Private Sector Fees, Taxes, and Payment Cuts
Issue: The Patient Protection and Affordable Care Act (PPACA) imposed a number of fees, taxes, and payment reductions for insurers, providers, as well as device and pharmaceutical manufacturers. Pharmaceutical manufacturers are required to pay fees totaling $3 billion in 2014, based on their market share of the sale of branded prescription drugs. Last year, the medical device tax began requiring manufacturers to pay a 2.3 percent excise tax, expected to total $1.7 billion in the first year. This year, health insurers are required to pay annual taxes totaling $8 billion and increasing to $14.3 billion in 2018, rising with premium trends thereafter. PPACA changes also reduced Medicare provider and plan payments by nearly $500 billion over 10 years. Congress continues to seek a permanent solution to the sustainable growth rate (SGR) Medicare physician payment formula. Finally, arbitrary healthcare cuts remain a threat through the yet-to-be-formed Independent Payment Advisory Board (IPAB).
HLC Position: HLC is concerned that cuts in provider payments to maintain program solvency, without long-term structural reforms, will limit patient access to quality health services. Provider payments should be structured to encourage care coordination and reward quality care and positive outcomes in both the public and private sectors. HLC supports user fee programs, such as the Prescription Drug User Fee Act (PDUFA) and the Medical Device User Fee Act (MDUFA), as a way to facilitate transparent and expedient review of lifesaving drugs and medical devices. However, HLC is concerned that nonuser fees and taxes, such as the medical device excise tax and pharmaceutical and insurer fees, may be passed on to the consumer in the form of higher prices for products and insurance premiums. These fees could also decrease innovation and inhibit job creation by draining funds that would otherwise be available for investment by manufacturers on the cutting edge of ground-breaking new therapies and technologies. HLC continues to oppose the IPAB and continues to lead a coalition dedicated to repealing it.
HLC Recent Activity:
- HLC wrote Rep. Kevin Brady (R-TX), the primary sponsor, in support of the “American Research and Competitiveness Act of 2014,” H.R. 4438. HLC also issued a press release in support of this legislation applauding bill cosponsors for taking action to protect jobs in the United States and support the development of lifesaving treatments for patients.
- HLC leads an informal coalition of stakeholders opposing the Independent Payment Advisory Board and utilized this group to conduct outreach and collect signatures for a letter asking lawmakers to repeal IPAB. These efforts have convened over 500 stakeholders, representing a breadth of entities including all sectors of the healthcare industry, employers of different sizes and geographic locations, purchasers of care, consumers, and patients. HLC continues to leverage its social media platforms to raise HLC’s concerns with IPAB and to urge repeal.
- HLC works to educate congressional leaders about how a consistent, long-term policy to replace the Medicare SGR would increase innovation and improve quality across the entire healthcare industry. HLC emphasizes how the unpredictability in costs and revenues due to SGR negatively affects long-term strategies to improve healthcare through the innovative new approaches of HLC members and urges Congress to seek a long-term solution.
- HLC closely tracks the ongoing activities related to the recommendations of the Food and Drug Administration Safety and Innovation Act (FDASIA) federal advisory workgroup and subsequent report issued by the Office of the National Coordinator (ONC) for Health Information Technology (HIT), the Federal Communications Commission (FCC), and the Food and Drug Administration (FDA). HIT software could become subject to a new tax, depending on the results of regulatory or congressional activity on this issue.
- HLC continues to stress the negative impact of the sequester cuts mandated by the Budget Control Act of 2011. Hospitals, physicians, and other care providers, including Medicare Advantage plans and the companies running Medicare Part D plans, are subject to an additional 2 percent in ongoing automatic spending cuts on top of the already more than $700 billion in cuts from the 2010 healthcare law.
- HLC monitors the regulatory implementation of the FDA user fee law.
- HLC joined with other organizations in running an ad urging Congress to eliminate the medical device tax.
- HLC President Mary R. Grealy and HLC staff have given speeches and presentations before healthcare leaders and policymakers.
- HLC uses in-district meetings as a venue to demonstrate the local impact of burdensome fees and taxes on the healthcare industry and support their repeal.
- HLC leverages its social media platforms to support the repeal of health industry fees and taxes that ultimately are passed on to consumers and customers.
Key Action Since the June 2014 Membership Meeting:
- In September, the Government Accountability Office (GAO) published a report, “CMS Should Fully Develop Plans for Encounter Data and Assess Data Quality before Use.” The report examines Medicare Advantage encounter data that CMS began collecting in January 2012 – and intends to use to determine payments in 2015. The GAO report found that the agency has not taken appropriate actions, such as performing statistical analyses, to guarantee that MA encounter data are complete and accurate.
- On August 20, the Treasury Inspector General for Tax Administration released a report that found the Internal Revenue Service (IRS) does not know how many companies are subject to the medical device tax. Some companies are paying too much while others are underpaying. It counted 51 tax returns in which companies potentially understated how much they owed by $76 million and 225 tax returns in which they may have overpaid by $42 million. Morover, the IRS wrongly issued more than $700,000 in penalties to companies for failing to pay, the report said.
- In late July, it was reported that Senator Barbara Boxer (D-CA) and other Democrats sought to advance a partial repeal of the medical device excise tax. The plan would repeal the Affordable Care Act’s 2.3 percent medical device tax for small businesses only. “There’s a way to compromise so that the small people get a break but the big people pay their fair share,” said Boxer. Senator Orrin Hatch (R-UT) offered his proposal for full repeal as an amendment to an unrelated tax bill. Procedural efforts, however, blocked a vote on Hatch’s amendment.
- On August 1, the FDA published a notice in the Federal Registerthat estimates 50 outsourcing compounders will register with FDA and pay associated fees, with five of those facilities expected to qualify for small business fee reductions. A registration period runs from October through December, and outsourcing facilities must pay the fee — the first time they are required to – to remain registered. The fiscal 2015 rates are $5,103 for small businesses, $16,442 for larger businesses, and $15,308 for facility reinspections, according to the notice. The Drug Quality and Security Act created the new voluntary category of outsourcing facilities and authorized fees associated with the facilities and those subject to reinspections.
- In August, HHS urged the courts to dismiss the American Hospital Association’s (AHA) lawsuit over the two-midnight inpatient admission policy and time restrictions on rebilling claims. AHA has countered the government’s move by repeating its request that the court decide immediately in the group’s favor.
- AHA earlier this year sued HHS over the two-midnight policy, physician order requirements, and the one-year time limit to refile Medicare inpatient claims as outpatient claims if it is determined that a patient was treated in the wrong setting. The hospitals say the two-midnight policy is arbitrary and capricious because it attempts to change the definition of what it means to be admitted to a hospital by saying an inpatient stay should last at least two midnights.
- On September 2, CMS proposed a settlement, offering hospitals 68 percent of what they have billed the government to settle pending appeals challenging Medicare’s denials of reimbursement for short-term care. Hospitals have until Oct. 31, 2014, to participate in the settlement or request an extension.
- On August 4, the Centers for Medicare and Medicaid Services (CMS) issued its final rule for the 2015 Medicare Inpatient Prospective Payment System (IPPS). Included is a 0.8 percent cut in hospital reimbursement to fulfill the requirements of the sequestration under the American Taxpayer Relief Act of 2012. Medicare payments for inpatient treatment at acute-care hospitals would decrease by $241 million in fiscal 2015. Also included in the rule is a reduction in Medicare disproportionate share hospital (DSH) payments by 1.1 percent in FY 2015. DSH payments will be reduced 75 percent by 2019, or $49.9 billion, as part of PPACA.