Health Care Provisions in the Extension of Payroll Tax Legislation

February 22, 2012
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The payroll tax extension bill (a.k.a Middle Class Tax Relief and Job Creation Act of 2012) passed both houses of Congress on Friday, February 17, 2012, and is expected to be signed by President Obama.  While additional details are to follow, some of the pertinent health care-related provisions include:

  • Revocation of the scheduled 27.4 percent reduction in Medicare physician fee schedule payments (current Medicare fee schedule payments are to remain as is through the end of 2012).  This provision also calls upon the Government Accountability Office (GAO) and the Department of Health and Human Services (HHS) to submit reports to assist Congress in developing a long-term solution to the Sustainable Growth Rate formula.
  • Extension of the floor on the adjustment to the work portion of payments for physician services in geographic regions where the adjustment would have been less than 1.0.  This provision essentially “props up” payments for physician services in 54 Medicare geographic areas, primarily rural physician locations.
  • Extension of higher wage payments to certain hospitals under Section 508 through March 31, 2012.  This provision was created in 2003 and was set to expire after three years.  However, through a series of extensions, Section 508 hospitals have maintained this benefit, which is now scheduled to expire on March 31, 2012.
  • Extension of hold harmless payments to qualifying rural hospitals and sole community hospitals with fewer than 100 beds through December 31, 2012.  The hold harmless payment provides reimbursement equal to 85 percent of the difference between an eligible hospital’s outpatient prospective payment system and the hospital’s cost.
  • Extension of the outpatient therapy cap exceptions process through December 31, 2012, with certain modifications.  Also, the spending caps would be extended to the hospital outpatient setting once enforcement of the exceptions process begins.  Previously, hospital outpatient therapies were not subject to the annual caps of $1,880 in 2012.
  • Extension of certain ambulance add-on payments, including two percent for urban ground ambulance service, three percent for rural ground ambulance services, and an increase to the base rate for trips in qualified “super rural” areas.
  • Lowering of hospital bad debt payments (including Critical Access Hospitals and Rural Health Clinics) to 65 percent in 2013 for PPS facilities and a three-year phase-in to those providers currently paid at 100 percent.
  • Reduction on lab payments by two percent in 2013, and a resetting of the lab base reimbursement used in determining future rates (2014 and beyond).
  • Rebasing of the Medicaid Disproportionate Share Hospital (DSH) allotments, thereby reducing overall DSH payments by an estimated $2.5 billion from 2012 through 2022.
  • Reduced funding established under health care reform for prevention and public health (the “Harkin Fund”).  This provision originally provided the Secretary of HHS discretionary spending authorization for activities authorized by the Public Health Service Act.

If you have any questions, or for more information, please contact your Wipfli relationship executive.

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