Following the government-wide sequestration cuts in 2011, the palliative care industry has not been spared. Medicare hospice payments have been reduced by two percent in accordance with a sequestration order issued on March 1, 2013, in accordance with Section 251A of the Balanced Budget and Emergency Deficits Control Act. But reconciling this simple reduction with the Medicare hospice cap has sparked a lot of debate, including policy changes, non-regulatory guidelines and, inevitably, litigation. Medicare imposes an aggregate annual cap on hospice payments, which tax intermediaries enforce after the end of each fiscal year by requiring reimbursement of any payments in excess of the hospice cap. However, following the reductions in escrow, tax intermediaries have included escrow payments in the calculation of the hospice ceiling. In doing so, many hospices have argued that tax intermediaries overestimated the liabilities of the hospice cap, which led to the hospices to challenge the cap calculations through the lengthy administrative appeal process. Some of these appeals are now being taken to the Federal District Court, where the reception so far has been cold. But temporary easing of sequestration cuts could be on the horizon with a bill that would extend the moratorium on sequestration cuts for hospices and other health care providers until the remainder of the public health emergency.
To put it in context, the Hospice Cap Statute (42 USC § 1395f (i) (2)) generally provides that the amount of annual Medicare payments to a hospice program cannot exceed the total “ceiling amount” for the year. Medicare places two annual limits on payments made to hospice providers: the inpatient cap and the overall cap. The inpatient cap limits the number of inpatient days for which Medicare will pay to 20 percent of a hospice’s total Medicare patient care days. The aggregate cap limits the total aggregate payments that an individual hospice can receive in a cap year to an authorized amount based on an annual cap per beneficiary multiplied by the number of beneficiaries served. Medicare Administrative Contractors (MACs) oversee the cap process, and hospices must file their Self-Determined Aggregate Limit Determination Notice with their MAC no later than five months after the end of the cap year. The overall cap was originally intended to ensure that hospice payments would not exceed Medicare spending in a conventional setting (that is, hospitals or other facilities offering curative treatment). CMS updates the overall cap amount each year, along with updates to hospice payments. CMS determines the number of beneficiaries served by a hospice using a simplified or proportional method, with the hospice choosing its preferred method.
For the first year of receivership (Cap Year 2013), the MACs initially calculated the overpayments of the hospice ceiling by comparing the net reimbursement of each hospice to its overall annual ceiling. But in the revised determinations for the 2013 cap year and in the determinations for subsequent years, the MACs compared each hospice’s annual aggregate cap to the amount of Medicare payment that would have been made to each hospice without the confinement. Many hospices claim that in doing so, MACs overestimated the amounts by which their payments exceeded their caps. Hundreds of hospices have challenged the new method of calculating MACs, appealing to the Provider Reimbursment Review Board. At least two of these flagship cases have now progressed to district court level, with rulings against the hospices. Hospices will likely appeal to federal circuit courts.
In the meantime, the pandemic has led to a suspension of sequestration cuts for hospices and other providers. The CARES (Coronavirus Aid, Relief, and Economic Security) Act of 2020 temporarily suspended Medicare escrow between May 1, 2020 and December 31, 2020. Recognizing that the effects of the pandemic would continue into 2021, Congress included provisions in the Consolidated Appropriations Act. , 2021, enacted by President Trump in December, which further postponed Medicare sequestration until March 31, 2021. Since it is now clear that the pandemic will extend beyond the March 31 deadline , further alleviation of sequestration is necessary.
Proposal Medicare Sequester COVID Moratorium Act (HR 315) would further delay Medicare sequestration during the duration of the public health emergency, helping providers overcome the additional costs associated with the COVID-19 pandemic. Biparty legislation would extend the current moratorium on escrow until the end of the public health emergency and provide hospices and other providers with additional financial support to provide needed patient care. Postponing these reductions for the remainder of the pandemic would eliminate the need to periodically address escrow. An accompanying invoice, HR 1868, would eliminate the 2% sequestration cuts until the end of 2021. HR 1868 also excludes the budgetary effects of this bill, as well as the American Rescue Plan Act of 2021, from the scorecards established by the Statutory Pay-As -You-Go (PAYGO) Act of 2010, preventing blanket cuts to many direct spending programs, including Medicare. Without this action, additional sequestration reductions would be triggered in January 2022. To pay for the change, the bill would extend sequestration, which is expected to expire at the end of fiscal year 2030 until fiscal year 2031.
While these sequestration relief bills are positive for the industry, hospices could face headwinds in reimbursement if Congress were to act on recent policy recommendations that contradict the forcible confinement relief. The Health Insurance Payment Advisory Committee (MedPAC), in its decision of March 2021 report in Congress on hospices, recommended eliminating the updated Medicare base payment rates for fiscal 2021 for hospices for fiscal 2022 and lowering the overall hospice cap by 20%, which would lead to a drop in the overall reimbursement of hospices. Although only a recommendation at this point, if adopted by Congress, the MedPAC recommendations could reduce access to life-saving palliative care for patients and families, especially in rural and underserved areas. .