[Federal Register Volume 84, Number 219 (Wednesday, November 13, 2019)]
[Notices]
[Pages 61619-61622]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24441]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-8071-N]
RIN 0938-AT76


Medicare Program; CY 2020 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) 2020 under Medicare's Hospital 
Insurance Program (Medicare Part A). The Medicare statute specifies the 
formulae used to determine these amounts. For CY 2020, the inpatient 
hospital deductible will be $1,408. The daily coinsurance amounts for 
CY 2020 will be: $352 for the 61st through 90th day of hospitalization 
in a benefit period; $704 for lifetime reserve days; and $176 for the 
21st through 100th day of extended care services in a skilled nursing 
facility in a benefit period.

DATES: The deductible and coinsurance amounts announced in this notice 
are effective on January 1, 2020.

FOR FURTHER INFORMATION CONTACT: Yaminee Thaker, (410) 786-7921 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 2020

    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 2020 for hospitals 
paid under the inpatient prospective payment system is the market 
basket percentage increase, otherwise known as the market basket 
update, reduced by 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 2020, 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 payment rates (or target amounts, as applicable) for FY 2020 
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 the MFP adjustment 
(see section 1886(m)(3)(A) 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 a 
productivity adjustment in accordance with section 1886(j)(3)(C)(ii)(I) 
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 used to update the target amounts 
for other types of hospitals that are excluded from the inpatient 
prospective payment system and that are paid on a reasonable cost 
basis, subject to a rate-of-increase ceiling, is the inpatient 
prospective payment system operating market basket percentage increase, 
which is described at section 1886(b)(3)(B)(ii)(VIII) of the Act and 42 
CFR 413.40(c)(3). These other types of hospitals include cancer 
hospitals, children's hospitals, extended neoplastic disease care 
hospitals, and hospitals located outside the 50 states, the District of 
Columbia, and Puerto Rico.
    The inpatient prospective payment system market basket percentage 
increase for FY 2020 is 3.0 percent and the MFP adjustment is 0.4 
percentage point, as announced in the final rule that appeared in the 
Federal Register on August 16, 2019 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 2020 Rates; Quality Reporting Requirements for Specific Providers; 
Medicare and Medicaid

[[Page 61620]]

Promoting Interoperability Programs Requirements for Eligible Hospitals 
and Critical Access Hospitals'' (84 FR 42343). Therefore, the 
percentage increase for hospitals paid under the inpatient prospective 
payment system that submit quality data and are meaningful EHR users is 
2.6 percent (that is, the FY 2020 market basket update of 3.0 percent 
less the MFP adjustment of 0.4 percentage point). The average payment 
percentage increase for hospitals excluded from the inpatient 
prospective payment system is 2.44 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 2020 is 2.58 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 2019 compared to FY 2018. (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 2019. These bills represent a total of about 7.1 million 
Medicare discharges for FY 2019 and provide the most recent case-mix 
data available at this time. Based on these bills, the change in 
average case-mix in FY 2019 is 0.6 percent. Based on these bills and 
past experience, we expect the overall case mix change to be 1.0 
percent as the year progresses and more FY 2019 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. Over the past several years, we have observed 
total case mix increases of about 0.5 percent per year and have assumed 
that they are real. Thus, since we do not have further information at 
this time, we expect that 0.5 percent of the 1.0 percent change in 
average case-mix for FY 2019 will be real.
    Thus as stated above, the estimate of the payment-weighted average 
of the applicable percentage increases used for updating the payment 
rates is 2.58 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 2020 to be $1,408. 
This deductible amount is determined by multiplying $1,364 (the 
inpatient hospital deductible for CY 2019 (83 FR 52459)) by the 
payment-weighted average increase in the payment rates of 1.0258 
multiplied by the increase in real case-mix of 1.005, which equals 
$1,406.19 and is rounded to $1,408.

III. Computing the Inpatient Hospital and Extended Care Services 
Coinsurance Amounts for CY 2020

    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 2020, 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 
$352 (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 $704 (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 $176 (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 2019 and 2020, as well as the number of each that is estimated 
to be paid.

                   Part A Deductible and Coinsurance Amounts for Calendar Years 2019 and 2020
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                                                               Value                 Number paid (in millions)
              Type of cost sharing               ---------------------------------------------------------------
                                                       2019            2020            2019            2020
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Inpatient hospital deductible...................          $1,364          $1,408            6.98            7.01
Daily coinsurance for 61st-90th Day.............             341             352            1.62            1.63
Daily coinsurance for lifetime reserve days.....             682             704            0.81            0.81
SNF coinsurance.................................          170.50          176.00           32.05           32.17
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    The estimated total increase in costs to beneficiaries is about 
$590 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 2019 and 2020 deductible and coinsurance 
amounts multiplied by the estimated increase in the number of 
deductible and coinsurance amounts paid.

V. Waiver of Proposed Rulemaking

    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 1871 of the Act and section 553(b) of 
the Administrative Procedure Act (APA). Section 1871(a)(2) of the Act 
provides that no rule, requirement, or other statement of policy (other 
than a national coverage determination) that establishes or changes a 
substantive legal standard governing the scope of benefits, the payment 
for services, or the eligibility of individuals, entities, or 
organizations to furnish or receive services or benefits under Medicare 
shall take effect unless it is promulgated through notice and comment 
rulemaking. Unless there is a statutory exception, section 1871(b)(1) 
of the Act generally requires the Secretary of the Department of Health

[[Page 61621]]

and Human Services (the Secretary) to provide for notice of a proposed 
rule in the Federal Register and provide a period of not less than 60 
days for public comment before establishing or changing a substantive 
legal standard regarding the matters enumerated by the statute. 
Similarly, under 5 U.S.C. 553(b) of the APA, the agency is required to 
publish a notice of proposed rulemaking in the Federal Register before 
a substantive rule takes effect. Section 553(d) of the APA and section 
1871(e)(1)(B)(i) of the Act usually require a 30-day delay in effective 
date after issuance or publication of a rule, subject to exceptions. 
Sections 553(b)(B) and 553(d)(3) of the APA provide for exceptions from 
the advance notice and comment requirement and the delay in effective 
date requirements. Sections 1871(b)(2)(C) and 1871(e)(1)(B)(ii) of the 
Act also provide exceptions from the notice and 60-day comment period 
and the 30-day delay in effective date. Section 553(b)(B) of the APA 
and section 1871(b)(2)(C) of the Act expressly authorize an agency to 
dispense with notice and comment rulemaking for good cause if the 
agency makes a finding that notice and comment procedures are 
impracticable, unnecessary, or contrary to the public interest.
    The annual inpatient hospital deductible and the hospital and 
extended care services coinsurance amounts announcement set forth in 
this notice does not establish or change a substantive legal standard 
regarding the matters enumerated by the statute or constitute a 
substantive rule which would be subject to the notice requirements in 
section 553(b) of the APA. However, to the extent that an opportunity 
for public notice and comment could be construed as required for this 
notice, we find good cause to waive this requirement.
    Section 1813(b)(2) of the Act requires publication of the inpatient 
hospital deductible and 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. Further, 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 deductible and 
coinsurance amounts for CY 2020. We have calculated the inpatient 
hospital deductible and hospital and extended care services coinsurance 
amounts as directed by the statute; the statute establishes both when 
the deductible and coinsurance amounts must be published and the 
information that the Secretary must factor into the deductible and 
coinsurance amounts, so we do not have any discretion in that regard. 
We find notice and comment procedures to be unnecessary for this notice 
and we find good cause to waive such procedures under section 553(b)(B) 
of the APA and section 1871(b)(2)(C) of the Act, if such procedures may 
be construed to be required at all. Through this notice, we are simply 
notifying the public of the updates to the inpatient hospital 
deductible and the hospital and extended care services coinsurance 
amounts, in accordance with the statute, for CY 2020. As such, we also 
note that even if notice and comment procedures were required for this 
notice, for the reasons stated above, we would find good cause to waive 
the delay in effective date of the notice, as additional delay would be 
contrary to the public interest under section 1871(e)(1)(B)(ii) of the 
Act. Publication of this notice is consistent with section 1813(b)(2) 
of the Act, and we believe that any potential delay in the effective 
date of the notice, if such delay were required at all, could cause 
unnecessary confusion both for the agency and Medicare beneficiaries.

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 in accordance with 
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). Although we do not consider this notice to constitute a 
substantive rule, this notice is economically significant under section 
3(f)(1) of Executive Order 12866. As stated in section IV of this 
notice, we estimate that the total increase in costs to beneficiaries 
associated with this notice is about $590 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.
    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 health care 
providers and suppliers are small entities, either by being nonprofit 
organizations or by meeting the Small

[[Page 61622]]

Business Administration's definition of a small business (having 
revenues of less than $7.5 million to $38.5 million in any 1 year). 
Individuals and states are not included in the definition of a small 
entity. This annual notice announces the Medicare Part A deductible and 
coinsurance amounts for CY 2020 and will have an impact on the Medicare 
beneficiaries. 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 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. This annual notice 
announces the Medicare Part A deductible and coinsurance amounts for CY 
2020 and will have an impact on the Medicare beneficiaries. As a 
result, 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 2019, that 
threshold is approximately $154 million. This notice does not impose 
mandates that will have a consequential effect of $154 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. This notice will not have a substantial direct effect on 
state or local governments, preempt state law, or otherwise have 
federalism implications.
    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.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.
    Consistent with the Congressional Review Act provisions of the 
Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 
801 et seq.), this notice has been transmitted to the Congress and the 
Comptroller General for review.
    Although this notice does not constitute a substantive rule, we 
nevertheless prepared this Impact Analysis section in the interest of 
ensuring that the impacts of this notice are fully understood.

    Dated: October 24, 2019.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.

    Dated: October 28, 2019.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2019-24441 Filed 11-8-19; 4:15 pm]
BILLING CODE 4120-01-P