With all the discussion over the last few weeks about the impact of changes in income tax rates and at what income level they should apply, it would be easy to miss some key non-tax items included in the American Taxpayer Relief Act of 2012 (ATRA). Although ATRA was not a grand budget deal, it does include several provisions that will impact hospitals and physicians.
ATRA Medicare/Medicaid Provisions
ATRA includes a number of Medicare and Medicaid provisions. Most notably, Congress passed a “doc fix” that yet again kicks the can down the road on an approximately 26 percent reduction in physician fee schedule payments. In lieu of a permanent fix, physician payment rates were held basically flat for 2013. Congress will have to address this issue again next year.
The cost of the “doc fix” was partially paid for with reductions in other Medicare/Medicaid payments. For example:
- Hospital inpatient payment rates from 2014 to 2018 will be reduced for documentation and coding “creep.” This provision is estimated to cost hospitals nearly $11 billion over four years.
- Providers of ESRD services will see a reduction in their base payment rates and in the rates paid for transporting patients to receive ESRD services.
- The statute of limitations in which overpayments can be recovered was increased from three to five years.
- Payments to Medicare Advantage plans will be reduced.
- Other reductions include payments to therapy providers, Medicaid disproportionate share payments for hospitals, and several provisions applicable to rural hospitals.
In addition to the “doc fix,” ATRA included a few other payment increases for certain small rural hospitals and ambulance providers.
Outlook
By passing ATRA, Congress delayed sequestration for two months. Sequestration would have reduced Medicare provider payments by 2 percent effective January 1, 2013. While this is good news for providers over the short-term, there is considerable concern that any permanent budget fix will include payment reductions that exceed what sequestration would have required.
Delaying sequestration added one more item for Congress to address this quarter. Congress must also raise the U.S. debt limit and pass an appropriation bill to keep the U.S. government running after late March. There are ample opportunities for legislators to find ways to reduce spending, and public health programs are sure to be in play. MEDPAC, the OIG and CBO have all proposed cuts to provider payments that may serve as a blueprint for how Congress can reduce spending in this area. It will be an interesting three months in Washington, and providers should closely monitor these activities to understand how future payments will be affected.
— Tom Watson is the managing partner of BKD’s Dallas-Waco practice.
