Alison Mitchell
Analyst in Health Care Financing
States are able to
use revenues from health care provider taxes to help finance the state share of Medicaid
expenditures. Federal statute and regulations define a provider tax as a health
carerelated fee, assessment, or other mandatory payment for which at least
85% of the burden of the tax revenue falls on health care providers. In
order for states to be able to draw down federal Medicaid matching funds,
the provider tax must be both broad-based (i.e., imposed on all providers
within a specified class of providers) and uniform (i.e., the same tax for all
providers within a specified class of providers). Also, states are not
allowed to hold the providers harmless for the cost of the provider tax
(i.e., they can not guarantee that providers receive their money back).
A vast majority of states use at least one provider tax to help finance
Medicaid. Many of these states use the provider tax revenue to increase
Medicaid payment rates for the class of providers, such as hospitals,
responsible for paying the provider tax. This financing strategy allows states
to fund increases to Medicaid payment rates without the use of state funds
because the increased Medicaid payment rates are funded with provider tax
revenue and federal Medicaid matching funds. States also use provider tax
revenues to fund other Medicaid or non-Medicaid purposes.
States first began using health care provider taxes to help finance the state’s
share of Medicaid expenditures in the mid-1980s. Some states were
particularly aggressive in their use of provider taxes. As a result, in
the early 1990s, the federal government imposed statutory and regulatory limitations
on states’ use of health care provider tax revenue to finance Medicaid.
While federal requirements allow states to impose provider taxes on 19 classes
of health care providers, the classes of providers that are most often
taxed include nursing facilities, hospitals, intermediate care facilities
for individuals with mental retardation or developmental disabilities (ICF-MR/DD),
and managed care organizations. During the most recent recession, a number of states
took action to generate additional provider tax revenue, and these actions
mainly involved hospital and nursing facility taxes.
Even with the statutory and regulatory limitations, provider taxes continue to
cause tension between the federal government and the states. As a result,
some deficit reduction proposals include a recommendation to limit states’
ability to use provider taxes to finance the state share of Medicaid
expenditures. This limitation would decrease federal Medicaid payments to
states.
This report provides background regarding states’ use of provider taxes in the
1980s and describes the relevant federal statutes and regulations, which
were mostly established in the early 1990s. The report explains how states
use provider taxes to help finance Medicaid and provides information
regarding the extent to which states currently use such taxes. The report ends
with a discussion of the provider tax provisions in various deficit
reduction proposals.
Date of Report: March 15, 2012
Number of Pages: 17
Order Number: RS22843
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Jim Hahn
Specialist in Health Care Financing
Christopher M. Davis
Analyst on Congress and the Legislative Process
In
response, in part, to overall growth in Medicare program expenditures and
growth in expenditures per Medicare beneficiary, the Patient Protection
and Affordable Care Act (PPACA, P.L. 111-148, as amended) created the
Independent Payment Advisory Board (IPAB, or the Board) and charged the
Board with developing proposals to “reduce the per capita rate of growth in
Medicare spending.” The Secretary of Health and Human Services (the Secretary)
is directed to implement the Board’s proposals automatically unless
Congress affirmatively acts to alter the Board’s proposals or to discontinue
the automatic implementation of such proposals.
The annual IPAB sequence of events begins each year, starting April 30, 2013,
with the Chief Actuary of the Centers for Medicare & Medicaid Services
calculating a Medicare per capita growth rate and a Medicare per capita
target growth rate. If the Chief Actuary determines that the Medicare per
capita growth rate exceeds the Medicare per capita target growth rate, the
Chief Actuary would establish an applicable savings target—the amount by
which the Board must reduce future spending. This determination by the
Chief Actuary also triggers a requirement that the Board prepare a
proposal to reduce the growth in the Medicare per capita growth rate by the applicable
savings target. The Board cannot ration care, raise premiums, increase cost
sharing, or otherwise restrict benefits or modify eligibility. In
generating its proposals, the Board is directed to consider, among other
things, Medicare solvency, quality and access to care, the effects of changes
in payments to providers, and those dually eligible for Medicare and Medicaid.
If the Board fails to act, the Secretary is directed to prepare a
proposal.
Board proposals must be submitted to the Secretary by September 1 of each year
and to the President and Congress by January 15 of the following year.
Board proposals are “fast-tracked” in Congress, and IPAB proposals go into
force automatically unless Congress affirmatively acts to amend or block
them within a stated period of time and under circumstances specified in the
act. Section 3403(d) of the act establishes special “fast track”
parliamentary procedures governing House and Senate committee
consideration, and Senate floor consideration, of legislation implementing
the Board or Secretary’s proposal. These procedures differ from the
parliamentary mechanisms the chambers usually use to consider most
legislation and are designed to ensure that Congress can act promptly on
the implementing legislation should it choose to do so. PPACA also established
a second “fast track” parliamentary mechanism for consideration of legislation discontinuing
the automatic implementation process for the recommendations of the Board.
The Board’s charge is to develop proposals for the Secretary to implement that
reduce the per capita growth in Medicare expenditures, not to reduce
Medicare expenditures. Therefore, while the CBO projects that the
cumulative impact of the Board’s recommendations from 2015 through 2019
will reduce total spending by $15.5 billion, during the same period, Medicare
expenditures will total $3.9 trillion with average spending per
beneficiary forecast to increase from $13,374 to $15,749. While the
Board’s potential impact on total expenditures is likely to be relatively small compared
to overall Medicare expenditures, its impact on particular Medicare providers
or suppliers may be significant, particularly if the Board alters payment
mechanisms.
The President’s FY2013 budget, as submitted to Congress on February 13, 2012,
includes a proposal to strengthen the IPAB. H.R. 452, the Medicare
Decisions Accountability Act of 2011, which would repeal the IPAB, was
ordered to be reported out of the House Energy and Commerce Committee on
March 6, 2012 and out of the House Committee on Ways and Means on March 8,
2012.
Date of Report: March 12, 2012
Number of Pages: 40
Order Number: R41511
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Elicia J.
Herz
Specialist in Health Care Financing
In
existence for 47 years, Medicaid is a means-tested entitlement program that
financed the delivery of primary and acute medical services as well as
long-term care to more than 69 million people in FY2011. The estimated
annual cost to the federal and state governments was roughly $404 billion
in FY2010. In comparison, the Medicare program provided health care benefits to nearly
48 million seniors and certain persons with disabilities, and cost roughly $523
billion in FY2010.
In its report The Budget and Economic Outlook: An Update, August 2011,
the Congressional Budget Office (CBO) projects that Medicaid outlays will
rise an average annual rate of 9.0% during the 2013-2021 period due to
both demographic changes and an increase in enrollment beginning in 2014
as a result of significant program changes under the recent Patient Protection and
Affordable Care Act (ACA). That enrollment increase is estimated to be roughly
17 million individuals by 2021. This legislation also increased the
federal share of Medicaid program costs for selected groups of
beneficiaries and particular services in future years. Because Medicaid represents
a large component of federal mandatory spending, Congress is likely to continue
its oversight of Medicaid’s eligibility, benefits, and costs.
Understanding the complex statutory and regulatory rules that govern Medicaid
is further complicated by the fact that each state designs and administers
its own version of the program under broad federal rules. State
variability is the rule rather than the exception in terms of eligibility
levels, covered services, and how those services are reimbursed and delivered.
The ACA makes both mandatory and optional changes to Medicaid along some
of these dimensions.
This report describes the basic elements of Medicaid, focusing on the federal
rules governing who is eligible, what services are covered, how the
program is financed, and how beneficiaries share in the cost of care, how
providers are paid, and the role of special waivers in expanding eligibility and
modifying benefits. Examples of both mandatory and optional eligibility groups
and benefits as defined in the federal statute are described. Basic
program statistics are also provided. Finally, selected legislative
changes at the federal level via the ACA that affect Medicaid in significant ways
are also described.
Date of Report: March 5, 2012
Number of Pages: 18
Order Number: RL33202
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Scott R.
Talaga
Analyst in
Health Care Financing
A Medicare
skilled nursing facility (SNF) is an institution, or distinct part of an
institution (e.g., building, floor, wing), that provides post-acute
skilled nursing care and/or skilled rehabilitation services, has in effect
a written agreement to transfer patients between one or more hospitals and the
SNF, and is certified by Medicare. In general, “skilled” nursing and
rehabilitative care are services ordered by a physician require the skills
of professional personnel (i.e., registered nurse, physical therapist) and
are provided under the supervision of such personnel.
The Medicare SNF benefit has drawn attention due to the rapid increase in SNF
expenditures. In 2009, Medicare Parts A and B payments to SNF providers
totaled $25.5 billion, having grown at an average annual rate of 10.2%
since 2000. SNF payment reductions have been recommended by various
deficit reduction groups. Some of the recommendations have included reducing
the SNF reimbursement rate and reducing or eliminating Medicare bad debt
reimbursement.
Given the beneficiary has met certain requirements, a Medicare beneficiary is
entitled to 100 days of SNF care for each Medicare-covered SNF stay. To be
eligible for SNF coverage, a Medicare beneficiary must have been an
inpatient of a hospital for at least 3 consecutive calendar days and transferred
to a participating SNF usually within 30 days after discharge from the
hospital. Beneficiaries must also receive treatment at the SNF for a
condition they were receiving treatment for during their qualifying
hospital stay (or for an additional condition that arose while in the
SNF). For the first 20 days of SNF coverage, Medicare beneficiaries have no
copayment. Medicare beneficiaries have a daily SNF copayment for the 21st through
the 100th day indexed annually at one-eighth (12.5 percent) of the current
Part A deductible. For 2012, the daily copayment is $144.50.
SNFs are reimbursed under a prospective payment system (PPS), which began on
July 1, 1998. The PPS reimbursement is a per diem “per day” amount that
covers most costs of furnishing SNF services to Medicare beneficiaries.
With the exception of certain high-cost ancillary services, the SNF PPS
bundles covered-SNF services into a single per diem reimbursement rather than Medicare
paying for each service individually.
This report describes the Medicare SNF benefit and the reimbursement system for
SNF services. In addition, this report describes recent issues, as well as
congressional and other proposals designed to slow the growth of Medicare
SNF expenditures.
Date of Report: March 9, 2012
Number of Pages: 19
Order Number: R42401
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Paulette C.
Morgan
Specialist in Health Care Financing
According
to the American Academy of Actuaries, “[h]ealth risk adjustment is the process
of adjusting payments to organizations (usually health insurance plans)
based on differences in the risk characteristics of people enrolled in
each plan.” By adjusting payments to compensate organizations for the
relatively higher medical costs associated with an ill individual, plans should,
all other things being equal, be indifferent between enrolling the sicker
person or the relatively healthier one.
Medicare Advantage (MA) is an alternative way for Medicare beneficiaries to
receive covered benefits. Under MA, private health plans are paid a
per-person amount to provide all Medicarecovered benefits (except hospice)
to beneficiaries who enroll in their plan. The Centers for Medicare &
Medicaid Services (CMS) risk adjusts the payments to MA plans. The size of the adjustment
depends on the demographic and health history of each plan enrollee. The
payment adjustment takes into account the severity of a beneficiary’s
illness, the accumulated effect of multiple diseases, as well as
interactive effects—instances where having two or more specified diseases
or characteristics results in expected health care expenditures that are larger
than the simple sum of the effects. The payments are not adjusted for
short-term illnesses because they are assumed to be poor predictors of
future health spending.
MA plans provide information to CMS to justify the risk-adjusted payments; CMS
therefore audits the plans to ensure that the risk-adjusted payments that
the plans are claiming are in fact supported by the medical record. Based
on the audit findings, plans may have to pay back money when the medical
record does not provide evidence for the risk-adjusted payment they had received.
Alternatively, the audit may reveal additional illnesses that had not
previously been taken into account. Previously, MA plans were only
required to pay back money (or receive money) based on the findings from
the audited enrollee records. CMS has proposed extrapolating the audit
findings to apply to all enrollees in the audited plan.
Some concerns have been raised about risk adjustment under Medicare Advantage
and the MA plan audits. First, risk adjustment compensates plans for the
average predicted cost of any particular diagnosis. To the extent that MA
plans could enroll beneficiaries with below-average expenditures relative
to the average for their disease, those plans would be over-compensated by risk
adjustment. Second, according to the American Academy of Actuaries, the
Medicare fee-forservice data used in the MA risk adjustment model were not
audited for accuracy and may contain errors. The audits under MA, however,
would apply the risk adjustment factors to data that were validated. The
inconsistency of using audited data in one circumstance and non-audited data in another
could create uncertainty; however, a for-for-service adjustment factor added by
CMS in the final notice of payment methodology may remedy this concern.
Third, some plans have expressed concern that recoveries from the audits
may place them at substantial financial risk.
This report describes how CMS pays providers under Medicare Advantage and how
these payments are risk adjusted. In addition, it describes how risk
scores for individual Medicare Advantage enrollees are initially generated
and change over time, and it discusses how CMS audits risk-adjusted MA
payments. It concludes with a short discussion of several concerns raised with
risk adjustment and the audit process.
Date of Report: March 5, 2012
Number of Pages: 30
Order Number: R42134
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Evelyne P.
Baumrucker
Analyst in Health Care Financing
Adrienne L. Fernandes-Alcantara
Specialist in Social Policy
Emilie Stoltzfus
Specialist in Social Policy
Bernadette Fernandez
Specialist in Health Care Financing
Approximately 662,000 children spend some time in foster care
each year. Most enter care because they have experienced neglect or abuse
by their parents. Between 35% and 60% of children entering foster care
have at least one chronic or acute physical health condition that needs
treatment. As many as one-half to three-fourths show behavioral or social
competency problems that may warrant mental health services. Many health
and mental health needs persist. A national survey of children adopted
from foster care found that 54% had special health care needs and research
on youth who aged out of foster care shows these young adults are more likely
than their peers to report having a health condition that limits their
daily activities and to participate in psychological and substance abuse
counseling.
The Social Security Act addresses some of the health care needs of children in,
or formerly in, foster care through provisions in the titles pertaining to
child welfare (Titles IV-B and IV-E) and to the Medicaid program (Title
XIX). Under child welfare law, state child welfare agencies are required
to have a written plan for each child in foster care that includes, among other
items, the child’s regularly reviewed and updated health-related records.
In addition, state child welfare agencies, in cooperation with state
Medicaid agencies, must develop a strategy that addresses the health care
needs of each child in foster care. Upon aging out of foster care, youth must
receive from the state child welfare agency a copy of their health record
and information about health insurance options and designating other
individuals to make health care decisions on their behalf if they are
unable to do so on their own.
States are not permitted to use federal child welfare program funds to pay
medical expenses of children in care or those who left foster care due to
their age or placement in a new permanent family. However, states can (and
do) receive reimbursement through Medicaid to pay a part of the medical
expenses, including well-child visits and other benefits, for many of these
children and youth. Most children in foster care are eligible for Medicaid
under mandatory eligibility pathways, meaning that states must provide
coverage because these children meet low-income and other eligibility
criteria. Children in foster care who are not eligible under mandatory pathways
generally qualify for Medicaid because the state has implemented one or more
optional eligibility categories allowing coverage. Further, some children
who leave foster care for legal guardianship remain eligible for Medicaid
on a mandatory basis, as do most children with statedefined “special needs”
who leave foster care for adoption. The income and resources of the child’s
guardian or adoptive parent are not considered under this eligibility pathway.
Separately, youth who age out of foster care may be eligible for Medicaid
through one of the mandatory eligibility pathways that are available to
adults generally. States also have the option of providing Medicaid to
youth up to the age of 21 if they aged out of foster care. However, the Patient Protection
and Affordable Care Act (ACA, P.L. 111-148, as amended), requires that
beginning on January 1, 2014, states must provide Medicaid to young people
under the age of 26 who aged out. Unlike most other Medicaid pathways,
coverage must be provided without regard to the income and assets of these
young people. This new pathway parallels another requirement in ACA that generally
directs health insurance companies to continue to provide coverage to children
up to age 26 who are enrolled in their parents’ health care plans.
ACA made additional changes to assist adults in obtaining private health
insurance, and young adults leaving foster care may benefit from these
changes. ACA may also include new opportunities for providing health
insurance to child welfare-involved children and their families, such as
those children in foster care who are vulnerable to losing Medicaid upon
returning home.
Date of Report: February 27, 2012
Number of Pages: 56
Order Number: R42378
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