September 26,2002

Summary of the Baucus-Grassley Beneficiary Access and Medicare Payment Equity package


Rural Health Care Improvements

• Equalize payments for rural and small urban hospitals

• Wage index changes: labor-related share for hospitals with a wage index below 1.0 is 68% for FY03-05; current law for hospitals with a wage index above 1.0

• Medicare disproportionate share (DSH) payments: increases the DSH adjustment for rural providers to 10% (phased-in over ten years)

• Temporary relief for non-teaching hospitals

• Extend hold harmless from outpatient PPS for small rural hospitals for one year

• 5% add-on for clinic and ER visits for small rural hospitals

• 2-year reasonable cost payments for diagnostic lab tests in SCHs

• Critical Access Hospital (CAH) improvements

• Equalize payments for physicians in rural areas for 2003-2005

• Incentive payments for physicians in underserved areas

• Extension of 10% rural add-on for home health through 2004

• 10% add-on for frontier hospice

• Ground Ambulance: 5% increase for rural

• Capital infrastructure loan program

Provisions Relating to Medicare Part A

• Full update for sole community hospitals and “market basket” minus -0.25% for all other hospitals

• IME Adjustment: 6.50% in FY03, 6.50% in FY04; 6.0% in FY05

• Puerto Rico: 75%-25% Federal-Puerto Rico blend beginning in FY 03

• Geriatric GME

• Increase to nursing component of RUGs:13% in FY03, 11% in FY04, 9% in FY05

• Require collection of staffing data; require staffing measure in CMS quality initiative

• Allow payment for hospice consultation services

• Permit hospices to contract for services with other hospices for extraordinary, exigent, and other non-routine circumstances

Provisions Relating to Medicare Part B

• Physician payment increase (same as House-passed version)

• Extension of treatment of certain physician pathology services for 2 years

• Competitive bidding for DME: Continue demos for FY 03; begin national phase-in FY 04; only applies to MSAs over 500,000

• ESRD: Increase composite rate 1.2% in 2003-2004

• Air Ambulance: medical necessity criteria for air ambulance services

• Exempt orphan drugs from outpatient pass-through

Provisions Relating to Medicare Parts A and B

• Eliminate 15% reduction for home health services; adjust updates in FY03-05

• Geriatric care assessment demonstration program

Medicare+Choice Provisions

• Increase minimum updates from 2% to 4% in 2003 and 3% in 2004

• Extend cost contracts for 5 years

• Extend the Social HMO Demonstration through 2005

• Extend specialized plans for special needs beneficiaries for 5 years (Evercare)

• Extend 1% entry bonus for M+C for 2 years. Bonus does not apply for private fee-for-service or demonstration plans

• Clarifies Secretary’s authority to disapprove unreasonable cost-sharing


• Medicaid DSH: Extend inflation updates to 2003, 2004 and 2005 allotments

• Low Medicaid DSH: 3% cap for FY 03-05

• FMAP increase: Temporary increase in Medicaid matching rate for one year; $1 billion increase in Social Services Block Grant

• CHIP Redistribution: Does not fill CHIP dip, allows certain states to use a portion of unspent CHIP money to buy out Medicaid programs

• Section 1115 waiver process improvements

• 340-B for inpatient drug prices


• HOPD coinsurance buy-down

• Improved coverage of immunosuppressive drugs

• Therapy Caps: 2-year extension of moratorium

• Waiver of Part B late enrollment penalty for certain military retirees

• Cholesterol and Lipid Screening

• Extend funding for Special Diabetes Programs

• Five year extension of QI-1 Program