Healthcare Provisions In The American Taxpayer Relief Act - The Good, The Bad And The Ugly

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In late night action on December 31, 2012, the American Taxpayer Relief Act of 2012 (ATRA) was passed by the Senate and finalized days later by Congress and the President with a set of tax and spending policy provisions intended to provide relief to the American taxpayer -- avoiding the "fiscal cliff" set up by the Budget Control Act of 2011. Upon closer inspection, however, the ATRA also has some important implications for the healthcare industry and sets the stage for future healthcare spending reductions and appropriations discussions in 2013. The following offers a brief overview of the ATRA's good, bad and ugly provisions for the healthcare industry.

The Good

One of the largest issues looming over Congress relating to Medicare involved the fate of the sustainable growth rate (SGR) impending statutory cuts of nearly 27 percent, which would have further exacerbated the physician shortage currently experienced in the Medicare program and was widely criticized. The ATRA addressed this issue, but once again, only did so for a short time. At a cost of $25 billion, the ATRA froze existing Medicare physician rates at their current level through 2013. This means that the SGR fight to obtain permanent relief will continue during 2013.

The impending Budget Control Act sequester which would have included a mandatory two percent Medicare provider rate cut, reductions in important discretionary spending programs such as the National Institutes of Health (NIH) and graduate medical education programs is delayed for two months.

Other Medicare reimbursement and healthcare programs set to expire on December 31, 2012, were extended, including the Medicare physician work geographic adjustment and certain Medicare programs necessary to sustain ambulance service and Medicare dependent individuals in rural areas. Medicare payment changes for outpatient therapy services at hospitals were also addressed.

Funding for low-income outreach and assistance programs and the Medicaid qualified individual and transitional assistance programs were extended. Similarly, the ATRA reauthorized the Medicaid and Children's Health Insurance Program express lane option program through September 30, 2014.

The Bad

Generally, the major issues that hung in the balance with regard to healthcare spending during last year's fiscal cliff negotiations remain unresolved, and the ATRA added upwards of $4 trillion to the deficit over the next ten years. As Congress continues to grapple with the nation's fiscal woes in the coming months, spending reductions in healthcare remain in the crosshairs.

Medicaid disproportionate share hospital (DSH) payments will be rebased to extend the anticipated Affordable Care Act (ACA) reductions from 2021 to 2022. The rebasing of DSH payments is expected to provide up to $4.2 billion in savings over ten years.

Bundled payments for end stage renal disease will be rebased. Incorporating recommendations from a General Accounting Office report relating to reductions in oral drugs and biologics, the payment reduction for renal dialysis services is anticipated to achieve $4.9 billion in savings.

The ATRA rescinds unobligated funds for the ACA's Consumer Operated and Oriented Plan (CO-OP) program to the tune of approximately $2.3 billion.

Also as discussed in detail in the article that follows, the ATRA significantly alters provider rights related to overpayment recoupment, refunds, audits and claims appeals.

The Ugly

Overall healthcare industry spending continues under the microscope and, as Congress prepares over the next several months to make significant headway on cost reductions, entitlement reform will rank high on the nation's agenda. Consequently, Medicare, Medicaid, discretionary programs, research and graduate medical education all will be targets for spending reductions. Creative solutions to save money and continue coverage for individuals will be sorely needed. Providers will want to be at the table to ensure that provider reimbursement, the first at the chopping block, will not be the sole mechanism that Congress employs to reduce healthcare spending in the budget battles ahead.

BakerHostetler remains committed to working with providers to ensure that their strategic initiatives are conveyed on Capitol Hill and that their issues are heard. For more information regarding our healthcare policy practice or relating to the ATRA and its impact, please contact Susan Feigin Harris, sharris@bakerlaw.com or 713.646.1307, or Kathleen P. Rubinstein, MPA, Policy Analyst, krubinstein@bakerlaw.com or 713.276.1650.