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Published 1/1/2016
Elizabeth Fassbender; Catherine Boudreaux

Money Deals Affect Health Care and Providers

The 2-year bipartisan budget deal signed by President Obama in November 2015 not only averted a default on the nation's debt but also extended a 2 percent sequestration cut to Medicare reimbursements. The measure, which raised the debt ceiling, could have a significant impact on health care and healthcare providers.

Specifically, the deal raised discretionary spending caps for defense and nondefense accounts by $80 billion above the sequester level for fiscal 2016 and suspended the debt limit until March 15, 2017. The additional funds are "paid for" by a mix of spending cuts and revenue increases.

"This agreement isn't perfect," House Majority Leader Kevin McCarthy (R-Calif.) said. "This is a fully-offset agreement that rejects tax hikes, secures long-term savings through entitlement reforms, and provides increased support for our military"

Pluses and minuses
The legislation did have some positive aspects for the healthcare field. It avoided an impending shortfall in the Social Security Disability Trust Fund and increases in Medicare premiums for outpatient care for approximately 15 million beneficiaries.

However, the legislation also eliminates approximately $13 billion in offsets that had, in part, been offered to pay for the 21st Century Cures Act. Because all legislation must be fully offset—also called a "pay-for"—this potentially hurts the bill's chances of passage. The House version, passed in July, seeks to encourage innovation in medicine by increasing funding for research and expediting the approval of new devices and drugs. It also funds amd reforms the National Institutes for Health (NIH) and Food and Drug Administration (FDA).

One provision of the budget deal will restrict the ability of health systems to benefit from Medicare hospital outpatient reimbursement rates after acquiring a physician practice or ambulatory surgery center. Under a "site-neutral" shift in Medicare payments, reimbursement for services provided in the new off-campus locations would be limited to the amounts that the physician practice would receive for the same services, rather than the higher payments that hospitals have traditionally received under the Outpatient Prospective Payment System after converting physician practices to hospital outpatient departments.

Though this policy change provides an important step toward site neutrality, grandfather clauses ensure that differences in reimbursements remain, depending on when the physician practice was acquired and where it is located.

The bill also repeals a provision from the Affordable Care Act regarding the employer mandate. Employers with more than 200 employees will no longer be required to automatically enroll new full-time equivalents into a qualifying health plan and to automatically continue enrollment of current employees in one of the employer's health plans.

Appropriations coming
As this issue of AAOS Now went to press (Dec. 15, 2015), money talks were focused on the appropriations process. Normally, appropriation bills must be passed by Oct. 1, to keep the government functioning through another fiscal year. If that doesn't happen, continuing resolutions are required that maintain and enable government spending at current levels until an omnibus spending measure is passed.

The proposed omnibus bill would extend several expiring tax breaks and make them permanent. Many Democrats have threatened to withdraw support for the omnibus bill if the tax extenders package remained attached.

If the omnibus measure moves forward, it will likely include $30 million in funding for the Department of Defense Peer Reviewed Orthopaedic Research Program (PRORP) that AAOS helped secure in the House 2015 Defense Appropriations bill. The program provides military personnel affected by orthopaedic injuries the opportunity for optimal recovery and restoration of function.

The proposed measure also includes cuts in funding for the U.S. Agency for Healthcare Research and Quality (AHRQ). Among other things, the agency supports research to improve healthcare quality and outcomes, and is currently funded with a $440 million operating budget through FY 2015. The American Association of Orthopaedic Surgeons (AAOS) has joined more than 140 other groups in opposing such cuts.
Finally, the Republican Doctor's Caucus delivered a letter to House Speaker Paul Ryan (R-Wisc) asking that the following three critical changes to current healthcare law be included in the appropriations package:

  • a delay of Stage 3 of meaningful use
  • more hardship exemptions for stage 2 of meaningful use
  • a delay of the comprehensive care for joint replacement (CJR) program

The letter was signed by all 18 members of the caucus, which includes nurses, doctors and other health care providers. House Appropriations Chairman Harold Rogers (R-Ky.) said that negotiations are moving slowly and there are still several dozen "policy riders" in play.

In addition, lawmakers may soon consider a larger tax deal that could include a delay of the Affordable Care Act's (ACA) Cadillac tax, if such a measure is not included in the appropriations package. The tax on high-cost healthcare plans, which goes into effect in 2018, is one of the more controversial provisions of the ACA and has been the subject of much debate within both parties.

For the latest on the appropriations process and other legislative updates, follow the AAOS Office of Government Relations on Twitter at @AAOSAdvocacy.

Elizabeth Fassbender is the communications manager and Catherine Boudreaux is the senior manager, government relations in the AAOS office of government relations.

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