This post is #5 in an ongoing series of posts as I read through the entire proposed health care legislation, HR 3200. You can visit my new blog site to see all of them in one place:
Big thanks to my friend Tom Burris, Dallas area mortgage broker, for the domain name suggestion. I am about 25% of the way through the bill at this point, for what it’s worth. As I expected, I have seen some great stuff therein, and some not-so-great items, too. I think the language needs to be tightened up considerably to avoid abuse, both from non-citizens and from the Commissioner.
Without further ado, please see my notes on pages 204-255 below.
PART 2–PREVENTION OF TAX AVOIDANCE
MY NOTE: There are three sections here that are added to keep (primarily wealthy) people from using tax shelters. Each section modifies and/or adds to the Internal Revenue Code.
SEC. 452. CODIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.
(1) APPLICATION OF DOCTRINE- In the case of any transaction to which the economic substance doctrine is relevant, such transaction shall be treated as having economic substance only if–
`(A) the transaction changes in a meaningful way (apart from Federal income tax effects) the taxpayer’s economic position, and
`(B) the taxpayer has a substantial purpose (apart from Federal income tax effects) for entering into such transaction.
MY NOTES: The fact that this is included is interesting to me. I researched the “economic substance doctrine”, and it has been hotly debated in Congress for years, since it basically removes many tax shelters that are currently available by making a valid tax shelter one that substantially affects the taxpayer AND requires a “substantial purpose” for entering into a transaction (rather than simply trying to avoid paying tax).
The fact that this is stuck into the health care reform bill is not all that unusual, I guess. It seems that most big pieces of legislation are not “stand alone” bills anymore, because everyone wants to achieve something more than the title of the bill would indicate.
As I see it, this section is included to ensure that they will collect adequate taxes from the wealthiest Americans to pay for this undertaking. The entirety of the following section is to provide penalties for underpayments and erroneous claims arising from “noneconomic substance transactions”. Fun, huh?
DIVISION B–MEDICARE AND MEDICAID IMPROVEMENTS
SEC. 1001. TABLE OF CONTENTS OF DIVISION.
MY NOTE: What follows this is a seven-page list detailing the table of contents for the intended improvements for Medicare and Medicaid.
PART 1–MARKET BASKET UPDATES
MY NOTE: I had to spend some time reading to understand what a “market basket” is. I have a minor in Economics so this material isn’t too tough for me, thankfully. Essentially, a market basket is created by taking the total of all expenses for a specified period of time, then determining how much each category cost as a percentage. Then, a “price proxy” is set by calculating an appropriate price variable. You multiply each category percentage by the price proxy to get the entire market basket. See how easy that is? J Just think of this term as the total of all expenses expressed in hard-to-understand language, and you’re there.
SEC. 1101. SKILLED NURSING FACILITY PAYMENT UPDATE.
MY NOTE: I had to read Section 1888 of the Social Security Act to see what this section was proposing. Basically, this would freeze 2010 expenditures at the same level as 2009. After that, it will continue to increase by whatever amount the market basket change does.
According to an article I read from McKnight’s, this relatively small change could save $26 billion over the next ten years, according to the Congressional Budget Office (CBO). Here’s the link if you’re interested: http://www.mcknights.com/CBO-market-basket-freeze-for-skilled-nursing-could-add-up-to-billions-in-savings/article/139823/.
It seems like this is forcing nursing homes to cut costs at least in the short-term. This could be a good thing, depending on what the actual daily outlay is from Medicare for this.
SEC. 1102. INPATIENT REHABILITATION FACILITY PAYMENT UPDATE.
MY NOTE: As with the immediate preceding section, this would freeze any increase in federal payments to an inpatient rehab facility at 0 percent through 2010. As it stands, this was already the case for 2008 and 2009, so the bill seeks to extend this for another year. According to the CBO, this would save another $5 billion in costs.
SEC. 1103. INCORPORATING PRODUCTIVITY IMPROVEMENTS INTO MARKET BASKET UPDATES THAT DO NOT ALREADY INCORPORATE SUCH IMPROVEMENTS.
`(II) The productivity adjustment described in this subclause, with respect to an increase or change for a fiscal year or year or cost reporting period, or other annual period, is a productivity offset equal to the percentage change in the 10-year moving average of annual economy-wide private nonfarm business multi-factor productivity (as recently published before the promulgation of such increase for the year or period involved). Except as otherwise provided, any reference to the increase described in this clause shall be a reference to the percentage increase described in subclause (I) minus the percentage change under this subclause.’;
MY NOTE: Yikes! That is some thick language to wade through. Rather than trying to explain every detail here, this section sets up an offset to any automatic increases in funding for places like psychiatric hospitals, acute-care facilities, hospice care, and long-term care facilities.
But how? This formula is based on increases in the 10-year moving average (think of a chart) using a variety of non-farm-based businesses and their productivity. Then, they subtract that from what would have been the normal market basket increase.
What’s the net result here? More than likely, this would provide billions of dollars in federal savings. That being said, it could also be argued that this would result in lower-quality care under Medicare since facilities aren’t getting as much money.
PART 2–OTHER MEDICARE PART A PROVISIONS
SEC. 1111. PAYMENTS TO SKILLED NURSING FACILITIES.
(a) (1) ANALYSIS- The Secretary of Health and Human Services shall conduct, using calendar year 2006 claims data, an initial analysis comparing total payments under title XVIII of the Social Security Act for skilled nursing facility services under the RUG-53 and under the RUG-44 classification systems.
MY NOTE: I can’t imagine why you wouldn’t already be familiar with the RUG-53 and RUG-44 classification systems. Oh, wait…perhaps you are a nursing home administrator. In that case, let me explain briefly. A “RUG” is a Resource Utilization Group. When Medicare Part A and B were enacted, they added nine new groups to the existing hierarchy of 44 groups, to get to 53. This was because there was not a good way to designate payments for people who needed both extensive nursing AND rehab services.
I have no idea why this is based on 2006 data, unless it is just the most recent data available. If that’s true, I am more than a little concerned about the efficiency of record-keeping.
(2) ADJUSTMENT IN RECALIBRATION FACTOR– Based on the initial analysis under paragraph (1), the Secretary shall adjust the case mix indexes under section 1888(e)(4)(G)(i) of the Social Security Act (42 U.S.C. 1395yy(e)(4)(G)(i)) for fiscal year 2010 by the appropriate recalibration factor as proposed in the proposed rule for Medicare skilled nursing facilities issued by such Secretary on May 12, 2009 (74 Federal Register 22214 et seq.).
MY NOTE: The “case mix index” mentioned here (CMI) is the number that represents the relative level of care for a RUG. The higher the CMI, the greater the intensity of care and the higher the payment will be.
Later in this section, the Secretary of Health and Human Services is called upon to perform an analysis for ancillary therapy services and to determine how much to pay for them. Thankfully, it also calls for “budget neutrality”, meaning that they cannot spend more than the Social Security Act would have called for.
It also limits “outlier” costs to 2 percent of the budget for this program. An outlier is a statistical term for those items that are outside of the rest of the data. In real estate, we sometimes see houses that are outliers (why did that place sell for so much/little?). As a small aside, Malcolm Gladwell’s book “Outliers” provides an interesting look at people who are outliers in their respective fields.
SEC. 1112. MEDICARE DSH REPORT AND PAYMENT ADJUSTMENTS IN RESPONSE TO COVERAGE EXPANSION.
(a) DSH Report-
(1) IN GENERAL- Not later than January 1, 2016, the Secretary of Health and Human Services shall submit to Congress a report on Medicare DSH taking into account the impact of the health care reforms carried out under division A in reducing the number of uninsured individuals. The report shall include recommendations relating to the following:
(A) The appropriate amount, targeting, and distribution of Medicare DSH to compensate for higher Medicare costs associated with serving low-income beneficiaries (taking into account variations in the empirical justification for Medicare DSH attributable to hospital characteristics, including bed size), consistent with the original intent of Medicare DSH.
(B) The appropriate amount, targeting, and distribution of Medicare DSH to hospitals given their continued uncompensated care costs, to the extent such costs remain.
MY NOTE: DSH stands for “disproportionate share”, and this was originally intended to provide extra funds for hospitals that care for a larger percentage of low-income patients, since they require more staff, supplies, etc. This section of the bill requires the Secretary to evaluate whether these subsidies will still be paid if the rate of uninsurance drops by a significant amount (anything over 8% decrease in the rate of uninsurance).
PART 1–PHYSICIANS’ SERVICES
SEC. 1121. SUSTAINABLE GROWTH RATE REFORM.
MY NOTE: This is one of the longest sections that I have encountered so far. In essence, this references. Here are a couple of glossary terms I learned today:
- Sustainable growth rate (SGR) – Cost containment mechanism intended to restrain the rate of growth in Medicare spending for physician services.
- MEI (Medicare Economic Index) – a measure of inflation faced by physicians with respect to their practice costs and general wage levels.
This section seeks to set different rates of payment and different SGRs for different service categories. Basically, this is another savings plan intended to help fund the public option.
SEC. 1122. MISVALUED CODES UNDER THE PHYSICIAN FEE SCHEDULE.
(ii) IDENTIFICATION OF POTENTIALLY MISVALUED CODES- “…the Secretary shall examine codes for which there has been the fastest growth; codes that have experienced substantial changes in practice expenses; codes for new technologies or services within an appropriate period after the relative values are initially established for such codes; multiple codes that are frequently billed in conjunction with furnishing a single service; codes with low relative values, particularly those that are often billed multiple times for a single treatment; codes which have not been subject to review since the implementation of the RBRVS (the so-called `Harvard-valued codes’); and such other codes determined to be appropriate by the Secretary.
MY NOTE: This section allows the Secretary to evaluate medical codes established in 1988 by a Harvard study, in order to see if the system is performing as originally intended. My guess is that it’s not, but it’s just a guess.
(1) FUNDING- For purposes of carrying out the provisions of subparagraphs (K) and (L) of 1848(c)(2) of the Social Security Act, as added by subsection (a), in addition to funds otherwise available, out of any funds in the Treasury not otherwise appropriated, there are appropriated to the Secretary of Health and Human Services for the Center for Medicare & Medicaid Services Program Management Account $20,000,000 for fiscal year 2010 and each subsequent fiscal year. Amounts appropriated under this paragraph for a fiscal year shall be available until expended.
MY NOTE: WHAT?!? Back up a minute here. This is a shocking paragraph, and it will only feed skepticism about government waste. I can understand allocating a good sum of money for this….the first time around. Why is it necessary for this to be a line item in the budget EVERY YEAR? I cannot conceive that medical codes need to be evaluated every single year, or that such re-evaluation would require $20 million each time if it’s that frequent. Where would this money actually go?
(2) ADMINISTRATION- (A) Chapter 35 of title 44, United States Code and the provisions of the Federal Advisory Committee Act (5 U.S.C. App.) shall not apply to this section or the amendment made by this section.
MY NOTE: Why is this the case? Please take a minute to read this, then think about why this committee would not be required to be governed by the FACA: http://en.wikipedia.org/wiki/Federal_Advisory_Committee_Act
I certainly don’t have the answer to this question – I just think it provides a very interesting point of discussion. It seems that this would allow the committee to operate behind closed doors and for an indeterminate amount of time, neither of which seems very appealing. What do you think?
As you can see, the first portion that I covered here is mainly a series of ways to save federal money in order to pay for the public health option. After that, Section 1122 starts out in a pretty innocuous manner, until you realize that the bill calls for $20 million every year to evaluate medical codes for Medicare. I would love to hear anyone explain why this much money is needed, especially when none is being spent on this right now, to the best of my knowledge.
I welcome your input. Thanks so much for reading this. It has taken me two weeks to get this far. I don’t intend to give up now!