President Releases Proposed Budget for Fiscal Year 2021

February 13, 2020
Policy Snapshot

Last week the president released his 2021 fiscal year budget. The proposal would cut almost a trillion dollars from Medicaid over 10 years, give the Centers for Medicare & Medicaid Services (CMS) more power to collect improper payments, impose a mandatory work requirement in Medicaid, and reform graduate medical education payments. The proposal also addresses payments for post-acute care providers by establishing a unified payment system based on patients’ clinical needs rather than site of service.

Below are summaries of sections of interest:

Post-Acute Care Payments

Under this proposal, skilled nursing facilities, home health agencies, and inpatient rehabilitation facilities will receive a lower annual Medicare payment update from FY 2021 to FY 2025. Beginning in FY 2026, a unified post-acute care payment system would span all four post-acute care settings, including long-term care hospitals, with payments based on episodes of care and patient characteristics rather than the site of service, and would include a unified quality reporting program across all four settings. Payment rates would be budget neutral in FY 2026, risk adjusted, and set prospectively on an annual basis, with episode grouping and pricing based on the average cost for providing post-acute care services for a diagnosis, similar to the Diagnosis-Related Group methodology under the Inpatient Prospective Payment System (IPPS).

Modified Hospice Payment for Beneficiaries in SNFs

This proposal reduces Medicare payment for hospice services under the routine home care level of care when furnished in skilled nursing facilities, to account for separate Medicare and Medicaid payments already provided for personal care services in the facility. Reducing the payment rate will align hospice payment between nursing facilities and other settings and reduce the incentive for hospices to seek out beneficiaries in nursing facilities.

Graduate Medical Education

Effective in FY 2021, the budget proposal consolidates federal graduate medical education spending from Medicare, Medicaid, and the Children’s Hospital Graduate Medical Education Program into a single grant program for teaching hospitals. Total funds available for distribution in FY 2021 will equal the sum of Medicare and Medicaid’s 2017 payments for graduate medical education, plus 2017 spending on Children’s Hospital Graduate Medical Education, adjusted for inflation. This amount will then grow at the CPI-U minus one percentage point each year.

Expand Basis for Beneficiary Assignment for Accountable Care Organizations (ACOs)

In addition to physicians, nurse practitioners, physician assistants, and clinical nurse specialists furnish primary care to Medicare beneficiaries, but ACOs cannot use non-physician primary care providers for patient assignment. Effective CY 2020, this proposal allows the secretary to base beneficiary assignment on a broader set of primary care providers. This option broadens the scope of ACOs to better reflect the types of professionals that deliver primary care services to fee-for-service beneficiaries [$80 million in savings over 10 years].

Extend and Enhance Medicare Independence at Home Demonstration

The Independence at Home Demonstration is a statutory patient-centered model that supports providers in caring for chronically ill patients in their own home. CMS implemented this successful model starting in 2012. This proposal extends the demonstration for an additional five years, lifts current restrictions on the number of beneficiaries that can enroll in the model, and provides HHS the flexibility to modify the demonstration design to ensure Medicare savings. Extending this demonstration will give certainty to existing participants, and the modifications will provide CMS the tools necessary to fully test the effectiveness of this demonstration in reducing costs and increasing quality of care. [Budget impact not available.]

Improve the Medicare Shared Savings Program Beneficiary Incentive Enhancements

ACOs in a risk-bearing arrangement in the Medicare Shared Savings Program can offer their assigned beneficiaries an incentive of up to $20 for receiving one or more qualifying primary care services. The low-cost incentive payment promotes primary care utilization to improve health outcomes and prevent costly acute care over time. ACOs are not using this incentive payment option because, under current law, they cannot target the payment toward specific primary care services or beneficiaries that would most benefit from the investment. This proposal allows ACOs to apply the incentive payment on a subset of primary care services or beneficiaries to incentivize specific care utilization, such as flu shots or chronic care treatment for beneficiaries with diabetes. Providing ACOs the flexibility to target the incentive payment will increase its use and promote preventive services that improve care coordination and quality and reduce Medicare costs. [Budget impact not available.]

Enhance Quality Improvement Oversight of Post-Acute Care Facilities and Hospice Providers

When a hospice or inpatient rehabilitation facility has a serious deficiency, CMS’ only recourse is the drastic step of terminating them from Medicare. This proposal allows the secretary to implement intermediate remedies on hospices and other post-acute care facilities, such as levying civil monetary penalties. This proposal also redirects from the General Fund to the Medicare Trust Fund penalties currently levied against skilled nursing facilities and home health agencies, as well as penalties proposed for other post-acute care providers under this proposal. These changes will give CMS more tools to address poor performance and quality of care concerns. [Budget impact not available.]

Reform Physician Self-Referral Law to Better Support and Align with Alternative Payment Models and to Address Overutilization

The department and the regulated industry find that the physician self-referral law (commonly referred to as the “Stark Law”) can be an impediment to care coordination, participation in alternative payment models, and the establishment of novel financial arrangements that further the goals of a value-based system. Effective CY 2022, this proposal establishes a new process for physicians to self-report inadvertent, technical non-compliance violations of the law and excludes physician-owned distributors from the indirect compensation exception if physician owners generate more than 40% of the physician-owned distributor’s business. [Budget impact not available.]

Eliminate the Unnecessary Requirement of a Face-to-Face Provider Visit for Durable Medical Equipment

Physicians must document a beneficiary’s face-to-face encounter with a physician or a non-physician practitioner as a condition for Medicare payment for a DME order. This proposal allows CMS flexibility in the enforcement of the face-to-face requirement, eliminating this overly burdensome requirement for most Medicare providers and beneficiaries. [Budget neutral.]

Simplify and Eliminate Reporting Burdens for Clinicians Participating in the Merit-based Incentive Payment System

The Merit-based Incentive Payment System (MIPS) is burdensome and overly complex, consisting of physician and other clinical level measures that are often not meaningful to clinicians who report them and do not help improve patient care. Effective CY 2023, this proposal alters the MIPS program by adopting a uniform set of broader claims and beneficiary survey measures to assess performance at the group practice level instead of the individual clinician level during the performance period to reduce burden and provide meaningful and comparable results to clinicians and patients. This proposal uses the budget-neutral payment adjustments under the current statute to fund the incentive pool during the corresponding payment year and retains $500 million in annual additional performance bonus payments for top performers. [Budget neutral.]

Modernize the Medicare Telehealth Benefit to Promote Value-Based Payment

This multifaceted proposal expands Medicare Fee-for-Service’s telehealth benefit by removing existing barriers to telehealth services for providers participating in Medicare fee-for-service advanced Alternative Payments Models, which require more than nominal financial risk. This proposal would also require the secretary to value telehealth services separately from similar services provided face-to-face for purposes of setting reimbursement rates in Medicare. This proposal broadens beneficiary access to Medicare telehealth services and addresses longstanding stakeholder concerns that the current statutory restrictions hinder beneficiary access, while ensuring Medicare is paying for value over volume. [Budget neutral.]

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