Health Care Provisions
of the Economic Stimulus Law
Following a month of intense negotiations, the U.S.
House and Senate passed a $787 billion extensive stimulus package, known as
the American Recovery and Reinvestment Act which was signed by
President Obama on February 17. The new law contains a number of health care
programs integral to physicians and people with disabilities including a
large boost for Medicaid, an extension of the moratoria for four
controversial Medicaid regulations, and a $10 billion boost for the National
Institutes of Health. Below is a summary of these provisions.
MEDICAID:
Federal Medical Assistance Percentage (FMAP) Increase
The FMAP is the rate at which states are reimbursed by the federal government
for most Medicaid service expenditures. The stimulus bill includes nearly $90 billion in FMAP funding to help states
sustain Medicaid services during the recession.
The new law increases FMAP funding for a 27-month period beginning October 1, 2008 with an
across-the-board increase to all states of 6.2%. In addition, the law provides for reductions in states’ shares
by 5.5, 8.5 or 11.5 percent for states with significant increases in their unemployment rates.
The House bill provided an across-the-board increase of 4.9 percent, which would
have distributed about half of the increased FMAP funding across all of the
states and half via the unemployment-related increase. The Senate bill included
a provision which favored rural states, which would have provided 80 percent of
its spending on an across-the-board increase and 20 percent based on
unemployment-related increases. The conference agreement split the difference
and provides about 65% of its spending via the hold harmless and
across-the-board increases, and about 35% via the unemployment-related increase.
The law also prohibits States that accept the funding from restricting Medicaid
eligibility beyond the Medicaid beneficiaries they covered as of July 1, 2008.
As a result, some states will re-enroll beneficiaries that had been removed from
the Medicaid program since July 1. However, states are allowed to restrict
Medicaid services and cut Medicaid provider payments if necessary. Despite the
increased FMAP funding, some states will likely choose to divert some of these
new funds to their overall state budgets and continue to implement cuts in
services and payments.
The conference agreement also included a Senate provision prohibiting states
from receiving the FMAP increase if they are out of compliance with requirements
for prompt payment of Medicaid providers, nursing facilities and hospitals. This
is a major victory for providers serving Medicaid beneficiaries, whose payments
are often delayed by many months.
FMAP increases will not apply to other parts of state Medicaid programs such as
calculations for payments for DSH, TANF, SCHIP, child/family services, etc. In
addition, States cannot use FMAP/high unemployment increases for rainy
day/reserve funds.
Extension of Moratoria on Medicaid Regulations
In the 2008 Medicare bill, Congress included moratoria until April 1, 2009 on
six controversial Medicaid regulations covering graduate medical education, cost
limits for public providers, rehabilitation services, targeted case management,
school-based services and provider taxes. A seventh regulation on outpatient
services was excluded from the moratoria and CMS finalized the rule last fall.
The House version of the stimulus bill would have extended the moratoria on all
seven regulations. The Senate bill lacked a provision to extend any of the
moratoria. The conference agreement extends the moratoria until June 30 for the
rules that have been finalized: the targeted case management, school-based
services, provider taxes and outpatient hospital services rules. The conference
agreement also states that HHS should not finalize the graduate medical
education, cost limits for public providers and rehabilitative services rules.
The extension of the moratoria provides more time for the new administration to
work through the time consuming process of analyzing the rules and figuring out
how to rescind or modify them.
COBRA
The law extends COBRA coverage to employees who lose their jobs and creates
premium subsidies for COBRA coverage. The law also provides a 65% subsidy for
COBRA continuation premiums for up to 9 months for workers who lose their jobs
between September 1, 2008 and January 1, 2010. The conference agreement added an
income threshold as an additional condition on an individual's entitlement to
the premium subsidy. If an individual making $145,000 or more receives the
premium subsidy, that individual must repay the amount of the subsidy. The
subsidy would terminate upon offer of any new employer-sponsored health care
coverage or Medicare eligibility.
However, provisions of the House bill that were not adopted in the final bill
would have made a number of very important changes to COBRA coverage. The House
bill proposed for the first time that an individual who loses their job between
ages 55 and 65 may keep their COBRA coverage until they qualify for Medicare or
get another job that offers coverage. In addition, the bill allowed individuals
who are employed by the same employer for more than 10 years and lose their job
to maintain their COBRA coverage until they qualify for Medicare or until they
find another job with health insurance.
Disability advocates argued that these provisions were important improvements to
COBRA but that they required amendments in order to make them equitable for
people with disabilities. Because one loses COBRA coverage when becoming
enrolled in Medicare (due to disability status or age) the House provision would
have eliminated the right of a person with a disability to keep COBRA coverage
as a wrap-around insurance benefit. The fact that there is no guaranteed issue
for Medigap policies for people below age 65 made this all the more inequitable
for people with disabilities. The solution would have been to terminate COBRA
coverage only when a person qualified for Medicare based on age, not based on
disability status.
HEALTH INFORMATION TECHNOLOGY (HIT)
ARRA provides approximately $19 billion over five years for HIT through Medicare
and Medicaid and requires HHS to develop an initial set of HIT standards by
2010. The Congressional Budget Office estimates that the law will assist about
90% of doctors and 70% of hospitals in adopting certified electronic health
records (EHR) within the next decade. In addition, federal privacy and security
laws were expanded to protect patient health information.
The law establishes HIT Policy and Standards Committees comprised of public and
private stakeholders (e.g., physicians, hospitals and other providers) to
provide recommendations on the HIT policy framework, standards, implementation
specifications, and certification criteria for electronic exchange and use of
health information.
Physicians
The conference agreement provided $18,000 of incentive payments in the first
year for physicians that show “meaningful use” of EHR in 2011 or 2012. For
physicians that begin using EHR in 2013 or 2014, the law provides an incentive
payment of $15,000 for the first year. The payments decrease over time, except
that incentive payments would be increased by 10% if the provider predominately
serves beneficiaries in any area designated as a health professional shortage
area. The law provides no payment incentives after 2016 and does not provide
incentive payments for physicians adopting EHR in 2015 or later. HHS will be
authorized to make available an HIT system to providers for a nominal fee. The
maximum amount a physician can collect through HIT bonuses is $44,000 over a
five-year period.
There are limited out-year penalties (with a sunset maximum of 6%) for
physicians who do not adopt or use a certified HIT system. Due to concerns with
double-dipping, physicians who also report electronic health records using
“e-prescribing” will no longer be able to collect bonuses for this activity
established under existing law. Because the law provides hospitals with
incentive payments, the law prohibits incentive payments for hospital-based
professionals.
Hospitals
The law provides incentive payments for qualified hospitals over a four year
period. The incentive payments include a base amount ($2 million) and a
discharge payment, which would then be multiplied by its Medicare's share. A
qualified hospital would receive $200 for each discharge paid under the
inpatient prospective payment system (IPPS) starting with its 1,150th discharge
through its 23,000th discharge.
The incentive payment would decrease after the first year to: 75 percent of the
amount in the second year; 50% for the third year; and 25 percent in the last
year. Hospitals that start using EHR in or after FY2015 would not receive
incentive payments.
EHR measures would include clinical quality measures and other measures selected
by the Secretary. Prior to implementation, the measures would be subject to
public comment. The electronic reporting of the clinical quality measures would
not be required unless the Secretary has the capacity to accept the information
electronically, which may be on a pilot basis.
Starting in FY2015, the law provides for steep penalties, implemented over a
three year period, for IPPS hospitals that do not submit required quality data
and for those that do not adopt EHR. Those that fail to submit the data will
face a 25 percent decrease in their annual update. Hospitals that are not
meaningful users of EHR will be at risk of losing the other 75 percent.
Aging Services Technology Study
The law also requires HHS to conduct a study, not later than 24 months after
enactment, of matters relating to the potential use of new aging services
technology to assist seniors, individuals with disabilities and their caregivers
throughout the aging process.
COMPARATIVE EFFECTIVENESS
The law provides $1.1 billion for comparative effectiveness research (CER), of
which $300 million will be administered by the Agency for Healthcare Research
and Quality, $400 million by the National Institutes of Health and $400 million
by the Secretary of Health and Human Services.
The law establishes the Federal Coordinating Council for Comparative
Effectiveness Research (FCC-CER) to be comprised of up to 15 representatives of
federal agencies of which at least half must be physicians or other experts with
clinical expertise. HHS is required to contract with the Institute of Medicine
to submit a report to Congress and HHS by June 30, 2009 with recommendations on
national CER priorities.
The comparative effectiveness House report language caused some concern amongst
stakeholders, as the language implied that CER could include cost comparisons
and ultimately result in Medicare rejecting more expensive but necessary
treatments. The conferees rejected a Senate limitation to “clinical” research
but included the following explanation in the agreement: “The conferees do not
intend for the comparative effectiveness research funding included in the
conference agreement to be used to mandate coverage, reimbursement, or other
policies for any public or private payer. The funding in the conference
agreement shall be used to conduct or support research to evaluate and compare
the clinical outcomes, effectiveness, risk, and benefits of two or more medical
treatments and services that address a particular medical condition. Further,
the conferees recognize that a ‘one-size-fits-all’ approach to patient treatment
is not the most medically appropriate solution to treating various conditions
and include language to ensure that subpopulations are considered when research
is conducted or supported with the funds provided in the conference agreement.”
The provisions will not include national clinical guidelines or coverage
determinations.
DELAY OF THE 3 PERCENT WITHHOLDING TAX
The conference report delays by one year implementation of a controversial
provision in a 2005 tax law that would withhold 3 percent of Medicare payments
to doctors and hospitals. The Tax Increase Prevention and Reconciliation Act (TIPRA)
of 2005 provision was scheduled to take effect at the end of 2010, but ARRA
pushes implementation to the end of 2011. The House version of the bill repealed
the tax, but the Senate version included only a delay.
The new tax would withhold 3 percent for government payments to contractors in
any industry, including health care providers who accept Medicare payment. The
rule is intended to collect underreported tax revenues and was inspired by a
2005 Government Accountability Office report that found 33,000 government
contractors could owe as much as $3 billion in unpaid federal taxes. However, it
would be tremendously burdensome on physician practices, as they have relatively
small operating margins.
NATIONAL INSTITUTES OF HEALTH
The new law provides $10 billion for the National Institutes of Health,
including $1.3 billion for the National Center for Research Resources and $8.2
billion for the Office of the Director to distribute at his discretion and
according to the grant scores achieved through the peer review process. The
conference agreement states that $800 million should be retained in the Office
of the Director for purposes that can be completed within two years. This is a
huge influx of funds for NIH at a time when the percentage of grant applications
to funded grants is historically low. The entire FY 2008 budget for NIH was
approximately $29.5 billion.
MEDICARE
Teaching Hospitals
Medicare sets separate per-discharge payment rates to cover a variety of
expenses in acute care hospitals. Under the 2008 Inpatient Prospective Payment
System (“IPPS”) rule, one of those payments—Medicare's capital IPPS indirect
medical education (IME) adjustment—was scheduled to be phased out over a 2-year
period. In FY2009, teaching hospitals would have received half of the IME
adjustment in Medicare's capital IPPS; in FY2010 and in subsequent years, the
capital IME adjustment would be eliminated.
The new law eliminates the FY 2009 cut and requires that Medicare payments be
recomputed for discharges after October 1, 2008. The elimination of capital IME
in FY2010 will not be affected. The House and Senate versions of the bill both
had the provision. It is expected that the hospital community will seek a
permanent fix in the annual IPPS rulemaking cycle.
Hospice
When Congress changed the wage data source used to adjust hospice payments in
1997, a budget neutrality adjustment factor (“BNAF”) was instituted as part of
the new payment system. The BNAF prevents participating hospices from
experiencing reductions in total payments as a result of the wage data change.
Last summer, HHS issued a final rule that would phase-out the BNAF over three
years, resulting in cuts to hospice payments.
The House bill would require that the Secretary not phase-out or eliminate the
budget BNAF before October 1, 2009. The hospice wage index used for FY2009 would
be recomputed with the BNAF. The Senate bill lacked a provision on the BNAF. The
new law adopts the House provision temporarily eliminating the threat to hospice
provider payments. It is expected that a permanent fix in the annual rulemaking
cycle for Medicare hospice payments will occur.
WORKFORCE TRAINING
The new law provides $500 million towards training of health professionals. $300
million is allocated for the National Health Service. $200 million is allocated
for a number of disciplines, including disciplines trained through the
scholarship and loan repayment programs authorized in Title VII (Health
Professions) and Title VIII (Nurse Training) of the PHS Act. These funds are
designed to assist in addressing shortages in the numbers of physicians, nurses
and other providers.
CHRONIC DISEASE PREVENTION
The new law provides $1 billion for a Prevention and Wellness Fund, which
includes $650 million to carry out evidence-based clinical and community-based
prevention and wellness strategies authorized by the Public Health Service Act,
as determined by the Secretary. These strategies are to deliver specific,
measurable health outcomes that address chronic disease rates. The amount also
includes $50 million towards States activities to implement
healthcare-associated infections (HAI) reduction strategies. The total amount
was less than the House requested for the Fund. The Senate bill did not include
a provision for the Fund.
WORKFORCE INVESTEMENT ACT
The new law includes $3.9 billion for Workforce Investment Act programs that
provide training and employment services. This stimulus is a significant
increase and will help ensure the funding of one-stop career centers. The
conference agreement also provides the authority for local workforce investment
boards to contract with institutions of higher education and other eligible
training providers.
IDEA: SPECIAL EDUCATION FUNDING
The new law provides $13 billion for the Individuals with Disabilities Act
(“IDEA”) state grant program and $500 million for IDEA Part C early
intervention. The funds are to be used during the 2009-2011 school years. ARRA
also provides that school districts receiving stabilization funds may only use
the funds for activities authorized under IDEA, the Elementary and Secondary
Education Act (ESEA), the Carl D. Perkins Career and Technical Education Act of
2006 (Perkins), and for education infrastructure. This is a huge injection of
funds for special education that will place the federal share of special
education funding at its highest level since the inception of the IDEA law.
VOCATIONAL REHABILITATION AND INDEPENDENT LIVING
In a significant victory for disability advocates, the new law provides
$540,000,000 for Vocational Rehabilitation State Grants, which is an increase
from the 500,000,000 proposed by both the House and the Senate. The law also
provides $140,000,000 for the Independent Living Centers program: $18,200,000
for State Grants; $87,500,000 for Independent Living Centers; and $34,300,000
for Services for Older Blind Individuals. In this manner, the billions of
dollars being spent by this bill on employment and training services for the
general population will be equitable with the amount spent on employment and
training assistance for people with disabilities.
SSA DISABILITY CLAIMS BACKLOG
The new law includes $1 billion to assist the Social Security Administration
(SSA) in the processing of a growing backlog of Social Security Disability
Insurance (“SSDI”) claims. Of the funding, $500 million is designated for a
replacement of the SSA National Computer Center (NCC). Another $500 million is
provided for processing disability and retirement workloads. The law also
includes $2 million for the SSA Inspector General to provide oversight and audit
of the implementation of these funds.
PAYMENT TO SOCIAL SECURITY BENEFICIARIES
Finally, the new law directs the Secretary of the Treasury to disburse a
one-time payment of $250 to adults who are eligible for Social Security
benefits, veteran's compensation or pension benefits; or individuals on
Supplemental Security Income (SSI) benefits.
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