Dear Secretary Thompson and Administrator Scully:
We are writing to express our deep concern about the direction being taken by the Centers for Medicare and Medicaid Services (CMS) with respect to pass-through payments for new medical devices, drugs and biologicals in the Outpatient Prospective Payment System (OPPS).
The Balanced Budget Act of 1997 mandated the new OPPS to replace the existing cost-based payment system for outpatient services. However, both Congress and CMS understood that insufficient data were available to ensure that costs of new medical devices, drugs and biologicals in outpatient procedures were adequately accounted for within the new Ambulatory Payment Classifications (APCs) under the OPPS.
As a result, in 1999, Congress established a hospital policy in the Balanced Budget Refinement Act (BBRA) to pay for new medical devices, drugs and biologicals within the OPPS, by setting aside a separate account equal to 2.5 percent of total spending in 2002, known as the "pass-through pool." An additional account was also set up for hospitals, known as the "outlier pool," equal to 2.0 percent of total spending in 2002, and designed to protect hospitals from high-cost patients. Both accounts would be available for a maximum of three years, the goal being to fold 100 percent of the costs of new medical devices, drugs and biologicals into the APCs as soon as OPPS data were available.
At the time the Outpatient Prospective Payment System (OPPS) was implemented in August of 2000, CMS estimated that the 2.5 percent pass-through pool would be insufficient, based on available data. As a result, an across-the-board reduction in pass-through payments of approximately 50 percent would have been necessary to keep expenses contained within the 2.5 percent allotted pass-through pool. The lack of appropriate data resulted in Congress asking CMS to delay any cut in pass-through payments for new medical devices, drugs and biologicals.
The Medicare program finds itself in a similar position again today. Projected expenses for new medical devices, drugs and biologicals in calendar year 2002 are expected to be $2.3 billion. However, the 2.5 percent pass-through pool is only $437 million. In order to keep payments within the mandated 2.5 percent pass-through pool, we understand that a payment cut of approximately 80 percent would be necessary. Clearly, a cut of this magnitude could create much greater difficulty for beneficiaries in accessing many important health care devices, drugs, and biologicals.
It is our understanding that CMS has decided to re-calibrate the APCs by taking 75 percent of the $2.3 billion in pass-through costs and accounting for these costs within the base APC payments. We understand this is being done in a budget-neutral manner, creating winners and losers. The losers represent 96 percent of total outpatient procedures - those APCs with no medical devices, drugs, or biologicals - who will see a decrease in payments of $900 million in 2002. These outpatient benefits scheduled for payment reductions include services such as clinic visits and emergency room visits. The winners represent 4 percent of total outpatient procedures - those APCs that include new medical devices, drugs, or biologicals - who will see a $900 million increase in payments in 2002.
It is also our understanding that any increase in APC payment rates will also result in a corresponding increase in beneficiary copayments, subject to either 55 percent of the total cost of the procedure or the Part A deductible, whichever is lower. Finally, the policy put forth by CMS would eliminate, for one year, the 2.0 percent outlier pool designated for hospitals that have many high-cost cases. The dollars allocated in the outlier pool would instead be used to further offset remaining payment cuts to new medical devices, drugs, and biologicals. In addition, 0.5 percent of the outlier pool would be specifically allocated to preventive services to ensure no decrease in APC payments.
We have a number of concerns with the policy CMS is advocating. First, CMS is not able to tell Congress how a re-calibration of APC payment rates will impact beneficiary co-payments. Clearly beneficiaries could potentially see a substantial increase in copayments for many services, yet no data are available from CMS at this time to determine the real impact on beneficiaries. We feel this information is critical and absolutely necessary in order to make an educated decision as to whether any policy is sound.
Second, CMS is not able to provide Congress with any information regarding the impact of the APC re-calibration on hospital payments for outpatient procedures that do not include new technologies. This again is critical information as all hospitals (except those hospitals held harmless under OPPS) are subject to the APC payment cuts proposed by CMS. For example, rural hospitals over 100 beds, many suburban hospitals, and hospitals in small cities typically perform routine procedures that do not involve new technologies. These hospitals could be especially hard hit, but without proper data from CMS, it is impossible to determine the magnitude of any payment reduction they might face. Any policy changes must take into account the needs of those hospitals that do not routinely conduct technology-laden procedures.
Third, we are concerned that CMS does not have the capability to even implement the policy they have proposed until March or April of 2002. The inability of CMS to properly implement their policy may place additional burdens on hospitals and beneficiaries as payment rates and copayment rates may be difficult to establish and reconcile. Please advise us on the status of the payment mechanisms within hospitals and fiscal intermediaries with respect to any changes in the OPPS.
Finally, we would like to express our disappointment with CMS in moving forward with major Medicare policy changes without giving due weight to the views of the Senate Finance Committee. The policy put forth on November 1, 2001, impacts many different stakeholders, including 39 million beneficiaries, thousands of hospitals, and companies manufacturing important medical devices, drugs and biologicals. This is a policy that should not be rushed, but instead requires careful thought and adequate consultation. We feel CMS failed to consult properly with the Senate Finance Committee, which is especially disconcerting given that CMS' policy requires immediate action by Congress.
We believe everyone involved shares the goal of ensuring that Medicare beneficiaries have access to the best possible medical care in hospital outpatient departments. Having sufficient OPPS data, understanding the impact on beneficiaries and hospitals, and ensuring proper and timely implementation of the policy are crucial steps that must not be overlooked. We believe a reasonable delay is one possibility that should be seriously considered in order for these goals to be met. We appreciate your attention to this issue and look forward to working together on a solution that protects all parties involved.
Sincerely,
| Max Baucus Chairman |
Chuck Grassley Ranking Member |