Healthcare Changes in the Fiscal Cliff Bill

On Monday night, the New Year came and went with the U.S. Senate still in session, debating a last minute compromise bill to avoid the so called “fiscal cliff.” The Senate ended up approving the bill about two hours later, on a vote of 89 to 9. The bill was then sent to the House of Representatives where members, after a day of party meetings, took up the bill at around 10:30pm eastern on January 1st. The bill passed the House, 257-167, and will be signed into law by President Obama.

The bill, known as the American Taxpayer Relief Act (ATRA), avoided the across-the-board spending cuts and tax hikes that were scheduled to go into effect, among other things.

One of the main provisions of the ATRA was to cancel out the massive automatic spending cuts known as sequestration. By doing this, the bill stops the 27% reduction in doctor Medicare reimbursement rates that would have been included in the sequestration cuts.  The ATRA also extends benefits on some outpatient services, extends the Medicare-Dependent Hospital (MDH) Program through Fiscal Year 2013, and extends the Low Volume Hospital Program through 2013.

The MDH Program provides funding for 200 rural hospitals through special Medicare rates resulting from high populations of Medicare patients. A hospital qualifies for the MDH Program if it is located in a rural area, has 100 beds or fewer, is not a "sole community hospital," and has at least 60 percent of inpatient days or discharges covered by Medicare. The Congressional Budget Office (CBO) estimates that this extension would cost approximately $100 million over 10 years.

The Low Volume Hospital program provides additional Medicare funding to hospitals in rural communities that are more than 15 road miles from another comparable hospital and have fewer than 1,600 Medicare discharges per year.

These extensions are offset by cuts in other healthcare spending. The current reduction in rates paid to hospitals for uncompensated care is extended by the bill, funding for the Medicare Improvement Fund is eliminated, and payments for end-stage renal disease treatments is modified.