New Law Includes Much More Than a Prescription Drug Benefit
The Medicare Prescription Drug, Improvement and Modernization Act of 2003 is not only the largest expansion of the Medicare program since its creation, but it also contains provisions that will have a significant impact on neurosurgeons and other providers. The $395 billion law contains a temporary increase to the conversion factor used to set reimbursement under the Physician Fee Schedule, a moratorium on physician ownership of specialty hospitals, bonuses to physicians providing services in rural areas, changes in the reimbursement of physician administered outpatient drugs, health savings accounts, grants and safe harbors to encourage electronic prescribing, and regulatory relief for physicians.
The bill passed both the House of Representatives and Senate in dramatic fashion. On Nov. 23 the House voting started at 3 a.m. and, after the longest roll call vote in history, a flood of phone calls from President Bush from Air Force One, hard lobbying and negotiating by Republican leaders and a flurry of last-minute vote changes, the bill passed 220 to 215. In the Senate, the bill had to survive three separate votes and squeaked through by a margin of 54 to 44 on Nov. 25. President Bush signed the bill into law on Monday, Dec. 8.
The primary focus of the law is the addition of a prescription drug benefit to the Medicare program. The optional program will be offered and managed by private insurers under contract with the Centers for Medicare and Medicaid Services (CMS). While estimates and models have been developed, no similar programs exist and private insurers have the ability to vary programs. Many lawmakers also have vowed to make significant changes to the bill before it goes fully into effect in 2006.
“Medicine has changed, but Medicare has not-until today,” President George W. Bush said while signing the bill into law. “Drug coverage under Medicare will allow seniors to replace more expensive surgeries and hospitalizations with less expensive prescription medicine.”
Physicians Receive Temporary Increase in Medicare Reimbursement
Before the bill was signed, the CMS had announced an across-the-board 4.5 percent decrease in physicians’ Medicare reimbursement for 2004. The new law halts the 4.5 percent decrease and replaces it with a 1.5 percent increase for both 2004 and 2005. Neurosurgeons saw this increase beginning Jan. 1. However, this is a temporary victory because the 1.5 percent increase will have to be paid back, with interest, over the following years. This likely will lead to negative updates for 2006 to 2010 and, while updates will be positive for 2010 to 2013, they still will be significantly less than the 2003 level. The AANS/CNS Washington Office estimates that the conversion factor will be $36.70 in 2004, up from $36.16 in 2003, and will rise to $37.30 in 2005.
The AANS/CNS Washington Office has received assurances from Republican leadership, including Senate Majority Leader Bill Frist, that the entire method for determining the conversion factor will be evaluated by Congress over the next two years and action will be taken before the negative impact of the Medicare bill is felt. In essence, the two years of positive updates to the Physician Fee Schedule may buy enough time for Congress to fix the complicated formula used by the CMS to determine physician reimbursement. Without a fix to the formula or other Congressional action, neurosurgeons will see significant decreases in fees after 2006 and actually will be in a worse position than if the Medicare bill had not included the 1.5 percent increase. Estimates provided by the CMS in mid-October demonstrate that fees will plummet over the next five years, settling at $29.70 in 2010 and slowly rising back to $31.70 in 2013.
Other Provisions
Additional provision of the Medicare legislation may affect neurosurgeons.
Rural Bonus Payments While the law provides numerous incentives and subsidies to rural areas, one element that may benefit neurosurgeons is a straight bonus of 5 percent to 15 percent for services provided in a designated rural area. This includes services provided at weekly or monthly clinics and does not require the physician to permanently locate to a rural area.
Specialty Hospital Moratorium The new law also contains an 18-month moratorium on the physician ownership of specialty hospitals during which time the Medicare Payment Advisory Commission will conduct a study on the costs of providing services in these hospitals to determine if the current payment system should be refined. The moratorium does not affect existing physician-owned hospitals or those under construction. While the moratorium is not welcome news to neurosurgeons considering investing in surgical or spine hospitals, the moratorium is considered somewhat of a victory as the Senate version of the bill provided for immediate and final elimination of the Stark exception. After MedPAC completes its study, neurosurgeons who currently have an investment in a specialty hospital, or who are considering such an investment, will have a better idea of any changes in the Stark exception and the reimbursement rates for these hospitals.
Health Savings Accounts The bill adds a new tool for patients interested in saving for future medical expenses. Health savings accounts will allow Americans to put away pretax dollars for future medical expenses, and unlike current medical savings accounts, funds will roll over each year and will be permitted to earn interest. Future withdrawals also will be tax-free. The Internal Revenue Service has stated the new health savings accounts will likely act like an individual retirement account, but additional analysis needs to be done to determine exactly how these accounts will be treated under the tax code. It is anticipated that HSAs will allow patients to better manage their healthcare expenditures and will provide them with greater flexibility in seeking medical care from the physician of their choice.
Electronic Prescribing At one point lawmakers seriously considered mandating that physicians utilize electronic prescribing to remain in the Medicare program. This would have represented an enormously expensive unfunded mandate, similar to the Health Insurance Portability and Accountability Act, requiring physicians to purchase new computer software and hardware in order to comply. However, the final law makes electronic prescribing voluntary for physicians. It also includes a number of grants to help physicians purchase the necessary equipment for electronic prescribing.
Regulatory Relief The new law also provides a number of reforms to streamline Medicare regulations and set clearer guidelines for physicians undergoing Medicare payment audits or appeals. The law allows for faster resolution of payment problems, additional provider education, minor modifications to claims without risk, and repayment of overpayments over time. It also limits audit triggers and the use of extrapolation. In addition, the legislation created the Technical Advisory Group to review Emergency Medical Treatment and Labor Act regulations and advise the Health and Human Services secretary accordingly. It additionally would allow treating physicians to determine whether EMTALA-related Medicare services are “reasonable and necessary” based on the information available at the time the care was provided. Finally, the bill addresses various issues related to Evaluation and Management Documentation Guidelines, requiring pilot testing of new E&M guidelines before implementation.
Barbara E. Peck is senior Washington associate in the AANS/CNS Washington Office.