Washington Report –February, 2011
Bill Finerfrock, David Connolly, Leigh Perica and Zhaneta Mansaku
Government Shutdown or Showdown?
2012 Budget and SGR Fix
EHR IncentivePayments Are Now Available
HHS Imposes $4.3 Million CMP For Violations Of HIPAA Privacy Rule
5010 Is Coming, Are You Ready
Don, We Hardly Knew Ya…
Wave If YouGot a Waiver
Repeal, Replace orLitigate
Who Are These People – a Series
1099Repeal on the Horizon?
CMS Transmittals
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Government Shutdown or Showdown?
If the government shuts down and no one notices, did it really shut down? The answer to that question may get answered in the not too distant future if the two Houses of Congress and the President are unable to reach an agreement on government spending to cover the remainder of the current Fiscal Year.
When the 111th Congress adjourned in December 2010, it failed to not only pass a budget for the first time in more than 30 years, it also failed to pass a single appropriations bill for the first time in our nation’s history. Consequently, the federal government has been operating on what is known as a “Continuing Resolution” since October 1, 2010.
A Continuing Resolution (CR) is a piece of legislation that effectively extends the Fiscal Year beyond its normal end of September 30th. And while enactment of CRs is fairly commonplace, most are for short periods of time or only cover a few agencies or programs, not the entire government. When a CR is in place, government agencies covered by the CR are authorized to continue spending money on programs approved under the previous appropriation bill but no new programs or initiatives can be undertaken. In effect, it freezes federal spending at the previous years level.
If Congress and the President are unable to reach agreement on a new spending bill by March 18thmany people have wondered what actions will/could be taken to close the government and what will/could remain open.
The last time we faced a similar situation was 1995. In that year, the Republican Congress and President Clinton were unable to reach agreement on spending bills for a number of federal agencies. For 21 days spanning late 1995 and early 1996, “non-essential” federal employees for several Departments were furloughed and a partial government shut-down ensued.
Employees of each agency deemed “essential” would still be required to report to work. Essential employees are determined by each agency in a plan submitted to the Office of Management and Budget (OMB) in case of a shutdown. The definition of an essential employee is one who performs “duties vital to national defense, public health and safety, or other crucial operations.”
Federally funded healthcare (Medicare and Medicaid) was continued during the 1995 shutdown, and evidence suggests that it would be automatically continued if a future shutdown occurred. During the 1995 shutdown, essential employees under public health and related crucial operations included employees in the Healthcare Financing Administration (now known as CMS) who handled Medicare claims administration (including contractors).
Evidence suggesting that these services will continue in the current environment is also based on a White House memo that states that programs with indefinite appropriations are not affected by annual appropriations legislation. The statement in context follows:
“Not all government functions are funded with annual appropriations. Some operate under multi-year appropriations and others operate under indefinite appropriations provisions that do not require passage of annual appropriations legislation. Social security is a prominent example of a program that operates under an indefinite appropriation. In such cases, benefit checks continue to be honored by the treasury, because there is no lapse in the relevant appropriation.”
As with Social Security, Medicare and Medicaid operate under “indefinite appropriations” and CMS employees (and contractors) responsible for ensuring payment of claims would, therefore, be deemed essential.
Ideally, the Congress and the President will be able to work out a compromise that is able to garner support from a majority in the House of Representatives and a majority in the Senate. Unfortunately, if past is prologue – and in these cases it usually is – a compromise won’t be reached until the last minute.
HBMA will continue to monitor this process and encourage Congress and the President to resolve their budget differences.
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2012 Budget and SGR Fix
On Monday, February 14, 2011, President Obama submitted his Fiscal Year 2012 budget to Congress.
According to Administration officials, President Obama’s budget would trim the deficit by $1.1 trillion over 10 years, with two-thirds of the savings coming from proposed spending cuts and one-third from proposed tax increases.
The President’s budget proposes a $663 million increase in CMS’s discretionary budget which reflects money needed to implement the health care reform law enacted last year.Republicans in both the House and Senate are seeking to eliminate these funds in order to “starve” the implementation of the Patient Protection and Affordable Care Act.
President Obama’s budget proposes a 2 year SGR fix. In essence, he is proposing a 2 year freeze of physician payments covering CY 2012 and CY 2013. His budget then assumes that Congress will find a permanent fix for the SGR problem beginning in 2014.
The short-term impact of freezing the Conversion Factor for two years would be an additional $62 Billion in Medicare expenditures relative to what would have been spent if the SGR related cuts go into effect. The President proposes to "pay for" this freeze by eliminating fraudulent or wasteful spending in the Medicare program, making various changes in the Medicaid program that would reduce federal outlays, impose a financial penalty on providers who do not update their Medicare enrollment information, and other activities aimed at reducing costs.
According to the President’s budget, the long-term cost of fixing the SGR problem is estimated at $315 Billion over 10 years. The President's budget assumes that this will occur and that Congress will find the money to pay for this fix. However, no specific long-term proposals for how to fix the SGR problem are put forward by the Obama Administration nor is there any proposal for how to pay for the unspecified fix.
With regard to the SGR problem, the President’s budget documents say the following:
"The Administration is committed to working with Congress to achieve permanent, fiscally responsible reform and to give physicians incentives to improve quality and efficiency, while providing them with predictable payments for the care they furnish to Medicare beneficiaries."
Below is a chart that highlights various key proposed funding levels for CMS. The line-item identified as “Program Operations” funds such activities as claims processing, provider enrollment and other administrative activities carried out by Medicare’s contractors. We would also direct your attention to the line-item for the Recovery Audit Contractor program. The Obama Administration proposes to more than double the amount of money available for RAC audits, dramatically expanding this program in 2012.
Dollars are in Millions
2010 Actual / 2011 Continuing Resolution (CR) / 2012 estimateProgram operations / $2,404 / $2,689 / $3,245
Federal administration / 697 / 767 / 925
State survey & certification / 366 / 469 / 417
Research, demonstrations / 39 / 602 / 90
High-risk pool grants / 55 / 55 / 44
ARRA Medicare/Medicaid HIT / 88 / 191 / 201
Consumer Assistance Grants / 1 / 29 / 0
Recovery audit contractors / 26 / 259 / 500
CLIA / 54 / 43 / 43
Data Sales / 8 / 2 / 2
Coordination of Benefits / 42 / 52 / 59
It is important to note that the President’s budget is a proposal. It has no binding authority on Congress or the agencies. The House and Senate will each adopt their own budget documents sometime this spring and attempt to reconcile the differences between the two versions. Unlike actual spending bills, the budget passed by Congress does not go to the President for signature or approval.
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EHR Incentive Payments Are Now Available
According to a press release issued by the Centers for Medicare and Medicaid Services (CMS), the initial response to the EHR incentive program has been very positive. CMS has announced that more than 21,000 providers “initiated registration for the Medicare” EHR meaningful use incentive program and four states have reported initial Medicaid incentive payments totaling more than $20 Million.
The Office of the National Coordinator for Health Information Technology (ONC) also announced that as of Feb. 11, 2011, “more than 45,000 providers requested information or registration help from 62 Regional Extension Centers (RECs).”
CMS and ONC interprets this early interest in the Medicare and Medicaid EHR programs to be reflective of “strong support for these programs that will advance health care through improvements in patient safety, quality of care, and patient involvement in treatment options.”
CMS has asked that we remind eligible professionals that they must register in order to participate in the Medicare and Medicaid EHR incentive programs. Registration opened on Jan. 3, 2011, at
For the Medicaid EHR Incentive Program, providers will follow a similar process using their state’s attestation system. Check here to see states’ scheduled launch dates for their Medicaid EHR Incentive Programs:
For more information on the Medicare and Medicaid EHR Incentive Programs, visit
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HHS Imposes $4.3 Million CMP For Violations Of HIPAA Privacy Rule
The U.S. Department of Health and Human Services’ (HHS) has concluded that Cignet Health of Prince George’s County, Md., (Cignet) violated the HIPAA Privacy Rule and therefore, the agency “has imposed a civil money penalty (CMP) of $4.3 million for the violations.” This represents the Civil Monetary Penalty (CMP) issued by the Department for a covered entity’s violations of the Privacy Rule.
In making the announcement, HHS Secretary Kathleen Sebelius said, “Ensuring that Americans’ health information privacy is protected is vital to our health care system and a priority of this Administration. The U.S. Department of Health and Human Services is serious about enforcing individual rights guaranteed by the HIPAA Privacy Rule.”
HHSfound that Cignet violated 41 patients’ rights by denying them access to their medical records when requested between September 2008 and October 2009. These patients individually filed complaints, initiating investigations of each complaint. The HIPAA Privacy Rule requires that a covered entity provide a patient with a copy of their medical records within 30 (and no later than 60) days of the patient’s request.
According to public information available about the case, Cignet officials refused to respond to demands by the Office of Civil Rights (OCR) that they produce the records. In addition, Cignet officials failed to cooperate with OCR’s investigations of the complaints and produce the records in response to a subpoena.
Finally, OCR found that Cignet failed to cooperate with OCR’s investigations on a continuing daily basis from March 17, 2009, to April 7, 2010, and that the failure to cooperate was due to Cignet’s willful neglect to comply with the Privacy Rule. Covered entities are required under law to cooperate with the Department’s investigations.
The total amount of the CMP for all of these findings was $4.3 Million dollars.
Covered entities and business associates must uphold their responsibility to provide patients with access to their medical records, and adhere to all of HIPAA’s requirements. HHS officials stated that they “…will continue to investigate and take action against those organizations that knowingly disregard their obligations under these rules.”
To read more about this case, go to
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5010 Is Coming, Are You Ready
Effective January 1, 2012, all covered entities must be able to engage in electronic transactions using the 5010 standards. During 2011, trading partners should be testing with one another to ensure readiness by the 2012 deadline.
During the transition to Versions 5010 and D.0, CMS will periodically remind you of important items and dates that may be of specific interest to Medicare fee-for-service (FFS) providers and suppliers. CMS has developed the following chart as a reminder. Please see below to learn about current, upcoming or past events that have taken place during the implementation process
Everyone affected by the Version 5010 and ICD-10 transitions – health care providers, payers, software vendors, and clearinghouses/third-party billers – need to prepare to meet the following timetable to ensure compliance.
Date / Compliance StepJanuary 1, 2010 / Payers and providers should begin internal testing of Version 5010 standards for electronic claims
December 31, 2010 / Internal testing of Version 5010 must be complete to achieve Level I Version 5010 compliance
January 1, 2011 / •Payers and providers should begin external testing of Version 5010 for electronic claims
•CMS begins accepting Version 5010 claims
•Version 4010 claims continue to be accepted
December 31, 2011 / External testing of Version 5010 for electronic claims must be completed to achieve Level II Version 5010 compliance
January 1, 2012 / •All electronic claims must use Version 5010
•Version 4010 claims are no longer accepted
October 1, 2013 / • Claims for services provided on or after this date must use ICD-10 codes for medical diagnosis and inpatient procedures
•CPT codes will continue to be used for outpatient services
According to CMS, if providers do not conduct electronic health transactions using Version 5010 as of January 1, 2012, delays in claim reimbursement may result.
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Don, We Hardly Knew Ya…
As you may recall, the CMS Administrator position has not had a Congressionally confirmed Administrator since Dr. Mark McClellan resigned from the position in 2006. It appears that it may be some time before that string is broken.
Last Spring, President Obama announced that he intended to nominate Dr. Donald Berwick to be Administrator of the Centers for Medicare and Medicaid. Dr. Berwick’s nomination quickly became controversial because of some statements he had made praising the British single-payer healthcare system and his seeming endorsement of the rationing of healthcare. Although the most vocal critics of Dr. Berwick were Republican Senators, the dearth of Democratic Senators rushing to his defense raised more than a few eyebrows.
The President, sensing that there might be trouble with the nomination, announced in July 2010 that he was making a “recess” appointment of Dr. Berwick to the CMS Administrator position. He would not be “acting” as had his predecessors since McClellan, but his appointment would not be “at the pleasure of the President” either.
Recess appointments are not unusual and have been used by Presidents from both parties.
However, they often come at a steep political price.
The U.S. Senate is very protective of its constitutionally established power of “Advice and Consent” on Presidential Appointments. This is true whether it is a Supreme Court Justice, Cabinet Official or the Administrator of CMS. The Senate generally does not react well when a President circumvents the confirmation process, even when the Senate is controlled by members of the President’s party.
Under the Constitution, the President can temporarily appoint someone to a position requiring Senate confirmation if the Senate is adjourned at the time the President makes the appointment. The person appointed to the position can serve, unconfirmed, until the end of the next session of Congress. Given that the Berwick appointment occurred in July 2010 (i.e. the 2nd session of the 111th Congress), this means that Dr. Berwick can serve until the end of the 1st Session of the 112th Congress. If Dr. Berwick is not confirmed by the end of this Session of Congress (likely to occur sometime around Thanksgiving or early December 2011), then he must vacate the Administrator position.
It now appears very likely that Dr. Berwick will be unable to secure sufficient votes to be confirmed by the U.S. Senate. In fact, the Chairman of the Senate Finance Committee, Senator Max Baucus (D-MT), has announced that does not even plan to hold a confirmation hearing on the Berwick nomination. In a recent statement released by his office, Senator Baucus said, the “votes aren’t there” to confirm Berwick as Medicare Administrator.
While Baucus could have easily blamed the impasse on the threat by 42 GOP Senators to filibuster the Berwick nomination, the fact that he won’t even hold hearings (which are not subject to a filibuster) suggests that Berwick may not even have the votes to get out of Committee.
All indications are that Dr. Berwick will serve as long as he is legally allowed to occupy the CMS Administrator position. It is possible that upon vacating the Administrator’s office, the President could appoint Dr. Berwick to a position in his Administration that does not require Senate confirmation.
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Wave If You Got a Waiver
The Patient Protection and Affordable Care Act allows employers and Unions to apply for a waiver from some of the new mandates imposed by the new law. For example, the legislation imposes new limits on “lifetime limit” in insurance policies.
According to the HHS website, the number of schools, businesses and unions that have applied for and received a waiver is approaching 1,000. Although some reports have put the number at more than 1,000 waivers requested and issued, we have only been able to confirm 740 waivers.
The Patient Protection and Affordable Care Act imposes new annual coverage limits on all insurance policies. These new limits began on January 1, 2011. For 2011, most plans can impose an annual limit of no less than $750,000. Many employers and unions realized that in order to meet this new limit, huge increases in premiums would have had to occur resulting in many people dropping their health insurance coverage.
Rather than see press reports indicating that people were actually losing health insurance coverage as a result of enactment of the PPACA, the Administration has taken to issuing hundreds and hundreds of waivers. According to the HHS website, these waivers apply to insurance policies covering more than 2 million people.
As might be expected, GOP lawmakers have seized on the waivers asprima fascia evidence that the PPACA is flawed and must be repealed. The President and other supporters of the PPACA have rejected this conclusion.