to post-acute care facilities.  In 2002, Congress began a 13-year run of delaying the resulting cuts to physicians and other Part B providers through legislative efforts commonly known as the “doc fix.”  Congress once again took action in 2009 to shore up the trust fund via the Affordable Care Act (ACA). Under the landmark health law, a growth in payroll taxes for high-income Americans and a Medicare net investment income tax increased the program’s solvency to a total of 19 years.  However, Congress ended up repealing many of the ACA’s revenue-generating policies like the “Cadillac Tax” and medical device tax, as well as the hugely unpopular Independent Payment Advisory Board, meaning the trust fund was once again facing hard times.  The Budget Control Act of 2011 ushered in an era of automatic Medicare payment cuts, which Congress continues to suspend, doing so through December 31, 2021 in the most recent COVID-19 relief law. 

How to Address Medicare’s Finances

There is no shortage of proposals to delay Part A’s insolvency, most of which revolve around either reducing spending or increasing revenue.  Many of these ideas would require statutory changes.  Below are some key proposals summarized.

  • Raise Medicare Taxes.  Congress could consider raising payroll taxes by 0.38% each on employees and employers to stave off insolvency.  However, such a move would be politically unpopular and inopportune as the economy continues to recover from the pandemic.  As an alternative, Congress could consider using the proceeds of the net investment income tax to finance the HI Trust Fund.  Under the Affordable Care Act (ACA), high-income Americans have a 3.8% net investment income tax, and bumping this up to 4% would provide the trust fund $490 billion in additional revenue over 10 years.
  • Build an Integrated Benefit and Trust Fund Structure.  Instead of having two separate insurance plans for Medicare – one for inpatient services (Part A) and one for ambulatory care (Part B) – Congress could integrate benefits covering inpatient and outpatient care with a simplified cost-sharing structure for patients.  Revenue sources would remain the same, although general fund payments to cover Medicare’s costs would be indexed in future years to a measure of economic growth or another measure not tied to Medicare’s costs.
  • Turn Medicare into a Premium Support Program. Beneficiaries would choose a plan each year, with the federal contribution determined by the second-lowest bid for all plans.  Instead of defining benchmarks by spending growth in the fee-for-service program, benchmarks would be defined by the second-lowest bid.  Competition among plans to be the second-lowest bidder would incentivize plans to keep premiums low.
  • Advance Health Equity.  Health inequities cost the US $83 billion each year and contribute to poor health outcomes for Medicare beneficiaries, subsequently driving greater spending.  Medicare could utilize telehealth, implicit bias training, regular screening for social and nonmedical needs, and enhanced data on beneficiaries to reduce chronic conditions and improve beneficiaries’ health.
  • Expand Promising Alternative Payment Models.  Alternative payment models create incentives for providers to collaborate to provide high-value care.  Since most alternative payment models have failed to produce noticeable savings, CMS could double down on the most promising models and encourage long-term investment in them. 

Medicare is very popular among beneficiaries, and lawmakers have repeatedly vowed to ensure the program has a future.  With potentially only a few years until the program faces a financial reckoning, Congress may yet take up the mantle to make changes to Medicare to ensure its long-term sustainability.  What those changes may be – and whether Congress can stick to its plan – are far from certain.