Post-Election Webinar Series, Part I: Falling Off the Fiscal Cliff? Consequences of Sequestration for Providers and the Medicare Program

Transcription

1 Post-Election Webinar Series, Part I: Falling Off the Fiscal Cliff? Consequences of Sequestration for Providers and the Medicare Program This webinar series is brought to you by the In-House Counsel Practice Group and is co-sponsored by the Health Information and Technology; Healthcare Liability and Litigation; Regulation, Accreditation, and Payment; and Tax and Finance Practice Groups; Healthcare Reform Educational Task Force; and AHLA Public Interest Department. This webinar series is sponsored by SunTrust Medical Specialty Group. Friday, November 16,

2 Presenters Cynthia Brown, Vice President, Government Affairs, American Medical Association, Washington, DC Blair Childs, Senior Vice President, Public Affairs, Premier Inc., Washington, DC G. William "Bill" Hoagland, Senior Vice President, Bipartisan Policy Center, Washington, DC Moderator Julie Barnes, Esquire, Director of Health Policy, Bipartisan Policy Center, Washington, DC 2

3 Election Results Status Quo Preserved FINAL RESULTS no change in control Obama 332 (51%) Presidential Votes Senate 3 Romney 206 (48%) 53 Ds (2 Indpt.) 45 Rs House* 196 Ds 233 Rs Governors 19 Ds (1 Indpt.) 30 Rs (Net +1) * Awaiting final results as of 11/14/2012

4 Post Election Webinar Series Part I: Falling Off the Fiscal Cliff? Consequences of Sequestration for Providers and the Medicare Program Background on sequester and economic fallout Impact of proposed cuts on providers and physicians Part II: Healthcare Reform Litigation and Coverage Consequences Focus on payors and life sciences industry Part III: Progress and Barriers to Modernizing the Healthcare Delivery System Exploring legal barriers and HIT 4

5 Background Budget Control Act of 2011 Supercommittee failure $1.2 trillion in across the board cuts Starting January 2013, phased in 2013 to 2021 Medicare cuts limited to 2% Doc fix through end of year only 5

6 The Fiscal Cliff: The Rubik Cube American Health Lawyers Association November 16, 2012 G. William Hoagland Senior Vice President Bipartisan Policy Center

7 TOTAL BUDGET SURPLUS/DEFICIT- FY Surplus Tax Cuts Expire/Sequester Tax Cuts Extended/No Sequester Actual Alternative Projections Deficit Trend Recession as announced by National Bureau of Economic Research 22 Source: The Budget and Economic Outlook: Fiscal Years 2012 to 2022 Congressional Budget Office, January

8 Budget outlook- FY (In billions of dollars) Actual 2012 Est 2013 Proj % annual Receipts 2,303 2,432 2,660 2,873 3,147 3,378 3, % Spending 3,603 3,627 3,660 3,826 4,030 4,312 4, % Deficits 1,300 1,195 1, NA % of GDP 8.7% 7.7% 6.3% 5.8% 5.0% 5.0% 4.8% NA Public Debt 10,128 11,370 12,479 13,536 14,515 15,545 16, % % GDP 68% 73% 78% 82% 82% 83% 84% Debt Subject Limit* 14,747 16,334 17,532 18,485 19,412 20,379 21, % % GDP 98% 104% 106% 106% 105% 104% 103% Nominal GDP estimated to increase 4.9 % annually * Debt subject to limit currently set at $16.4 trillion. Source: CBO, Updated Budget Projections: Fiscal Years 2012 to March, 2012.

9 NOVEMBER /6/12 - Election Day Looming Fiscal Cliff 9 DECEMBER /31/12 - Expiration of the Bush tax cuts 12/31/12 - Expiration of the Sustainable Growth Rate Doc Fix 12/31/12 - Expiration of extended Unemployment Insurance benefits 12/31/12 - Expiration of the Alternative Minimum Tax Patch 12/31/12 - Expiration of the current estate and gift tax rates 12/31/12 - Deadline for addressing tax extenders JANUARY /2/13 - Sequestration FEBRUARY 2013 Estimated breach of the $ trillion debt ceiling (post-extraordinary measures) MARCH /27/12 Expiration of Continuing Resolution to fund the government for Fiscal Year /27/12 - Expiration of the Temporary Assistance for Needy Families (TANF) authorization

10 Header goes here 10 Revenue & Spending Not Linked to Policy $105 b $140 b

11 IMPACT OF THE SEQUESTER: 2013 AND $109.3 Billion Sequester 2013 Discretionar y Mandatory Defense $ 54.6 bn (9.4% reduction) $ 0.1 bn (10.0% reduction) Non- Defense $ 38.0 bn (8.2% reduction) $16.6 bn (7.6% /2.0% Medicare reduction) Total $54.7 bn $54.7 bn $11.1 bn Medicare

12 FY 2013 SEQUESTER CUTS FALL ON THE SMALLEST PIECES OF THE BUDGET 12 Mandatory $2,160B Domestic Discretionary* $504B Tax Expenditures $1,343B Defense Discretionary* $729B Cuts Cuts Cuts $17B $38B 35% of Sequester $55B 50% of Sequester Non-Defense 50% Defense 50% * These amounts include all discretionary budgetary resources for the duration of FY 2013, not solely the non-exempt monies that are subject to sequester. Additionally, the figures assume that a continuing resolution at FY 2012 levels is enacted for FY 2013, that war funding (Overseas Contingency Operations funds) is provided at the level requested by the president. Defense discretionary funds include unobligated balances from prior years, which are subject to sequester. Sources: Congressional Budget Office, Donald Marron and Tax Policy Center using data from the Office of Management and Budget and Treasury

13 Sequester delays Federal debt reaching 100% of GDP by only 2 years % Debt Held by the Public as % of GDP 200% 150% 100% 50% BPC January 2012 Plausible Baseline Debt post-bca Sequester 0% Fiscal Years Note: The Bipartisan Policy Center s (BPC) January 2012 Plausible Baseline assumes that the 2001, 2003, and 2010 tax cuts are extended permanently, Medicare physician payments are frozen (the doc fix ), the AMT is indexed to inflation, and overseas combat operations wind down. Sources: Congressional Budget Office; Bipartisan Policy Center projections

14 Individuals andsmall Businesses with Taxable Income in the Following Ranges: Up to $8,700 for single filers and Up to $17,400 for married couples FederalTax Rates Pre Post Fiscal Cliff Tax Rate -- Pre Cliff 2012 Tax Rate Post Cliff % 15 % 14 Between $8,700 and $35,350 for single filers and Between $17,400 and $70,700 for married couples 15% 15% Between $35,350 and $85,650 for single filers and Between $70,700 and $142,700 for married couples. 25% 28% Between $85,650 and $178,650 for single filers and Between $142,700 and $217,450 for married couples 28% 31% Between $178,650 and $388,350 for single filers And Between $217,450 and $388,350 for married couples 33% 36% Over $388,350 for both single filers and married couples 35% 39.6% -40.8% (Reinstatement of PEP & Pease Top Rate on Long Term Capital Gains 15% 20% -25% (Health Care Net Investment 3.8% + PEP/Pease Top Rateon Qualified Dividends 15% 39.6% -44.6% (Health Care Net Investment 3.8% + PEP/Pease

15 Economic Forecasts Calendar Years Forecast 2012 Forecast 2013 Real GDP Growth Administration CBO Blue Chip +2.3% +2.1% +2.1% +2.7% -0.3% +2.3% Recession Inflation (CPI) Administration CBO Blue Chip +2.1% +1.8% +2.0% +1.9% +1.4% +1.9% Unemployment Rate Administration CBO Blue Chip 8.0% 8.2% 8.2% 7.7% 8.8% 7.8% 10 Year Note Administration CBO Blue Chip 2.0% 1.8% 1.9% 2.7% 1.8% 2.4% Sources: Congressional Budget Office, August 2012; Office of Management and Budget, Mid-Session FY 2013 Budget of the U.S. Government. July 2012; Blue Chips July 2012.

16 FY 2013 SEQUESTER CUTS WILL DAMAGE ECONOMIC GROWTH 16 Note: Historic recovery growth was calculated by averaging growth from the four years following each recession since WWII (up to 2001), excluding years in which the country quickly experienced another recession. This selection of years is meant to represent what a modest to strong recovery has looked like in the past. Source: BPC calculations based on St. Louis Federal Reserve data (FRED II) and Congressional Budget Office projections and economic multipliers

17 THE SEQUESTER WOULD COST THE ECONOMY OVER 1 MILLION JOBS IN 2013 & ,000,000 3,000,000 2,000,000 1,000, ,000,000 Projected Jobs Added* in 2013 & Projected Jobs Lost in 2013 & 2014 if FY13 Sequester Takes Effect Net Jobs Added in 2013 & 2014 if FY13 Sequester Takes Effect -2,000,000 The projection for jobs added averages the first five months of job growth in ,000 jobs/month and assumes that level of growth continues through the end of Sources: BPC calculations based on Bureau of Labor Statistics data and Congressional Budget Office projections and economic multipliers.

18 SEQUESTER DELAYS FEDERAL DEBT REACHING 100% OF GDP BY ONLY 2 YEARS % Debt Held by the Public as % of GDP 200% 150% 100% 50% BPC January 2012 Plausible Baseline Debt post-bca Sequester 0% Fiscal Years Note: The Bipartisan Policy Center s (BPC) January 2012 Plausible Baseline assumes that the 2001, 2003, and 2010 tax cuts are extended permanently, Medicare physician payments are frozen (the doc fix ), the AMT is indexed to inflation, and overseas combat operations wind down. Sources: Congressional Budget Office; Bipartisan Policy Center projections

19 Federal Debt Held by the Public: Baseline, Alternative Fiscal Scenario, President s Budget % of GDP % 95% Baseline Avg : 68.6% Alternative Fiscal Scenario Avg : 84.4% President s Budget Avg : 77% 94.2% 90% 85% 80% 76.5% 75% 72.5% 70% 65% 62.0% 60% 55% 50% CBO s Alternative Fiscal Scenario assumes expiring tax provisions (other than the payroll tax reduction) are extended, the AMT is indexed for inflation after 2011, Medicare s payment rates for physicians services are held constant at their current level, and automatic spending reductions required by the Budget Control Act do not take effect. CBO January President s Budget estimates from FY 2013 Federal Budget, OMB, February 2012.

20

21 The certainty in changing times! Blair Childs, SVP, Public Affairs

22 Today s discussion Election realities: Fiscal cliff and fiscal realities Status quo and no referendum ACA is law of the land Lame duck President Obama legacy 2 Key implications of ACA: 1. Payment reform will prompt transformation 2. Market forces and transparency Strategy implications for overcoming these challenges 2 2

23 Trend #1: Payment reform Track 1 Track 2 Cuts to Existing FFS System Market basket reductions Bad debt cuts Nonpayment for anything preventable or unnecessary Disrupt Existing System Bundled Payments Innovation Center Demonstrations ACOs 2 3

24

25 Value Based Purchasing across payment silos VBP modifier plan Implementat ion in CY2013 P4R in FY13; VBP implementation plan submitted to Congress on 4/18/2011 VBP commenced 10/1/2012 P4R in FY14; VBP test pilot by 1/1/2016 VBP test pilot by 1/1/2016 VBP implementation plan sent to Congress 6/15/12 VBP implementation plan to Congress; overdue (10/1/2011 deadline) Track Two Track One 2 5

26 Track 1 - Push Track 2 - Pull Push/pull to accountable care (in X years?) Cuts to Medicare FFS System 30 day readmissions penalty Penalty = 5x readmissions payment Value based purchasing FY-15 - Efficiency measure: total spending 3 days prior/30 days post Care coordination measures Private Payors and Medicaid Bundled payment: 2016? Disrupt Existing System MSSP Pioneer Flexible design; retro & prospective attribution State/Federal duals demo State partnership; eased enrolling Medical home demo; new CMMI Primary Care Initiative Reducing readmissions from nursing homes demo Bundled payment demos 26

27 ACO growth and distribution by state 310 ACOs in 45 states and the District of Columbia First ACOs (10 organizations) part of the PGP Demonstration project beginning in CMMI Pioneer participants, program began January 2012 Roughly 30% physician organization led Medicare Shared Savings Program 04/01 27 ACOs selected to participate. Majority of organizations physician organization led 07/01 89 ACOs selected to participate in this second cohort Source: Center for Accountable Care Intelligence, Growth and Dispersion of Accountable Care Organizations: June 2012 Update (06/2012)

28 Where we are headed and critical success factors Value-based purchasing: HACs, quality, efficiency, cuts Bundled payment Capitation Readmissions/HAC Penalties Shared savings FEE FOR SERVICE TO INTEGRATED CARE, NEW PAYMENT MODELS AND RISK High-performing hospitals Best outcomes in quality, safety Waste elimination Most efficient supply chain Satisfied patients High-value episodes DRG and episode targeting Care models and gainsharing Data analytics Cost management Population management Population analytics Care management Financial modeling and management Legal Physician integration 28

29 Trend #2: Movement toward market-based reforms Private and Public Exchanges: 16MM will join public exchanges Possible employers will dump to exchanges Many individuals will purchase Bronze plan Influence consumer behavior Will drive higher value plans Impact on potential for bad debt New competitive environment, transparency and marketing by insurers Will create market demand for price, quality & transparency Exchange market mechanism expandable to new populations 2 9

30 Consumer directed health plans

31 What does this mean? Take advantage of today s payment levels Coverage expansion (revenue relief) tweaked Don t be distracted by the political environment Value-based payment reforms and market transformation is happening -- this time Movement to more market-based system with greater transparency, consumer choice and demands on providers Providers are well positioned in this environment, but Provider-led transformation will require policy change, deregulation, scale and smart decisions 3 1

32 American Health Lawyers Association Fiscal Cliff: Its Impact on Physicians Cynthia A. Brown VP, Government Affairs November 16, 2012

33 Medicare Sustainable Growth Rate (SGR) system GDP-based expenditure target used to determine payment updates Has called for cuts annually since 5 percent cut was implemented in 2002 Formula overridden 14 times (usually in Dec.) Largest (and last) positive update legislated in percent Updates over decade average to 0.3 percent annually Budget baseline assumes both past and future cuts will occur Must offset 20 years of cuts in 10-year budget window Current cost of repeal $245 billion/ 10 years 2011 American Medical Association. All rights reserved. 33

34 Updates and practice costs Recent comprehensive MEI review is first since its Marcus Welbyera creation (1973) MEI has always incorporated a productivity adjustment Gap today between payment levels and MEI is about 20 percent American Medical Association. All rights reserved.

35 Incentives and penalties Year Deficit Reduction Sequester E-Prescribing 2011 American Medical Association. All rights reserved. Health Information Technology Physician Quality Reporting System, including Maintenance of Certification (MOC) Program % 2% % 2% % $18K 1% if no MOC; 1.5% if MOC % (-1%) $12-18K 0.5% if no MOC; 1.0% if MOC 2013 (-2%) 0.5% (-1.5%) $8-15K 0.5% if no MOC; 1.0% if MOC 2014 (-2%) (-2%) $4-12K 0.5% if no MOC; 1.0% if MOC 2015 (-2%) $2-8K (-1%) (-1.5%) 2016 (-2%) $2-4K (-2%) (-2%) 2017 (-2%) (-3%) (-2%) 2018 (-2%) (-3%) (-2%) Note: Value-based modifier to be applied to all physicians in 2017, potential impact TBD 35 ICD-10 Implementation $100 to $50,000 penalty per HIPAA violation, depending on if it is knowing, willful & corrected

36 Lame duck situation 27 percent cut scheduled for Jan. 1, percentage point additional sequester cut Cost of one year SGR freeze now $18.5 billion Perspective: Medicare outlays for physician services in 2011 totaled $67.3 billion Full SGR repeal in 2005: $48.6 billion SGR is usually the locomotive; now it is the caboose Will that help? American Medical Association. All rights reserved.

37 Lame duck scenario Preparing for grand or mini bargain, anticipating status quo Thelma and Louise option would be very bad Short-term SGR patch tied to tax cut, sequestration extensions Advocacy messages Long-term, expedient policy changes for short-term remedy are no bargain Policy changes should be consistent with long-term goals for reform American Medical Association. All rights reserved.

38 Medicare physician payment and delivery reform SGR repeal tied to permanent reforms Include transitions for all specialties, regions, practice models 110 physician groups agreed on core elements and principles Several options for specific transition proposals under development Bottom line: Future financial rewards will be tied to performance (financial and quality) FFS will remain, but not dominate future system 2011 American Medical Association. All rights reserved. 38

39 Questions 39

40 Post-Election Webinar Series, Part I: Falling Off the Fiscal Cliff? Consequences of Sequestration for Providers and the Medicare Program 2012 is published by the American Health Lawyers Association. All rights reserved. No part of this publication may be reproduced in any form except by prior written permission from the publisher. Printed in the United States of America. Any views or advice offered in this publication are those of its authors and should not be construed as the position of the American Health Lawyers Association. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal or other professional services. If legal advice or other expert assistance is required, the services of a competent professional person should be sought from a declaration of the American Bar Association 40