[Federal Register Volume 82, Number 223 (Tuesday, November 21, 2017)]
[Notices]
[Pages 55367-55370]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-24913]


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

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-8065-N]
RIN 0938-AT05


Medicare Program; CY 2018 Inpatient Hospital Deductible and 
Hospital and Extended Care Services Coinsurance Amounts

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 (CY) 2018 under Medicare's Hospital 
Insurance Program (Medicare Part A). The Medicare statute specifies the 
formulae used to determine these amounts. For CY 2018, the inpatient 
hospital deductible will be $1,340. The daily coinsurance amounts for 
CY 2018 will be: $335 for the 61st through 90th day of hospitalization 
in a benefit period; $670 for lifetime reserve days; and $167.50 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, 2018.

FOR FURTHER INFORMATION CONTACT: Clare McFarland, (410) 786-6390 for 
general information. 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 the Secretary of 
the Department of Health and Human Services (the Secretary) 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 2018

    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 2018 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 2018, the applicable 
percentage increase for hospitals that do not submit quality data as 
specified by 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 100 
percent for FY 2017 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

[[Page 55368]]

payment rates for FY 2018 for hospitals excluded from the inpatient 
prospective payment system is as follows:
     The percentage increase for long term care hospitals is 1 
percent (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 1 percent (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 0.75 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 2018 is 2.7 percent and the MFP adjustment is 0.6 
percentage point, as announced in the final rule that appeared in the 
Federal Register on August 14, 2017 entitled, ``Hospital Inpatient 
Prospective Payment Systems for Acute Care Hospitals and the Long-Term 
Care Hospital Prospective Payment System and Policy Changes and Fiscal 
Year 2018 Rates'' (82 FR 37990). Therefore, the percentage increase for 
hospitals paid under the inpatient prospective payment system that 
submit quality data and are meaningful EHR users is 1.35 percent (that 
is, the FY 2018 market basket update of 2.7 percent less the MFP 
adjustment of 0.6 percentage point and less 0.75 percentage point). The 
average payment percentage increase for hospitals excluded from the 
inpatient prospective payment system is 1.38 percent. This average 
includes long term care hospitals, inpatient rehabilitation facilities, 
and other hospitals excluded from the inpatient 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 2018 is 1.35 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 inpatient prospective payment 
system in FY 2017 compared to FY 2016. (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 2017. These bills represent a total of about 7.5 million 
Medicare discharges for FY 2017 and provide the most recent case-mix 
data available at this time. Based on these bills, the change in 
average case-mix in FY 2017 is -0.09 percent. Based on these bills and 
past experience, we expect the overall case mix change to be 0.4 
percent as the year progresses and more FY 2017 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. 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. We expect that all of the change in average 
case-mix for FY 2017 will be real and estimate that this change will be 
0.4 percent.
    Thus as stated above, the estimate of the payment-weighted average 
of the applicable percentage increases used for updating the payment 
rates is 1.35 percent, and the real case-mix adjustment factor for the 
deductible is 0.4 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 2018 to be $1,340. 
This deductible amount is determined by multiplying $1,316 (the 
inpatient hospital deductible for CY 2017 (81 FR 80060)) by the 
payment-weighted average increase in the payment rates of 1.0135 
multiplied by the increase in real case-mix of 1.004, which equals 
$1,339.10 and is rounded to $1,340.

III. Computing the Inpatient Hospital and Extended Care Services 
Coinsurance Amounts for CY 2018

    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 2018, 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 
$335 (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 $670 (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 (SNF) in a benefit period will 
be $167.50 (one-eighth of the inpatient hospital deductible as stated 
in section 1813(a)(3) of the Act).

IV. Cost to Medicare Beneficiaries

    The Table below summarizes the deductible and coinsurance amounts 
for CYs 2017 and 2018, as well as the number of each that is estimated 
to be paid.

                   Part A Deductible and Coinsurance Amounts for Calendar Years 2017 and 2018
----------------------------------------------------------------------------------------------------------------
                                                               Value                 Number paid (in millions)
              Type of cost sharing               ---------------------------------------------------------------
                                                       2017            2018            2017            2018
----------------------------------------------------------------------------------------------------------------
Inpatient hospital deductible...................          $1,316          $1,340            7.16            7.23
Daily coinsurance for 61st-90th Day.............             329             335            1.75            1.77
Daily coinsurance for lifetime reserve days.....             658             670            0.86            0.87
SNF coinsurance.................................          164.50          167.50           37.21           38.02
----------------------------------------------------------------------------------------------------------------


[[Page 55369]]

    The estimated total increase in costs to beneficiaries is about 
$550 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 2017 and 2018 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. 
We ordinarily publish a notice of proposed rulemaking in the Federal 
Register and invite public comment prior to a rule taking effect in 
accordance with section 553(b) of the Administrative Procedure Act 
(APA) and section 1871 of the Act. However, we believe that the 
policies being publicized in this document do not constitute agency 
rulemaking. Rather, the statute requires that the agency determine and 
publish the inpatient hospital deductible and hospital and extended 
care services coinsurance amounts for each calendar year in accordance 
with the statutory formulae, and we are simply notifying the public of 
the changes to the Medicare Part A deductible and coinsurance amounts 
for CY 2018. To the extent any of the policies articulated in this 
document constitute interpretations of the statute's requirements or 
procedures that will be used to implement the statute's directive, they 
are interpretive rules, general statements of policy, and rules of 
agency organization, procedure, or practice, which are not subject to 
notice and comment rulemaking under the APA.
    To the extent that notice and comment rulemaking would otherwise 
apply, we find good cause to waive this requirement. Under the APA, we 
may waive notice and public 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 this document does not propose to make any 
substantive changes to the policies or methodologies, but simply 
applies the formulae used to calculate the inpatient hospital 
deductible and hospital and extended care services coinsurance amounts 
as 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, so we also do 
not have any discretion in that regard. Therefore, we find good cause 
to waive notice and comment procedures, if such procedures are required 
at all.

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.

B. Overall Impact

    We have examined the impacts 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), the Congressional Review Act (5 U.S.C. 804(2)) and 
Executive Order 13771 on Reducing Regulation and Controlling Regulatory 
Costs (January 30, 2017).
    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). Section 
3(f) of Executive Order 12866 defines a ``significant regulatory 
action'' as an action that is likely to result in a rule: (1) Having an 
annual effect on the economy of $100 million or more in any 1 year, or 
adversely and materially affecting a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or state, local or tribal governments or communities (also 
referred to as ``economically significant''); (2) creating a serious 
inconsistency or otherwise interfering with an action taken or planned 
by another agency; (3) materially altering the budgetary impacts of 
entitlement grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raising novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in the Executive Order. A regulatory impact 
analysis (RIA) must be prepared for major rules 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 $550 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. 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 Medicare 
Part A deductible and coinsurance amounts for CY 2018. 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 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

[[Page 55370]]

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. 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. In 2017, that 
threshold is approximately $148 million. This notice does not impose 
mandates that will have a consequential effect of $148 million or more 
on state, local, or tribal governments or on the private sector.
    Executive Order 13771, titled ``Reducing Regulation and Controlling 
Regulatory Costs,'' was issued on January 30, 2017 (82 FR 9339, 
February 3, 2017). It has been determined that this notice is a 
transfer notice that does not impose more than de minimis costs and 
thus is not a regulatory action for the purposes of E.O. 13771.
    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 will not have a substantial direct effect on 
state or local governments, preempt state law, or otherwise have 
Federalism implications.
    Although this notice merely announces the Medicare Part A 
deductible and coinsurance amounts for CY 2018 and does not constitute 
a substantive rule, we nevertheless prepared this Impact Analysis in 
the interest of ensuring that the impacts of this notice are fully 
understood.

    Dated: October 27, 2017.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.

    Dated: November 1, 2017.
Eric D. Hargan,
Acting Secretary, Department of Health and Human Services.
[FR Doc. 2017-24913 Filed 11-17-17; 4:15 pm]
 BILLING CODE 4120-01-P