Significant Health Policy Changes Contained in Bipartisan Budget Act of 2018

by King & Spalding

On February 9, 2018, after passing the House and Senate, the President signed into law the Bipartisan Budget Act of 2018 (BBA). The BBA amends the Budget Control Act of 2011 (BCA) to increase the spending caps on both defense and non-defense discretionary spending for Fiscal Year (FY) 2018 and FY 2019 by almost $300 billion. Under the law, defense caps are increased by $165 billion over the two years; non-defense caps are increased by $131 billion. Despite the revisions made to discretionary spending caps, the BBA maintains the sequestration of mandatory spending for FY 2018 and FY 2019, including the two-percent cut to Medicare providers. Further, the BBA extends mandatory sequestration for an additional two years, through FY 2027.

The BBA funds the Federal government through March 23, 2018 to allow Congress time to enact final FY 2018 omnibus appropriations under the revised spending caps. The BBA urges that the increased funding provided for non-defense programs over two fiscal years be used to provide:  $6 billion to address the opioid epidemic; $4 billion for improvements in veterans’ health care; and $2 billion for the National Institutes of Health. The BBA also provides nearly $90 billion in emergency disaster aid for the 2017 hurricanes and other natural disasters; suspends the Federal debt limit through March 1, 2019; and retroactively renews or extends a number of individual and business tax provisions.

The BBA includes a significant number of healthcare provisions under what is called the Advancing Chronic Care, Extenders, and Social Services (ACCESS) Act. The changes include renewing several expired Medicare programs, making several policy changes to the Medicare program, codifying Stark Law changes, and extending the Children’s Health Insurance Program (CHIP) for an additional four years (through FY 2027), following the six-year authorization contained in last month’s continuing resolution. The BBA also repeals the Affordable Care Act provisions that established the Independent Payment Advisory Board (IPAB) and maintains the current non-binding Medicare Payment Advisory Commission (MedPAC) spending review process.

The BBA health care policy provisions of note include the following:

Codification of Stark Law Changes
The BBA codifies the significant changes CMS made effective January 1, 2016 to its Stark regulations as part of the CY 2016 Physician Fee Schedule Final Rule. (Additional information regarding these regulatory changes is available here). Specifically, the Stark Law statute has been revised to codify the following:

  • The clarification that the writing requirement of Stark exceptions can be satisfied through a collection of documents;
  • The 90-day grace period to obtain missing signatures; and
  • The indefinite holdover provisions for leases and personal service arrangements.

Outpatient Therapy Payments
Effective January 1, 2018, annual payment limits for outpatient hospital therapy services – including physical therapy, speech-language pathology services, and occupational therapy – are repealed. The BBA lowers the targeted manual medical review threshold from $3,700 to $3,000. Hospitals that operate outpatient therapy clinics must now make sure that their departments comply with the Medicare provider-based regulation, 42 C.F.R. § 413.65, as there is now a payment differential between what Medicare will pay for such services in a freestanding setting (i.e., a capped amount) and in an outpatient setting (i.e., uncapped).

Low-Volume Hospital Program and the Medicare-Dependent Hospital program
The BBA extends both the Low-Volume Hospital Program and the Medicare-Dependent Hospital program through FY 2022. These programs had expired on October 1, 2017. The BBA modifies the low-volume payments effective in FY 2019 but specifies that low-volume payments under the current law continue for FY 2018, in order to provide a year transition.

Ambulance Services
The BBA extends Medicare reimbursement rates for ground ambulance service, including add-on payments, through December 31, 2022.

The BBA expands telehealth services in several areas. Beneficiaries receiving home dialysis therapy will be able to receive their required monthly clinical assessments via telehealth. Medicare Advantage plans are authorized to offer additional telehealth benefits effective in plan year 2020. Certain Accountable Care Organizations (ACOs) are given greater flexibility to provide telehealth services. By eliminating the geographic restriction on physicians providing telehealth consultation for patients presenting with stroke symptoms, the BBA aims to ensure patients receive a timely consultation to determine the best course of treatment.

ACO Beneficiary Incentive Program
The BBA establishes a new, voluntary beneficiary incentive program as part of an effort to eliminate barriers to care coordination. Certain two-sided risk ACOs will be allowed to make incentive payments of up to $20 per service directly to a beneficiary for qualifying primary services.

Increase in Civil Monetary Penalties (CMPs) and Criminal Fines
Under the BBA the amounts of many CMPs have doubled, including the CMPs applicable to kickbacks and the retention of overpayments. Additionally, criminal fines for crimes involving federal health care penalties are significantly increased.

Removal of Requirement that Meaningful Use Standards become More Stringent
The BBA removes the requirement that HHS make Electronic Health Record (EHR) meaningful use standards more stringent over time in an effort to reduce the volume of significant hardship requests.

Home Health Payment Reform
The home health payment system will be reformed beginning in 2020. Under these reforms, the unit of payment for a home health episode will be reduced from 60 days to 30 days. Additionally, HHS will be required to revise the home health case-mix system, including eliminating the use of therapy thresholds. The elimination of therapy thresholds is consistent with prior recommendations from CMS, the MedPAC, and a Senate Finance Committee staff report.

Extension for community health centers (CHC), the National Health Service Corps, and teaching health centers that operate GME programs
The BBA increases and extends funding for community health centers and allows the Secretary to award supplemental grants for implementing evidence-based models that increase access to high-quality primary care. Priority for funding and grants shall be giving to areas with the greatest unmet needs through a focus on:

  • Providing new access points in areas with the highest unmet needs;
  • Addressing emerging public health, behavioral health, mental health, or substance use issues;
  • Giving special considerations to grant applications that seek to address significant barriers to care;
  • Using grant money for innovative programs for outreach and health services for homeless veterans and veterans at risk of becoming homeless; and
  • Requiring the Secretary of HHS to report to Congress on the distribution of funding for new access points and expanded services among rural and urban areas and the rate of closures of health centers and access points.

The BBA also extends mandatory funding for the National Health Service Corps and extends and increases funding for the Teaching Health Center Graduate Medical Education Program.

The BBA seeks to offset some of the budget costs by implementing changes such as the following:

  • Reductions in Medicaid Disproportionate Share Hospital (DSH) Allotments. The BBA eliminates the DSH reductions in FY 2018 and FY 2019, but maintains the $4 billion in reductions for FY 2020. The amount of reductions for FY 2021 through FY 2025 is set at $8 billion per year.
  • Third Party Liability (TPL) in Medicaid and CHIP. The BBA permanently repeals 2013 provision that allowed states to recover medical expense claims from any portion of a Medicaid beneficiary settlement and modifies TPL rules related to Medicaid payer of last resort and applies TPL requirements to CHIP.
  • Physician fee schedule update. The BBA reduces the update to the Physician Fee Schedule for 2019 from 0.50 percent to 0.25 percent.
  • Medicare Payment Updates for HHAs and SNFs. Medicare reimbursement for HHA providers will increase by 1.5 percent in 2020 and for SNF providers will increase by 2.4 percent in fiscal year 2019.
  • Preventing Unwarranted Quality Bonus Payments. CMS is directed to calculate a weighted average of star ratings across MA plan contracts that have been consolidated to more accurately reflect quality and mitigate unwarranted quality bonus payments.
  • Sunsetting Exclusion of Biosimilars. Biosimilars are added to the Medicare Part D coverage gap discount program and biosimilar manufacturers must provide a discount to remove the incentive to prescribe a brand reference biologic over the biosimilar.
  • Closing the Donut Hole for Seniors. The BBA accelerates the closure of the Part D program coverage gap, known as the “donut hole” where beneficiaries are responsible for a greater portion of their prescription drug costs, with the beneficiary contribution decreasing to 25 percent of prescription costs in 2019, instead of 2020 under current law. It also increases the percentage that a drug manufacturer must discount the cost of prescriptions in this phase from 50 percent under current law to 70 percent.

The text of the Balanced Budget Act of 2018, Public Law 115-123, can be found here.

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