[Federal Register Volume 63, Number 203 (Wednesday, October 21, 1998)]
[Notices]
[Pages 56199-56201]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-28162]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration
[HCFA-8001-N]
RIN 0938-AJ02


Medicare Program; Inpatient Hospital Deductible and Hospital and 
Extended Care Services Coinsurance Amounts for 1999

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 1999 under Medicare's hospital 
insurance program (Medicare Part A). The Medicare statute specifies the 
formulae used to determine these amounts.
    The inpatient hospital deductible will be $768. The daily 
coinsurance amounts will be: (a) $192 for the 61st through 90th day of 
hospitalization in a benefit period; (b) $384 for lifetime reserve 
days; and (c) $96 for the 21st through 100th day of extended care 
services in a skilled nursing facility in a benefit period.

EFFECTIVE DATE: This notice is effective on January 1, 1999.

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

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 1999

    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) 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).
    Under section 1886(b)(3)(B)(i) of the Act, as amended by section 
4401(a) of the Balanced Budget Act of 1997 (Pub. L. 105-33), the 
percentage increase used to update the payment rates for fiscal year 
1999 for most hospitals paid under the prospective payment system is 
the market basket percentage increase minus 1.9 percentage points. 
Certain nonteaching, nondisproportionate share, non-Medicare-dependent 
hospitals, however, are allowed higher updates than those provided for 
other hospitals paid under the prospective payment system. These 
hospitals must be located in States where, for nonteaching, 
nondisproportionate share, non-Medicare-dependent hospitals--
     Aggregate Medicare operating payments for their cost 
reporting periods beginning during fiscal year 1995 are less than the 
aggregate allowable operating costs of inpatient hospital services for 
all these hospitals in the State for those cost reporting periods; and
     The Medicare operating payments for discharges in the cost 
reporting period involved are less than their allowable operating costs 
for inpatient hospital services in that period.
    For hospitals meeting these criteria, the percentage increase used 
to update the payment rates for fiscal year 1999 is the market basket 
percentage increase minus 1.6 percentage points.
    Under section 1886(b)(3)(B)(ii) of the Act, as amended by section 
4411(a) of the Balanced Budget Act of 1997, the percentage increase 
used to update the payment rates for fiscal year 1999 for hospitals 
excluded from the prospective payment system depends on the hospital's 
allowable operating costs of inpatient hospital services. If the 
hospital's allowable operating costs of inpatient hospital services for 
the most recent cost reporting period for which information is 
available--

[[Page 56200]]

    (1) Are equal to or exceed 110 percent of the hospital's target 
amount for that cost reporting period, the applicable percentage 
increase is the market basket percentage;
    (2) Exceed 100 percent but are less than 110 percent of the 
hospital's target amount for that cost reporting period, the applicable 
percentage increase is the market basket percentage minus 0.25 
percentage points for each percentage point by which the hospital's 
allowable operating costs are less than 110 percent of the target 
amount for that cost reporting period (but not less than 0 percent);
    (3) Are equal to or less than 100 percent of the hospital's target 
amount for that cost reporting period, but exceed two-thirds of the 
target amount, the applicable percentage increase is 0 percent or, if 
greater, the market basket percentage minus 2.5 percentage points; or
    (4) Do not exceed two-thirds of the hospital's target amount for 
that cost reporting period, the applicable percentage increase is 0 
percent.
    The market basket percentage increase for fiscal year 1999 is 2.4 
percent, as announced in the Federal Register on July 31, 1998 (63 FR 
40954). Therefore, the percentage increase for most hospitals paid 
under the prospective payment system is 0.5 percent, and the percentage 
increase for the certain nonteaching, nondisproportionate share, non-
Medicare-dependent hospitals paid under the prospective payment system 
and meeting the criteria described above is 0.8 percent. The average 
payment percentage increase for hospitals excluded from the prospective 
payment system is 0.4 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 fiscal year 
1999 is 0.5 percent.
    To develop the adjustment for real case mix, we first calculated 
for each hospital an average case mix 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 fiscal 
year 1998 compared to fiscal year 1997. (We excluded from this 
calculation hospitals excluded from the prospective payment system 
because their payments are based on reasonable costs and are affected 
only by real changes in case mix.) We used bills from prospective 
payment hospitals received in HCFA as of July 1998. These bills 
represent a total of about 8.5 million discharges for fiscal year 1998 
and provide the most recent case mix data available at this time. Based 
on these bills, the change in average case mix in fiscal year 1998 is 
-0.81 percent. Based on past experience, we expect the overall case mix 
change to be -0.6 percent as the year progresses and more fiscal year 
1998 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. There is a negligible change in overall case 
mix for fiscal year 1998. We estimate that there is no change in real 
case mix; that is, we estimate that the change in real case mix for 
fiscal year 1998 is 0.0 percent.
    Thus, the estimate of the payment-weighted average of the 
applicable percentage increases used for updating the payment rates is 
0.5 percent, and the real case mix adjustment factor for the deductible 
is 0.0 percent. Therefore, under the statutory formula, the inpatient 
hospital deductible for services furnished in calendar year 1999 is 
$768. This deductible amount is determined by multiplying $764 (the 
inpatient hospital deductible for 1998) by the payment-weighted average 
increase in the payment rates of 1.005 multiplied by the increase in 
real case mix of 1.000, which equals $767.82 and is rounded to $768.

III. Computing the Inpatient Hospital and Extended Care Services 
Coinsurance Amounts for 1999

    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 1999, 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 $192 (one-fourth of the inpatient hospital 
deductible); the daily coinsurance for lifetime reserve days will be 
$384 (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 $96 (one-eighth 
of the inpatient hospital deductible).

IV. Cost to Beneficiaries

    We estimate that in 1999 there will be about 8.4 million 
deductibles paid at $768 each, about 2.3 million days subject to 
coinsurance at $192 per day (for hospital days 61 through 90), about 
1.1 million lifetime reserve days subject to coinsurance at $384 per 
day, and about 34.4 million extended care days subject to coinsurance 
at $96 per day. Similarly, we estimate that in 1998 there will be about 
8.6 million deductibles paid at $764 each, about 2.3 million days 
subject to coinsurance at $191 per day (for hospital days 61 through 
90), about 1.1 million lifetime reserve days subject to coinsurance at 
$382 per day, and about 32.3 million extended care days subject to 
coinsurance at $95.50 per day. Therefore, the estimated total increase 
in cost to beneficiaries is about $100 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 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 
calendar year. 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, 
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 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 would be contrary to the public 
interest. Therefore, we find good cause to waive publication of a 
proposed notice and solicitation of public comments.

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VI. Regulatory Impact Statement

    We have examined the impacts of this notice as required by 
Executive Order 12866 and the Regulatory Flexibility Act (RFA) (Pub. L. 
96-354). Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, when regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects; distributive impacts; and equity). The RFA requires agencies 
to analyze options for regulatory relief for small businesses. For 
purposes of the RFA, States and individuals are not considered small 
entities.
    Also, section 1102(b) of the Act requires the Secretary to prepare 
a regulatory impact analysis for any notice that may have a significant 
impact on the operations of a substantial number of small rural 
hospitals. Such an analysis must conform to the provisions of section 
604 of the RFA. For purposes of section 1102(b) of the Act, we consider 
a small rural hospital as a hospital that is located outside of a 
Metropolitan Statistical Area and has fewer than 50 beds. We have 
determined that this notice will not have a significant effect on the 
operations of a substantial number of small rural hospitals. Therefore, 
we are not preparing an analysis for section 1102(b) of the Act.
    This notice announces that the inpatient hospital deductible for 
calendar year 1999 is $768. It also announces the daily coinsurance 
amounts of $192 for the 61st through 90th day of hospitalization in a 
benefit period; $384 for lifetime reserve days; and $96 for the 21st 
through 100th day of extended care services in a skilled nursing 
facility in a benefit period. We believe that the total increase in 
costs to beneficiaries associated with this notice is about $100 
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. Therefore, this notice is a major rule as 
defined in Title 5, United States Code, section 804(2) and is an 
economically significant rule under Executive Order 12866.
    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 18, 1998.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.

    Dated: October 8, 1998.
Donna E. Shalala,
Secretary.
[FR Doc. 98-28162 Filed 10-16-98; 9:34 am]
BILLING CODE 4120-01-P