Year-End Appropriations Bill Includes Myriad Medicare Policy Changes

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The Big Picture

Until late December, few if any Medicare policy changes were anticipated as part of a year-end healthcare package, barring extensions of funding for programs that otherwise would have expired. But after several days of closed-door negotiations, congressional leaders unveiled—and very shortly thereafter Congress passed—a legislative package containing an amalgam of Medicare policy changes.

The Consolidated Appropriations Act, 2021 (the Act) includes significant payment adjustments, rural health improvements, transparency requirements for certain manufacturers of drugs covered under Medicare Part B, and fixes to long-standing coverage and benefits issues such as eliminating beneficiary cost-sharing for colorectal cancer screenings. None of these changes, taken individually, represent a monumental shift in administration of the Medicare program. But as a whole, they represent an important body of policies that address long-standing concerns.

Payment Adjustments

Suspension of Medicare Sequestration Through March 2021. The Medicare sequester was previously suspended by Congress through December 30, 2021; the Act further extended the moratorium on the 2% payment reduction for January, February and March 2021, increasing payments to Medicare providers of all types for the coming three months.

3.75% Physician Fee Schedule Increase. The Act provided a 3.75% increase to the physician fee schedule for all services in calendar year (CY) 2021. The increase is not subject to the budget neutrality requirements that typically apply to the Physician Fee Schedule, and Congress appropriated $3 billion to the Part B Trust Fund to ensure that the increase will not impact solvency or premiums.

Moratorium on Payment of Add-On Code for Inherently Complex E&M Visits. The Act prohibits the Centers for Medicare & Medicaid Services (CMS) from making payments to physicians under code G2211 until January 1, 2024. CMS adopted the Evaluation and Management (E&M) code in the CY 2021 Physician Fee Schedule to make extra payments for inherently complex visits typically provided by primary care physicians. But due to budget neutrality rules, this adjustment resulted in reductions of payments for other services, particularly those provided by certain specialists. With the code now suspended, CMS recalibrated the 2021 physician payments, yielding a -3.325% change from 2020 as opposed to -10.2%.

Rural Health

Rural Health Clinic (RHC) Payment Increases. In addition to the payment changes enumerated above, the Act raises the statutory cap. The cap will increase to $100 on April 1, 2021, with annual increases through 2028 when it reaches $190 (bringing it in line with that of federally qualified health center payments). Starting in 2029, the RHC cap will increase based on an inflationary adjustment.

Establishment of Rural Emergency Hospitals. The Act also allows hospitals currently designated as a critical access hospital (CAH) or a small, rural hospital with fewer than 50 beds to convert to a “Rural Emergency Hospital” that provides “Rural Emergency Hospital Services.” These new designations, established by the Act, allow certain facilities to receive Medicare reimbursement for providing emergency and observation services without the provision of inpatient services. Facilities electing the option to become a Rural Emergency Hospital and meeting specific staffing and transition requirements (including a transfer agreement with a Level I or II trauma center) to be considered staffed emergency departments for Medicare purposes are eligible to deliver emergency department services, observation care and any other services permitted by CMS. These facilities could also designate a unit licensed as a Skilled Nursing Facility for post-acute care, allowing the facility to take in patients for emergency treatment, transfer them to other hospitals for acute care, and then receive them back for post-acute treatment. The provision does not allow for new facilities to become a Rural Emergency Hospital, and appears to allow conversion solely by existing facilities. Rural Emergency Hospital Services will be paid as an outpatient department, but with a 5% increase to reflect additional costs plus an annual additional facility subsidy payment from CMS.

Drug Pricing

Beginning January 1, 2022, the Act requires manufacturers of drugs covered under Medicare Part B to report average sales price (ASP) information to the HHS, even if they are not otherwise required to do so by virtue of rebate agreements for the Medicaid Drug Rebate Program. This provision will allow the CMS to price these drugs for Part B purposes using the ASP rather than the current alternative methodologies that use wholesale acquisition cost (WAC), average wholesale price or invoice pricing, each of which often yields a higher payment than ASP.

The Act also authorizes CMS, when determining payment for products covered under Medicare Part B, to review and exclude payments made for the self-administered (Part D) versions of products that are not covered under Part B from the ASP calculation when identified by the HHS Office of Inspector General (OIG) for exclusion. CMS will begin applying this authority on July 1, 2021, for two drugs already identified by the OIG as falling within this category of products.

Coverage and Benefits

Extension of Coverage for Immunosuppressive Drugs for Kidney Transplant Patients. The Act establishes a new basis for Medicare Part B eligibility for post-kidney-transplant immunosuppressive drug coverage only. Previously, patients with end-stage renal disease were entitled to coverage, but would lose that coverage after transplants, leaving them without coverage for drugs necessary to prevent organ rejection.

No Cost-Sharing for Certain Colorectal Cancer Screening Tests. The Act gradually eliminates Medicare beneficiary cost-sharing for colorectal cancer screening tests when tissue is removed. Although Medicare previously covered colorectal screening tests without cost-sharing, the beneficiary could be responsible for 20% coinsurance if the colonoscopy included a procedure. The Act reduces cost-sharing obligation for colorectal cancer tests if a polyp is removed, if the test results in a biopsy or if the beneficiary receives a colonoscopy after a fecal occult blood test indicative of the presence of cancerous cells. The Act requires that, on or after January 1, 2022, the cost-sharing obligation of beneficiaries for tests under these circumstances is reduced to the lesser of the actual service charge or the fee schedule prescribed under the section. Cost-sharing obligations will gradually be reduced from 20%, beginning in 2022, to 10% by 2029, after which point they will drop to nothing.

Other Provisions

The Act includes a handful of other Medicare policy changes, such as:

  • Multiyear extensions of Medicare programs such as funding for quality measure endorsement, input, and selection and funding outreach and assistance for Low-Income Programs.
  • A freeze on the Advanced Payment Model (APM) payment incentive thresholds, preventing participating providers from needing to meet rising year-over-year payment and patient count thresholds in the 2023 and 2024 payment years (for performance years 2021 and 2022). Similarly, the Act delays the start of the Center for Medicare & Medicaid Innovation (CMMI) radiation oncology model to January 1, 2022.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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