Summary of Long-Term Care and Post-Acute Care Provisions in the American Taxpayer Relief Act of 2012

January 4, 2013

On Wednesday, Jan. 2, 2013, President Obama signed into law the American Taxpayer Relief Act (Act) of 2012 — the House- and Senate-approved bill to avert the fiscal cliff. The Act, while raising taxes on high-income earners, also contains certain amendments to existing healthcare statutes and regulations and new regulations and programs that will affect providers and suppliers. This article summarizes key provisions of the Act impacting long-term care and post-acute care providers.

Repeal of the CLASS Act; Implementation of Commission on Long-Term Care. Section 642 of the Act repeals the Community Living Assistance Services and Supports (CLASS) Act, which was originally enacted as Title VIII of the Patient Protection and Affordable Care Act. The CLASS Act was enacted for the purpose of creating a voluntary and public long-term care insurance option for employees. In October 2011, however, the program was abandoned, partially as a result of the Congressional Budget Office’s (CBO) findings that projected premiums from participants would not self-sustain the program.

In its place, however, Section 643 of the Act provides a new federal Commission on Long-Term Care (Commission) to develop a plan for the establishment, implementation and financing of a high-quality system to ensure the availability of long-term services and support for individuals. The Commission will be composed of 15 individuals (three each appointed by the speaker, House minority leader, Senate majority leader, Senate minority leader and the President). These individuals will represent different areas of the long-term care continuum and focus on how the Medicare and Medicaid programs, along with the private long-term care insurance market, can better meet the needs of stakeholders. The Commission will have six months to submit their report to Congress on legislative and administration recommendations, but there appears to be no requirement for Congress to act upon the recommendations and findings of the Commission. This provision has no CBO scoring implications.

Therapy Multiple Procedure Payment Reduction. Section 633 of the Act reduces Medicare payments for subsequent therapies when multiple therapies are provided on the same day. From Jan. 1, 2013, through March 30, 2013, the multiple procedure payment reduction (MPPR) policy applies a 20 percent or 25 percent payment reduction to the practice expense value of select CPT codes deemed “always therapy services.” The 20 percent reduction is applicable to physicians and physical therapists in private practice, and the 25 percent reduction is applicable to other settings that bill for Part B services, including CORFs, SNFs (Part B), home health (Part B), outpatient hospitals and rehabilitation agencies.

Effective April 1, 2013, the MPPR that applies to the practice expense will increase from the 20 or 25 percent to 50 percent for all outpatient therapy settings. For the second and each subsequent code, the practice expense value will be reduced. This means that the CPT code with the highest practice expense value that day will be reimbursed at 100 percent and the practice expense values for the second and subsequent codes will be reduced when multiple therapy services are billed on the same day by the same practitioner or provider under the same NPI, regardless of whether those therapy services are furnished in separate sessions. The CBO estimates that implementation of the MPPR will result in estimated savings of $1.8 billion to Medicare over 10 years.

Payment for Outpatient Therapy Services. Current law places annual per beneficiary payment limits of $1,880 for all Medicare outpatient therapy services provided by nonhospital providers, but includes an exceptions process for cases in which the provision of additional therapy services is determined to be medically necessary. Section 603 of the Act extends the exception process through Dec. 31, 2013. The provision also extends the cap to services received in hospital outpatient departments through Dec. 31, 2013. Section 603 also extends the mandate that Medicare perform manual medical review of therapy services furnished Jan. 1, 2013, through Dec. 31, 2013, for which an exception was requested when the beneficiary has reached a dollar aggregate threshold amount of $3,700 for therapy services, including hospital outpatient department therapy services, for a year. There are two separate $3,700 aggregate annual thresholds: (1) physical therapy and speech-language pathology services and (2) occupational therapy services.

Increase Statute of Limitations for Recovering Overpayments. Section 638 of the Act increases the federal statute of limitations to recover overpayments from three to five years, based on recommendations from the HHS Office of Inspector General (OIG). The CBO estimates that implementation of this longer statute of limitations will result in estimated savings of $1.8 billion to Medicare over 10 years.

Decreasing Hospital and Other Payments to Fund the “Doc-fix ”: Section 601 of the Act averts a 26.5 percent payment rate reduction for doctors resulting from implementation, and the compounding effect, of the Medicare Sustainable Growth Rate (SGR) formula enacted by the Balanced Budget Act of 1997. The SGR formula was implemented to ensure that yearly increases in expenses per Medicare beneficiary would not exceed the growth in gross domestic product. However, every year since 2002, Congress has staved off this scheduled cut to physician payments. The Centers for Medicare & Medicaid Services (CMS) is currently revising the 2013 Medicare Physician Fee Schedule (MPFS) to reflect the Act’s requirements as well as technical corrections identified since publication of the final rule in November.

The Act funds the “doc-fix” by reducing inpatient hospital payments over the next decade to pay for nearly half of the approximately $25.2 billion needed to prevent this year’s physician payment rate reduction. The Act reduces hospital payments by cutting $10.5 billion from projected Medicare hospital payments over 10 years through a downward adjustment in the annual base rate payable to hospitals paid under the Inpatient Prospective Payment System. Outpatient dialysis centers and other providers are also impacted. Lawmakers said the cuts would offset $11 billion in overpayments made to hospitals since the 2008 fiscal year, when Medicare changed payment codes, known as medical severity diagnosis-related group codes, to more accurately describe illnesses and the hospital services provided to treat them. The Medicare Payment Advisory Commission, which advises Congress on Medicare legislation, recommended in December that Congress make future payment adjustments to recoup these overpayments. The Act also reduces Medicaid disproportionate share payments to hospitals by an additional $4.2 billion over the next 10 years. The reductions to hospital payments are in addition to the significant payment cuts made as part of the Affordable Care Act of 2010.

While the Act addressed certain consequences of the fiscal cliff, Congress will still be faced with additional challenges that will prove to be no less daunting. By the end of March, Congress will be forced to raise the $16.4 trillion debt ceiling or default on the nation’s debts. In addition, and most importantly, Congress must also address across-the-board budget cuts that were scheduled to take effect on Jan. 2, 2013, but which have been delayed two months, and which could further cut payments to Medicare providers and suppliers by an additional 2 percent.

Please contact the authors or another member of McGuireWoods’ healthcare department if you have any questions about the information contained in this client alert.

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