The Medicare Improvements for Patients and Providers Act (MIPPA)

Summary of Key Provisions

Medicare Advantage Improvements

• Reduces overpayments to private Medicare Advantage plans by phasing out an adjustment for indirect medical education (IME).

Teaching hospitals receive Indirect Medical Education (IME) payments each time a Medicare beneficiary is admitted to help with the extra costs of educating doctors and providing more intensive care. These payments are also included in the calculation of payments to Medicare Advantage (MA) plans, but the plans are not required to provide payments to teaching hospitals. The Medicare Improvements for Patients and Providers Act (MIPPA) eliminates the duplicate payments by phasing out the IME adjustment in MA rates; teaching hospitals will still be reimbursed directly by Medicare.

• Requires private fee-for-service (PFFS) plans to establish provider networks and to measure and report on the quality of care they deliver.

On average, the government pays PFFS plans 17 percent more than would be paid per beneficiary under traditional Medicare. Despite receiving excessive subsidies, PFFS plans are inefficient and largely unregulated by the government. They are easier to establish than other Medicare Advantage plans in part because they are not required to establish a network of providers or collect data on quality of care. The MIPPA requires PFFS plans to have contracts with hospitals and providers in most areas beginning in 2011. In addition, the legislation requires PFFS plans to report data on the same quality measures as reported by other MA plans, which is intended to help patients in choosing a plan, beginning January 1, 2010.

• Reduces money in the Medicare Advantage Stabilization Fund.

The Medicare Modernization Act of 2003 (MMA) created a $10 billion "stabilization" fund to benefit regional preferred provider organizations (PPOs). The goal of the fund was to entice private PPOs to enter into and remain in the Medicare program. Since there has been heavy PPO participation in the Medicare program without the use of the additional incentives, it appears unlikely that these funds will be needed in future years. The nonpartisan Medicare Payment Advisory Commission (MedPAC) has recommended that this stabilization fund be eliminated. The MIPPA removes $1.8 billion, all but $1, from the stabilization fund for regional preferred provider organizations in 2012.

• Prohibits and limits certain sales and marketing activities under Medicare Advantage and Part D prescription drug plans.

Inflated payments to private plans allow them to offer exceedingly large commissions to agents who enroll beneficiaries into Medicare Advantage plans, particularly PFFS plans, regardless of whether or not the plan meets their needs. To receive their commissions, some insurance agents have engaged in fraudulent activities. A survey of state insurance departments in 2007 found that 39 of 43 states had received complaints about misrepresentations and inappropriate marketing practices of Medicare Advantage plans. In most cases, these practices led to Medicare beneficiaries enrolling in a private plan without adequate understanding of the plan or of their ability to stay in traditional Medicare. The MIPPA p rohibits certain sales activities of Medicare Advantage (MA) plans and Part D drug plans, including door-to-door sales, cold calling, free meals, and cross selling of non health-related products; and requires limitations on commissions and gifts, effective for the 2009 plan year.

Beneficiary Improvements

• Provides Medicare mental health parity.

Under current law, Medicare imposes a discriminatory coinsurance rate of 50 percent for outpatient mental health services, as compared to 20 percent for most other services. The MIPPA phases down Medicare's coinsurance for outpatient mental health services to the 20 percent rate over a five year period, beginning in 2010.

• Offers new preventive benefits to Medicare beneficiaries.

There is a growing awareness of the importance of preventive services in the early detection of health problems and of risk factors for future health problems. The MIPPA makes it easier to add preventive services to the list of Medicare-covered services by allowing coverage of services if they are recommended by the U.S. Preventive Services Task Force. The bill would also improve the "Welcome to Medicare" initial preventive exam by waiving the deductible and extending the eligibility period from six months to one year after enrollment in Part B.

• Extends the exceptions process for therapy caps.

Congress has limited the amount of Medicare coverage for beneficiaries receiving outpatient therapy services, including physical therapy, speech-language pathology services, and occupational therapy. To compensate for these limits, Congress created an "exceptions process" which allows for specific diagnoses and procedures to receive Medicare coverage even after a beneficiary has met their therapy cap for the year.  This exceptions process was scheduled to end June 30, 2008, but the MIPPA Act extends it through December 31, 2009.

• Modifies the Medigap program.

The MIPPA directs the Department of Health and Human Services to work with states to establish new requirements for Medigap plans. Plans made redundant by Medicare Part D will be eliminated. Plan benefit structures are modified, and two new types of plans are allowed that alter cost-sharing structures. The new law also clarifies that Medicare Advantage and PFFS plans must meet the requirements for Medigap plans that exist in current law.

• Provides better care for patients with kidney disease, also known as end-stage renal disease (ESRD).

Medicare provides coverage to all patients with kidney failure, regardless of their age. Currently, Medicare payments to dialysis facilities are divided into separate payments for most items and services needed to treat dialysis patients along with additional payments for drugs and laboratory services. The MIPPA modernizes this payment system by "bundling" all the costs of ESRD care into a single payment, beginning January 1, 2011. This provision is designed to ensure that patients receive the most appropriate care and that providers receive appropriate reimbursement depending on the health status of the patients they serve. In addition, the legislation establishes a new Medicare benefit to help people with advanced kidney disease, but before kidney failure occurs, to learn more about the options for dialysis and transplants and prepare for the treatment that is best for them.

• Delays a competitive bidding demonstration for durable medical equipment, prosthetics, orthotics and supplies (DMEPOS).

Under current law, Medicare pays for DMEPOS items based on a traditional fee schedule, which some believe is overpaying for items and services. In order to reform the payment system, the Medicare Modernization Act of 2003 (MMA) requires the phase-in of a competitively bid system, which the Centers for Medicare and Medicaid Services (CMS) intended to implement in 10 metropolitan areas on July 1, 2008. However, concerns were raised by suppliers about the bidding process and by beneficiary advocates that implementation could lead to access and quality problems. Therefore, the MIPPA delays the competitive bidding program and restarts Round 1 in 2009, makes improvements to the bidding process, and establishes quality measures for DME suppliers. The legislation does not include cuts in funding for oxygen supplies and equipment or for power wheelchairs.

Low-Income Improvements 

• Extends the Qualifying Individual (QI) program.

Authorization for the QI program expired on July 1, 2008. The MIPPA restores authorization through December 1, 2009 and authorizes funding levels necessary to cover beneficiaries currently helped by the program. The QI program pays Part B premiums for beneficiaries with incomes between 120 and 135 percent of the Federal poverty line.

• Raises allowed asset levels in the Medicare Savings Program.

Low-income beneficiaries depend on the Medicare Savings Program (MSP) for assistance with the cost-sharing requirements of Parts A and B. Under current law, beneficiaries cannot qualify for the program if they have total assets of more than $4,000 for individuals and $6,000 for couples. These limits have not been changed since 1989. The MIPPA, however, raises these asset levels to those used for the Low Income Subsidy (LIS) in Part D: $6,000 for individuals and $9,000 for couples in 2008.

• Codifies suspension of the late enrollment penalty for Part D beneficiaries who qualify for Low Income Subsidy (LIS) assistance.

Currently, CMS guidance prevents Part D enrollees who qualify for reduced cost-sharing under the LIS program from being charged a late enrollment fee. The MIPPA codifies this policy in statute.

• Excludes the value of life insurance policies and in-kind support from resource calculations for LIS.

Current law allows CMS to consider the value of life insurance policies and support provided by family members and community organizations as part of a person's financial resources in determining eligibility for the Part D LIS program. The MIPPA clarifies that these resources may not affect eligibility.

Part D Benefit Improvements

• Requires Part D plans to cover benzodiazepines and barbiturates.

Benzodiazepines are a class of drugs commonly used by individuals with mental illnesses. A number of people with epilepsy or other seizure disorders rely on barbiturate medications to avoid acute problems. Many seniors in nursing homes and extended-care facilities rely on these drugs. The MIPPA requires Part D drug plans to cover both of these medication classes.

• Codifies a requirement for Part D plans to cover most drugs in certain important classes of drugs.

CMS guidance currently requires drug plans to cover "all or substantially all" drugs in classes of medications for which lack of timely access to a particular medication can result in serious clinical consequences. Currently protected are anticancer drugs, immunosuppressants, HIV/AIDS drugs, anticonvulsants, antipsychotics, and antidepressants. The MIPPA provides statutory protection for medication classes of this kind and requires CMS to define any exemptions to this policy.

Physician Services under Part B

• Blocks a scheduled 10.6 percent cut to physician fees.

On July 1, 2008, payments for physicians' services were scheduled to be cut by 10.6 percent under the Sustainable Growth Rate (SGR) formula that determines doctors' fees for Medicare outpatient services. The American Medical Association and other physician groups warned that doctors would likely respond by refusing to accept new Medicare patients. The MIPPA averts this cut through the end of 2008, and it increases physician fees by 1.1 percent in 2009.

• Incentivizes adoption of electronic prescribing by physicians.

The MIPPA creates new financial incentives to encourage Medicare physicians to adopt technology that will allow them to order prescriptions electronically. Use of this technology will reduce medical errors and help physicians consider cost issues as they make prescribing decisions. Beginning in 2009, physicians will receive a 2 percent increase in payments, phasing down to 0.5 percent in 2013. However, in 2014 and afterward, physicians that have not implemented the technology will lose 2 percent of their payments.

• Increases incentives for physician quality reporting.

The Medicare Physician Quality Reporting Initiative is extended by the MIPPA. Physicians reporting on approved quality measures are provided a 2 percent incentive payment for the services they deliver in 2009 and 2010. The law also requires that a formal standard setting agency endorse measures used in the program in consultation with relevant medical specialty organizations.

 

Government Relations and Policy, September 2008