[Federal Register Volume 60, Number 199 (Monday, October 16, 1995)]
[Notices]
[Pages 53625-53626]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-25518]



-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
[OACT-049-N]
RIN 0938-AH08


Medicare Program; Inpatient Hospital Deductible and Hospital and 
Extended Care Services Coinsurance Amounts for 1996

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Notice.

-----------------------------------------------------------------------

SUMMARY: This notice announces the inpatient hospital deductible and 
the hospital and extended care services coinsurance amounts for 
services furnished in calendar year 1996 under Medicare's hospital 
insurance program (Medicare Part A). The Medicare statute specifies the 
formulae to be used to determine these amounts.
    The inpatient hospital deductible will be $736. The daily 
coinsurance amounts will be: (a) $184 for the 61st through 90th days of 
hospitalization in a benefit period; (b) $368 for lifetime reserve 
days; and (c) $92 for the 21st through 100th days of extended care 
services in a skilled nursing facility in a benefit period.

EFFECTIVE DATE: This notice is effective on January 1, 1996.

FOR FURTHER INFORMATION CONTACT: John Wandishin, (410) 786-6389. For 
case-mix analysis only: Gregory J. Savord, (410) 786-6384.

SUPPLEMENTARY INFORMATION:

I. Background

    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 between September 1 and September 15 of 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.

II. Computing the Inpatient Hospital Deductible for 1996

    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 calendar year, changed 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). This estimate is used for 
updating the payment rates to hospitals for discharges in the fiscal 
year that begins on October 1 of the same preceding calendar year and 
adjusted to reflect 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).
    For fiscal year 1996, section 1886(b)(3)(B)(i)(XI) of the Act 
provides that the applicable percentage increase for hospitals in all 
areas is the market basket percentage increase minus 2.0 percent. 
Section 1886(b)(3)(B)(ii)(V) of the Act provides that, for fiscal year 
1996, the otherwise applicable rate-of-increase percentages (the market 
basket percentage increase) for hospitals that are excluded from the 
prospective payment system are reduced by the lesser of 1 percentage 
point or the percentage point difference between 10 percent and the 
percentage by which the hospital's allowable operating costs of 
inpatient hospital services for cost reporting periods beginning in 
fiscal year 1990 exceeds the hospital's target amount. Hospitals or 
distinct part hospital units with fiscal year 1990 

[[Page 53626]]
operating costs exceeding target amounts by 10 percent or more receive 
the market basket index percentage. The market basket percentage 
increases for fiscal year 1996 are 3.5 percent for prospective payment 
system hospitals and 3.4 percent for hospitals excluded from the 
prospective payment system, as announced in the Federal Register on 
September 1, 1995 (60 FR 45778). Therefore, the percentage increases 
for Medicare prospective payment rates are 1.5 percent for all 
hospitals. The average payment percentage increase for hospitals 
excluded from the prospective payment system is 2.84 percent. Thus, 
weighting these percentages in accordance with payment volume, our best 
estimate of the payment-weighted average of the increases in the 
payment rates for fiscal year 1996 is 1.65 percent.
    To develop the adjustment for real case mix, an average case mix 
was first calculated for each hospital that reflects the relative 
costliness of that hospital's mix of cases compared to that of other 
hospitals. We then computed the increase in average case mix for 
hospitals paid under the Medicare prospective payment system in fiscal 
year 1995 compared to fiscal year 1994. (Hospitals excluded from the 
prospective payment system were excluded from this calculation since 
their payments are based on reasonable costs and are affected only by 
real increases in case mix.) We used bills from prospective payment 
hospitals received in HCFA as of July 1995. These bills represent a 
total of about 8.0 million discharges for fiscal year 1995 and provide 
the most recent case mix data available at this time. Based on these 
bills, the increase in average case mix in fiscal year 1995 is 1.1 
percent. Based on past experience, we expect overall case mix to 
increase to 1.4 percent as the year progresses and more fiscal year 
1995 data become available.
    Section 1813 of the Act requires that the inpatient hospital 
deductible be increased only by that portion of the case mix increase 
that is determined to be real. We estimate that the increase in real 
case mix is about 1 percent. Since real case mix had been assumed to be 
increasing at about 1 percent per year in prior years, we expect a 
return to this trend.
    Thus, the estimate of the payment-weighted average of the 
applicable percentage increases used for updating the payment rates is 
1.65 percent, and the real case mix adjustment factor for the 
deductible is 1 percent. Therefore, under the statutory formula, the 
inpatient hospital deductible for services furnished in calendar year 
1996 is $736. This deductible amount is determined by multiplying $716 
(the inpatient hospital deductible for 1995) by the payment rate 
increase of 1.0165 multiplied by the increase in real case mix of 1.01 
which equals $735.09 and is rounded to $736.

III. Computing the Inpatient Hospital and Extended Care Services 
Coinsurance Amounts for 1996

    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 calendar year. Thus, the increase in the 
deductible generates increases in the coinsurance amounts. For 
inpatient hospital and extended care services furnished in 1996, in 
accordance with the fixed percentages defined in the law, the daily 
coinsurance for the 61st through 90th days of hospitalization in a 
benefit period will be $184 (\1/4\ of the inpatient hospital 
deductible); the daily coinsurance for lifetime reserve days will be 
$368 (\1/2\ of the inpatient hospital deductible); and the daily 
coinsurance for the 21st through 100th days of extended care services 
in a skilled nursing facility in a benefit period will be $92 (\1/8\ of 
the inpatient hospital deductible).

IV. Cost to Beneficiaries

    We estimate that in 1996 there will be about 9.2 million 
deductibles paid at $736 each, about 3.4 million days subject to 
coinsurance at $184 per day (for hospital days 61 through 90), about 
1.5 million lifetime reserve days subject to coinsurance at $368 per 
day, and about 21.9 million extended care days subject to coinsurance 
at $92 per day. Similarly, we estimate that in 1995 there will be about 
8.9 million deductibles paid at $716 each, about 3.3 million days 
subject to coinsurance at $179 per day (for hospital days 61 through 
90), about 1.5 million lifetime reserve days subject to coinsurance at 
$358 per day, and about 21.2 million extended care days subject to 
coinsurance at $89.50 per day. Therefore, the estimated total increase 
in cost to beneficiaries is about $570 million (rounded to the nearest 
$10 million), due to (1) the increase in the deductible and coinsurance 
amounts and (2) the change in the number of deductibles and daily 
coinsurance amounts paid.

V. Impact Statement

    This notice merely announces amounts required by legislation. This 
notice is not a proposed rule or a final rule issued after a proposal 
and does not alter any regulation or policy. Therefore, we have 
determined, and certify, that no analyses are required under Executive 
Order 12866, the Regulatory Flexibility Act (5 U.S.C. 601 through 612), 
or section 1102(b) of the Act.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.

    Authority: Section 1813(b)(2) of the Social Security Act (42 
U.S.C. 1395e(b)(2)).

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance)

    Dated: September 26, 1995.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
    Dated: September 29, 1995.
Donna E. Shalala,
Secretary.
[FR Doc. 95-25518 Filed 10-13-95; 8:45 am]
BILLING CODE 4120-01-P