[Federal Register Volume 67, Number 203 (Monday, October 21, 2002)]
[Notices]
[Pages 64641-64643]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-26674]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-8013-N]
RIN 0938-AL56


Medicare Program; Inpatient Hospital Deductible and Hospital and 
Extended Care Services Coinsurance Amounts for 2003

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Notice.

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SUMMARY: This notice announces the inpatient hospital deductible and 
the hospital and extended care services

[[Page 64642]]

coinsurance amounts for services furnished in calendar year 2003 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 $840. The daily 
coinsurance amounts will be: (a) $210 for the 61st through 90th day of 
hospitalization in a benefit period; (b) $420 for lifetime reserve 
days; and (c) $105.00 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, 2003.

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 2003

    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 such preceding calendar year, and adjusted to 
reflect changes in real case mix. The adjustment to reflect changes in 
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 (BBA '97) (Pub. L. 105-33) 
and section 301(a) of the Medicare, Medicaid and SCHIP Benefits 
Improvement and Protection Act of 2000 (Pub. L. 106-554, enacted on 
December 21, 2000), the percentage increase used to update the payment 
rates for fiscal year 2003 for hospitals paid under the prospective 
payment system is the market basket percentage increase minus 0.55 
percentage points.
    Under section 1886(b)(3)(B)(ii) of the Act, the percentage increase 
used to update the payment rates for fiscal year 2003 for hospitals 
excluded from the prospective payment system is the market basket 
percentage increase, defined according to section 1886(b)(3)(B)(iii) of 
the Act.
    The market basket percentage increase for fiscal year 2003 is 3.5 
percent, as announced in the final rule titled ``Medicare Program; 
Changes to the Hospital Inpatient Prospective Payment Systems and 
Fiscal Year 2003 Rates; Final Rule'' published in the Federal Register 
on August 1, 2002 (67 FR 49982). Therefore, the percentage increase for 
hospitals paid under the prospective payment system is 2.95 percent. 
The average payment percentage increase for hospitals excluded from the 
prospective payment system is 3.5 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 
2003 is 3.0 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 2002 compared to fiscal year 2001. (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 CMS as of July 2002. These bills 
represent a total of about 8.8 million discharges for fiscal year 2002 
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 2002 is 
0.17 percent. Based on past experience, we expect the overall case mix 
change to be 0.5 percent as the year progresses and more fiscal year 
2002 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 
for fiscal year 2002 is 0.5 percent.
    Thus, the estimate of the payment-weighted average of the 
applicable percentage increases used for updating the payment rates is 
3.0 percent, and the real case mix adjustment factor for the deductible 
is 0.5 percent. Therefore, under the statutory formula, the inpatient 
hospital deductible for services furnished in calendar year 2003 is 
$840. This deductible amount is determined by multiplying $812 (the 
inpatient hospital deductible for 2002) by the payment-weighted average 
increase in the payment rates of 1.03 multiplied by the increase in 
real case mix of 1.005, which equals $840.54 and is rounded to $840.

III. Computing the Inpatient Hospital and Extended Care Services 
Coinsurance Amounts for 2003

    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 2003, 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 $210 (one-fourth of the inpatient hospital 
deductible); the daily coinsurance for lifetime reserve days will be 
$420 (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 $105.00 (one-
eighth of the inpatient hospital deductible).

IV. Cost to Beneficiaries

    We estimate that in 2003 there will be about 8.95 million 
deductibles paid at $840 each, about 2.31 million days subject to 
coinsurance at $210 per day (for hospital days 61 through 90), about 
1.03 million lifetime reserve days subject to coinsurance at $420 per 
day, and about 26.50 million extended care days subject to coinsurance 
at $105.00 per day. Similarly, we estimate that in 2002 there will be 
about 8.78 million deductibles paid at $812 each, about 2.27 million 
days subject to coinsurance at $203 per day (for hospital days 61

[[Page 64643]]

through 90), about 1.01 million lifetime reserve days subject to 
coinsurance at $406 per day, and about 25.99 million extended care days 
subject to coinsurance at $101.50 per day. Therefore, the estimated 
total increase in cost to beneficiaries is about $580 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 formulae used to calculate the 
inpatient hospital deductible and hospital and extended care services 
coinsurance amounts are statutorily directed, and we can exercise no 
discretion in following those formulae. 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.

VI. Regulatory Impact Statement

    We have examined the impacts of this notice as required by 
Executive Order 12866 (September 1993, Regulatory Planning and Review), 
the Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L. 96-
354), section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). As stated in section IV of 
this notice, we estimate that the total increase in costs to 
beneficiaries associated with this notice is about $580 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.
    The RFA requires agencies to analyze options for regulatory relief 
of small entities. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and government agencies. 
Most hospitals and most other providers and suppliers are small 
entities, either by nonprofit status or by having revenues of $6 
million to $29 million in any 1 year. Individuals and States are not 
considered small entities. We have determined that this notice will not 
have a significant economic impact on a substantial number of small 
entities. Therefore, we are not preparing an analysis for the RFA.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 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.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in expenditures in any 1 year by 
State, local, or tribal governments, in the aggregate, or by the 
private sector, of $110 million. This notice has no consequential 
effect on State, local, or tribal governments or on the private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a rule that imposes substantial 
direct requirement costs on State and local governments, preempts State 
law, or otherwise has Federalism implications. This notice has no 
consequential effect on State or local governments.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.

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

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

    Dated: September 4, 2002.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.

    Dated: September 20, 2002.
Tommy G. Thompson,
Secretary.
[FR Doc. 02-26674 Filed 10-18-02; 8:45 am]
BILLING CODE 4120-01-P