Administration Releases FY 2014 Budget Proposal

After a nearly three-month delay, President Obama released his Administration’s Fiscal Year 2014 budget proposal, totaling $3.778 trillion in discretionary and mandatory spending – an increase of capitol webabout 6% over FY 2013. Typically, a sitting Administration will release its budget proposals to Congress between the first Monday of January and February of each year. However, the President cited budgetary issues stemming from the “fiscal cliff” negotiations and the recent application of the across-the-board cuts as a result of the sequestration, as the main causes for the delay.

In the days leading up to the release of the budget, the President proclaimed that the proposal would contain elements of a “grand bargain,” in his attempt to show Republican lawmakers that he is serious about reducing the nation’s debt. Unlike previous proposals, this budget makes several attempts control costs through adjustments made to entitlement programs and raises taxes on the wealthiest Americans.

The proposal includes $1.8 trillion of additional deficit reduction over 10 years, bringing total deficit reduction realized to $4.3 trillion. Among these are $400 billion in health savings that targets waste and fraud and trims Medicare spending for providers and beneficiaries.

While the President’s budget framework would keep the Budget Control Act’s annual spending limits, the specific spending cuts mandated under sequestration ($1.2 trillion) would be replaced by other program increases and decreases.

Among others, the budget specifically aims to reduce Medicare spending by:

  • Combining mandatory and discretionary program integrity funding to implement activities that reduce payment error rates, prevent fraud and abuse, target high-risk services and supplies, and enhance civil and criminal enforcement for Medicare, Medicaid and CHIP. This proposal will save approximately $640 million over 10 years.
  • Reducing Medicare Coverage of Bad Debt by aligning Medicare policy more closely with private sector standards. This proposal will save approximately $25 billion over 10 years.
  • Aligning Graduate Medical Education Payments with patient care costs by modifying Indirect Medical Education (IME) add-on payments. This proposal would save approximately $11 billion over 10 years.
  • Aligning Payments to Rural Providers with the Cost of Care by improving the consistency of payments across rural hospital types, providing incentives for efficient delivery of care, and eliminating higher than necessary reimbursement, saving approximately $2 billion over 10 years.
  • Adding new initiatives to reduce improper payments in Medicare; require prior authorization for advanced imaging; the Budget proposes a series of policies that will save nearly $4.1 billion over the next 10 years.
  • Strengthen the Independent Payment Advisory Board (IPAB) to Reduce Long-Term Drivers of Medicare Cost Growth. This proposal would lower the target rate from the GDP per capita growth rate plus one percentage point to plus 0.5 percentage points.

It is unclear if any of the proposals outlined in the President’s budget will be incorporated into a final budget plan that will be passed by Congress. Both Democrats and Republicans were quick to point out major flaws of the President’s plan, as Republicans argued that the President’s proposal didn’t go far enough to reduce the deficit and Democrats citing that the proposal would hurt seniors’ access to care.

NASS’ Government Relations team is closely following the President’s budget proposal and will be working with federal agencies to address concerns over specific proposals that affect NASS members.

A copy of the President’s Budget can be found here.

A short summary of the Department of Health and Human Services proposed budget can be found here.

To view a summary of the specific deficit reduction measures within the FY 2014 budget proposal, click here.

President’s Budget Proposal Addresses Medicare’s Physicians Payment Formula

The President’s FY 2014 budget proposal recommends that the current sustainable growth rate (SGR) physician payment formula should be replaced by an unspecified period of “stable payments” followed by a revised scheme under which physicians would be encouraged to partner with the Center for Medicare and Medicaid Services (CMS) to be reimbursed for activities based on providing high quality care.

The Administration has also expressed interest in working with Congress to enact legislation to reform the process. The budget does not specify the means for paying for the $250 billion 10-year cost of the proposal. However, the budget does assume that Congress will eliminate the scheduled 25% cut in CY 2014 Medicare physician payments. The President has been credited for his latest position on SGR reform as it mirrors measures recently proposed in the House.

House Committees Release Second Iteration of SGR Repeal Plan

Recently, Republicans on the House Ways & Means and Energy & Commerce committees released their second draft proposal on restructuring Medicare payment model for physician reimbursements. The outline provided more details of a three-phased plan to transition away from the SGR. According to the proposal, the Medicare payment formula would be repealed during the first stage, and payment rates would be stabilized until reaching the second stage when new performance measures on which a percentage of physician pay would be based, would take effect. Finally, stage three would allow providers to earn incentive payments based on systemic efficiencies.

While the proposal gives considerable leeway for physicians to develop quality measures and advance payment models that satisfy their respective specialties, many details still need to be ironed out before the proposal becomes a bill.

NASS is currently drafting a response for this proposal and will be submitting comments to committee staff. Sources inform NASS that the committees will incorporate comments and release draft legislation by August 2013. NASS will continue to report on any developments as they become available.

A copy of the House Ways and Means and Energy and Commerce Committee proposal on the SGR can be found here.

New Rule Lowers Minimum Number of Requests from RACs for Certain Providers

A new rule published by the Centers for Medicare & Medicaid Services (CMS) limits the minimum number of medical records that Recovery Audit Contractors (RACs) can request in a 45-day time period. Beginning April 15, RACs may issue a minimum request of 20 records in a 45-day period from hospitals and other providers, with the exception of physicians and suppliers. Further, the rule calls for only 75% (down from 100%) of a hospital’s record request limit to be used for a particular type of claim. Provider groups have applauded the move. However, they are insisting that CMS do more to lessen the burden RACs pose to providers.

In light of this rule, Rep. Sam Graves (R-MO) recently re-introduced H.R. 1250 Medicare Audit Improvement Act of 2013, legislation that would hold RACs more accountable and implement financial penalties for RACs that have a pattern of failure to comply with these and other basic program requirements.

A copy of the CMS rule can be found here.

A copy of the Medicare Audit Improvement Act of 2013 can be found here.

Senate Finance Committee Holds Hearing on CMS Nominee

At a recent hearing on the nomination of Marilyn Tavenner to become the Administrator of CMS, Chairman Max Baucus (D-MT) said he hopes to have the Senate Finance Committee vote on the nomination this week. The vote to nominate Mrs. Tavenner is expected to pass out of the Finance committee easily. A recording of the hearing can be found here.