[Federal Register Volume 69, Number 174 (Thursday, September 9, 2004)]
[Notices]
[Pages 54671-54673]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-20414]


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

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-8021-N]
RIN 0938-AN16


Medicare Program; Inpatient Hospital Deductible and Hospital and 
Extended Care Services Coinsurance Amounts for 2005

AGENCY: Centers for Medicare & Medicaid Services (CMS), 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 2005 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 $912. The daily 
coinsurance amounts will be: (a) $228 for the 61st through 90th day of 
hospitalization in a benefit period; (b) $456 for lifetime reserve 
days; and (c) $114 for the 21st through 100th day of extended care 
services in a skilled nursing facility in a benefit period.

DATES: This notice is effective on January 1, 2005.

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 2005

    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, the percentage increase 
used to update the payment rates for fiscal year 2005 for hospitals 
paid under the prospective payment system is the market basket 
percentage increase. However, under Section 501 of The Medicare 
Prescription Drug, Improvement and Modernization Act of 2003 (MMA) 
(Pub. L. 108-173, enacted on December 8, 2003), hospitals will receive 
the full market basket update, for fiscal years 2005 through 2007, only 
if they submit quality data as specified by the Secretary. Those 
hospitals that do not submit such data will receive an update of the 
market basket reduced by 0.4 percentage point (\4/10\ of one percent). 
In determining the payment-weighted average of the updates to payment 
rates to hospitals in 2005, we are estimating that the payments to 
hospitals not submitting quality data will be insignificant.
    Under section 1886(b)(3)(B)(ii) of the Act, the percentage increase 
used to update the payment rates for fiscal year 2005 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 2005 is 3.3 
percent, as announced in the final rule titled ``Medicare Program; 
Changes to the Hospital Inpatient Prospective Payment Systems and 
Fiscal Year 2005 Rates,'' published in the Federal Register on August 
11, 2004 (69 FR 48915). Therefore, the percentage increase for 
hospitals paid under the inpatient prospective payment system is 3.3 
percent. The average payment percentage increase for hospitals excluded 
from the inpatient prospective payment system is 3.3 percent. Weighing 
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 2005 is 3.3 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 2004 compared to fiscal year 2003. (We excluded from this 
calculation hospitals excluded from the prospective payment system 
because their payments are based on reasonable costs.) We used bills 
from prospective payment hospitals that we received as of July 2004. 
These bills represent a total of about 9.5 million discharges for 
fiscal year 2004 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 2004 is 0.44 percent. Based on past experience, we expect 
the overall case mix change to be 0.7 percent as the year progresses 
and more fiscal year 2004 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 2004 is 0.7 percent.
    Thus, the estimate of the payment-weighted average of the 
applicable percentage increases used for updating the payment rates is 
3.3 percent, and the real case mix adjustment factor for the

[[Page 54672]]

deductible is 0.7 percent. Therefore, under the statutory formula, the 
inpatient hospital deductible for services furnished in calendar year 
2005 is $912. This deductible amount is determined by multiplying $876 
(the inpatient hospital deductible for 2004) by the payment-weighted 
average increase in the payment rates of 1.033 multiplied by the 
increase in real case mix of 1.007, which equals $911 and is rounded to 
$912.

III. Computing the Inpatient Hospital and Extended Care Services 
Coinsurance Amounts for 2005

    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 2005, 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 $228 (one-fourth of the inpatient hospital 
deductible); the daily coinsurance for lifetime reserve days will be 
$456 (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 $114 (one-eighth 
of the inpatient hospital deductible).

IV. Cost to Beneficiaries

    Table 1 summarizes the deductible and coinsurance amounts for 2004 
and 2005, as well as the number of each that is estimated to be paid.

              Table 1.--Part A Deductible and Coinsurance Amounts for Calendar Years 2004 and 2005
----------------------------------------------------------------------------------------------------------------
                                                                       Value                 Number paid (in
                                                            ---------------------------         millions)
                    Type of cost sharing                                               -------------------------
                                                                 2004          2005         2004         2005
----------------------------------------------------------------------------------------------------------------
Inpatient hospital deductible..............................       $876            $912         9.07         9.14
Daily coinsurance for 61st-90th day........................        219             228         2.36         2.37
Daily coinsurance for lifetime reserve days................        438             456         1.09         1.10
SNF coinsurance............................................        109.50          114        28.79        29.16
----------------------------------------------------------------------------------------------------------------

    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 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 (as amended by Executive Order 13258, which 
merely reassigns responsibility of duties) 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, we estimate that the total increase in costs to 
beneficiaries associated with this notice is about $610 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. For purposes of the RFA, States 
and individuals 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 notice 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

[[Page 54673]]

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 expenditure 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 proposed rule (and subsequent 
final 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: Sections 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: August 30, 2004.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.

    Dated: September 1, 2004.
Tommy G. Thompson,
Secretary.
[FR Doc. 04-20414 Filed 9-3-04; 5:00 pm]
BILLING CODE 4120-01-P