[Federal Register Volume 87, Number 188 (Thursday, September 29, 2022)]
[Notices]
[Pages 59094-59098]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-21180]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-8080-N]
RIN 0938-AU71


Medicare Program; CY 2023 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) 2023 under Medicare's Hospital 
Insurance Program (Medicare Part A). The Medicare statute specifies the 
formulae used to determine these amounts.

DATES: The deductible and coinsurance amounts announced in this notice 
are effective on January 1, 2023.

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

SUPPLEMENTARY INFORMATION: For CY 2023, the inpatient hospital 
deductible will be $1,600. The daily coinsurance amounts for CY 2023 
will be: $400 for the 61st through 90th day of hospitalization in a 
benefit period; $800 for lifetime reserve days; and $200 for the 21st 
through 100th day of extended care services in a skilled nursing 
facility in a benefit period.

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

[[Page 59095]]

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 2023

    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 2023 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 2023, 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 FY. 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 2023 
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 the MFP adjustment (see section 1886(s)(2)(A)(i) 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 2023 is 4.1 percent and the MFP adjustment is 0.3 
percentage point, as announced in the final rule that appeared in the 
Federal Register on August 10, 2022 entitled, ``Hospital Inpatient 
Prospective Payment Systems for Acute Care Hospitals and the Long-Term 
Care Hospital Prospective Payment System and Proposed Policy Changes 
and Fiscal Year 2023 Rates; Quality Programs and Medicare Promoting 
Interoperability Program Requirements for Eligible Hospitals and 
Critical Access Hospitals; Costs Incurred for Qualified and Non-
Qualified Deferred Compensation Plans; and Changes to Hospital and 
Critical Access Hospital Conditions of Participation'' (87 FR 49052). 
Therefore, the percentage increase for hospitals paid under the 
inpatient prospective payment system that submit quality data and are 
meaningful EHR users is 3.8 percent (that is, the FY 2023 market basket 
update of 4.1 percent less the MFP adjustment of 0.3 percentage point). 
The average payment percentage increase for hospitals excluded from the 
inpatient prospective payment system is 3.9 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 2023 is 3.81 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 2022 compared to FY 2021. (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 2022. These bills represent a total of about 5.4 million 
Medicare discharges for FY 2022 and provide the most recent case-mix 
data available at this time. Based on these bills, the change in 
average case-mix in FY 2022 is -0.7 percent. Based on these bills and 
past experience, we expect the overall FY 2022 case mix change to be-1 
percent as the year progresses and more FY 2022 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. COVID-19 has complicated the determination of 
real case-mix changes. COVID-19 cases typically have higher-weighted MS 
DRGs which would cause a real increase in case-mix while hospitals have 
experienced a reduction in lower-

[[Page 59096]]

weighted cases which would also cause a real increase in case-mix. The 
lower amount of COVID-19 cases in 2022 compared to the last several 
years would therefore mean a decrease in real case mix. In addition, 
care that was deferred in 2020 and 2021 could be more costly in 2022 
causing an increase in real case-mix. Due to the uncertainty we are 
assuming that all of the recently observed care is not due to coding 
optimization and hence all of the -1 percent is real.
    Thus, the estimate of the payment-weighted average of the 
applicable percentage increases used for updating the payment rates is 
3.81 percent, and the real case-mix adjustment factor for the 
deductible is -1 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 2023 to be $1,600. 
This deductible amount is determined by multiplying $1,556 (the 
inpatient hospital deductible for CY 2022 (86 FR 64217)) by the 
payment-weighted average increase in the payment rates of 1.0381 
multiplied by the decrease in real case-mix of 0.99, which equals 
$1,599.13 and is rounded to $1,600.

III. Computing the Inpatient Hospital and Extended Care Services 
Coinsurance Amounts for CY 2023

    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 2023, 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 
$400 (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 $800 (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 $200 (one-eighth of the inpatient hospital deductible as stated in 
section 1813(a)(3) of the Act).

IV. Cost to Medicare Beneficiaries

    Table 1 summarizes the deductible and coinsurance amounts for CYs 
2022 and 2023, as well as the number of each that is estimated to be 
paid.

                Table 1--Medicare Part A Deductible and Coinsurance Amounts for CYs 2022 and 2023
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                                                               Value                 Number paid (in millions)
              Type of cost sharing               ---------------------------------------------------------------
                                                       2022            2023            2022            2023
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Inpatient hospital deductible...................          $1,556          $1,600            5.41            5.90
Daily coinsurance for 61st-90th day.............             389             400            1.32            1.43
Daily coinsurance for lifetime reserve days.....             778             800            0.67            0.73
SNF coinsurance.................................          194.50             200           28.38           27.93
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    The estimated total increase in costs to beneficiaries is about 
$1,210 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 2022 and 2023 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 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

[[Page 59097]]

extended care services coinsurance amounts for each CY in accordance 
with the statutory formulae, and we are simply notifying the public of 
the changes to the deductible and coinsurance amounts for CY 2023. 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 
2023. 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

    Although this notice does not constitute a substantive rule, we 
nevertheless prepared this Regulatory Impact Analysis section in the 
interest of ensuring that the impacts of this notice are fully 
understood.

A. Statement of Need

    This notice announces the Medicare Part A inpatient hospital 
deductible and associated coinsurance amounts for hospital and extended 
care services applicable for care provided in CY 2023, as required by 
section 1813 of the Act. It also responds to section 1813(b)(2) of the 
Act, which requires the Secretary to provide for publication of these 
amounts in the Federal Register between September 1 and September 15 of 
the year preceding the year to which they will apply. As this statutory 
provision prescribes a detailed methodology for calculating these 
amounts, we do not have the discretion to adopt an alternative approach 
on these issues.

B. Overall Impact

    We have examined the impacts of this rule 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. 804(2)).
    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, based on our estimates, OMB's Office of Information 
and Regulatory Affairs has determined this rulemaking is ``economically 
significant'' as measured by the $100 million threshold, and hence also 
a major rule under Subtitle E of the Small Business Regulatory 
Enforcement Fairness Act of 1996 (also known as the Congressional 
Review Act). As stated in section IV of this notice, we estimate that 
the total increase in costs to beneficiaries associated with this 
notice is about $1,210 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.

C. Accounting Statement and Table

    As required by OMB Circular A-4 (available at https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf), in Table 2, we have prepared an accounting 
statement showing the estimated total increase in costs to 
beneficiaries of about $1,210 million, which is due to the increase in 
the deductible and coinsurance amounts, and the increase in the number 
of deductibles and daily coinsurance amounts paid. As stated in section 
IV of this notice, we determined the increase in cost to beneficiaries 
by calculating the difference between the 2022 and 2023 deductible and 
coinsurance amounts multiplied by the estimated increase in the number 
of deductible and coinsurance amounts paid.

   Table 2--Estimated Transfers for CY 2023 Deductible and Coinsurance
                                 Amounts
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                 Category                             Transfers
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Annualized Monetized Transfers............  $1,210 million.
From Whom to Whom.........................  Beneficiaries to Providers.
------------------------------------------------------------------------

D. Regulatory Flexibility Act

    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 being nonprofit organizations 
or by meeting the Small Business Administration's definition of a small 
business (having revenues of less than

[[Page 59098]]

$8.0 million to $41.5 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 2023 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 certified 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 an 
RIA 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 2023 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 
certified that this notice will not have a significant impact on the 
operations of a substantial number of small rural hospitals.

E. Unfunded Mandates Reform Act

    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 2022, that 
threshold is approximately $165 million. This notice would not impose a 
mandate that will result in the expenditure by state, local, and Tribal 
Governments, in the aggregate, or by the private sector, of more than 
$165 million in any 1 year.

F. Federalism

    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.

G. Congressional Review

    This final regulation is subject to the Congressional Review Act 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801 et seq.) and has been transmitted to the Congress 
and the Comptroller General for review.
    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document on September 23, 2022.

    Dated: September 26, 2022.
Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2022-21180 Filed 9-27-22; 8:45 am]
BILLING CODE 4120-01-P