[Federal Register Volume 61, Number 214 (Monday, November 4, 1996)]
[Notices]
[Pages 56690-56691]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-28142]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES
[OACT-054-N]
RIN 0938-AHO8


Medicare Program; Inpatient Hospital Deductible and Hospital and 
Extended Care Services Coinsurance Amounts for 1997

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

ACTION: Notice.

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SUMMARY: This notice announces the inpatient hospital deductible and 
the hospital and extended care services coinsurance amounts for 
services furnished in calendar year 1997 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 $760. The daily 
coinsurance amounts will be: (a) $190 for the 61st through 90th days of 
hospitalization in a benefit period; (b) $380 for lifetime reserve 
days; and (c) $95 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, 1997.

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 1997

    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 1997, 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 0.5 percent. 
Section 1886(b)(3)(B)(ii)(V) of the Act provides that, for fiscal year 
1997, 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 operating costs 
exceeding target amounts by 10 percent or more receive the market 
basket index percentage. The market basket percentage increases for 
fiscal year 1997 are 2.5 percent for prospective payment system 
hospitals and 2.5 percent for hospitals excluded from the prospective 
payment system, as announced in the Federal Register on August 30, 1996 
(VOL. 61, No. 170 FR 46166). Therefore, the percentage increases for 
Medicare prospective payment rates are 2.0 percent for all hospitals. 
The average payment percentage increase for hospitals excluded from the 
prospective payment system is 1.96 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 1997 is 2.0 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 1996 compared to fiscal year 1995. (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 1996. These bills represent a 
total of about 8.2 million discharges for fiscal year 1996 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 1996 is 1.1 
percent. Based on past experience, we expect overall case mix to 
increase to 1.4

[[Page 56691]]

percent as the year progresses and more fiscal year 1996 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 this 
pattern to continue.
    Thus, the estimate of the payment-weighted average of the 
applicable percentage increases used for updating the payment rates is 
2.0 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 1997 is 
$760. This deductible amount is determined by multiplying $736 (the 
inpatient hospital deductible for 1996) by the payment rate increase of 
1.02 multiplied by the increase in real case mix of 1.01 which equals 
$758.23 and is rounded to $760.

III. Computing the Inpatient Hospital and Extended Care Services 
Coinsurance Amounts for 1997

    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 1997, 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 $190 (\1/4\ of the inpatient hospital 
deductible); the daily coinsurance for lifetime reserve days will be 
$380 (\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 $95 (\1/8\ of 
the inpatient hospital deductible).

IV. Cost to Beneficiaries

    We estimate that in 1997 there will be about 9.2 million 
deductibles paid at $760 each, about 3.1 million days subject to 
coinsurance at $190 per day (for hospital days 61 through 90), about 
1.4 million lifetime reserve days subject to coinsurance at $380 per 
day, and about 21.3 million extended care days subject to coinsurance 
at $95 per day. Similarly, we estimate that in 1996 there will be about 
8.9 million deductibles paid at $736 each, about 3.0 million days 
subject to coinsurance at $184 per day (for hospital days 61 through 
90), about 1.4 million lifetime reserve days subject to coinsurance at 
$368 per day, and about 20.8 million extended care days subject to 
coinsurance at $92 per day. Therefore, the estimated total increase in 
cost to beneficiaries is about $610 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. Waiver of Notice of Proposed Rulemaking

    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 
calendar year. The amounts are determined according to the statute. As 
has been our custom, we use general notices, rather than formal notice 
and comment rulemaking procedures, to make such announcements. In doing 
so, we acknowledge that, under the Administrative Procedure Act, 
interpretive rules, general statements of policy, and rules of agency 
organization, procedure, or practice are excepted from the requirements 
of notice and comment rulemaking.
    We considered publishing a proposed notice to provide a period for 
public comment. However, we may waive that procedure if we find good 
cause that prior notice and comment are impracticable, unnecessary, or 
contrary to the public interest. We find that the procedure for notice 
and comment is unnecessary because the formula used to calculate the 
inpatient hospital deductible and the hospital and extended care 
services coinsurance amounts is statutorily directed, and we can 
exercise no discretion in following that formula. Moreover, the statute 
establishes the time period for which the deductible and coinsurance 
amounts will apply and delaying publication of these amounts would be 
contrary to the public interest. Therefore, we find good cause to waive 
publication of a proposed notice and solicitation of public comments.

VI. 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 10, 1996.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
    Dated: September 27, 1996.
Donna E. Shalala,
Secretary.
[FR Doc. 96-28142 Filed 11-1-96; 8:45 am]
BILLING CODE 4120-01-M