[Federal Register Volume 81, Number 220 (Tuesday, November 15, 2016)]
[Notices]
[Pages 80060-80063]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-27389]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-8062-N]
RIN 0938-AS70


Medicare Program; CY 2017 Inpatient Hospital Deductible and 
Hospital and Extended Care Services Coinsurance Amounts

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 coinsurance amounts for 
services furnished in calendar year (CY) 2017 under Medicare's Hospital 
Insurance Program (Medicare Part A). The Medicare statute specifies the 
formulae used to determine these amounts. For CY 2017, the inpatient 
hospital deductible will be $1,316. The daily coinsurance amounts for 
CY 2017 will be: (1) $329 for the 61st through 90th day of 
hospitalization in a benefit period; (2) $658 for lifetime reserve 
days; and (3) $164.50 for the 21st through 100th day of extended care 
services in a skilled nursing facility in a benefit period.

DATES: Effective Date: This notice is effective on January 1, 2017.

FOR FURTHER INFORMATION CONTACT:
    Clare McFarland, (410) 786-6390 for general information.

[[Page 80061]]

    Gregory J. Savord, (410) 786-1521 for case-mix analysis.

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 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 (CY).

II. Computing the Inpatient Hospital Deductible for CY 2017

    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 CY, adjusted 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 (FY) that begins on October 
1 of the same preceding CY, and adjusted to reflect changes in 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)(XX) of the Act, the percentage 
increase used to update the payment rates for FY 2017 for hospitals 
paid under the inpatient prospective payment system is the market 
basket percentage increase, otherwise known as the market basket 
update, reduced by 0.75 percentage points (see section 
1886(b)(3)(B)(xii)(V) of the Act), and an adjustment based on changes 
in the economy-wide productivity (the multifactor productivity (MFP) 
adjustment) (see section 1886(b)(3)(B)(xi)(II) of the Act). Under 
section 1886(b)(3)(B)(viii) of the Act, for FY 2017, the applicable 
percentage increase for hospitals that do not submit quality data as 
specified by the Secretary of the Department of Health and Human 
Services (the Secretary) is reduced by one quarter of the market basket 
update. We are estimating that after accounting for those hospitals 
receiving the lower market basket update in the payment-weighted 
average update, the calculated deductible will not be affected, since 
the majority of hospitals submit quality data and receive the full 
market basket update. Section 1886(b)(3)(B)(ix) of the Act requires 
that any hospital that is not a meaningful electronic health record 
(EHR) user (as defined in section 1886(n)(3) of the Act) will have 
three-quarters of the market basket update reduced by 66\2/3\ percent 
for FY 2016, 100 percent for FY 2017, and 100 percent for FY 2018 and 
each subsequent fiscal year. We are estimating that after accounting 
for these hospitals receiving the lower market basket update, the 
calculated deductible will not be affected, since the majority of 
hospitals are meaningful EHR users and are expected to receive the full 
market basket update.
    Under section 1886 of the Act, the percentage increase used to 
update the payment rates for FY 2017 for hospitals excluded from the 
inpatient prospective payment system is as follows:
     The percentage increase for long term care hospitals is 
the market basket percentage increase reduced by 0.75 percentage points 
and the MFP adjustment (see sections 1886(m)(3)(A) and 1886(m)(4)(F) of 
the Act). In addition, these hospitals may also be impacted by the 
quality reporting adjustments and the site-neutral payment rates (see 
sections 1886(m)(5) and 1886(m)(6) of the Act).
     The percentage increase for inpatient rehabilitation 
facilities is the market basket percentage increase reduced by 0.75 
percentage points and the MFP adjustment (see sections 1886(j)(3)(C) 
and 1886(j)(3)(D)(v) of the Act). In addition, these hospitals may also 
be impacted by the quality reporting adjustments (see section 
1886(j)(7) of the Act).
     The percentage increase used to update the payment rate 
for inpatient psychiatric facilities is the market basket percentage 
increase reduced by 0.2 percentage points and the MFP adjustment (see 
sections 1886(s)(2)(A)(i), 1886(s)(2)(A)(ii), and 1886(s)(3)(E) of the 
Act). In addition, these hospitals may also be impacted by the quality 
reporting adjustments (see section 1886(s)(4) of the Act).
     The percentage increase for other types of hospitals 
excluded from the inpatient hospital prospective payment system (cancer 
hospitals, children's hospitals, and hospitals located outside the 50 
States, the District of Columbia, and Puerto Rico) is the market basket 
percentage increase (see section 1886(b)(3)(B)(ii)(VIII) of the Act).
    The Inpatient Prospective Payment System market basket percentage 
increase for FY 2017 is 2.7 percent and the MFP adjustment is -0.3 
percentage point, as announced in the final rule that appeared in the 
Federal Register on August 22, 2016 entitled, ``Hospital Inpatient 
Prospective Payment Systems for Acute Care Hospitals and the Long-Term 
Care Hospital Prospective Payment System and Fiscal Year 2017 Rates'' 
(81 FR 56762). Therefore, the percentage increase for hospitals paid 
under the inpatient prospective payment system that submit quality data 
and are meaningful EHR users is 1.65 percent (that is, the FY 2017 
market basket update of 2.7 percent less the MFP adjustment of 0.3 
percentage point and less 0.75 percentage point). The average payment 
percentage increase for hospitals excluded from the inpatient 
prospective payment system is 2.0 percent. This average includes long 
term care hospitals, inpatient rehabilitation facilities, and other 
hospitals excluded from the inpatient hospital prospective payment 
system. Weighting these percentages in accordance with payment volume, 
our best estimate of the payment-weighted average of the increases in 
the payment rates for FY 2017 is 1.70 percent.
    To develop the adjustment to reflect changes in real case-mix, we 
first calculated an average case-mix for each hospital 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 
FY 2016 compared to FY 2015. (We excluded from this calculation 
hospitals whose payments are not based on the inpatient prospective 
payment system because their payments are based on alternate 
prospective payment systems or reasonable costs.) We used Medicare 
bills from prospective payment hospitals that we received as of July 
2016. These bills represent a total of about 7.4 million Medicare 
discharges for FY 2016 and provide the most recent case-mix data 
available at this time. Based on these bills, the change in average 
case-mix in FY 2016 is 2.61 percent. Based on these bills and past 
experience, we expect the overall case mix change to be 2.7 percent as 
the year progresses and more FY 2016 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

[[Page 80062]]

be real. Real case-mix is that portion of case-mix that is due to 
changes in the mix of cases in the hospital and not due to coding 
optimization. Over the past several years, we have seen case mix 
increases of about 0.5 percent per year. (In some years there were 
larger increases in case mix due to much lower discharges for that 
year.) For 2016, we expect the increase in real case mix to continue to 
be 0.5 percent. Most of the observed FY 2016 case mix increase is 
likely due to artifacts of the implementation of ICD-10 which affects 
the calculated case mix level, but does not measure the actual increase 
in real case mix. Therefore, we expect that much of the change in 
average case-mix will not be real and estimate that this real change 
will be 0.5 percent.
    Thus as stated above, the estimate of the payment-weighted average 
of the applicable percentage increases used for updating the payment 
rates is 1.70 percent, and the real case-mix adjustment factor for the 
deductible is 0.5 percent. Therefore, using the statutory formula as 
stated in section 1813(b) of the Act, we calculate the inpatient 
hospital deductible for services furnished in CY 2017 to be $1,316. 
This deductible amount is determined by multiplying $1,288 (the 
inpatient hospital deductible for CY 2016 (81 FR 56762)) by the 
payment-weighted average increase in the payment rates of 1.017 
multiplied by the increase in real case-mix of 1.005, which equals 
$1,316.45 and is rounded to $1,316.

III. Computing the Inpatient Hospital and Extended Care Services 
Coinsurance Amounts for CY 2017

    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 CY. The increase in the deductible 
generates increases in the coinsurance amounts. For inpatient hospital 
and extended care services furnished in CY 2017, 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 
$329 (one-fourth of the inpatient hospital deductible as stated in 
section 1813(a)(1)(A) of the Act); the daily coinsurance for lifetime 
reserve days will be $658 (one-half of the inpatient hospital 
deductible as stated in section 1813(a)(1)(B) of the Act); 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 
$164.50 (one-eighth of the inpatient hospital deductible as stated in 
section 1813(a)(3) of the Act).

IV. Cost to Medicare Beneficiaries

    Table 1 below summarizes the deductible and coinsurance amounts for 
CYs 2016 and 2017, as well as the number of each that is estimated to 
be paid.

    Table 1--Part A Deductible and Coinsurance Amounts for Calendar Years 2016 and 2017 Type of Cost Sharing
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                                                               Value                 Number paid (in millions)
                                                 ---------------------------------------------------------------
                                                       2016            2017            2016            2017
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Inpatient hospital deductible...................           $1288           $1316            7.15            7.26
Daily coinsurance for 61st-90th Day.............             322             329            1.77            1.80
Daily coinsurance for lifetime reserve days.....             644             658            0.87            0.88
SNF coinsurance.................................             161          164.50           40.56           41.83
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    The estimated total increase in costs to beneficiaries is about 
$740 million (rounded to the nearest $10 million) due to: (1) The 
increase in the deductible and coinsurance amounts; and (2) the 
increase in the number of deductibles and daily coinsurance amounts 
paid. We determine the increase in cost to beneficiaries by calculating 
the difference between the 2016 and 2017 deductible and coinsurance 
amounts multiplied by the estimated increase in the number of 
deductible and coinsurance amounts paid.

V. Waiver of Proposed Notice and Comment Period

    Section 1813(b)(2) of the Act requires publication of the inpatient 
hospital deductible and all coinsurance amounts--the hospital and 
extended care services coinsurance amounts--between September 1 and 
September 15 of the year preceding the year to which they will apply. 
These amounts are determined according to the statute as discussed 
above. 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 
(APA), 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 here, 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 the 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. Collection of Information Requirements

    This document does not impose information collection requirements, 
that is, reporting, recordkeeping or third-party disclosure 
requirements. Consequently, there is no need for review by the Office 
of Management and Budget under the authority of the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501 et seq.).

VII. Regulatory Impact Analysis

A. Statement of Need

    Section 1813(b)(2) of the Act requires the Secretary to publish, 
between September 1 and September 15 of each year, the amounts of the 
inpatient hospital deductible and hospital and extended care services 
coinsurance applicable for services furnished in the following CY.

[[Page 80063]]

B. Overall Impact

    We have examined the impact of this notice as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 
1999) and the Congressional Review Act (5 U.S.C., Part I, Ch. 8).
    Executive Orders 12866 and 13563 direct 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). A 
regulatory impact analysis (RIA) must be prepared for major notices 
with economically significant effects ($100 million or more in any 1 
year). As stated in section IV of this notice, we estimate that the 
total increase in costs to beneficiaries associated with this notice is 
about $740 million due to: (1) The increase in the deductible and 
coinsurance amounts; and (2) the increase in the number of deductibles 
and daily coinsurance amounts paid. As a result, this notice is 
economically significant under section 3(f)(1) of Executive Order 12866 
and is a major action under the Congressional Review Act. In accordance 
with the provisions of Executive Order 12866, this notice was reviewed 
by the Office of Management and Budget.
    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. Most hospitals and most other providers and 
suppliers are small entities, either by nonprofit status or by having 
revenues of less than $7.5 million to $38.5 million in any 1 year (for 
details, see the Small Business Administration's Web site at http://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf). 
Individuals and states are not included in the definition of a small 
entity. As discussed above, this annual notice announces the inpatient 
hospital deductible and the hospital and extended care services 
coinsurance amounts for services furnished in CY 2017 under Medicare's 
Hospital Insurance Program (Medicare Part A). As a result, we are not 
preparing an analysis for the RFA because the Secretary has determined 
that this notice will not have a significant economic impact on a 
substantial number of small entities.
    In addition, section 1102(b) of the Social Security 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 for Medicare payment regulations and 
has fewer than 100 beds. As discussed above, we are not preparing an 
analysis for section 1102(b) of the Act because the Secretary has 
determined that this notice will not have a significant impact on the 
operations of a substantial number of small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. For 2016, that 
threshold accounting for inflation is approximately $146 million. This 
notice does not impose mandates that will have a consequential effect 
of $146 million or more 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. Since this notice does not impose any costs on state or 
local governments, preempt state law, or have Federalism implications, 
the requirements of Executive Order 13132 are not applicable.

    Dated: September 23, 2016.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: November 8, 2016.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2016-27389 Filed 11-10-16; 4:15 pm]
 BILLING CODE 4120-01-P