Medicare Program; Inpatient Hospital Deductible and Hospital and Extended Care Services Coinsurance Amounts for CY 2014

SUMMARY: This notice announces the inpatient hospital deductible and the hospital and extended care services coinsurance amounts for services furnished in calendar year (CY) 2014 under Medicare's Hospital Insurance Program (Medicare Part A). The Medicare statute specifies the formulae used to determine these amounts. For CY 2014, the inpatient hospital deductible will be $1,216. The daily coinsurance amounts for CY 2014 will be: $304 for the 61st through 90th day of hospitalization in a benefit period; $608 for lifetime reserve days; and $152 for the 21st through 100th day of extended care services in a skilled nursing facility in a benefit period.

DATES: Effective Date: This notice is effective on January 1, 2014.

FOR FURTHER INFORMATION CONTACT: Clare McFarland, (410) 786-6390 for general information. Gregory J. Savord, (410) 786-1521 for case-mix analysis.

SUPPLEMENTARY INFORMATION: Section 1813 of the Social Security Act (the Act) provides for an inpatient hospital deductible to be subtracted from the amount payable by Medicare for inpatient hospital services furnished to a beneficiary. It also provides for certain coinsurance amounts to be subtracted from the amounts payable by Medicare for inpatient hospital and extended care services. Section 1813(b)(2) of the Act requires us to determine and publish each year the amount of the inpatient hospital deductible and the hospital and extended care services coinsurance amounts applicable for services furnished in the following calendar year (CY).

II. Computing the Inpatient Hospital Deductible for CY 2014

Section 1813(b) of the Act prescribes the method for computing the amount of the inpatient hospital deductible. The inpatient hospital deductible is an amount equal to the inpatient hospital deductible for the preceding CY, adjusted by our best estimate of the payment-weighted average of the applicable percentage increases (as defined in section 1886(b)(3)(B) of the Act) used for updating the payment rates to hospitals for discharges in the fiscal year (FY) that begins on October 1 of the same preceding CY, and adjusted to reflect changes in real case-mix. The adjustment to reflect real case-mix is determined on the basis of the most recent case-mix data available. The amount determined under this formula is rounded to the nearest multiple of $4 (or, if midway between two multiples of $4, to the next higher multiple of $4).

Under section 1886(b)(3)(B)(i)(XX) of the Act, the percentage increase used to update the payment rates for FY 2014 for hospitals paid under the inpatient prospective payment system is the market basket percentage increase, otherwise known as the market basket update, reduced by 0.3 percentage points (see section 1886(b)(3)(B)(xii)(II) of the Act), and an adjustment based on changes in the economy-wide productivity (the multifactor productivity (MFP) adjustment (see section 1886(b)(3)(B)(xi)(II) of the Act). Under section 1886(b)(3)(B)(viii) of the Act, hospitals will receive this update only if they submit quality data as specified by the Secretary of the Department of Health and Services (the Secretary). The update for hospitals that do not submit this data is reduced by 2.0 percentage points. We are estimating that after accounting for those hospitals receiving the lower market basket update in the payment-weighted average update, the calculated deductible will remain the same, as the majority of hospitals submit quality data and receive the full market basket update.

Under section 1886(b)(3)(B)(ii)(VIII) of the Act, the percentage increase used to update the payment rates for FY 2014 for hospitals excluded from the inpatient prospective payment system is as follows:

* For FY 2014, the percentage increase for long term care hospitals is the market basket percentage increase reduced by 0.3 percentage points and the MFP adjustment (see sections 1886(m)(3)(A) and 1886(m)(4)(C) of the Act).

* For FY 2014, the percentage increase for inpatient rehabilitation facilities is the market basket percentage increase reduced by 0.3 percentage points and the MFP adjustment (see sections 1886(j)(3)(C) and 1886(j)(3)(D)(ii) of the Act).

* For FY 2014, the percentage increase used to update the payment rate for psychiatric hospitals is the market basket percentage increase reduced by 0.1 percentage points and the MFP adjustment (see sections 1886(s)(2)(A)(ii) and 1886(s)(3)(B) of the Act).

The Inpatient Prospective Payment System market basket percentage increase for 2014 is 2.5 percent and the MFP adjustment is 0.5 percent, as announced in the final rule with comment period published in the Federal Register on August 19, 2013 entitled, "Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Fiscal Year 2014 Rates; Quality Reporting Requirements for Specific Providers; Hospital Conditions of Participation; Payment Policies Related to Patient Status " (78 FR 50608). Therefore, the percentage increase for hospitals paid under the inpatient prospective payment system is 1.7 percent. The average payment percentage increase for hospitals excluded from the inpatient prospective payment system is 1.94 percent. Weighting these percentages in accordance with payment volume, our best estimate of the payment-weighted average of the increases in the payment rates for FY 2014 is 1.73 percent.

To develop the adjustment to reflect changes in real case-mix, we first calculated an average case-mix for each hospital that reflects the relative costliness of that hospital's mix of cases compared to those of other hospitals. We then computed the change in average case-mix for hospitals paid under the Medicare prospective payment system in FY 2013 compared to FY 2012. (We excluded from this calculation hospitals whose payments are not based on the inpatient prospective payment system because their payments are based on alternate prospective payment systems or reasonable costs.) We used Medicare bills from prospective payment hospitals that we received as of July 2013. These bills represent a total of about 7.8 million Medicare discharges for FY 2013 and provide the most recent case-mix data available at this time. Based on these bills, the change in average case-mix in FY 2013 is 0.89 percent. Based on these bills and past experience, we expect the overall case mix change to be 1.0 percent as the year progresses and more FY 2013 data become available.

Section 1813 of the Act requires that the inpatient hospital deductible be adjusted only by that portion of the case-mix change that is determined to be real. We estimate that the change in real case mix will be 1.0 percent.

Thus, the estimate of the payment-weighted average of the applicable percentage increases used for updating the payment rates is 1.73 percent, and the real case-mix adjustment factor for the deductible is 1.0 percent. Therefore, under the statutory formula, the inpatient hospital deductible for services furnished in CY 2014 is $1,216. This deductible amount is determined by multiplying $1,184 (the inpatient hospital deductible for CY 2013) by the payment-weighted average increase in the payment rates of 1.0173 multiplied by the increase in real case-mix of 1.01, which equals $1,216.53 and is rounded to $1,216.

III. Computing the Inpatient Hospital and Extended Care Services Coinsurance Amounts for CY 2014

The coinsurance amounts provided for in section 1813 of the Act are defined as fixed percentages of the inpatient hospital deductible for services furnished in the same CY. The increase in the deductible generates increases in the coinsurance amounts. For inpatient hospital and extended care services furnished in CY 2014, in accordance with the fixed percentages defined in the law, the daily coinsurance for the 61st through 90th day of hospitalization in a benefit period will be $304 (one-fourth of the inpatient hospital deductible); the daily coinsurance for lifetime reserve days will be $608 (one-half of the inpatient hospital deductible); and the daily coinsurance for the 21st through 100th day of extended care services in a skilled nursing facility in a benefit period will be $152 (one-eighth of the inpatient hospital deductible).

IV. Cost to Medicare Beneficiaries

Table 1 below summarizes the deductible and coinsurance amounts for CYs 2013 and 2014, as well as the number of each that is estimated to be paid.

.... Table 1--Part A Deductible and Coinsurance Amounts for Calendar Years 2013

.... and 2014 Type of Cost Sharing

...................................... Value............ Number paid (in

..........................................................millions)

....................................2013......2014......2013......2014

Inpatient hospital deductible........$1,184....$1,216.. 7.91......8.07

Daily coinsurance for 61st-90th Day 296...... 304...... 2.04......2.09

Daily coinsurance for lifetime......592...... 608...... 1.02......1.04

reserve days

SNF coinsurance.................... 148...... 152...... 42.10.... 43.40

The estimated total increase in costs to beneficiaries is about $870 million (rounded to the nearest $10 million) due to--(1) the increase in the deductible and coinsurance amounts; and (2) the increase in the number of deductibles and daily coinsurance amounts paid.

V. Waiver of Proposed Notice and Comment Period

The Medicare statute, as discussed previously, requires publication of the Medicare Part A inpatient hospital deductible and the hospital and extended care services coinsurance amounts for services for each CY. The amounts are determined according to the statute. As has been our custom, we use general notices, rather than notice and comment rulemaking procedures, to make the announcements. In doing so, we acknowledge that, under the Administrative Procedure Act (APA), interpretive rules, general statements of policy, and rules of agency organization, procedure, or practice are excepted from the requirements of notice and comment rulemaking.

--This is a summary of a Federal Register article originally published on the page number listed below--

Notice.

RIN Number: "RIN 0938-AR59"

Citation: "78 FR 64953"

Document Number: "CMS-8053-N"

Federal Register Page Number: "64953"

"Notices"