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Perspectives

Budget agreement includes technical changes to MACRA, notable policy changes to other health care programs

The President on February 9, 2018, signed H.R. 1892, the Bipartisan Budget Act of 2018, which sets discretionary spending caps for the federal government for fiscal years (FY) 2018 and 2019 while also reauthorizing federal funding and making important policy changes to a number of health care programs.

February 12, 2018 | Health care

The Medicare Part B physician fee schedule, including implementation of the Medicare Access and CHIP Reauthorization Act (MACRA); the Children’s Health Insurance Program (CHIP); and state allotments to Medicaid Disproportionate Share Hospital (DSH) payments are among the health care issues addressed in the law.

Health care providers, plans, and other industry stakeholders may consider revisiting strategic, operational and compliance plans in light of a number of provisions of the law.

Importantly, the law also funds the federal government through March 23, 2018, to provide congressional appropriators time to develop legislation to fund the government for the remainder of FY 2018 (which ends September 30, 2018) and suspends the federal debt limit until March 1, 2019. The Congressional Budget Office had projected that Congress would need to address the federal debt limit by March 2018 for the federal government to continue to meet all of its obligations.

Although the law settles a number of health-related spending issues, changes to ACA insurance provisions were left largely unaddressed. Members of the Senate and the House continue discussions around an ACA insurance market stability package. Current proposals focus on offering states reinsurance funds as a backstop to high claims, or in offering a stabilization fund for states to draw from for a range of purposes. In addition, the legislation leaves in place changes in 340B payment policy that were included in a final rule in November 2017 that have drawn sharp resistance from some health systems.

Highlights of select health care provisions included in the law are provided below.

Medicare payments

Medicare sequester

As part of the enforcement mechanism on spending included in the Budget Control Act of 2011 (BCA), Medicare payments to providers and plans have been reduced by two percent since 2013. The sequestration cuts originally were slated to expire in 2021, but subsequently had been extended twice previously to run through 2025.

The new law further extends the sequestration cuts to Medicare payments through 2027.

Independent Payment Advisory Board (IPAB)

The law repeals the Independent Payment Advisory Board (IPAB), which was created by the Affordable Care Act (ACA) as a mechanism to help control health care cost growth.

Medicare trustees in 2017 projected that Medicare per capita spending growth will exceed growth rates that would have triggered IPAB in 2021.

Medicare Part B

Physician Fee Schedule (PFS) Update

The law sets the Medicare Part B physician fee schedule (PFS) update at 0.5 percent for 2018. In the Part B final rule for 2018 issued in November 2017, CMS set the PFS update for 2018 at 0.41 percent, reflecting the 0.5 percent update set by MACRA and a reduction of 0.09 percent as a result of the misvalued code target recapture amount set by a 2014 law.

Under the Bipartisan Budget Act of 2018, the PFS update for 2019 will be 0.25 percent, instead of the 0.5 percent that had been set under MACRA.

MACRA sets PFS updates at zero percent for 2020 through 2025.

Merit-based Incentive Payment System (MIPS)

The law generally provides greater flexibility to the Secretary of the Department of Health and Human Services in the timing of the implementation of the Merit-based Incentive Payment System (MIPS) under MACRA’s Quality Payment Program (QPP) without making fundamental changes to the underlying structure or direction of the law’s approach to physician payment reform.

For example, the Bipartisan Budget Act of 2018 allows the HHS Secretary an additional three years to increase the weight of the MIPS Cost measure from 10 percent to 30 percent of the overall MIPS composite score. MACRA generally would have required clinicians’ performance under the Cost measure to account for 30 percent of the MIPS composite score by the 2019 performance year; the Bipartisan Budget Act gives the Secretary until the 2022 performance year to increase the weight of the Cost measure to 30 percent of the MIPS composite score.

Similarly, the new law gives the HHS Secretary an additional three years of flexibility to set the MIPS threshold score at the mathematic mean of MIPS performance scores. Thus, the HHS Secretary will have the option of setting the MIPS threshold score at less than the mathematic mean of MIPS performance scores through performance year 2022. The MIPS threshold score is the score that CMS uses to determine which clinicians participating in MIPS will receive a negative, neutral or positive payment adjustment. For the 2017 and 2018 performance years, CMS has set the threshold score at three points and 15 points, respectively, in an effort to limit the application of negative payment adjustments while MACRA’s QPP is implemented.

In addition, the new law modifies provisions of MACRA so that MIPS payment adjustments will apply only to services billed to Part B, thereby excluding payments for Part B drugs from MIPS payment adjustments.

Accountable Care Organizations (ACOs)

The law provides for ACOs that enter into or renew participation agreements on or after January 1, 2020, to opt to have beneficiaries assigned prospectively.

The law also creates a new ACO Beneficiary Incentive Program, which will provide a process for the HHS Secretary to permit qualifying ACOs to make incentive payments of up to $20 per service to assigned beneficiaries who receive certain primary care services. The program could begin as soon as January 1, 2019, but not later than January 1, 2020. The program will last for at least one year, at the Secretary’s discretion. The program will be open to ACOs participating in 2 or 3 of the Medicare Shared Savings Program (MSSP), as well as any subsequent models that require two-sided financial risk.

In addition, the Bipartisan Budget Act includes provisions that will expand the availability of telehealth services in ACOs participating in MSSP Tracks 2 and 3. The provision generally makes available to MSSP Track 2 and 3 ACOs the telehealth waiver that currently is available to Next Generation ACOs.

Telemedicine

The law will allow Medicare Advantage (MA) plans to include in annual bid amounts additional, clinically-appropriate telehealth services beyond the services that currently are eligible for reimbursement under Part B. This provision will take effect beginning in 2020.

In-home infusion services

The law creates a temporary Medicare payment structure for in-home infusion services to allow payment for those services prior to the establishment of a permanent payment system in 2021.

Therapy caps

The law repeals outpatient therapy caps for medically necessary services. The most recent temporary exemption from the cap expired December 31, 2017.

Medicare Advantage

Special Needs Plans

The law permanently reauthorizes the Medicare Advantage Special Needs Plan (SNP) for patients who are institutionalized (I-SNPs), have chronic conditions (C-SNPs), or are dually eligible for Medicare and Medicaid (D-SNPs). The law also includes targeted changes to D-SNPs and C-SNPs aimed at improving care management.

Benefit uniformity

The law will permit MA plans to offer additional supplemental benefits targeted to the chronically ill beginning in 2020. CMS included such a proposal in its Advance Notice and Draft Call Letter for 2019.

Value-Based Insurance Design

The MA Value-Based Insurance Design (V-BID) model allows MA plans to vary their benefits offerings and cost sharing requirements based on a beneficiary’s health status. Under the law, V-BID will be expanded to all states beginning in the 2020 plan year.

Star ratings

The law codifies a proposal aimed at preventing the artificial inflation of MA plan star ratings by consolidating a lower-rated plan into a higher-rated plan. Under the law, the consolidated plan’s star rating will be based on an enrollment-weighted average of the star ratings for the continuing and consolidated contracts.

Medicare Part D

Donut hole

The law closes the so called Medicare Part D “donut hole” in 2019, instead of 2020, and changes the percentage of liability for prescription drug costs in the donut hole among enrollees, plan sponsors and drug manufacturers. Thus, beginning in 2019, prescription drug manufacturers will be required to discount the price of brand-name prescription drugs by 70 percent, while enrollees’ cost-sharing liability will decrease to 25 percent and plan sponsor’s liability will decrease to 5 percent.

The law also sunsets the exclusion for biosimilars from the donut hole discount requirement for drug manufacturers. Biosimilars will be subject to the policy beginning in plan year 2019.

Post-acute care

Long-term care hospitals

The law will reduce the market basket update for Medicare payments to long-term care hospitals (LTCHs) for FY 2018 through FY 2026 by 4.6 percent.

In addition, the law will extend the use of the FY 2017 blended payment formula for Medicare payments to LTCHs for two years to FY 2020. Under the FY 2017 formula, LTCHS are reimbursed a blended rate of 50 percent the site-neutral payment rate and 50 percent the LTCH payment rate. Beginning in FY 2020, the new formula will reimburse LTCHs a blended rate of 75 percent the site-neutral payment rate and 25 percent the LTCH payment rate.

Home health

For Medicare payments for home health services in 2020, the law requires a market basket update of 1.5 percent. The change in adjustment factor will result in lower payment rates for home health services in 2020.

Skilled nursing facilities

For Medicare payments to skilled nursing facilities (SNFs) in 2019, the law requires a market basket update of 2.4 percent. The change in adjustment factor will result in lower payment rates for SNF services in 2019.

Medicaid, CHIP, and Community Health Centers

Medicaid Disproportionate Share Hospital Payments

The law eliminates $4 billion in aggregate reductions to state allotments for Medicaid DSH payments for FY 2018 and 2019. The law replaces the reductions for FY 2018 and FY 2019 with a $6 billion increase in reductions to state allotments for Medicaid DSH payments for FY 2021 through FY 2023.

The reductions to state allotments for Medicaid DSH payments under the ACA were scheduled to take effect beginning in 2014, but Congress has repeatedly enacted legislation to delay them.

Disaster response

As part of a larger disaster aid package, the law will increase the Medicaid funding cap for Puerto Rico and the U.S. Virgin Islands by as much as $4.9 billion for the period from January 1, 2018, through September 30, 2019. Local cost-sharing requirements also will be waived under the law.

Children’s Health Insurance Program (CHIP)

The Bipartisan Budget Act of 2018 funds CHIP through 2027, adding four years to the six-year authorization that was enacted as part of the January 22, 2018, continuing resolution.

Community Health Centers (CHCs)

The law provides $3.6 billion annually to community health centers for FY 2018 and FY 2019.

The law also extends for two years funding for the National Health Service Corps and the Teaching Center Graduate Medical Education Program.

Meaningful Use

The law removes statutory language that required the HHS Secretary to adopt progressively more stringent measures of meaningful use standards for Medicare and Medicaid EHR incentive programs. This change effectively grants HHS more latitude to set standards for whether EHR adoption and health care quality reporting measures meet programmatic goals.

Opioids

The Act gives Congress $6 billion over two years to allocate towards combating the opioid crisis, funding new state and regional partnership grants, prevention programs, and law enforcement initiatives.

This article contains general information only and Deloitte is not, by means of this article, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This article is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor.

Deloitte shall not be responsible for any loss sustained by any person who relies on this article.

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Anne Phelps
Principal | Deloitte Risk and Financial Advisory

US Health Care Regulatory Leader
Deloitte & Touche LLP
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Daniel Esquibel
Senior Manager | Deloitte Risk and Financial Advisory

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Ethan Joselow
Manager | Deloitte Risk and Financial Advisory

Deloitte & Touche LLP

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