Healthcare Update: Sequester to Squeeze Medicare Payments; CMS Announces New Participants in Community-Based Care Program


    The automatic spending cuts that went into effect on March 1 under the Budget Control Act, also known as the sequester, included 2% cuts to provider payments under the Medicare program. While cuts to other federal agencies were more substantial – an average of 8% – the new Medicare cuts would nonetheless amount to $11 billion over one year, according to the White House, if the sequester lasts that long. The Centers for Medicare & Medicaid Services (CMS) has announced that the payment reductions will be effective for services provided to Medicare beneficiaries on or after April 1.

    The new cuts are in addition to recent payment reductions under the Patient Protection and Affordable Care Act, which particularly affected hospitals. Although CMS has not announced details of how it will implement the cuts, the 2% reductions are expected to apply roughly equally to Medicare payments to hospitals, physicians and other healthcare providers. As most know, in order to end the sequester, Congress must agree on replacement cuts.

    Although payments to providers will be reduced by 2%, Medicare beneficiaries will not receive the benefit of comparable reductions of their deductibles and co-insurance payments.

    In addition to the provider payment reductions, CMS’s own administrative and staffing costs will be subject to the larger 8% cuts. If the sequester persists, it may affect the ability of CMS and the Department of Health and Human Services (HHS) to execute their obligations under the Affordable Care Act, including with regard to the establishment of state health insurance “marketplaces,” or exchanges; 26 states have elected to have the federal government operate exchanges for them, and seven other states opted for a partnership model with HHS for their exchanges. The sequester cuts will also affect previously approved federal grants to states to set up their exchanges. Open enrollment on state exchanges is scheduled to begin on October 1 of this year.

    On March 7, CMS announced 20 additional participants in the Affordable Care Act’s Community-based Care Transitions Program (CCTP), an initiative with the stated goals of improving transitions of beneficiaries from hospitals to other care settings, improving quality of care, reducing hospital readmissions, and documenting savings to the Medicare program. CMS maintains a website with information on the CCTP and the 102 organizations chosen to participate in the initiative thus far, and a map showing their locations.

    The CCTP was launched in 2011 and will run for five years. Participants are awarded two-year agreements that may be extended annually through the duration of the program based on performance. The CCTP is part of the Partnership for Patients, a nationwide public-private partnership that aims to reduce preventable hospital-acquired conditions by 40% and hospital readmissions by 20%. Participants in the CCTP include area hospitals, nursing homes, social service providers, home health agencies, pharmacies, primary care practices, and other healthcare providers serving patients in each community. Up to $500 million in total funding is available for the program over its five-year duration. Additional information on the CCTP is available in a CMS fact sheet.

    Edwards Wildman’s Healthcare Practice Group will continue to monitor healthcare news from Capitol Hill, CMS, HHS, and other federal and state agencies and courts, and will bring you timely updates as new developments occur.

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