The Obama administration said Monday that it was cutting payments to doctors and hospitals after finding that cost overruns are threatening to use up the money available in a health insurance program for people with cancer, heart disease, and other serious illnesses.

The administration had predicted that up to 400,000 people would enroll in the program, created by the 2010 health care law. About 135,000 have enrolled, but the cost of their claims has far exceeded White House estimates, exhausting most of the $5 billion provided by Congress.

Under a new policy issued by Kathleen Sebelius, the secretary of health and human services, “health care facilities and providers will get paid less” for providing the same services to patients in the federal program, known as the Pre-Existing Condition Insurance Plan.

Congress established the program to provide coverage to people with pre-existing conditions who had been uninsured for at least six months. The program provides a transition to 2014, when most consumers will be able to obtain insurance regardless of their pre-existing conditions.

In a regulation to be published Wednesday in the Federal Register, the administration says that doctors and hospitals must accept the amounts set by the government as “payment in full” for services in the high-risk pool administered by the federal government. Providers can still collect co-payments from patients, but cannot bill them for more than the “cost-sharing amounts” allowed by the government.

The administration said the restrictions were necessary to prevent “irreparable financial harm” to patients, who might otherwise be “forced to pay substantially higher out-of-pocket costs.”

The government will not set payment rates for prescription drugs, organ transplants or kidney dialysis. Officials did not say why those items and services had been exempted.

When the federal program for people with pre-existing conditions ends on Jan. 1, 2014, many of them are expected to go into private health plans offered through new insurance markets being established in every state. Federal and state officials worry that an influx of people with serious illnesses could destabilize these markets, leading to higher premiums for other subscribers.

For this reason, federal and state officials say, they will try to recruit large numbers of healthy young people to buy insurance. Their premiums would help pay for the care of less healthy people.

Source: New York Times, May 20, 2013 

The U.S. Court of Federal Claims has denied two protests that were filed challenging a decision by the Centers for Medicare and Medicaid Services (CMS) to award the Medicare Administrative Contractor (MAC) contract for Medicare Parts A and B in Jurisdiction E to Noridian Administrative Services.

CMS and Noridian will now move forward to implement the new contract and expects this process to complete by mid-September 2013. SFMS/CMA has and will continue to work closely with CMS and the new contractor to ensure a smooth transition.

Jurisdiction E (previously called Jurisdiction 1) covers California, Nevada and Hawaii, as well as the U.S. territories of American Samoa, Guam and the Northern Mariana Islands. Jurisdiction E includes over 3.5 million Medicare fee-for-service beneficiaries, 500 Medicare hospitals and 86,500 physicians. MACs process Part A and Part B claims and perform other critical Medicare operational functions, including enrolling, educating and auditing Medicare providers.

The Centers for Medicare & Medicaid Services (CMS) has confirmed that the Medicare electronic health record (EHR) incentive program payments will be cut by 2% as required by the Sequestration Transparency Act.

The 2% "sequestration" cuts to Medicare are part of the $1.2 trillion in cuts required by the Sequestration Transparency Act, part of a deal worked out to end last year's debt-ceiling crisis.

According to CMS, the 2% reduction will be applied to Medicare EHR incentive payments for reporting periods that end on or after April 1, 2013. If the final day of the reporting period occurs before April 1, 2013, those incentive payments will not be subject to the reduction.

Medicaid (Medi-Cal in California) is exempt from the sequestration cuts.

Click here for more details on the sequestration cut as previously reported by SFMS. 

Click here for our Sequestration FAQ.

Under the provisions of the federal Affordable Care Act (ACA), Medi-Cal is required to pay primary care physicians at Medicare rates for primary care services for two years. The increase is fully funded by the federal government. The requirement began January 1, 2013 and ends December 31, 2014.

The California Department of Health Care Services (DHCS) submitted their state plan amendment (SPA) to implement the rate increase on March 29, 2013. Approval of the SPA is required by the Centers for Medicare and Medicaid Services (CMS) before the state can implement the rate adjustment. It is unclear when the rate adjustment will be approved by CMS and implemented by DHCS. In previous communications, DHCS has indicated that they expect implementation will begin in July 2013. However, the rate adjustment will be retroactive to the beginning of the year.

Below are answers to frequently asked questions about implementation of the rate adjustment as outlined in the SPA. Please note these provisions are subject to change pending approval by the CMS.

Why is the SPA just being filed now?

Federal guidance on the implementation of the rate increase was delayed until November 2012. The DHCS claims that the federal delay and the complications involved with applying the rate increase to managed care delayed the submission of the SPA.

Who qualifies as a “primary care physician”?

Any physician who is board-certified in internal medicine, family medicine, or pediatrics by the American Board of Physician Specialties, the American Board of Medical Specialties, or the American Osteopathic Association. This includes recognized physician subspecialties of the above board certified specialties.

Or, any physician who practices (but is not board certified) in a specialty or sub-specialty of internal medicine, family medicine, or pediatrics who also bills at least 60% of services rendered for qualifying codes. DHCS has indicated that billing 60% of services for qualifying codes alone does not qualify a physician unless they also can legitimately attest to practicing in internal medicine, family medicine or pediatric medicine or a subspecialty of internal medicine family medicine or pediatric medicine recognized by the ABMS, ABPS or AOA.

Click here to view the list of qualifying primary care providers (PCP).

How will physicians prove that they qualify?

Generally, physicians will self-attest that they qualify for the increased rates. DHCS is developing an online registry that physicians will use to register. However, managed care plans are allowed to choose to either use the DHCS attestation tool or develop their own.

What counts as a primary care service?

The rate increase applies to:

• Evaluation and management codes 99201-99499
• Vaccine administration codes 90460, 90461, and 90471-90474
• Preventive care codes 99381-99387 and 99391-99397
• Counseling risk/behavior intervention codes 99401, 99404, 99408-409, 99411, 99412, 99420 and 99429

The rate increase also applies to state-specific “Z” codes—Z0100, Z0102, Z0104, Z0106 and Z0108. These codes are relevant to some state-only programs, such as Family PACT, as well as many services provided in neonatal and prenatal intensive care units (NICU and PICU).

What Medicare rates will Medi-Cal use? Will they apply the GPCIs?

Per the SPA, rates will be based on the 2009 Medicare Fee Schedule. Geographic Payment Center Indices (GPCIs) will apply. SFMS/CMA urged the DHCS to adopt this approach based on our analysis that this approach would benefit California physicians. 

Are clinics or physician employers eligible for the Medi-Cal reimbursement adjustment?

No, only the physician who is personally providing the service is eligible for the increase.

Does the increase apply to managed care?

Yes. Plans will be receiving increased payments, through the State of California, to pay providers at Medicare rates. The increase is fully funded by the federal government for 2 years beginning January 1, 2013 and ending December 31, 2014.

How will the state guarantee that the money actually makes it to the physician?

Plans will be contractually obligated to prove that they are paying primary care physicians at least the Medicare rates. The payments made to plans to cover the increased cost of higher rates will be separate from their general capitation payments, allowing for separate accounting. The SPA included plan reporting requirements to ensure the rate adjustment funding is going to the service providing physician.

Questions & Assistance

SFMS/CMA members with questions about Medi-Cal reimbursements can receive complimentary one-on-one assistance by contacting our Member Helpline at (800) 786-4262.

Senator Ricardo Lara (D – Long Beach) introduced Senate Bill 640 today, which will stop the implementation of a 10% rate cut to Medi-Cal. The cut was part of the health services trailer bill (AB 97) to the 2011-12 state budget. SB 640 is co-sponsored by the SFMS and CMA.

“California has one of the lowest reimbursement rates for Medicaid in the nation,” said CMA President Paul Phinney, MD. “At a time when millions of new patients will be entering the program under health reform, the state should not be looking to rate cuts as a budget solution.”

SB 640 would block the 10% Medi-Cal provider rate cut and would stop the state from ‘clawing back’ rate cuts from providers dating back to 2011.

SFMS and CMA applaud Senator Lara for his commitment to ensure accessible health care for all. Cutting resources while adding patients to the Medi-Cal managed care system will make it hard for patients to find doctors and will delay much needed federal health reform in California. The cuts in trailer bill AB 97 were proposed when California was facing an enormous budget deficit. Those times have changed and there is no need to punish California’s poor and vulnerable patients any longer.

"This measure protects our most vulnerable communities from the devastating impacts of the cuts to Medi-Cal," stated Senator Lara. "I am proud to partner with CMA and the broad coalition of advocates to ensure that all of our communities have access to health care."

Following approval of the AB 97, CMA along with the California Dental Association, California Pharmacists Association, National Association of Chain Drug Stores, California Association of Medical Suppliers, Aids Healthcare Foundation and American Medical Response, filed suit against both the California Department of Health Care Services and the U.S. Department of Health and Human Services seeking to stop implementation of the cuts. That case is currently being considered by the 9^th Circuit Court of Appeals.

Click here for more information about the CMA lawsuit to stop the Medi-Cal cuts.