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December 20, 2007

Congress Passes Medicare/SCHIP Bill

TO:    Chief Executive Officers, Member Hospitals & Health Systems
          Government Relations Personnel

In the final days of first session of the 110th Congress, the Senate passed the Medicare, Medicaid and SCHIP Extension Act of 2007 (S. 2499) by unanimous consent on December 18. The House followed on December 19, voting 411-3 to approve the legislation. The President is expected to sign the bill. This short-term, slimmed-down Medicare package delays by six months a scheduled 10% Medicare pay cut for physicians, and replaces it with a 0.5% increase through June 30, 2008. The bill also extends current funding for the State Children’s Health Insurance Program (SCHIP) until March 31, 2009 and ensures additional dollars for those states expected to experience shortfalls.

Senate leaders purposely scaled back the bill to a "bare bones" version during the final days of session to ensure that it would be non-controversial enough to pass Congress and be signed by the President. Senate Republicans (with the ability to filibuster) and the administration (with the power of a presidential veto) derailed larger and more expensive packages proposed earlier by Democrats. The President already had vetoed two earlier SCHIP bills and had promised to veto any bill that made major cuts to the Medicare Advantage program (which was a key way Dems planned to pay for a larger package.)

Following is a brief overview of additional hospital related provisions:
  • Inpatient and Outpatient Payment Cuts: S. 2499 rejects inpatient or outpatient update cuts as included in earlier House versions of the proposal.
  • Rehab Hospitals: Makes permanent the Medicare 60% qualifying threshold for inpatient rehabilitation facilities (IRFs) with cost reporting periods beginning July 1, 2006, and recognizes comorbidities as counting towards the threshold. Instructs HHS, in consult with various health care providers, to submit a report on access and appropriate patient classification for IRFs. While rejecting reductions for certain hip and knee procedures, it freezes the rehab market basket update from April 1, 2008 through FFY 2009.
  • Rural Hospitals:
    - Extends current "Section 508" provisions and exceptions through September 30, 2008, providing geographic reclassification eligibility for certain hospitals that could not otherwise qualify for reclassification to a higher wage index.
    - Extends through June 30, 2008 cost-based payment for outpatient laboratory services for rural hospitals with fewer than 50 beds in certain low-population areas.
    - Extends for six months the provision allowing independent laboratories to continue to bill Medicare directly for the technical component of certain physician pathology services provided to hospitals.
    - Extends through June 30, 2008 the provision providing a 5% bonus payment for physicians practicing in physician shortage areas.
  • Long-Term Care Hospitals: Provides regulatory relief for three years from the 25% Rule and short-stay outliers, while also imposing a limited moratorium on new long-term facilities. Freezes the market basket update for the last quarter of 2008.
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    Additional Provisions:
  • Provides funding assistance for Medicare beneficiary outreach and enrollment assistance.
  • Extends the QI program through June 30, 2008, providing Medicaid assistance to help low-income seniors pay Medicare premiums.
  • Extends through June 30, 2008 the Transitional Medical Assistance programs to help low-income individuals transition from welfare to work by maintaining health insurance coverage for their children.
    •

    We are pleased that Congress rejected earlier proposed hospital cuts, extended SCHIP and certain key rural measures, and made permanent the 60% rehabilitation threshold. However, two key issues not addressed were the moratorium on Medicaid regulations (IGT/CPE, GME, and outpatient) and enactment of a permanent ban on physician self-referrals to limited-service hospitals.

    Looking Ahead:
    With the new physician fix in place only through June 30, 2008, Congress will begin working on a Medicare/Medicaid package early in the year to address this issue, along with other measures not included in the recently passed abbreviated package. The benefit of the short time frame in this year’s bill is that Congress will be tackling the Medicare/Medicaid issues early rather than later next year, when the distractions of an election and a lame-duck presidency will intensify. This early agenda should be helpful in efforts to extend and expand the Medicaid moratorium which is set to expire in May.

    IHA will continue working for an extension of the Medicaid regulatory moratorium on public and teaching hospitals and its expansion to include the outpatient regulation. As previously noted, The Centers for Medicaid and Medicare Services (CMS) final IGT/CPE/GME regulation is scheduled to take effect when the current moratorium expires in May. The CMS regulation would undermine the ability of the Cook County intergovernmental transfer to bring critically needing funding to Illinois’ Medicaid program, and its impact would be felt by hospitals, patients, and communities throughout the state. In addition, IHA will continue working with AHA and other state and metro organizations for better reimbursement for hospitals and to protect them from new Medicare and Medicaid cuts and burdensome regulations.

    Staff Contact: Barb Filliung: (630) 276-5482