US POLITICS: MEDICARE UPDATE from NAAOP

US POLITICS: MEDICARE UPDATE from NAAOP

Paul Prusakowski

5/14/1999

O&P Issues Move On Capitol Hill



Final Budget Resolution Approved By Congress, With No O&P Cuts

In mid-April Congress adopted the conference report on a $1.75 trillion
fiscal year 2000 budget resolution largely along party lines. The House
passed the resolution on April 14 by a vote of 220-208, and the Senate
approved the measure April 15 in a 54-44 vote. The resolution is
non-binding and does not have the force of law.

Should Congress decide to act on legislation to restructure Medicare and
extend the life of the program, the budget plan includes a $101 billion,
10-year reserve fund that could be used to pay for a Medicare prescription
drug benefit. However, the budget resolution does not include President
Clinton's proposal to cut the Medicare O&P benefit by limiting reimbursement
to the national median and below.

While short on specifics, the conference report does include a sense of the
Congress resolution stating that Congress should move expeditiously to
consider the bipartisan recommendations of the Medicare commission
co-chairmen, while also working with President Clinton as he unveils his
Medicare reform plan.

The budget blueprint sets broad spending outlines for the 13 appropriations
bills to be approved by Congress later this year. The plan retains the $536
billion statutory cap on FY2000 discretionary spending. Congress is facing
a tough job in its efforts to follow the spending blueprint set forth in the
budget resolution. If followed, the existing budget caps would result in
spending cuts of $45 billion below current levels, a total that is $28
billion less than a budget freeze. Clearly, with a large budget surplus,
the political will to enact such drastic cuts does not exist in Congress.

In the end, however, we believe these caps will be broken and spending for
the largest appropriations bills, such as Labor/HHS/Education and VA/HUD
will increase. House Labor-HHS Appropriations Subcommittee Chair John
Porter (R-IL) recently said that the spending caps will ultimately have to
be raised. Until the discretionary spending caps are lifted, however, it
will be difficult not only to fulfill the Republican pledge to double the
budget for the National Institutes of Health over five years, but to draft
any large appropriations bill that will be enacted into law.



CBO Reports Decline in Medicare Spending

Growth in Medicare spending slowed remarkably in the first half of fiscal
year 1999, Congressional Budget Office (CBO) Director Dan Crippen told the
Senate Finance Committee at a hearing on the implications of Medicare
financing for the federal budget.

Spending during the first half of the current fiscal year is actually $2.6
billion less than during the comparable six-month period in 1998, Crippen
testified. That slowdown is unprecedented and contributes to the favorable
near-term outlook for the federal budget, which will accumulate a large and
growing surplus, he said.

According to CBO, the 10-year budget outlook has improved dramatically with
the passage of the BBA. Between its January and March baselines, CBO
lowered its projection of Medicare spending for fiscal year 1999 by about $6
billion. CBO attributes the slowdown in Medicare spending to three factors:

§ The Balanced Budget Act of 1997 reduced Medicare payment rates and
restrained update factors;
§ Anti-fraud and abuse initiatives have improved providers' compliance with
Medicare's payment rules; and
§ The average time for processing Medicare claims rose dramatically in 1998.

CBO's new spending projections will help to bolster the efforts of NAAOP and
the other O&P organizations to prevent the cut in Medicare reimbursement for
orthotics and prosthetics that was proposed by the Clinton Administration in
the Fiscal Year 2000 federal budget. The Health Care Financing
Administration estimated that this proposal would save Medicare $580 million
over 5 years.

We are continuing to work with members of Congress to educate them that such
a cut would amount to a drastic reduction in reimbursement rates for O&P
providers. The recent CBO projections will help us show that the Medicare
reductions included in BBA '97 were much greater than expected and that any
further cuts would be devastating to O&P providers and patients.




O&P Fee Schedule Updates For FY 2000 Are On Track



Despite the agency's public concerns that Y2K-related problems could delay
annual provider payment rate updates, HCFA said in late April that payment
updates for doctors, hospitals and other providers will be made in October
and mid-January, as long as Year 2000-readiness efforts continue on track.

HCFA Administrator Nancy-Ann DeParle said that despite Y2K readiness being
the top priority, the agency wants to meet statutory deadlines for making
routine payment updates for providers. DeParle said she's pleased that
we're now on track to meet both goals.

Under the Balanced Budget Act of 1997, Medicare reimbursement for orthotics
and prosthetics is scheduled to be increased by 1% on January 1, 2000, while
DME will be frozen through 2002.




HCFA Provides Guidance to DMERCs On Medical Necessity



In early May, HCFA issued a program memorandum to the DMERCs stating that
faxed certificates of medical necessity (CMN) and physician orders are
acceptable forms of documentation to initiate Medicare billing. According
to the memo (Transmittal No. B-99-23), faxed documentation must be
sufficiently detailed and meet other requirements in order to be accepted by
HCFA.

HCFA requested that each DMERC publish a detailed article in upcoming
provider bulletins to get information out to suppliers and ask them to
remind physicians to complete and sign the CMNs or physician orders.

HCFA also said, however, that if a DMERC identifies suppliers with patterns
of improperly following up faxed or verbal orders with signed paper CMNs or
physician orders, the DMERC may choose to develop a civil monetary penalty
case against the supplier.

Among other requirements, a supplier must have a verbal, faxed, or original
order in their records before they provide any item of durable medical
equipment, prosthetics, orthotics and supplies to a beneficiary, HCFA wrote.
In addition, a written order must be sufficiently detailed and include: (1)
the patient's name; (2) description of the item (the description can be
either a narrative or a brand name/model number); (3) physician's signature;
and (4) all options or additional features which will be separately billed
or which will require an upgraded code. The date on the written order or
the CMN should be the date that the physician has signed the written order
and/or CMN.



NAAOP Supports OrthoConcepts Supreme Court Appeal



In March, NAAOP spearheaded an effort to file an Amicus Curiae, or
Friend-of-the-court, brief with the United States Supreme Court supporting
OrthoConcepts, Inc.'s recent request that the high court review the
validity of HCFA Ruling 96-1. If the court were to have granted the request
supported by NAAOP - known as a writ of certiorari - it would have reviewed
the appellate court's controversial decision to uphold HCFA Ruling 96-1, and
hopefully would have reversed the negative decision.

Other groups joining NAAOP in filing the amicus curae brief included the
American Orthotic and Prosthetic Association, the American Medicare
Rehabilitation Providers Association, the American Academy of Physical
Medicine and Rehabilitation and sixteen other organizations. Unfortunately,
the high court recently rejected the request to hear the case, striking a
blow against the ability of the Administrative Procedures Act to fight
actions by HCFA that arguably exceed its authority.

From an O&P perspective, the court's decision not to accept the case for a
hearing means that the devices provided by OrthoConcepts will no longer be
reimbursable in nursing homes under the Medicare O&P benefit. These devices
will be considered DME and, therefore, covered under a nursing home's per
diem payment rate, not as a separately billable item under Medicare Part B.
The Court's decision is also a blow against nursing home patients with
severe disabilities whose orthotic options are severely restricted by HCFA
Ruling 96-1.

NAAOP will continue to press this case politically, both with Congress and
with HCFA officials directly.



Medicare Commission Disbands, As Program's Fiscal Health Improves



A proposal to fundamentally restructure Medicare was defeated 10-7 at the
final meeting of the National Bipartisan Commission on the Future of
Medicare on March 15. After more than one year of work, Commission Chair
Sen. John Breaux (D-LA) failed to obtain the 11-vote supermajority necessary
to formally deliver recommendations to Congress.

Proponents of the Breaux proposal argue the premium support model would
save Medicare money while improving its health care delivery system. The
proposal's opponents, however, argue that the plan's predicted savings are
illusionary and that the proposal would eventually dismantle the Medicare
program.

President Clinton's appointees did not support the Breaux plan. Clinton did
praise the Commission for its valuable work but said the approach it
considered fell short, and said he would issue his own reform plan, possibly
as early as May.

Breaux and Commission Co-Chair Rep. Bill Thomas (R-CA) introduced
legislation based on the plan. Senate Finance Committee Chair Bill Roth
(R-DE) said his Committee would markup the Breaux proposal, and House Ways
and Means Committee Chair Bill Archer (R-TX) issued a statement saying his
panel would review the Commission's recommendations.

The cost-savings from the premium support model would extend the life of
Medicare, the Commission found. However, the need to improve the life of
the Medicare Trust Fund has been somewhat reduced by savings realized by the
program after implementation of much of the Balanced Budget Act of 1997
(BBA).

The Medicare Trustees said in early March that the government account that
pays for Medicare hospital costs and other Part A services will not go
bankrupt until 2015. The new anticipated bankruptcy date for the Hospital
Insurance Trust Fund is seven years later than the Trustees predicted last
year.

The Trustees said the nation's strong economy as well as reductions in the
rate of Medicare growth made by the BBA contributed to the improved outlook
for the HI Trust Fund. The report also said that Medicare's projected
75-year actuarial deficit was reduced by one-third over the last year.



Patient Protection Legislation Moves In Senate, House In Early Deliberations



With the failure of the National Bipartisan Commission on the Future of
Medicare to make formal Medicare reform recommendations, managed care reform
has again taken center stage in the health care activities of Congress as
both political parties push for public support of their version of reform.

With interest group activity swirling, Congress has pushed forward on the
patient protection issue. The Senate Health, Education, Labor & Pensions
(HELP) Committee held a hearing on patient protections, followed by a
mark-up of S. 326, the Patients' Bill of Rights Act.

The bill was introduced by Committee Chair James Jeffords (R-VT) and
approved by the Committee in March. The Senate Finance Committee has vowed
to move bipartisan legislation at some point in the first half of 1999. The
bill from the Finance Committee is expected to be little more than
rifle-shot legislation allowing external, independent review of denials of
benefits, as well as tax provisions such as Medical Savings Accounts.

NAAOP Legislative Counsel Peter Thomas testified at the Senate HELP
Committee hearing about the critical need for federal legislation in this
area, specifically focusing on the needs of patients with disabilities and
chronic conditions, and patients in need of specialized rehabilitation care,
such as orthotics and prosthetics.

At a March 18 mark-up following the hearings, Democrats roundly criticized
the Jeffords bill for a variety of reasons including the fact that it only
applies to ERISA plans and does not provide that limited population the
strong protections they need. In part to diffuse some of the Democratic
criticism, the Committee approved two amendments proposed by Sen. Bill Frist
(R-TN), that would improve access to specialty care for enrollees and
require that appeals processes are timely and include input from an
independent medical expert - two key issues for NAAOP.

The bill still falls short of other proposals. Despite the relative
improvements made by the Frist amendments, the bill was only approved along
party lines by a slim 10-8 margin. The inclusion of the Frist language on
specialty care, however, brings this issue to the Senate floor when the bill
comes up for debate and offers NAAOP and other organizations an opportunity
to strengthen the current language.

In the House, the Commerce Subcommittee on Health and Environment has held
one hearing on managed care reform and the House Education and Workforce
Subcommittee on Employer-Employees relations has held four managed care
reform hearings.

NAAOP Legislative Counsel Peter Thomas, former chair of the President's
Advisory Commission Subcommittee on Patient Rights, testified at the House
Commerce Committee hearing. He urged the committee to include in their
managed care reform bill provisions that guarantee access to critical
specialty care such as that provided by rehabilitation hospitals and units,
physicians and other rehabilitation providers, such as orthotists and
prosthetists.

The protections outlined in the Patients' Bill of Rights - such as access to
emergency care, specialty care, and choice of providers - move toward the
goal of health plans competing on quality, not just cost, Thomas noted.
High quality should be the hallmark of the American health care
marketplace, not attempts to avoid costly and risky patients, he added.

NAAOP expects the subcommittee to hold at least three more hearings over the
next few months. Both the subcommittee and the full Commerce Committee are
likely to mark-up patient protection legislation by the middle part of this
year. The House Ways & Means Committee is also considering action on this
issue, with particular concern to be placed on the cost and access to care
issues. The House Education and Workforce Committee is also likely to
consider legislation covering the managed care reform issues that fall under
its jurisdiction, particularly ERISA.