New Legislation Effecting Healthcare

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This week Congress and the Senate passed legislation that will have an immediate effect on healthcare payments to most providers, including: hospitals, physicians, rehabilitation specialists and laboratories. The new legislation, which is called the Middle Class Tax Relief and Job Creation Act of 2012, extends the payroll tax cut and unemployment benefits, as well as makes the following adjustments to the healthcare system:

• Freezes the current reimbursement rate that Medicare pays physicians, preventing the proposed 27.4% cut in payments, which was to begin on March 1, 2012. The cuts are now postponed to Dec. 31, 2012;
• Extends the outpatient therapy cap exception process, whereby Medicare beneficiaries can exceed the caps on obtaining therapy as long as the physician certifies that the therapy is medically necessary; and
• Stops a planned reduction in hospital payments for evaluation and management services in outpatient departments.

To assist paying for the cuts in reimbursement, the bill reduces the amount of money hospitals and nursing facilities are reimbursed for bad debt. Under current law, Medicare reimburses hospitals and nursing facilities for 70% of what they are unable or unwilling to collect and 100% of the nursing facility bad debt resulting from the treatment of the dual eligibles (those with Medicare and Medicaid).

This provision would reduce the reimbursement to 65% within a 3 year period, saving approximately $7 billion to the Medicare system; however, it would cause unknown harm to the providers, who have razor thin margins already.