Congress Passes Historic
Medicare Prescription Drug Legislation
November 25, 2003 - The House of Representatives Nov.
22 and Senate Nov. 25 approved the $400 billion House-Senate
Medicare conference agreement, "The Medicare Prescription
Drug, Improvement and Modernization Act of 2003" (H.R.
1). In addition to providing a discount prescription drug
card and voluntary prescription drug benefit; expanding private
plan choices for Medicare beneficiaries; improving Medicare
fee for service benefits; combating waste, fraud and abuse;
and reforming regulatory procedures, the bill includes a number
of provisions that would benefit teaching hospitals and academic
physicians. Because the agreement includes a number of the
AAMC's teaching hospital and physician payment priorities,
the AAMC announced
(PDF, 2 pages - 44 KB) its support for the agreement
Nov. 19.
The House passed the bill in the early morning hours of Nov.
22 by a vote of 220-215 after a nearly three-hour roll call
vote that ended only after several members switched their
votes from "nay" to "yea." Twenty-five
mostly conservative, Republicans voted against the measure
and 16 Democrats for it.
The Senate passed the agreement Nov. 25 (54 - 44) after voting
to invoke cloture on debate and waiving a budget point of
order. Two-thirds of the Senate was required for the two procedural
votes. On final passage, 8 Republicans voted against the legislation
and 11 Democrats and 1 Independent voted for the bill.
The House-Senate conference bill includes the following provider
provisions of interest to teaching hospitals and physicians:
Hospital Provisions:
- Increases Medicare Indirect Medical Education (IME) payments
from current law of 5.5 percent to 6.0 percent in April
1 through Sept. 30, 2004, 5.8 percent in FY 2005, 5.55 percent
in FY 2006, and 5.35 percent in FY 2007 before returning
to 5.5 percent in FY 2008 and beyond;
- Maintains the hospital inpatient update at a full market
basket (MB) in FY 2004. In FYs 2005-07, hospitals participating
in CMS's quality initiative would receive full MB updates.
For those hospitals not participating in the initiative,
the MB would be reduced by 0.4 percentage points;
- Sets FY 2004 state Medicaid DSH allotments at 116 percent
of FY 2003 levels. Allotments are then frozen at FY 2004
levels until the year in which they fall below BBA-scheduled
levels. State allotments will then increase by inflation.
Also temporarily increases Medicaid DSH allotments for "Low
DSH" states by 16 percent over five years (FY 2004
through FY 2008);
- Permanently increases the standardized amount (or base
payment rate) for rural hospitals and hospitals in cities
under 1 million by 1.6 percent in FY 2004 and beyond;
- Reduces in FY 2005 the percent of the labor share (from
71 to 62 percent) to which the hospital wage index is applied
for hospitals wage indices lower than 1; this will mean
increases in payments for these hospitals. Hospitals with
wage indices above 1 will not be affected;
- Increases Medicare DSH payments as of April 2004 for
small rural and urban hospitals in all areas by more than
doubling the amount of allowed payments (5.7 percent to
12 percent of total Medicare inpatient payments);
- Increases payments for new technologies associated with
inpatient hospital services; and
- Requires an 18-month moratorium on physician investment
in niche hospitals and a Medicare Payment Advisory Commission
(MedPAC) study of the costs and payments associated with
providing care at niche hospitals.
Physician Provisions:
- Sets the conversion factor update to physician payments
at no less than 1.5 percent in both CY 2004 and CY 2005
using a 10-year rolling average when calculating the Gross
Domestic Product;
- Temporarily (CY 2004 through CY 2006) increases to 1.0
the Geographic Practice Cost Index (GPCI) applied to relative
value units (RVUs). This increases overall payments to physicians
in areas with GPCIs currently below 1.0;
- Provides primary care and specialty physicians who work
in "scarcity areas" and health professional shortage
areas (HPSAs) with bonus payments of up to 15 percent;
- Mandates the development, pilot testing, and promulgation
of electronic prescribing standards by April 2008. The standards
may not impose an "undue administrative burden"
on physicians. Also authorizes in $50 million in matching
grants in FY 2007 to help physicians implement electronic
prescribing programs. Additional grants will be available
in FYs 2008 and 2009; and
- Implements regulatory reforms to reduce the burden on
providers regarding Medicare payment audits and appeals.
Examples include provider education enhancements; limits
on audit "triggers" and the use of extrapolation;
support for swift resolutions; opportunities for providers
to make minor payment corrections without risk; and in certain
cases, repayment of overpayments over time. Also mandates
pilot testing of any new E&M guidelines before implementation,
with one testing site located within a teaching setting.
Additional Graduate Medical Education Provisions:
- Maintains Medicare Direct Graduate Medical Education (DGME)
and IME payments associated Medicare Advantage plans. (The
bill renames the current Medicare+Choice program to Medicare
Advantage.)
- Redistributes the portion of hospitals' resident limits
that are being "unused" to teaching hospitals
seeking to increase their resident limits. Specifically,
with limited exceptions if a hospital's resident count is
below its corresponding resident limit ending on or before
September 30, 2002, for which a cost report has been settled
or submitted, effective July 1, 2005, its resident limit
would be permanently reduced by 75 percent of the difference
between its resident limit and its resident count. Increases
in resident slots would be granted under the following priority
order: 1) hospitals located in rural areas; 2) hospitals
located in small urban areas; 3) hospitals where the residency
training program is the only resident program in the state.
A hospital's resident limit could not be increased by more
than 25 positions. DGME payments for the additional residents
would be paid based on a national average per resident amount
rather than the hospital's current per resident amount.
IME payments for the additional residents would be paid
based on an add-on percentage of 2.7 percent.
- Freezes FY 2004-2012 updates to Medicare DGME payments
for those teaching hospitals with per resident limits above
140 percent of the national average. (Under current law,
in FYs 2003-2005, those hospitals with per resident amounts
above 140 percent of the national average would see their
payments increased by the Consumer Price Index minus 2 percent.)
Clarifies that geriatric residents will be counted as one
full time equivalent for two years for purposes of calculating
DGME payments;
- Clarifies in conference report language that for purposes
of calculating DGME payments the initial residency period
for any residency for which the Accreditation Council of
Graduate Medical Education requires a preliminary year of
general clinical year of training is to be determined in
the resident's second year of training.
- Allows for 1 year hospitals to count residents in osteopathic
and allopathic family medicine programs in existence as
of Jan. 1, 2002, who are training in non-hospital sites
without regard to the financial arrangement between the
hospital and the teaching physician in the non-hospital
setting; and
- Requires the Inspector General of the Health and Human
Services to study the training of allopathic and osteopathic
residents in non-hospital settings and the use of volunteer
faculty in those settings.
AAMC President Jordan J. Cohen, M.D., sent a letter Nov.
19 to Senate Majority Leader Bill Frist (R-Tenn.) and House
Speaker Dennis Hastert (R-Ill.) expressing support for the
Medicare conference agreement. The letter states appreciation
for the agreement's amelioration of current reductions to
the Medicare Indirect Medical Education (IME) adjustment and
states' Medicaid Disproportionate Share Hospitals (DSH) allotments
and for the agreement's inclusion of temporary relief from
cuts to Medicare physician payments.
Information:
Lynne Davis Boyle, Assistant Vice President
AAMC Office of Governmental Relations
ldavisboyle@aamc.org
(202) 828-0526
Christiane Mitchell, Senior Legislative Affairs Manager
AAMC Government Relations
cmitchell@aamc.org
(202) 828-0526
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