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In Defense of Patients: Preserving Access to Professional O&P Care in the 109th Congress

By Peter W. Thomas, Esq.

NAAOP General Counsel

Congress just finished a major health care bill without significant direct impact to O&P. But what’s in store for 2006? Are O&P professionals safe from another 3-year fee schedule freeze similar to the one scheduled to end next year? Will access to medical rehabilitation or the new Medicare competitive bidding program seriously disadvantage patients? While 2006 promises to be a year of action and uncertainty for the O&P field, NAAOP is prepared to take a strong message to Congress and the federal government: preserve access to professional O&P care and ensure that these services are being provided by qualified providers.

2005 Retrospective—O&P Spared Major Impact from Deficit Reduction Bill

Late in December 2005, Congress passed an historic budget reconciliation bill (the “Deficit Reduction Act”) that is slated to cut Medicare and Medicaid as well as make important changes to both entitlement programs. The O&P field was spared direct impact from the more than $17 billion in entitlement cuts from Medicare and $10 billion from Medicaid. But many provisions will have significant short and long-term impacts on people with disabilities, particularly with respect to access to rehabilitation services and state Medicaid funding.

NAAOP has prepared the following summary of the major provisions that could impact people with disabilities in the Deficit Reduction Act and may have an indirect impact on O&P patient care. It should be noted, however, that at the time of this writing, the bill is not yet final law. Though the bill has essentially cleared both houses of Congress on its way to the President for his signature, a procedural issue has stalled enactment of the legislation until late January or early February when Congress reconvenes for the annual State of the Union speech. It is not anticipated that, prior to enactment, any changes will be made to the contents of the bill impacting the following provisions.

Medicare 75% Rule—The final bill, known as a “conference report,” includes a provision that addresses Medicare’s “75% Rule” on inpatient rehabilitation hospitals. While not directly related to O&P care, this provision was on the top of the disability and rehabilitation provider communities’ agenda. Just in the past year, over 40,000 patients have been denied access to inpatient medical rehabilitation. Presumably these patients will go to SNFs or other less-intensive health care settings.

The legislation passed in the bill will freeze the required percentage of admission with one of thirteen diagnoses at the 60% level for an additional year, ending June 30, 2007. The extension pushes the implementation dates for the 65% to July 1, 2007, and the 75% would take effect July 1, 2008. The Senate reconciliation bill included a provision that would have stopped implementation of the rule at the 50% level for two years-a proposal widely supported by disability organizations and provider groups. Clearly the Senate provision would have been more favorable than the final bill, but a delay of one year will certainly be helpful in terms of preserving appropriate access to inpatient hospital rehabilitation-a key step in the road to restoration of patients’ function.

Medicare Therapy Caps—As many O&P professionals are aware, the Balanced Budget Act of 1997 imposed $1,500 per patient caps on occupational and physical/speech therapy. These caps, however, have never fully gone into effect-until this year. The reconciliation conference report allows implementation of the Medicare caps on therapy services (now adjusted for inflation at $1,740 per patient on occupational therapy and $1,740 on speech and physical therapy). The current moratorium expired on January 1, 2006. However, the bill does permit, for 2006 only, an exceptions process whereby individual patients may apply for additional therapy services if their need for treatment exceeds the cap. In addition, the report instructed HHS to improve coding to reduce erroneous payments for therapy services. If Congress does not act by January 1, 2007, the full weight of the therapy caps will be enforced.

Medicaid—Perhaps the most significant impact of the conference report on consumers and people with disabilities is in the Medicaid section. Over $10 billion in gross cuts were passed that stand to push additional health care costs and reduced benefits onto the lowest-income and most vulnerable people and their states. The conference report included increases in patient co-payments and premiums that produce cuts of $1.9 billion over five years and $10.1 billion over ten years. States would be allowed to increase the co-payments that many Medicaid beneficiaries are required to pay to access items or services, as well as the premiums that can be charged. Additionally, the conference report changes the definition of “nominal” with regard to cost-sharing from the current $2, to an amount that increases yearly with the medical care consumer price index.

States will have the option of liberally applying and increasing cost sharing and premiums on Medicaid recipients with certain limits for very low-income families. Generally, premiums and cost-sharing may not apply to individuals under 18 years of age in foster care; pregnant women; terminally ill individuals in hospice care; and individuals who must “spend-down” to receive inpatient care in a hospital, nursing facility or ICF/MR.

There are several provisions in the conference report that allow greater state autonomy in determining the benefit package covered under state Medicaid programs. With the current state fiscal situation, state flexibility allowed under this legislation will have the effect of further shrinking coverage of services for recipients. This presents a real threat to O&P coverage in state Medicaid programs. Although many of the financing proposals included in the bill attempt to focus on reducing waste, fraud and abuse in the Medicaid system, the proposed policies will likely have a negative impact on many individuals with disabilities or long-term needs.

In addition to the Medicaid cuts in the bill, several new spending initiatives were included that total approximately $5 billion over 5 years. Of top priority to many disability organizations was the Family Opportunity Act, which will provide states the option of allowing families with children (up to age 19) with disabilities to buy into the Medicaid program for that child. The states would set the income limitations for eligibility with some federal limitations. Also included in the final conference report were the following provisions of interest to consumer and disability groups: demonstration projects regarding home and community-based alternatives to psychiatric residential treatment facilities for children; a “Money Follows the Person” rebalancing demonstration project; a state option to establish non-emergency medical transportation programs; expansion of access to home and community-based services for the elderly and people with disabilities; and, the optional choice of self-directed personal assistance services, otherwise known as “Cash and Counseling.” On the whole, these new programs are a bright spot on a bill that ultimately seeks to reduce spending on entitlement programs.

Ultimately, state budgets will be further tightened as these provisions take effect. O&P benefits in Medicaid, which are already stretched to the limit if they exist at all, will undoubtedly be under further assault as states seek to cut benefits and reimbursement.

2006 O&P Preview

2006 is likely to be a major year for consideration of health care issues in Congress and federal agencies. O&P is not specifically targeted on a legislative front, but that could quickly change as major proposals are likely to be debated. But what is the likelihood of any substantial legislative action in an election year?

If history is any indicator, major bills impacting health care often occur in odd-numbered, non-election years. Medicare and Medicaid were enacted in 1965. The Social Security Amendments of 1983 significantly changed Medicare. 1987 witnessed the creation of the “Six Point Plan,” which defined the current O&P benefit under Medicare. 1993 was President Clinton’s “Health Security Act,” which, as soon as it spilled into the electioneering of 1994, backfired and led to a Republican overthrow in Congress. The Balanced Budget Act of 1997, which cut hundreds of billions from Medicare, and the Balanced Budget Refinement Act of 1999 are more recent examples. In 2003, the Medicare Prescription Drug Improvement and Modernization Act was enacted and 2005 saw the budget reconciliation bill that just passed in December and is slated for enactment in early 2006. The only election year bill, BIPA, the Benefits Improvement and Protection Act of 2000, was actually finalized in a “lame duck” session after the election.

Despite this historical perspective, 2006 is a likely candidate for another Medicare bill. President Bush will make health care a top priority in his State of the Union speech. There is also increasing talk on Capitol Hill about making changes to the Medicare prescription drug benefit, which appears to be having serious trouble enrolling patients and providing access to needed medications, especially among beneficiaries who are covered by both Medicare and Medicaid. Physicians, who were spared a payment cut of 4.4% in the budget reconciliation bill, will likely be facing an even deeper cut in 2007 if Congress does not act. Thus, it is possible that Congress could break the historical trend and move a bill this year.

As such, the O&P field needs to be vigilant. NAAOP will be closely monitoring Congress as it looks to “offset” any new Medicare spending with cuts in other areas, such as a potential extension of the O&P fee schedule freeze that was originally enacted in late 2003 in the Medicare Prescription Drug law. Additionally, the O&P field will be supporting the disability community on longer term solutions to the 75% Rule and therapy caps.

The crux of major reform from Congress on O&P issues took place in the 2003 Medicare Prescription Drug law as new statutory frameworks were erected on Medicare competitive bidding, quality standards, and accreditation of DMEPOS suppliers. NAAOP does not anticipate any new programs similar to these to be enacted this year in Congress. Rather, the focus on these major initiatives has moved to regulatory monitoring and advocacy. In 2006, there will be an increased effort to work directly with policymakers in the agencies, particularly CMS, to ensure that the concerns of the O&P community are heard. NAAOP is poised, together with other O&P organizations, to mount an aggressive strategy that focuses on the direct impact federal policy can have on patient access to professional O&P care.


2006 will undoubtedly be a challenging year. However, NAAOP will continue its ambitious agenda to defend professional O&P care in a tough fiscal and regulatory environment. With the President’s FY 2007 budget due out in early February and new health care initiatives on tap for debate in Congress this session, there may be an opportunity for a national platform to discuss O&P issues. We will keep you updated throughout the year as developments occur.

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