Summary of Health Care Provisions in the American Taxpayer Relief Act of 2012

January 2, 2013

While most of the focus on the “fiscal cliff” legislation in Congress was on tax rates, the legislation also included a number of health-related provisions. Below is a brief summary.

“Doc-fix”: The legislation averts a 26.5 percent reduction for doctors that come from a payment formula created in 1997. Every year since 2002, Congress has staved off the scheduled cut. However, the legislation funds the “doc-fix” by reducing hospital spending over the next decade to pay for nearly half of the approximately $30 billion needed to avert the physician fee reduction. The reductions in hospital payments come on top of cuts made as part of the Affordable Care Act of 2010.

IPPS Documentation and Coding (DCI) Adjustment: This provision will phase in the recoupment of past overpayments to hospitals made as a result of the transition to Medicare Severity Diagnosis Related Groups (MS-DRGs). Savings: $10.5 billion.

Rebase End Stage Renal Disease (ESRD) Payments: This provision incorporates recommendations from the General Accountability Office by re-pricing the bundled payment to take into account changes in behavior and utilization of drugs for dialysis. Savings: $4.9 billion.

Therapy Multiple Procedure Payment Reduction: This provision further reduces payment for subsequent therapies when therapies are provided on the same day. Savings: $1.8 billion.

Payment for Certain Radiology Services: This provision would equalize payments for stereotactic radiosurgery services provided under Medicare hospital outpatient payment system. Savings: $0.3 billion.

Adjustment of Equipment Utilization Rate for Advance Imagining Services: This policy would increase the utilization factor used in the setting of payment for imaging services in Medicare from 75 percent to 90 percent. Savings: $0.8 billion.

Competitive Prices for Diabetic Supplies: This proposal would apply competitive bidding to diabetic test strips purchased at retail pharmacies. Savings: $0.6 billion.

Adjust Payment Adjustment for Non-Emergency Ambulance Transports for ESRD Beneficiaries: This provision reduces the payment rates for ambulance services by 10 percent for individuals with ESRD obtaining non-emergency basic life support services involving transport, based on a recent General Accountability Office report. Savings: $0.3 billion.

Increase Statute of Limitations for Recovering Overpayments: This provision increases the statute of limitations to recover overpayments from three to five years, based on recommendations from the Office of Inspector General at the Department of Health and Human Services. Savings: $0.5 billion.

Medicare Improvement Fund: This provision eliminates funding for the Medicare Improvement Fund. Savings: $1.7 billion.

Rebase Medicaid Disproportionate Share Hospital (DSH) Payments to Extend the Changes from the Affordable Care Act (ACA) for an Additional Year: This proposal rebases DSH allotments to maintain the level of changes achieved in the ACA, and determines future allotments off of the rebased level using current law methodology. Savings: $4.2 billion.

Repeal of CLASS Act: The provision repeals the Community Living Assistance Services and Supports (CLASS) program established by the Affordable Care Act. This provision has no scoring implications. The Department of Health and Human Services had already decided not to implement this provision in the near future.

Commission on Long Term Care: The provision establishes the Commission on Long Term Care to develop a plan for the establishment, implementation, and financing of a high quality system that ensures the availability of long-term services and supports for individuals. This provision has no scoring implications.

Coding Intensity Adjustment: Under current law, Medicare Advantage plans receive risk-adjustment payments that are further adjustment to reflect differences in coding practices between Medicare fee-for-service and Medicare Advantage. This provision increases this coding intensity adjustment. Savings: $2 billion.

Consumer Operated and Oriented Plan (CO-OP): This provision will rescind all unobligated CO-OP funds under section 1332(g) of the Affordable Care Act. This provision also creates a contingency fund of 10 percent of the current unobligated funds to be used to further assist currently approved co-ops that have already been created. The provision does not take away any obligated CO-OP funds. Savings: $2.3 billion.

Health Extenders: A number of health care provisions were set to expire at the end of the year. The legislation extended most provisions through 2013. These extensions include:

  1. Medicare inpatient hospital payment adjustment for low-volume hospitals
  2. Medicare Advantage plans for special needs individuals (SNPS)
  3. Medicare reasonable cost contracts
  4. Medicare-dependent hospital (MDH) program
  5. Out-patient therapy cap
  6. Funding outreach and assistance for low income programs
  7. Qualifying individual program (Q1) program
  8. Medicaid and CHIP Express Lane option
  9. Transitional Medicaid Assistance (TMA)
  10. Family-to-family health information centers
  11. Special Diabetes Program for Type I Diabetes and for Indians