April 1st has come and gone. The affects of the Sequestration will now begin to hit the healthcare industry full force. But what does that mean for you? The large impact may not be felt immediately. It will take some time for the results of Medicare re-imbursement to be fully realized. lets look at some basics on how you will be affected.

According to the Congressional Research Service, percentage payment reductions made under Medicare Parts A and B will be made to individual payments to providers for services (e.g., hospital and physician services) rather than to fee schedule allowable charges. Therefore, it has been ACP’s understanding, which has now been confirmed by CMS, that for Part B services provided under assignment (i.e., when the patient agrees to have Medicare pay the physician directly), the reduced Medicare payment would be considered payment in full to the physician (meaning that the physician’s payment receives the 2 percent reduction), but the patient’s cost sharing amount remains unchanged.

Physicians will begin to see their Medicare payments cut by 2% for services rendered as of April 1st as the federal budget sequester takes effect. Their patients will still be responsible for co-insurance and deductibles at the same, pre-sequester level. For unassigned claims, reimbursements to beneficiaries would be subject to the 2% sequester reduction just like payments to physicians on assigned claims.

A procedure that today generates $100.00 for a practice participating in Medicare will bring in only $98.40 under sequestration. Medicare’s payment to the practice will be reduced by 2%, from $80.00 to $78.40 while the patient will continue to be responsible for the full $20.00 co-insurance.

This math has special implications for physicians who elect non participation status in Medicare. Contrary to what the term implies, non participation does not mean that a physician shuns the program. Rather, nonparticipating physicians can choose to accept the Medicare allowable as payment in full — taking assignment on a claim, in CMS parlance — on a patient-by-patient or claim-by-claim basis. If they choose not to take assignment on a particular claim, they’re eligible to receive only 95% of the allowable. As always, the patient is responsible for 20% of that amount.

Impact on the Department of Health and Human Services’ Programs

The report released by OMB identifies $6.57 billion in the Department of Health and Human Services (DHHS) discretionary spending. DHHS faces the second largest cuts within the BCA; the Department of Defense cuts being the largest.

Contractors with the Centers for Disease Control and Prevention (CDC) and researchers for the National Institutes of Health (NIH) will be the hardest hit by the sequestration cuts in the DHHS’ budget.

$470 million in discretionary spending will be sequestered in the CDC budget, $2.5 billion at the NIH and $509 million at Health Resources and Services Administration (HRSA). The Food and Drug Administration (FDA) budget will be cut by $318 million dollars.

Exemptions
In the law, Congress outlined healthcare related accounts that would be exempt from these cuts. The exemptions include:

• All programs administered by the Department of Veterans Affairs
• Grants to States for Medicaid
• Children’s Health Insurance Fund
• Non‐defense un-obligated balances
• Black Lung Disability Trust Fund Refinancing
• Medical Facilities Guarantee and Loan Fund
• Payment to Department of Defense Medicare‐Eligible Retiree Health Care Fund
• Payments to Health Care Trust Funds
• Payment to Radiation Exposure Compensation Trust Fund
• Radiation Exposure Compensation Trust Fund
• Vaccine Injury Compensation
• Vaccine Injury Compensation Program Trust Fund
• Black Lung Disability Trust Fund
• Department of Defense Medicare‐Eligible Retiree Health Care Fund
• Energy Employees Occupational Illness Compensation Fund
• Postal Service Retiree Health Benefits Fund
• Retirement Pay and Medical Benefits for Commissioned Officers, Public Health Service

Unfortunately, threats of payment cuts are nothing new in physician practices and a 2 percent cut may seem small compared to much larger cuts threatened each year due to the sustainable growth rate (SGR). However, under sequestration the “trickle down” effect may have deeper ramifications due to the other impacts patients may face, such as job losses and/or furloughs, hospitals having to reduce services due to payment cuts, and more. Practices should keep an eye on payments from all sources and should consider adjusting their annual budget to account for possible revenue shortfalls.

Medical Management Services will keep you posted on any further changes that surface as the ramifications of this sequestration unfold.