Hospital Pay, Medicare Reforms Among Concerns for Congress

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By Nathaniel Weixel

Congress surprised everyone in 2015 by working together to permanently fix the Medicare sustainable growth rate (SGR) formula. Had Congress not acted, doctors would have faced a 21 percent payment cut. It was an example of bipartisanship that some hoped would be a sign of a positive working relationship between the parties in the future, but additional Medicare reforms are unlikely to attract the bipartisan support needed to get them enacted.

On the legislative front, analysts expect 2016 will serve mostly as a bridge year to 2017, as lawmakers will be reluctant to put forward too many controversial proposals in a presidential election year. Congress is scheduled to be in session fewer than 120 days in 2016 because of the summer's presidential conventions, which doesn't leave much time for major legislation to be considered.

House Speaker Paul Ryan (R-Wis.) said his plan to have House Republicans offer specific detailed proposals for overhauling U.S. health-care in 2016 may not include offering legislation. Speaking to reporters Dec. 17 at his weekly press conference, Ryan declined comment on putting those proposals in legislative language, saying the issue would be discussed at the joint House-Senate Republican retreat set for January in Baltimore.

Details Forthcoming

“That's going to be decided by our members. So that's why I say I don't want to presume to have it all figured out because we haven't as a team decided exactly when and under what context we're going to be rolling our agenda out,” Ryan said. “So, those are details to be decided jointly as a House Republican caucus, in concert with our friends over in the Senate.”

The Senate Health, Education, Labor and Pensions Committee will take up its precision medicine bill, the Senate version of the House-passed 21st Century Cures legislation to speed the introduction of new medicines. There has been some disagreement over funding sources, but HELP Committee Chairman Lamar Alexander (R-Tenn.) said he expects the panel will quickly take up the bill in January.

The House Energy and Commerce Committee will continue debating mental health legislation sponsored by Rep. Tim Murphy (R-Pa.). That bill, which was expected to be bipartisan, hit a snag in late 2015 when Democrats said they felt shut out of the legislative process. The result was a 10-hour markup in the health subcommittee. There are three different mental health bills in the Senate, so while senators could be looking to combine them, at least one of the bills deals with mental health requirements for gun purchases, which would complicate matters due to the controversy over gun control issues in Congress.

On Jan. 5, President Barack Obama announced a push to require all sellers of firearms to perform background checks on their customers and directed the Social Security Administration to begin the rulemaking process to include information in the background check system about beneficiaries who are prohibited from possessing a firearm for mental health reasons.

New House Ways and Means Committee Chairman Kevin Brady (R-Texas) has expressed an interest in Medicare reforms, and developed a broad package of hospital and post-acute care reforms in draft form earlier in 2015. He also is expected to work with both parties in the House on a way to revisit the site-neutral payment provisions of the debt ceiling legislation approved in early November.

The Senate also is expected to hold a confirmation hearing on Andy Slavitt to lead the Centers for Medicare & Medicaid Services, and to vote on Robert Califf to lead the Food and Drug Administration.

Budget Battles

President Barack Obama is scheduled to release his budget priorities during the first week of February. The 2015 budget proposal included broad policy ideas, such as allowing Medicare to negotiate drug prices. In 2015, Obama proposed about $400 billion in cuts to government health spending, much of it in the form of recycled policies from past budgets that weren't adopted by Congress. Large parts of the savings came from adjustments to provider rates and Medicare structural reforms. For example, the budget proposed to save approximately $100 billion through 2025 by adjusting payment updates for certain post-acute care providers, and to align Medicare drug payment policies with Medicaid for some low-income patients.

Julius Hobson, a senior policy adviser at Polsinelli PC in Washington, told Bloomberg BNA he expects more of the same types of broad-reaching proposals, including a copayment for home health visits and a hospital site-neutral payment provision.

A presidential budget proposal is frequently dead on arrival, although “it still sets the tone” for the year ahead, Hobson said. The proposals often are ignored by Congress, even when the legislature is controlled by the president's own party. While the document is the first step in negotiations over the government's annual spending plan, it often serves more as a statement of ideals and priorities than as a basis for policy.

“I don't think it behooves anyone to legislate” with the 2016 budget, Andrew Shin, senior director, policy and strategic partnerships at the Schwartz Center for Compassionate Healthcare in Boston, told Bloomberg BNA. “Budgets have become less and less actual legislative proposals and more and more political statements. They'll hit drug companies on transparency, investment into mental health and public health, support primary care, telehealth. But we'll see if any of that gets any traction. Probably not this year.”

Site-Neutral Payment

The final 2015 bipartisan budget agreement, which Obama signed Nov. 2, is paid for in part by $6.25 billion in health-care offsets. One of the health-care offsets equalizes payment rates for hospital outpatient departments and hospital-owned physician offices. The provision is meant to address the practice of hospitals acquiring physician offices and then billing patients under the outpatient prospective payment system, which has higher reimbursement rates than the Medicare physician fee schedule.

Analysts expect Congress to act to alter it in some way. Rep. Pat Tiberi (R-Ohio), chairman of the House Ways and Means Health Subcommittee, told Bloomberg BNA in November he's worried the effective date of the policy is too soon for hospitals that already have started construction on new outpatient facilities.

But it's unclear if there's a legislative vehicle that Congress can use to alter the provision. Lobbying efforts to include a change of the policy in the omnibus appropriations bill fell short, as well as efforts by House Democrats to include it as part of the Electronic Health Fairness Act of 2015 that passed just before Congress adjourned for the year.

“There's no real must-pass health reform legislation that will happen between now and the election, unless it's appropriations, which isn't the right vehicle for it. There's no logical place for the provision to go in,” Shin said.

Under the provision, all new hospital acquisition of providers that don't serve patients on the main campus of a hospital would be eligible for reimbursement from either the ambulatory surgical center prospective payment system (ASC PPS) or the Medicare physician fee schedule (PFS), not the higher reimbursed outpatient prospective payment system (OPPS). The reimbursement changes will apply to hospital-owned physician practices acquired or opened since the date the law was signed—Nov. 2—that are located farther than 250 yards from a hospital's main campus.

The American Hospital Association has decried the site-neutral payment proposal. Thomas Nickels, AHA's executive vice president of government relations, said in a statement when the law was signed that the “untested idea may endanger patient access to care, especially among patients who are sicker, the poor, minorities and seniors who often receive care in hospital outpatient departments. Moreover, rural communities will be most adversely impacted, as hospitals will no longer be able to help physicians in these communities continue to provide access to their patients.”

Yet the Federation of American Hospitals, which represents investor-owned hospitals, didn't see the proposal the same way. Charles Kahn III, FAH president and chief executive officer, told Bloomberg BNA the provision is narrowly tailored, and focused only on specific physician-hospital arrangements. Kahn said he isn't thrilled with any proposal that could cut hospital payments, but the budget agreement as proposed was the best deal the industry was going to get.

Hospital lobbyists have been calling for an exemption for hospitals that are already under development. “We are concerned there's not enough of a transition” in the law for hospitals already under construction, Kahn said.

Shin said the provision could be a “huge deterrent for hospitals when they're considering acquiring outpatient practices. If there's any way to get it reversed or delayed [in 2016], they're going to try.”

Medicare Reforms

Ways and Means Chairman Brady in late 2015 said the committee's health panel was crafting a hospital bill and was prepared to advance it to the floor if time permitted. Other issues took precedence, and so Brady said he'll be looking for opportunities early in 2016.

Brady said the package would have included previously introduced legislation that changes the post-acute care delivery system, reforms graduate medical education and creates a site-neutral payment policy for certain inpatient and outpatient surgeries. Brady also is pursuing a “premium support” model for Medicare, though that long-controversial policy is aimed at 2017, not 2016.

But like the hospital site-neutral payment issue, there's no real indication of how much traction the policies could get, or whether they'd be able to pass as stand-alone legislation. He said reforming Medicare's sustainable growth rate (SGR) for physicians took too long, and bipartisan Medicare reforms shouldn't wait.

“We can't afford to wait 15 years, like the SGR. We really need to make some progress now,” Brady said at a conference in October.

Shin told Bloomberg BNA that until Congress gets sidetracked with efforts to repeal the Affordable Care Act, there will be room for “smaller, technical bills to find their way through.” Shin said he wasn't sure whether some of Brady's Medicare reforms would qualify as small enough. It would depend on whether he was willing to modify them, Shin said.

The National Committee to Preserve Social Security & Medicare said it will be advocating for inclusion of an “observation status” proposal that would make it possible for all beneficiaries to receive skilled nursing facility (SNF) care following a hospitalization, whether they are classified as an outpatient in observation status or an inpatient.

The group said it will oppose “so-called Medicare ‘reform' proposals that are likely to receive a great deal of attention in 2016, in preparation for action in the 115th Congress following the election.”

These proposals, the group said, “include benefit restructuring that would increase costs for most beneficiaries and premium support/vouchers that would undermine and eventually end traditional Medicare. Medicare beneficiaries already have high out-of-pocket health care costs even with Medicare. We should be expanding Medicare coverage, for example by providing vision, dental and hearing coverage, not asking people whose average annual income is $24,150 to pay more to see the doctors of their choice and to receive the health care services they need.”

ACA Repeal

House Republicans voted to repeal the ACA, but like most of the past times they've done so, analysts don't expect there to be any solid replacement proposals.

The House Jan. 6 passed and sent to President Obama a bill (H.R. 3762) that would repeal much of the ACA and also defund Planned Parenthood, but Obama Jan. 8 vetoed the bill and it is unclear whether Republicans have enough votes for an override.

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Rep. Tom Price (R-Ga.), chairman of the House Budget Committee, told Bloomberg BNA in a Dec. 11 interview that Republicans were concerned the ACA repeal vote would get lost in the flurry of activity at the end 2015. So rather than try to rush it through, the vote will occur in January. Obama will veto the bill, but Republicans have said it's an important message vote to show their policy options if a Republican wins the White House in 2016.

In previous public appearances, Ryan has said he wants to roll out detailed proposals on overhauling the health-care system relatively early in the new year so that they won't get lost in the back-and-forth of the presidential primary campaigns, even if they have no chance of enactment into law by Obama.

Shin said he doesn't think Republicans should put out anything too detailed. “I think it would be foolish for House Republicans, Republicans in Congress in general, to put something too specific on paper. I don't see them gaining any traction on any proposal” because it would decrease access to care, increase the number of uninsured, and increase deficit. “There's no benefit to make a tough decision on [an ACA] replacement bill,” Shin said.

21st Century Cures

The House passed the bipartisan 21st Century Cures bill last summer (H.R. 6), which is intended to speed up the approval of innovative drugs and medical devices. The legislation is fully offset, and includes a provision that requires manufacturers of brand-name drugs to exclude the cost of the cheaper “authorized” generic versions of the drugs they sell when calculating the average manufacturer price (AMP). The bill is also paid for by a provision regarding the amount of oil sold from the Strategic Petroleum Reserve.

The Senate has held a few hearings on the issue, but no legislation has been introduced. Sen. Alexander told Bloomberg BNA he intends to make the issue a priority in early 2016.

“We have a lot of bipartisan interest in it and no reason not to succeed. We'll go to work on it immediately after the first of the year,” Alexander said.

But the bipartisan omnibus spending package enacted at the end of 2015 essentially took most of the pay-fors that were included in the House Cures bill. That will have to send members back to the drawing board with limited time to find new solutions.

“If it's going to make it, it will have to make it before June,” Polsinelli's Hobson said. “Otherwise, forget it.”

The fiscal year 2016 omnibus spending bill paid for the program to provide health care for the first responders and victims of the 9/11 attacks by limiting Medicaid reimbursement for durable medical equipment to the Medicare rate beginning in 2019. It also reduces payments for X-ray services that use film instead of digital imaging, rescinds funds from the Medicare Improvement Fund (MIF), and reimburses home health agencies when they use cost-effective disposable alternatives to certain durable medical equipment. All of those were used to offset the House Cures bill. The MIF is a fund set up to make improvements in the original Medicare fee-for-service program under Parts A and B. Most recently, its funding was reduced to pay for the doc pay fix.

Questions have lingered as to whether the Senate version will include mandatory spending as does H.R. 6. Unlike the House Energy and Commerce Committee, the Senate HELP Committee doesn't have the jurisdictional bandwidth to develop same cost offsets to pay for the bill.

“For many of us, mandatory funding is the villain,” Alexander said during a hearing on the 2016 National Institutes of Health budget. “But I'm convinced this is a critical time in science and a critical time of opportunity.”

Alexander told Bloomberg BNA in late December he's willing to consider special funding for the NIH “on limited projects like precision medicine that have a start and a stopping point and I'm willing to consider them with mandatory funding. We haven't figured out how to do that yet but that's part of the discussion we're having.”

Senate Democrats, especially Patty Murray (D-Wash.), the ranking member of the HELP Committee, are committed to ensuring mandatory funding for NIH. The omnibus appropriations bill ensures a $2 billion boost for the agency, so it's possible lawmakers could find a way to reduce the mandatory funding and find more offsets. But time is a pressing concern.

Mental Health

Congress also may act on mental health reform in 2016, but like most major legislative proposals, there's only a limited time to get something done. In response to recent mass shootings, lawmakers have said the mental health system in the country needs fixing. Most notably, Ryan mentioned the House bill (H.R. 2646) currently under consideration in the Energy and Commerce Committee.

The bill, sponsored by Rep. Tim Murphy (R-Pa.) has 45 Democrats as co-sponsors, but many of them aren't on the Energy and Commerce committee. The bill would make changes to the Health Insurance Portability and Accountability Act privacy provisions to allow health-care providers to disclose information about patients with mental illness to their caregivers, even if the patient specifically directed the provider not to disclose such information. It also would encourage states to adopt controversial assisted outpatient treatment (AOT) laws, which allow judges to force people with mental illnesses into treatment. The bill was advanced to the full committee on a mostly party-line vote after a contentious markup in early November.

“I know on our side, people really want to do a compromise, and they felt they were on that road and suddenly they had the rug pulled out from under them,” Rep. Eliot Engel (D-N.Y.) told Bloomberg BNA in late December. “Suddenly there seemed to be a lack of interest from the majority to compromise, so everybody turned against the bill. I would hope we can get everybody back to a compromising mood because I think the issue of mental health is greater than any political position and I think its something that needs to be looked at.”

The bill is backed by many mental health advocacy groups. The American Psychiatric Association (APA) has endorsed both Murphy's bill and similar legislation (S. 1945) introduced in the Senate by Sens. Chris Murphy (D-Conn.) and Bill Cassidy (R-La.). A separate Senate bill by Majority Whip John Cornyn (R-Texas) focuses on mental health in the criminal justice system, including the mental health reporting requirements for people who buy guns.

“We did the HIPAA [aspect] first because both Democrat and Republican members were looking at how we could deal with giving some flexibility to HIPAA for someone who might not be family,” Rep. Gene Green (D-Texas), the ranking member of the health subcommittee, told Bloomberg BNA. But “the biggest issue is funding. You can't do mental health treatment on the cheap. Mental health is expensive.”

Green said Republicans shouldn't cut Medicaid to pay for the bill because it's the predominant payer for mental health services. Green said he thinks the best way forward is to not get caught up in funding issues, and hammer out the policy first.

“You don't need all Democrats to be for it,” Shin said. “It depends on how seriously Republicans view a response is needed on mental health.”

Shin said he thinks Tim Murphy's House bill will prove to be the best way forward in the Senate “because it's the most vetted right now,” but much of the broad reforms will be stripped out due to funding concerns.

Mental health is an issue every time there's a major shooting, and the next tragedy will either result in a coalition in support behind the House bill, otherwise the odds of any reforms passing will be significantly lower, Shin said.

To contact the reporter on this story: Nathaniel Weixel in Washington at

To contact the editor responsible for this story: Steve Teske at

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