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TESTIMONY OF
HERB KUHN
DIRECTOR
CENTER FOR MEDICARE MANAGEMENT
CENTERS FOR MEDICARE & MEDICAID SERVICES
ON HOSPITAL BILLING AND THE UNINSURED
BEFORE THE
HOUSE ENERGY AND COMMERCE SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
June 24, 2004
Chairman Greenwood, Rep. Deutsch, thank you for inviting me to speak with
you about the role the Centers for Medicare & Medicaid Services plays in how
hospitals and other Medicare providers bill patients who are uninsured or
under-insured.I want to
acknowledge the Subcommittee for their efforts in bringing to the forefront the
problem of providing quality health care for patients of limited means and I
applaud you for making this important issue the focus of your hearing today.
Combined, the Medicare and Medicaid programs
provide health insurance for over 80 million Americans.The provider reimbursement rules for those programs -should
in no way restrict the ability of hospitals and other providers to offer free or
discounted care to patients who do not have coverage under these two programs.I am here today to talk about how the Medicare program provides the
flexibility for providers to do so if they choose.
Hospital billing for the
uninsured and underinsured is a very timely issue and an issue in which CMS and,
in particular, the Center for Medicare Management, which I direct, have been
deeply involved for over a year.It
was a year ago that we received a request from some hospitals in the country for
guidance on whether it was permissible to discount charges to low income
uninsured or under-insured patients.Some
months later, after responding to numerous inquiries on the issue, CMS began
discussions with your staff in the fall of 2003.In December of 2003, Secretary Thompson received a letter from the
American Hospital Association that alleged that Medicare program rules, as well
as restrictions imposed by the HHS Office of Inspector General, hindered the
ability of hospitals to provide discounts to low-income patients or to patients
who were medically indigent.Secretary
Thompson responded to the AHA letter in February, and subsequently responded to
a letter and request for information from this Subcommittee. CMS also briefed
your staffs in preparation for this hearing.
There are three central topics that most commonly arise when providing
guidance on this issue.I'd like
to address those topics for you today.Then,
to conclude, I'd like to say a few words about what the Medicare and Medicaid
programs are currently doing to assist hospitals that treat the uninsured.Finally, I'd like to conclude by mentioning the many initiatives that
the Administration has taken to reduce the number of uninsured.
Three Topics of Focus on Billing the Uninsured
· Discounts: Medicare billing
requirements do not prevent discounts as long as:
Ø Full charges, not discounted
charges, are reported on the cost report.
Ø Accounts and records are
maintained in a manner that would be necessary for any business.
Indigency
· Medicare indigency requirements
do not prevent discounting to uninsured patients.
Ø Providers may make indigency
(including medical indigency) determinations using their customary methods.
Ø In order to protect all patients
and the Medicare program, the methods used in determining indigency for
non-Medicare patients should be similar to those used for Medicare patients.
Ø Indigency should be supported by
documentation (good business practices would dictate that).
Ø Indigence should be determined on
a patient-by-patient basis because financial need is specific to each patient.
Ø Medicare does not reimburse the
bad debts of non-Medicare patients.
Ø Once indigence is determined,
collection is no longer undertaken with regard to the patient for the forgiven
amount.
Bad
Debt
Medicare
does not require providers to be aggressive in their collection of accounts.Medicare rules state that:
· Efforts to collect from
non-Medicare patients must be similar to the efforts to collect from Medicare
patients.Medicare wants parity in
the treatment of Medicare and non-Medicare patients to protect the program and
all patients, not just our beneficiaries.
· Efforts to collect on accounts
should be more than a token effort.Rather,
they should be positive efforts that would be used in any business.
Since the enactment of the Medicare program in
1965, the program's rules have attempted to prevent "cross-subsidization"
- in other words, preventing the Medicare program from subsidizing a service
that should be paid for by another payor, or preventing another payor from
subsidizing a service the Medicare program should be reimbursing.One way that Medicare's regulations do that is to require
hospitals to list their stated charges for a service on their cost reports for a
service and maintain a uniform charge for a service.To repeat, nothing in CMS regulations prevents a hospital from providing
a discount off of that stated charge.But
when filing its cost report, the hospital must list its full charges.
Without question, a hospital can provide free care
or discount charges to uninsured or underinsured patients.As we noted in our response to the American Hospital Association,
"[n]othing in the Centers for Medicare & Medicaid Services' (CMS')
regulations, Provider Reimbursement Manual, or Program Instructions prohibit a
hospital from offering discounts to any patients, Medicare or non-Medicare,
including low-income, uninsured or medically indigent individuals."
In reference to the ability of a hospital to
develop an indigency policy, it may be overstating matters to say that the
Medicare program imposes a "restriction" on this.Hospitals - not the federal government - set their own indigency
policies and have the discretion and flexibility to define eligibility
indicators including income level.This
makes sense because a hospital, as a community institution, is in the best
position to know what policy best suits the community that it serves.
As
I have stated earlier, if a hospital wishes to provide a discount off of its
customary charges as part of an indigency policy, it can do so, but it must
report the full charge for that
service on its Medicare cost report.
Turning to the issue of bad debt, we often hear
from hospitals that Medicare somehow "requires" aggressive collection
efforts that include attaching a patient's home, use of a bill collector, and
other similar tactics.The reality
is otherwise.The Medicare program
does not require any particular level of collection activity.It does not require that collection activities be "aggressive."It does not require that hospitals seize patient's homes or bank
accounts.What the program does
require, however, is that if the hospital wants to bill the Medicare program for
bad debt related to unpaid deductibles and coinsurance by Medicare
beneficiaries, it must use the same level of collection activity to secure
collection of those debts by Medicare patients as it does to secure collection
of debts by non-Medicare patients.For
example, if a hospital wants to use a bill collection agency for its bad debts,
it cannot turn only non-Medicare patient bills over to that collection agency;
rather, the hospital must treat all bad debts the same.The principle, again to prevent cross-subsidization, is that collection
of Medicare and non-Medicare debts need to be treated similarly.
In addition, a hospital may make an individualized indigency
determination for a particular Medicare patient and excuse that patient from any
efforts to collect unpaid deductibles and coinsurance.Doing so would not prevent the hospital from collecting Medicare bad debt
payments from other payors on those unpaid amounts, provided the hospital treats
all indigent patients the same.This
is also true if the patient is a dually-eligible Medicare and Medicaid
beneficiary.In such a case, the
hospital would submit a bill for the unpaid deductible and coinsurance amounts
to the state Medicaid plan.If the
state Medicaid plan was not liable and denied payment on the account, the
hospital could bill the Medicare program for it as a bad debt.
It is also important to note that in very limited circumstances, Medicare
reimbursement could be affected by the "lesser of cost-or-charges," or
"LCC" principle.This principle was of significant importance in the early
years of the program, but is admittedly less so now that most providers are
reimbursed on the basis of a prospective payment methodology rather than on the
basis of costs.However, where the
LCC principle is applicable, a Medicare provider is paid the lesser
of its actual costs or its actual charges.Implementing a reduced charge program for uninsured patients could
potentially trigger the LCC principle because if a hospital lowered charges for
enough patients, a hospital's fiscal intermediary could take the position that
a hospital's charges were not its posted, or stated, charges, but rather, the
charges applicable to most of its patients who were receiving discounted
services.If the FI did take that
position, it could then invoke the LCC principle and pay the hospital that lower
charge-based amount.
Few providers are subject to the principle at all.The only example I am aware of is a pediatric or cancer hospital in its
first year of operation, before it becomes subject to the TEFRA methodology,
because there are no base year costs upon which to calculate a TEFRA target rate
limitation.Other providers,
including critical access providers, are not subject to the LCC provision.
The Office of Inspector General Guidelines
I cannot speak for the Office of Inspector General (OIG), but I will note
that shortly after we released our letter to the AHA, the OIG put on its website
a document addressing the application of its fraud and abuse authorities to
discounts for uninsured patients and cost-sharing waivers for financially needy
Medicare beneficiaries.
Lewis
Morris, the Chief Counsel to the Inspector General, is here with me today to
address the OIG's perspective on these issues.
Funding Programs for Uninsured Individuals
CMS has done its share to reimburse hospitals for the treatment of
uninsured individuals.Since 1986, select hospitals have received reimbursement
under the Medicare disproportionate share(DSH)
program.Hospitals qualify for
Medicare DSH payments if they treat a "disproportionate share" of low-income
patients - defined in the statute as the share of a hospital's total
inpatient days attributable to Medicare patients who are also eligible for SSI
compared to all Medicare patients plus days attributable to Medicaid patients
compared to all patients.As I
mentioned above, Medicare also reimburses hospitals for the bad debt that arises
from treating low-income Medicare beneficiaries who are unable to pay their cost
sharing and deductible amounts.Finally,
the Medicaid program requires states to designate certain hospitals as
disproportionate share under their state Medicaid plans, and make additional
payments to those DSH hospitals.The
Medicaid DSH program is also advantageous for states because DSH payments to a
hospital under a state plan are not counted in determining whether or not the
state has breached the Medicaid upper payment limit, thus enabling states to
increase payments to other providers participating under their state plan.
Other Administration Initiatives for the Uninsured
In addition to providing the guidance to hospitals on the uninsured, this
Administration has undertaken other initiatives to address the plight of
individuals who otherwise lack access to health insurance or who may be
under-insured.For example, the
Administration has dramatically increased funding to federally qualified
community health centers, the "front line" treatment option for low-income
uninsured individuals.The
Administration provides an advanceable health coverage tax credit to certain
individuals who are receiving a pension from the Pension Benefits Guaranty
Corporation or who have become unemployed due to the adverse effects of
international trade and are eligible for Trade Adjustment Assistance.This tax credit pays 65% of the premium for qualifying health insurance,
including either employer-sponsored "COBRA" coverage or a state-designated
private health insurance plan.The
Administration's Medicaid waivers, state plan amendments, and HIFA waivers
have provided health insurance for 2.6 million people who would have otherwise
lacked coverage, and enhanced existing benefits for nearly 7 million
individuals.
Many of you in Congress voted for and deserve
credit for the provisions in the Medicare Modernization Act that will
revolutionize health savings accounts and help make insurance more affordable
for millions of Americans.In
addition to creating a Medicare prescription drug benefit and providing interim
savings and subsidies through Medicare-approved discount cards, this historic
legislation allows people to establish health savings accounts (HSAs) in
conjunction with affordable, high-deductible major medical coverage.These new products will make health insurance more affordable to
businesses large and small, as well as to individuals whose employers do not
sponsor coverage.The President has
proposed to provide further assistance to such individuals by allowing them to
claim an above-the-line deduction of the major medical insurance premiums.
For working
individuals and families who would not benefit from tax deductibility because
their incomes are too low, the President has proposed $70 billion in refundable,
advanceable tax credits.He also
proposed allowing expanded use of association health plans that allow small
businesses to more easily pool resources to purchase health insurance.Combined with the steps that we have already taken, enactment of these
and other measures will further reduce the number of individuals without health
insurance in the United States.
Mr. Chairman and Congressman Deutsch, thank you for your invitation to
testify this morning.I am happy to
answer any questions that you may have.
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