After several months of intense negotiating and with rare bipartisan cooperation, the Congress and President Clinton finalized a budget deal in early August. The Balanced Budget Act of 1997 cuts Medicare spending over the next five years by $115 billion. The total Medicare physician payment reductions are $5.3 billion, considerably less than in past proposals, but much of this is on the backs of surgeons. Key provisions affecting neurosurgeons include:
- Resource-Based Practice Expenses – The bill extends the implementation deadline for the new practice expense methodology by one-year and phases-in the new changes over a four year period from 1999-2002. It sets out detailed requirements for the Health Care Financing Administration (HCFA) in developing the new values. HCFA is also required to develop new values for the malpractice component of the resource based relative value system (RBRVS), a provision long sought after by the AANS and CNS. (See Cover Story for more details on these provisions)
- Establish a Single Medicare Conversion Factor – The legislation repeals the three separate conversion factors and replaces them with a single conversion factor for all physician services. The 1998 conversion factor is estimated to be $37.13. Current conversion factors are $40.96 for surgery, $35.77 for primary care, and $33.85 for all other services. Some of the $5.3 billion in savings achieved by the Act came from this change.
- Eliminate the Medicare Volume Performance Standard (MVPS)– The bill replaces the current MVPS system with a sustainable growth rate system based on real Gross Domestic Product (GDP). The annual conversion factor update is capped at the Medicare Economic Index (MEI) + 3 percent and any annual update decrease is capped at MEI -7 percent. The surgical community has done especially well under the MVPS system, getting generous updates by holding the volume of services down. It is not yet clear how this new system will impact the physician community, but we continue to be concerned that limiting the growth of physician services to GDP will not adequately account for the costs associated with treating Medicare beneficiaries. Some of the $5.3 billion in savings achieved by the act also came from this change.
- Elimination of Balance Billing Limits – In certain limited circumstances, the bill eliminates the application of Medicare’s current balance billing limits and allows physicians and their Medicare patients to privately contract their fee arrangements. It is doubtful that this provision will have a wide-spread effect, however, because of the many restrictions associated with it. The final version of the bill allows those physicians not providing emergency or urgent care to submit a signed affidavit to the Department of Health and Human Services (HHS) indicating that they intend not to submit any claims or receive any reimbursement through the Medicare program (i.e., be neither “participating” or “non-participating”) for a two-year period. Private contracts would have to be in writing and contain specific consumer safeguards, including requirements for disclosure of fees and notice to beneficiaries that they remain eligible to receive Medicare services through other physicians. Under these circumstances, the balance billing limits would not apply.
- Expand Choice of Medicare Options – The law creates the new “Medicare Choice” program, which will give seniors an expanded choice of Medicare health plans. Some of the options include: fee-for-service plans, PPO plans, point-of-service plans, PSO plans, HMOs and MSAs. Included in this section are numerous beneficiary protections, including some guarantees for direct patient access to specialty care, an expedited appeals and grievance process, and the ability to change plans if the patient is dissatisfied. The bill also establishes the “prudent layperson” definition of emergency. This will ensure that managed care plans will pay for emergency services even if it turns out that the patient did not in fact have an emergency condition. Finally, the bill includes new anti-gag clause and anti-gag practice language, which would prohibit Medicare Choice plans from restricting medical communications with beneficiaries, although certain practices by religiously-based health plans would not be affected under conscience clause protection.
- Medical Savings Accounts (MSAs)– The bill includes language that allows a four-year demonstration project of up to 390,000 Medicare beneficiaries to utilize the MSA option. Beneficiaries must purchase a $6,000 high-deductible plan to qualify for this option. Physicians participating in the fee-for-service Medicare Choice plan would not be subject to balance billing limits when treating beneficiaries with a MSA account. Government contributions to an individual’s MSA account would be generally tax free so long as they are used for qualified medical expenses.
- Graduate Medical Education (GME) – The new law caps the number for residents reimbursed by the government on a national and facility level, for both direct medical education (DME) and indirect medical education (IME) payments at current levels. The HHS Secretary is authorized to develop rules for establishing new residency programs. The agreement allows DME payments to go to entities not currently eligible for funds, including federally qualified health centers, rural health centers and new Medicare Choice organizations. The Secretary is also required to establish a demonstration project in which DME payments could go to qualifying consortia. The Secretary must study variations in the per resident payment amounts to reduce the current discrepancies. Finally, the bill “carves-out” GME payments from the current Medicare HMO capitation formula. Under current law, HMOs receive additional funds to account for the increased expenses associated with sending Medicare patients to teaching hospitals. However, in the past this money has not been passed-through to the teaching hospitals, either directly or in the form of increased patients. The money will be used to increase the GME payment formula.
The bill is important both for what it did include and for what it did not include. Three key provisions that did not make it into the final bill, but that would have impacted neurosurgeons are:
- Eliminate Payments for Assistants at Surgery — President Clinton originally included a provision in his budget proposal that would have eliminated the additional payment for physician assistants at surgery. The surgical community strenuously objected to this provision, and, as a result, it was not included in the final package.
- Expand “Centers of Excellence” Program — Currently HCFA is conducting demonstration projects for CABG and total hip and knee replacement whereby “Centers of Excellence” bid to provide these services at a reduced, all-inclusive global fee. This saves both the Medicare program and beneficiaries money. The House proposal would have expanded this program to apply to any surgical procedures HCFA deemed appropriate, and likely would have included some neurosurgical services (possibly back surgery, because it is a high volume, high dollar Medicare service). Organized medicine opposed this provision, and it ultimately was stripped out of the final bill.
- Medical Liability Reform — The House version of the bill included comprehensive medical liability reforms including: a 2 year statute of limitations, a $250,000 cap on noneconomic damages, the elimination of joint and several liability, a cap on punitive damages, periodic payment for future losses, consideration of collateral sources of payment in calculating damages, and preemption of more lenient state laws. The provision died because it did not have the enough votes in the Senate and would have subjected the entire bill to a presidential veto. The AANS and CNS will continue to seek other legislative vehicles for federal tort reform.
For more information or copies of the details of any of the above provisions, please contact Katie Orrico in our Washington Office at (202) 628-2072 or e-mail [email protected]. The complete text of the bill is available on the Internet at the House Speaker’s Web site: https://speakernews.house.gov.