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Summary of the Major Medicare/Health Provisions in the Government Funding Deal

by Bill Finerfrock on February 12, 2018 at 5:21 PM


In the early hours of February 9, 2018, the Congress approved a bi-partisan budget package that keeps the government funded through March 23, 2018. The bill was signed into law by President Trump within hours of passing the House. The bill, however, does much more than simply keep the government open: the legislation would make a number of changes to the Medicare program as well as other health programs.

The bill will also significantly raise funding available for both domestic discretionary spending and the money available for the Department of Defense. Specifically, the top line budget figures for both defense and non-defense discretionary spending will increase by about $300 billion over two years. The agreement also suspends the debt ceiling until March 2019.

Budget Cap Increase

With this budget deal, the increase in non-defense spending will be $63 billion this fiscal year and $68 billion next fiscal year. The agreement does not describe how this money will be allocated, but it is safe to assume that this will translate into an increase in funding for HHS and its sub-agencies.

This agreement does not repeal the budget sequestration policy which implemented a two percent across-the-board cut to both defense and non-defense spending, absent of any Congressional action to exceed the caps. However, the agreed-upon spending caps exceed the sequestration budget caps.

Physician Fee Schedule Update

The scheduled 0.5 percent update to the Physician Fee Schedule slated to occur on January 1, 2019 has been reduced to 0.25 percent.

Extension of 2% Medicare Sequestration Payment Reduction

Included in the budget package is language extending the mandatory Medicare sequestration cut until 2027. This is mentioned in the CBO report on the overall fiscal impact of this bill.

IPAB Repeal

The bill repeals the broad authority of the Independent Payment Advisory Board (IPAB), a committee which has never been formed or convened, to institute Medicare payment cuts. The IPAB was created by the Affordable Care Act (ACA) and is unpopular among both Republicans and Democrats.

Technical Amendments to MACRA

Congress will provide the Centers for Medicare and Medicaid Services (CMS) with increased flexibility to implement the Merit-based Incentive Payment System (MIPS). Congress is allowing CMS to set the performance threshold for performance years two through five. The original MACRA statute required CMS to use either the mean or the median Composite Performance Score (CPS) as the performance threshold beginning in year three of MIPS.

Eligible clinicians who score below the performance threshold will receive a negative payment adjustment for the corresponding performance year. This flexibility will allow CMS to gradually increase the performance threshold over time. CMS would be required to use the mean or median CPS beginning in the sixth year of MIPS.

The bill further grants CMS discretion in how to weight the Resource Use (cost) performance category in MIPS for the second through fifth years of MIPS. Cost will account for ten percent of each EC’s CPS score in the 2018 reporting year and is required by statute to represent 30 percent of an EC’s CPS score in the 2019 reporting year. CMS would still be required to maintain at least a weighting of 10 percent for the cost category. Additionally, CMS would not be allowed to factor improvement within this category into an EC’s CPS.

On a related note, Medicare Part B drug payments would be excluded from MIPS payment adjustments.

The Physician Focused Payment Model Technical Advisory Committee (PTAC) would be granted the ability to provide more robust feedback to applicants on the models they submit to the PTAC.

Medicare Extenders

The bill addresses a number of temporary Medicare payment policies that expired at the end of 2017 due to Congressional inaction. These provisions are often referred to as “extenders.” The bill extends most of these expired provisions, including the following:

  • Extended ground ambulance add-on payments until December 2023.
  • Extended the Geographic Practice Cost Indices (GPCI) floor of 1.0 on the “work” component of Medicare payments for two years, until January 1, 2020.
  • Permanently repealed the Medicare payment cap for outpatient physical therapy, occupational therapy and speech-language pathology services. CMS would continue to require that an appropriate modifier be included on claims over the current exception threshold, indicating that the services are medically necessary, and it would lower the threshold for the targeted manual medical review process from $3,700 to $3,000.

Reducing Improper Medicare Payments

The bill increased civil and criminal penalties and sentences for Federal health care program fraud and abuse. The bill updates both the civil and criminal penalties for fraud and abuse in federal health programs that have largely remained static over the past 20 years.

Additionally, CMS is directed to more rigorously enforce the requirement that durable medical equipment suppliers in the competition bidding program offer at least 50 percent of the diabetes test strip brands used by beneficiaries. It would also codify and enhance the regulatory prohibition against suppliers unduly influencing beneficiaries to switch from their preferred brand of diabetes supplies.

Community Health Center Funding

The bill reauthorizes funding for Community Health Centers (CHC) for two years and increases funding by about $4 billion for each year. Funding for CHCs expired on September 30, 2017.

Extension of CHIP Authorization

The bill provides an additional four years of authorization for the Children’s Health Insurance Program (CHIP), beyond the six-year reauthorization passed in the previous CR. This will result in about $6 billion in savings for the federal government.


The bill includes S. 870, the CHRONIC Care Act which expands certain telehealth policies within the Medicare Advantage Program and also expands access to MA Special Needs Plans (SNP) among other policies.

EHR Hardship Exemptions

The bill makes it easier for providers to obtain a hardship exemption from the Advancing Care Information (ACI) reporting category of MIPS and the EHR Meaningful Use Program.

The bill also removes a requirement that CMS make meaningful use standards more stringent over time, increasing the likelihood that providers will be able to comply with those standards.

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This post was written by Bill Finerfrock

Bill Finerfrock is a consultant at Intermedix and is president of Capitol Associates (CAI). Finerfrock specializes in health care financing, health systems reform, health workforce and rural health. Finerfrock has worked in and with the U.S. Congress and Federal agencies on health policy matters for nearly 40 years