News | Medicare Payment and Reimbursement

News briefs: The new COVID-19 relief legislation could result in a big Medicare payment cut

News | Medicare Payment and Reimbursement

News briefs: The new COVID-19 relief legislation could result in a big Medicare payment cut

The $1.9 trillion American Rescue Plan, which was signed into law March 11, could lead to a significant reduction in Medicare revenues for providers if Congress does not act.

As explained in a brief issued Feb. 25 by the Congressional Budget Office (CBO), the federal Office of Management and Budget (OMB) has a statutory obligation to offset any deficit increase that’s projected to result from the legislation.

Based on CBO’s projections, the resulting deficit will amount to $381 billion per year over five years. If OMB’s calculations align with that figure, that amount must be offset via spending reductions each year over a five-year period starting in FY22. Some of the cuts would come out of Medicare spending, with the reduction capped at 4 percentage points, or an estimated $36 billion per year.

That decrease would be in addition to the ongoing 2% sequestration, which was paused near the outset of the COVID-19 pandemic but — as of March 22, when this issue went to press — was scheduled to resume in April.

According to CBO, the additional reduction is required to be implemented unless Congress passes further legislation to offset the deficit or votes to “waive the recordation of the bill’s effects on the [deficit] scorecard.”

On March 19, the House passed H.R. 1868, a bill that would both prevent the new sequestration from taking effect and extend the moratorium on the 2% sequester. A Senate vote on the bill, which will need support from at least 10 Republicans, had yet to be scheduled as of March 22. 

A separate bill introduced in the Senate would address only the 2% sequester, extending the pause until the end of the ongoing public health emergency. That bill has bipartisan sponsorship.

The American Rescue Plan contains various items of note for providers, including an $8.5 billion allocation for rural providers to cover healthcare-related expenses and lost revenue attributable to COVID-19. Recipients will need to apply for funding.  

Post-publication update: The Senate on March 25 passed a bill to postpone restoration of the 2% payment sequester through the end of 2021. The House was expected to pass it as well following the Easter recess. Between the April 1 expiration of the moratorium and the date when President Joe Biden signs the bill into law, CMS was expected to ensure no claims would be subject to the payment cut.

New federal guidance seeks to clarify reimbursement of COVID-19 testing and vaccinations

CMS and two other federal agencies in late February issued guidance intended to make it easier for healthcare providers to be reimbursed for administering COVID-19 tests to insured individuals and for providing testing and vaccinations to the uninsured.

Portions of the guidance prohibit group health plans from imposing restrictions on coverage of testing, regardless of the clinical circumstances of the test.

“This guidance makes clear that private group health plans and issuers generally cannot use medical screening criteria to deny coverage for COVID-19 diagnostic tests for individuals with health coverage who are asymptomatic and who have no known or suspected exposure to COVID-19,” CMS stated in a news release.

The guidance notes that federal funding is available to compensate providers for administering COVID-19-related services — including testing and vaccination — to the uninsured.

The Provider Relief Fund makes funding available through the COVID-19 Uninsured Program, which has disbursed $3 billion for COVID-19 testing and treatment of uninsured individuals and which “expects to see vaccine administration claims as states scale up their vaccination efforts,” CMS stated.

With insolvency looming for the Medicare Hospital Insurance Trust Fund, provider payments could be impacted

Hospital revenues and revenue cycle processes could be significantly affected if the trust fund used to make Medicare Part A payments to hospitals becomes insolvent over the next few years, as is projected, industry experts say.

Some of the latest data, including from the Congressional Budget Office, indicates the Medicare Hospital Insurance Trust Fund, which is funded by payroll taxes, will run out of assets in 2024. Other sources project 2026 as the depletion date. The uncertainty in the estimates stems from factors such as the lingering effect of the economic downturn on payroll taxes and any ongoing impact of deferred care on Medicare spending.

“If the trust fund does go insolvent, there are real consequences to how hospitals get paid, how post-acute care providers get paid,” Jonathan Blum, vice president for federal policy and managing director for Medicare with Health Management Associates, said during a briefing hosted by the Alliance for Health Policy.

A 2020 report from the Medicare Boards of Trustees estimates that with no money in the trust fund, incoming payroll taxes would cover only 90% of Medicare expenditures.

“What it means is that providers would be delayed in getting their payments,” said Cori Uccello, senior health fellow with the American Academy of Actuaries. “People could go to the doctor, but [for] the provider, it might take a little while because they have to wait for the payroll tax revenue to come in” to be paid.

Indirect impacts could be felt across the system of care, Uccello added. “Do people then face delays in getting care because providers are getting delayed in their payments? If that’s the case, it’s the people who have higher health needs that are going to face more problems.” 

New Medicare CoP regarding ADTs begins for hospitals in May

Effective May 1, hospitals must send real-time e-notifications of any admissions, discharges or transfers (ADTs) to a variety of community-based and post-acute care providers. The requirement stems from a new CMS Condition of Participation (CoP) created as part of the Interoperability and Patient Access final rule.

The new CoP requires hospitals to send real-time notifications of a patient’s ADT data to providers that have an established care relationship with the patient and that need the information for treatment, care coordination or quality improvement activities. 

Recipients may include the patient’s established primary care practitioner; the patient’s established primary care practice group or entity; or any other practitioner (or other practice group or entity) identified by the patient as primarily responsible for their care.

At a minimum, notifications must include the names of the patient, the treating practitioner and the sending institution. In addition, sending the patient’s diagnosis is strongly encouraged (if including such information is not prohibited by other applicable law). 

— Lisa A. Eramo, MA, HFMA contributing writer

About the Author

Nick Hut

is a senior editor with HFMA, Westchester, Illinois (nhut@hfma.org).

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