Medicare 101

1
Medicare 101

• Rebecca Kelly
• ACC Legislative Conference
• September 15, 2008

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Session Topics

• Outlook for Medicare physician payment for
  cardiology in 2009
• Major Medicare regulatory issues for 2009
• Provisions of MIPPA affecting payment
• PQRI for 2009
• Key CMS regulatory proposals
• Whats next

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Medicare the big picture

• 428 billion spent in 2007
• 43 million beneficiaries
• 22 of total personal health expenditures

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Where does the Medicare dollar go?
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Medicare Spending as Percent of GDP
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Medicare Part A

• Inpatient hospital care, nursing home care,
  inpatient rehabilitation, home care, hospice
• Paid for by a dedicated payroll tax
• No premium for most beneficiaries

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Medicare Part B

• Physician services, outpatient hospital, DME,
  some drugs, physical therapy
• Paid for by general revenue and beneficiary
  premiums
• Premiums are set to cover 25 of projected cost

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Part C

• Medicare managed care plans (Medicare Advantage)
• Paid for by Part A and B funding streams

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Medicare Part D

• Prescription drug coverage
• Paid for by general revenue and beneficiary
  premiums

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Medicare administration

• Private companies local Medicare carriers and
  fiscal intermediaries actually run Medicare on a
  day-to-day basis
• Medicare is moving from a system of state-based
  carriers and FIs to a system of regional MACs
  that will administer both Part A and Part B

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Medicare and physicians

• More than 569,000 physicians
• 68 billion in expenses under MPFS
• Cardiology accounts for almost 10 percent

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Medicare physician payment basics

• Payments are based on RVUs for each code
• The pool of RVUs is fixed any changes must be
  budget neutral
• The Medicare conversion factor determines the
  overall level of Medicare payments
• A formula spelled out in the Medicare statute
  determines the annual update to the conversion
  factor

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Environment for Medicare physician payment

• Payments have declined in real terms
• Total expenditures on physician services continue
  to rise
• Services per beneficiary grew 35 between 2000
  2006

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Outlook for 2009

• MIPPA prevented the 15 cut
• 1.1 positive update for 2009
• Butpayment cuts for some cardiology services are
  certain

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Sources of cuts for cardiology

• Practice expense transition
• Bundled services
• DRA
• Budget neutrality

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Practice expense transition

• 2009 is the 3rd year of transition to new
  practice expense RVUs
• Projected impact on cardiology 1 percent cut in
  total Medicare payments
• Impact varies for different services

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Cardiology practice expense impact
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Bundled services

• Assumptions
• Fee for service is inflationary
• Paying for small units of service makes it worse
• Component codes and add-on codes lead to
  duplicative payment
• The solution? Bundled codes!
• Cardiology is the test case

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Bundled cardiology services in 2009

• New comprehensive code for transthoracic
  echocardiography
• New combination code for stress echocardiography
• 2010 and 2011 we move beyond echo to other
  areas of cardiology

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DRA 2009
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Budget neutrality

• Many changes to RVUs in 2007 and 2008 from 5 Year
  Review of the RBRVS
• Budget neutrality adjustment --12 reduction to
  work RVUs
• Per MIPPA -- 2009 and forward, this adjustment is
  applied to the conversion factor
• CMS has not yet announced what the adjustment
  will be

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Budget neutrality impact for cardiology, 2008
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PQRI 2009

• Bigger bonus payment 2 percent
• More measures 179 proposed
• More options for reporting
• Registries
• EHR
• Measures groups, including CAD

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CMS proposals for 2009 -- IDTF

• All physician practices performing diagnostic
  tests would enroll in Medicare as IDTFs, comply
  with IDTF requirements
• ACC and cardiology community strongly opposed
  this proposal
• Well continue to work to educate CMS about
  better ways to promote quality for diagnostic
  testing
• Watch for Final Rule for physician fee schedule
  for outcome

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CMS Proposals Anti-markup

• Last year, physician community successfully
  delayed implementation of sweeping expansion of
  prohibition on mark-up of purchased diagnostic
  tests
• CMS proposed options for revising the rule
  scheduled to launch January 1, 2009
• Cardiology community still opposed --- revisions
  would still unreasonably restrict arrangements
  that benefit patients

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Cardiac device monitoring codes

• ACC and HRS developed a series of 23 new CPT
  codes for cardiac device monitoring
• New codes will be effective January 1
• ACC and HRS will be providing a variety of
  resources to help members learn about the new
  codes

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Whats next?
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How does CMS determine the update?

• A formula spelled out in the Medicare statute
  determines the annual change
• Known as the Sustainable Growth Rate or SGR
  system
• There are three components
• Sustainable growth rate (SGR)
• Medicare Economic Index (MEI)
• Annual update adjustment factor (UAF)

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SGR

• Put in place to control growth in spending on
  physician services
• Links changes in spending to factors affecting
  the cost of providing services to Medicare
  beneficiaries and to economic growth
• SGR used to set an annual target for spending on
  physician services

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SGR formula

• SGR is the product of four factors
• Change in physician fees
• Change in Medicare fee for service enrollment
• Change in real per capita GDP
• Change in law and regulation affecting spending
  on physician services
• CMS estimates SGR for 2009 at 0.7

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Calculating the annual fee schedule update

• Annual update to the conversion factor is the
  product of
• Medicare Economic Index (MEI)
• Update Adjustment Factor
• Must also account for the cost of previous
  temporary fixes that havent been paid for

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Update Adjustment Factor Formula

• .75 Target08 Actual06
• Actual08
• .33 Target96 08 Actual96 08
• Actual spending08 SGR09

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Flaws with UAF

• Setting of target SGR and all its flaws
• Calculation of actual expenditures
• Cumulative aspect of formula

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ACC Position

• SGR system is fatally flawed
• Cannot account for technological advances and
  expansion of medical knowledge
• Inappropriately linked to GDP
• Cumulative nature of system means the problem can
  only get worse
• Align financial incentives for patient-centered,
  evidence-based, cost-effective care
• Link updates to the cost of providing care

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What to expect in the meantime

• Scrutiny of high volume, high growth services
• Bundling of payments
• Focus on overvalued services
• Aligning payments across service sites

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Bundling of payments

• Micro level
• move away from add-on codes, component coding for
  physician services
• Macro level
• Episode of treatment payments
• Bundling of payments across providers

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Overvalued Services

• MedPAC pressure on CMS and RUC to decrease RVUs
• Belief that high volume, high growth services are
  overpriced
• Cardiology must expect close scrutiny of its
  procedures

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Challenges for Cardiology

• Can we maintain work and practice expense value
  for CV services?
• Can we make the case for coverage and payment of
  patient care services that are not paid for now?
• Can cardiology lead the way to a better system?

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ACC Regulatory Staff

• Rebecca Kelly 202-375-6398
• rkelly_at_acc.org
• Brian Whitman 202-375-6396
• bwhitman_at_acc.org
• Gretchen Wyatt 202-375-6392
• gwyatt_at_acc.org
• Kendall Kodey 202-375-6216
• kkodey_at_acc.org