Budget Deal Would Ease, Not Eliminate, Medicare Premium Increases

A budget agreement between congressional leaders and the Obama administration would lessen, but not eliminate, a premium increase for about 15 million Medicare beneficiaries, the New York Times reports.

If the agreement is approved by Congress, monthly Medicare Part B premiums would increase to about $120, rather than to $159, for roughly 30% of beneficiaries. Meanwhile, annual deductibles for all Medicare beneficiaries would increase to about $167, rather than to $223 (Pear, New York Times, 10/27).

According to CQ News, funding to offset the remaining portions of the projected increases would come from a loan to the supplemental medical insurance trust fund. The loan would be repaid through a $3 monthly surcharge on premiums for the 30% of beneficiaries who will experience the increase. Beneficiaries with higher incomes, who also pay higher Medicare premiums, would see larger surcharges (Attias, CQ News, 10/27).

Further, the agreement would extend a two-percentage-point reduction in Medicare payments to physicians and hospitals through the end of a 10-year budget, which will fund an estimated $25.8 billion of the budget deal (California Healthline, 10/27).

Additional Budget Deal Details

The budget agreement also would:

• Prevent a cut to Social Security disability benefits. About nine million workers and 1.7 million children receive Social Security disability benefits. Social Security trustees in July predicted that the disability trust fund would run out in the final quarter of 2016. Disability benefits under the program would be cut by 19% when the trust was depleted. To avoid the cut, the agreement would temporarily reallocate revenue from the Social Security payroll tax from the trust fund for retired workers to the disability benefits trust fund (New York Times, 10/27);
• Eliminate an Affordable Care Act mandate that requires large companies to automatically enroll employees in health plans unless the workers opt out of the coverage (American Health Line, 10/27);
• Require generic drugmakers to give greater discounts to Medicaid if prices of the drugs rise more quickly than inflation (New York Times, 10/27). The provision is expected to save $1 billion over a decade; and
• Bar physician practices that are not part of a hospital's main campus from billing through the hospital's outpatient system, which receives higher Medicare reimbursements than independent practices. According to The Hill, the provision aims to curb hospitals from obtaining higher Medicare reimbursements by acquiring physician practices and classifying them as "outpatient hospital departments" (Sullivan [1], The Hill, 10/27). The rule would apply to practices located farther than 250 yards from a hospital's main campus. The rule would take effect in 2017 (Young, CQ News, 10/27). According to the Congressional Budget Office, the provision would save an estimated $9.3 billion over the next decade.

Hospital Groups Oppose Payment Changes

The American Hospital Association has said it opposes the deal because of the changes to physician practices' reimbursements, The Hill reports.

AHA Executive Vice President Thomas Nickels in a statement said, "This untested idea may endanger patient access to care, especially among patients who are sicker, the poor, minorities and seniors who often receive care in hospital outpatient departments."

Separately, Federation of American Hospitals President and CEO Chip Kahn in a statement said that the group "has always opposed arbitrary payment reductions" but noted that he was not surprised by the proposed change (Sullivan [1], The Hill, 10/27).

Hospital Groups Seek Fix To 'Sweetheart Deal'

In related news, hospital groups in several states are urging Congress to include in the budget agreement a measure that would revise a Medicare hospital payment rule that they say benefits some hospitals but penalizes others, The Hill reports.

Under an ACA provision, urban hospitals must receive wage reimbursements that are at least equal to those received by rural hospitals. According to The Hill, the measure, referred to as the "Bay State Boondoggle," provides more funding to Massachusetts than any other state, while it costs other states because it drives up required reimbursements.

Jonathan Archey, director of public affairs at the Ohio Hospital Association, in an email to Ohio hospitals wrote, "A coalition of states (including Ohio) that have been negatively affected by the sweetheart deal is working once again this week to get a legislative fix included in the pending budget deal." According to Archey, the organization "is in the process of lobbying [House] Speaker [John] Boehner [(R-Ohio)] and the other members of Ohio's congressional delegation for inclusion of the fix" (Sullivan [2], The Hill, 10/27).